Thursday, December 27, 2012

The Bush Tax Cuts and Why the States are Lusting to Go Over the Fiscal Cliff

Liberals and Democrats are literally foaming at the mouth in anticipation of new tax and Obamacare revenues pouring in starting January 1, 2013.   Going 'over the cliff' is music to their confiscatory ears.   It's what they live for - growing state powers and crushing private business, especially small family owned businesses where entrepreneurship and innovation have historically driven the economy.  According to liberal speak: We don't need no stinking economy because we'll just steal what we want to impose our dream totalitarian society.

Starting with the Bush tax cuts that expire on 12/31/12 and the ongoing 'going over the cliff' fiasco, the out of control deficit spending federal government (Fedzilla) is lusting for new taxes to ring in the New Year, specifically with the implementation of Obamacare taxes and the expiration of the Bush tax cuts. Exactly why the idiot Republicans put an expiration date on the Bush tax cuts as opposed to making them permanent remains a mystery that is easily solved. The Republicans are fundamentally opposed to lower taxes and cutting spending.

Although the Democrats never saw a tax increase they didn't love, the Dems are beginning to perceive ballot box blowback because the Bush tax cuts really did benefit the middle class that the Dems claim to love and perpetually romance with pledges of undying devotion.  For the Dems it's all about endless class warfare. Now the Dems are backing down on letting the Bush tax cuts expire and are finally acknowledging that the Bush tax cuts did indeed accrue to the middle class.

Obama's Middle-Class Tax Flip Wall Street Journal
Here's how President Obama put it during a recent White House event with a group of middle-class Americans: Unless Congress acts, he said, "starting Jan. 1, every family in America will see their taxes automatically go up." 
He went on: "A typical middle-class family of four would see its income taxes go up by $2,200. That's $2,200 out of people's pockets. That means less money for buying groceries, less money for filling prescriptions, less money for buying diapers. It means a tougher choice between paying the rent and paying tuition. And middle-class families just can't afford that now." 
To emphasize that these cuts are a big deal, he asked people to "tell members of Congress what a $2,000 tax hike would mean to you." He is now taking his message on the road, telling a group of Michigan auto workers on Monday that the end of the Bush cut would be "a hit you cannot afford to take." 
In any honest universe, this would be news. President Obama says the middle class benefits mightily from the Bush tax cuts and cannot afford to see them expire.
Clearly, maintaining middle class tax cuts is now a hot potato political issue with significant consequences as the Republicans and Democrats calculate and plot ways to beneficially politicize the issue. In reality the Dems really don't care about going over the so-called fiscal cliff because they've opposed the Bush tax cuts for years.  Moreover, if the Republicans refuse to increases taxes on the rich as the Dems demand and if the middle class incurs taxes increases because of the Republican refusal to raise taxes on the rich (incomes over $250,000 a year), the Dems can just point the finger of blame at the Republicans.  The advantage point goes to the Dems because it's difficult to see how they can lose.

Besides playing the calculated game of political blowback on the Bush tax cuts, there are other profoundly significant issues.  The Bush tax cuts had a $5 million dollar exemption on the estate tax before an estate tax rate of 35% kicked in.  When the Bush tax cuts expire, the floor for the estate tax drops to $1 million and the tax rate increases to 55%.  The estate tax will have a devastating impact on small family businesses who simply don't have the cash to pay the tax.

Are New Inheritance Tax Laws Really Aimed At The Rich? Or Is The Average Joe Getting Caught In The Cross Fire?
What Are The New Inheritance Taxes Going To Be?

Currently, there is a $5 million estate tax exemption, and only those who stand to inherit an estate that exceeds that amount have to pay a tax rate of 35%. In January, 2013, many liberals have been celebrating what they consider to be a fair tax on the rich person. What they don’t realize is that the$ 1 million exemption and 55% taxation for those whose estate exceeds 1 million, will affect many Americans who could hardly be considered as wealthy. In this day and age, it doesn’t take much for an estate to add up to a million dollars. If you consider house, 401(k), savings, and other investments and assets, many people will fall into the new tax category.

What Will Happen To The Average Small Farmer When The New Inheritance Tax Is Imposed
97% of farms, small ranches, and small businesses will be affected by this tax. The problem is, the recipients of the inheritance are small-time people who barely make enough each year to scrape by. Individuals like this will have no option but to come up with the 55% tax to give to Uncle Sam, or they will be forced to sell the family farm or business that has been in the family for generations. Most farmers don’t just have $500k just sitting around as a tax fee for a property worth 1 million dollars.

The new inheritance tax could represent the end of an era. The death of the “family farm” as we know it to be today. Even if you are not a farmer or a business owner, your inheritance may be at stake.
The above estate tax scenario is a crushing blow to small family businesses.  However, the situation is compounded by the fact that the vastly increased estate taxes on middle class entrepreneurs are also endorsed by the states because Fedzilla engineered a revenue sharing  scheme.

Why States May Want to Fall off the 'Cliff'
In an example of federal and state tax law interaction that gets little notice on Capitol Hill, 30 states next year could collect $3 billion more in estate taxes if Congress and President Barack Obama do not act soon, estimated the Urban-Brookings Tax Policy Center, a Washington think tank.

The reason? The federal estate tax would return with a vengeance and so would a federal credit system that shares a portion of it with the 30 states. They had been getting their cut of this tax revenue stream until the early 2000s. That was when the credit system for payment of state estate tax went away due to tax cuts enacted under former President George W. Bush.

With the return of the credit system next year as part of the "cliff," states such as Florida, Colorado and Texas -- which have not collected estate tax since 2004 -- could resume doing so. California Gov. Jerry Brown has already begun to add the anticipated estate tax revenue into his plans, including $45 million of it in his 2012-2013 revised budget.
Basically, the entire tax structure at all levels is a war on small business, a war on entrepreneurship, a war on the family farm, and a war on the ability of ordinary Americans to earn a living and support their families.  Meanwhile, the Democrats are lusting and foaming at the mouth to sink their carnivorous  fangs into those productive and entrepreneurial bourgeois that they hold in the highest contempt and vow to reduce to serfs and beggars.  A farmer really doesn't have anything of value except his dirt.  Why not just take it away from him and give it to Big Ag to grow more taxpayer subsidized GMO poison food?

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