What Happens After the Fiscal Cliff?
As the fiscal cliff looms, efforts are being made to avert the cliff, but little progress is being made. Some lawmakers are predicting that increases in federal income taxes and federal spending cuts will begin to take hold this coming January, unless there are strides made to complete the deal.
With the possibility of such changes happening, the economy stands to be hit by a great jolt. In some predictions economists predict that another recession could be veryconceivable. If the nation were to fall over the so called “cliff”, consumer spending power will greatly decrease and the federal government will see an annual tax increase of about 500 billion dollars. While this will cut the federal budget deficit by a considerable amount, it will be at a great economic price.
According to the Tax Policy Center, on average the federal income tax bill will increase by $3,500. And the average middle income home will see an increase of about $2,000.
If the fiscal cliff actually becomes a reality, federal income taxes will be greatly affected. On December 31, the low ordinary federal income tax, put in place by former president George W. Bush, will expire. An extension by President Obama and Congress was agreed upon in the end of 2010, but this extension will only have a few days remaining. Along with this lapse in the low ordinary federal income tax, Americans will see rates increase up to 15, 28, 31, 36, and 39.6% from the current 10, 15, 25, 28, 33, and 35%.
There is an effort being made by President Obama and his fellow Democrats to extend the Bush era tax rates, but this would only be for those who make less than $200,000 or for a family making less than $250,000. For the rest of those who don’t fall into this category federal income tax rates would increase to the higher pre-Bush era.
Categories: Federal Tax, Income Tax, Tax Law Tags: federal income tax, federal tax, income tax, payroll tax, tax code, tax law, tax reform
Speaker of the House proposes tax hike for millionaires
In a recent proposition made by the Speaker of the House, John Boehner, an increase in federal income tax for the wealthiest Americans could be made, but only in exchange for an agreement by President Obama to make a major cut to entitlements.
This proposition would mark the first time that Speaker Boehner has offered a rise in marginal federal income tax rates since the talks regarding the fiscal cliff have begun. The offer proposed suggested a hike in Bush-era federal income tax rates for those who have an annual income of one million dollars or more.
As a part of the proposition Speaker Boehner also is looking to implement a new method, “Chained CPI”, for calculating the benefits of entitlement programs. By using this method the growth of federal health programs, such as Medicare, would slow down, saving billions of dollars over the next ten years.
Although the proposition did make strides in terms of federal income tax increases, there was nothing included to extend the federal unemployment benefits and no mention was made about how sequestration would be addressed.
A deal is not close to be made, but a phone conversation, after a recent face to face session, between President Obama and Speaker Boehner suggested that both parties are making progress in their negotiations.
The offer on federal income tax by Speaker Boehner was a significant move towards the position held by President Obama. Unfortunately the overall proposal still is unacceptable to the Democrats considering the level of revenue, the hit beneficiaries would take from the changes to entitlement programs, and the lack of extension to the federal unemployment benefits.
Categories: Federal Tax, Income Tax, Tax Law Tags: buffet rule, federal income tax, federal tax, fiscal cliff, fiscall cliff, take hike, tax code, tax cuts, tax law, tax pledge, tax reform, tax the rich
France throws out tax hike on the rich
France- The high court for France struck down a supertax on its nations most elite individuals. This serves as a major blow to President Francois Hollande’s plan to repair France’s economy. This came days before it was proposed to pass the high court.
The high court saw that taxing individuals income over 1.32 million at a 75% tax rate was unconstitutional and highly unfair.
Almost immediately the socialist President vowed to modify and resubmit the proposal which had been passed by the Parliament earlier in the month.
Prime Minister Jean-Marc Ayrault said in a statement that a new proposal to tax the rich “taking into account the principles raised by the Constitutional Council’s decision” would be drawn up as part of the next budget law submitted in 2013 or 2014. No further details of how and when this would be done were given.
The controversial measure was a pillar of Hollande’s success presidential campaign. The measure was proposed on a temporary basis and would effect less that 2000 people in the entire population of France and raise just shy of under a billion dollars during it being in effect. This will hardly solve the financial crisis that burdens this country.
This was just one of several measure s proposed by Hollande to bring down the countries spending deficit to 3% of its gross domestic product. The proposed timeframe for this to occur was within five years or his full term in office.
The measure which was widely support by the leftist wing of the political party drew nothing but criticism from conservatives and business owners that were concerned that such high tax rates would drive wealthy entrepreneurs to flee the country.
These concerns held footing when two of France’s most elite jumped shipped to move to Belgium supposedly to avoid the 75% tax rate. One of those two individuals is world renowned billionare Bernard Arnault, owner of luxury goods company Luis Vuitton.
A number of French nationales already have jumped ship to move to Switzerland, Belgium, and Britain which boast predominately lower tax burdens on the wealthy.
The ruling released by the Council on Saturday struck down the measure because it “failed to recognize equality” The proposed rule change would impact individuals only on income over 1.3 million dollars whereas everyone else in the country would skirt those high tax rates. This tax proposal would indirectly effect a small portion of the population in an unfair manner.
Upon hearing about this unfair ruling Finance Minister Pierre Moscovici recently confirmed that the federal government of France will not drop its pursuit to tax the wealthy to solve its debt crisis.
“Our deficit-cutting path will not be diverted,” Moscovici told BFM television.
Categories: Federal Tax, Income Tax, Tax Law Tags: corporate tax, federal income tax, federal tax, federal tax fraud, french tax, tax law, tax reform, tax the rich