Latest Fiscal Cliff Deal....

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Submitted by Coronita on December 31, 2012 - 7:45am

Well if this is true it's actually pretty good (for me that is).....

http://finance.yahoo.com/news/two-sides-...


The Democrats made several key concessions yesterday in the Fiscal Cliff negotiations.

As a result, the two sides are absurdly close together. If we don't get a deal at this point, the entire country will be justified in being outraged.

Here's the Democrats' latest offer, as reported by Lori Montgomery and Paul Kane of the Washington Post:

* The Democrats agreed to raise the income threshold for tax increases to $450,000 a year (couples) from the prior $250,000. The Republicans are insisting on $550,000 threshold. This is a massive tax cut for almost the entire country relative to the rates that will otherwise take effect on January 1. (So agree on $500,000 already and call it a day.)

* However, to the Republicans' chagrin, the Democrats insist on raise capital gains and dividend taxes to 20% on households over $250,000 and reducing some of the allowable deductions. Importantly, this, too, is a massive tax cut relative to the scheduled changes, which would boost dividend taxes to 40% on incomes over $250,000.

* The Democrats conceded on the estate tax: They'll keep the threshold for taxable estates at $5 million, with a 35% rate over that level. This, again, is a massive tax cut over current law, in which the threshold will drop to $1 million with a much higher rate.

* The Democrats' offer would permanently protect middle-class households from the Alternative Minimum Tax. No details on how this would work.

* On the spending side, the Democrats' offer would delay the "sequester" (automatic spending cuts) until 2015. This would cost an estimated $200 billion. But it would avoid the cuts to the military budget that the Republicans are so desperate to avoid.

* The Democrats would also extend unemployment benefits for a year, extend farm subsidies for a year, and avoid a 27% cut in Medicare payments to doctors. The Republicans say they want offsets to these spending cuts.

When you boil all that down, the two sides are absurdly close.

The Republicans say they want spending cuts to offset the postponement of the sequester spending cuts, but the Republicans do not appear to have proposed anything in particular. Also, the postponement will only cost $200 billion over two years, which is not much on a government budget of $4 trillion a year. And the postponement of the cuts will avoid a shock to the weak economy, which will likely help on the tax revenue side.

On the tax side, the country will be getting a massive tax cut over the new taxes that will take effect on January 1. The current low income and investment tax rates for 98% of the country would be extended, and the income tax rates would be extended on even more households. The fact that the two sides are still haggling over whether the threshold for a modest income tax increase should be $450,000 or $550,000 is almost comical.

(At some point, taxes are going to have to rise modestly for everyone. If it's this hard to raise taxes even on the richest 1% of the country, imagine what the fight will be like when this increase will hit all Americans).

It's worth noting that this proposed deal would be good for the economy, especially relative to the Fiscal Cliff. The postponement of most of the tax hikes and spending increases would preserve the status quo, avoiding the austerity shock that will otherwise hit growth. The deal would likely boost the deficit over the next two years, but, again, neither side is arguing that the Fiscal Cliff would be preferable to a deal.

Submitted by flyer on January 1, 2013 - 2:19am.

We had the news on in the den during most of "party time" tonight, and it seems things are looking better than expected--for now. Feel sorry for future generations, though.

Happy New Year!

Submitted by Coronita on January 1, 2013 - 3:22am.

flyer wrote:
We had the news on in the den during most of "party time" tonight, and it seems things are looking better than expected--for now. Feel sorry for future generations, though.

Happy New Year!

Hell, I'm still working night before new year. Find me a millienial that is. Too darn bad...I tried to care, but I gave up...I'll just take care of my own kid and be done with it. Everyone else's kid is everyone else's problem.

Submitted by Coronita on January 1, 2013 - 3:26am.

Here's the bill. In it's glorious 144 pages....
http://i2.cdn.turner.com/cnn/2013/images...

Wonder how many house reps are gonna read it tonight/today :)

I'm gonna try while I'm waiting for folks overseas.

Submitted by flyer on January 1, 2013 - 5:25am.

flu wrote:
flyer wrote:
We had the news on in the den during most of "party time" tonight, and it seems things are looking better than expected--for now. Feel sorry for future generations, though.

Happy New Year!

Hell, I'm still working night before new year. Find me a millienial that is. Too darn bad...I tried to care, but I gave up...I'll just take care of my own kid and be done with it. Everyone else's kid is everyone else's problem.

Still up with a house full of guests, so thought I'd reply flu.

I agree that we all absolutely have to take care of our own, and, believe me, everyone in our family has done so to the greatest degree possible. We've all tried to create plans so that our kids will enjoy their lives as much as we have.

It's still unfortunate to realize what those who may not have families who have planned well for them will be facing in the future with regard to jobs, housing, retirement and, and. . .

Only time will tell how all of this will play out.

Submitted by Coronita on January 1, 2013 - 8:36am.

So... The fiscal cliff deal will cap itemized deductions. I believe the cap rule will be as follows.

If your AGI is

$250k for single filers
$300k for joint filers
$275k for head of houshold

your itemized deduction will be reduced by the lesser of either
a) 3% of the amount of you above your AGI
or
b) 80% of your itemized deduction amount

So using the governments new definition of "rich"

$400k AGI for single
$450k AGI for couples

* If single, their itemized deduction will be reduced by (400-250)k * 0.03 = $4500
* If couple, itemized deduction reduced by (450-300)k *0.03 = $4500
* If HofH, itemized deduction reduced by (400-275)k *0.03= $3750

Interesting to note though... if you live in CA, and have a huge property tax and state income sales tax, depending what has been revised by the AMT (which I'll figure out), this might not matter to anyway, because at those income levels, changes are AMT is kicking in most likely before being hit with these itemized deduction caps...

So higher w-2 income earners are probably ok with this, up to the governments new definition of "rich" threshold

Sources:

Section 108 of:
http://www.gpo.gov/fdsys/pkg/PLAW-107pub...

And

Section 68 of:

http://www.law.cornell.edu/uscode/text/2...

Note to GOP House...Take the deal...

Submitted by CA renter on January 2, 2013 - 3:27am.

SD Realtor wrote:
Funny because the so called fiscal cliff was in reality what really needed to be done. It cut spending (mostly in defense) and it raised taxes.

Also this mess was the result of yet another cave in on the debt limit. So we get another debt limit debate in another what, 6 weeks?

Hooray!!!

Keep spending baby!!

Could not agree more, SDR.

Submitted by Coronita on January 2, 2013 - 7:11am.

...but they promised they wouldn't raise taxes for anyone but the rich....Oh wait, payroll taxes are going back up...Uh oh.... Too damn bad....

Told ya...It wasn't gonna be just the rich that are paying for this....Long term it's coming out of the middle class...what's left of it....

http://money.cnn.com/2013/01/02/smallbus...

But hey, it's just like an extra 2% in payroll taxes for everyone. Not a big deal..I'm glad everyone has to pay for something to support this sort of government spending...

Everyone's paycheck is about to take a hit, and it's not the boss' fault. But some business owners say it's a tough talk to have.
The rate of workers' payroll taxes, which fund Social Security, has been 4.2% for the past two years. As of Jan. 1, it's back to 6.2%, on the first $113,700 in wages.

That forced Mike Brey, who owns four Hobby Works shops near Washington, D.C., to notify his store managers about the upcoming change during a conference call Monday. He called the experience uncomfortable. "These are the people who can least afford it," Brey said.
Brey said he can't raise compensation to ease the pain. Enduring the recession meant cutting his own salary, firing workers, taking on half a million dollars in debt and raiding his own 401(k).

http://finance.yahoo.com/news/despite-de...

Submitted by livinincali on January 2, 2013 - 8:31am.

flu wrote:
...but they promised they wouldn't raise taxes for anyone but the rich....Oh wait, payroll taxes are going back up...Uh oh.... Too damn bad....

Told ya...It wasn't gonna be just the rich that are paying for this....Long term it's coming out of the middle class...what's left of it....

http://money.cnn.com/2013/01/02/smallbus...

But hey, it's just like an extra 2% in payroll taxes for everyone. Not a big deal..I'm glad everyone has to pay for something to support this sort of government spending...

The 2% increase is going to bring in far more money than the tax hikes on the rich. It's about $120+ billion per year while the tax hikes on the rich are expected to bring in about $600 billion over 10 years. I wonder how long wall street stays in a jolly mood before it realizes how weak this can kick was.

Submitted by no_such_reality on January 2, 2013 - 9:03am.

Wall Street will stay jolly. The Gub'ment again confirmed that they are delusional narcissists that are unwilling to have the confrontation with their debt junkie constituency.

I'm partly bouyed by a ad-hoc poll on the LA Times on the fiscal cliff deal article. It's showing 90% saying spending is the problem. That's on the typical uber left LA Times readers.

The fiscal cliff itself was a gimme. It was taxes and a minimal $110 billion spending cut. Barely 2 cents on the dollar in cuts.

We shouldn't worry about the cliff, we should worry about the tsunami, which is the 10% annual increases we are seeing in Medicare and Social Security.

Now, how to convert my income streams to cash and barter?

Submitted by an on January 2, 2013 - 9:13am.

flu wrote:
Hell, I'm still working night before new year. Find me a millienial that is. Too darn bad...I tried to care, but I gave up...I'll just take care of my own kid and be done with it. Everyone else's kid is everyone else's problem.
Don't worry too much about us Millennial. We're no different than any other generation. After all, isn't the boomer's average retirement account is around $50k?

Submitted by Coronita on January 2, 2013 - 9:24am.

AN wrote:
flu wrote:
Hell, I'm still working night before new year. Find me a millienial that is. Too darn bad...I tried to care, but I gave up...I'll just take care of my own kid and be done with it. Everyone else's kid is everyone else's problem.
Don't worry too much about us Millennial. We're no different than any other generation. After all, isn't the boomer's average retirement account is around $50k?

AN, you're really an exception...Millenials are slightly better than Generation X (not much, but slightly better....) Baby boomers by far are the worst when it comes to entitlements :)

Submitted by an on January 2, 2013 - 10:34am.

flu wrote:
AN, you're really an exception...Millenials are slightly better than Generation X (not much, but slightly better....) Baby boomers by far are the worst when it comes to entitlements :)

I'm pretty a lot of us on here are exceptions to our respective generation.

Submitted by carlsbadworker on January 2, 2013 - 11:30am.

no_such_reality wrote:
I'm partly bouyed by a ad-hoc poll on the LA Times on the fiscal cliff deal article. It's showing 90% saying spending is the problem. That's on the typical uber left LA Times readers.

They favor cut spending but not any spending cut that will impact them. Just look at last year's CA propositions for increasing taxes on education. Just like people say that revenue should be raised but it should not get raised from their taxes.

So as long as we tax somebody else and cut spending that impacts somebody else. As a nation, we will do just fine.

Submitted by flyer on January 2, 2013 - 7:43pm.

AN wrote:
flu wrote:
AN, you're really an exception...Millenials are slightly better than Generation X (not much, but slightly better....) Baby boomers by far are the worst when it comes to entitlements :)

I'm pretty a lot of us on here are exceptions to our respective generation.

I think you and probably many in your age group are an exception, AN, and will do very well, just like I, and most people I know are exceptions to the "Baby Boomer" generalizations.

Yet, when you look at the overall stats, in all age groups, (and I know I've said this before) only around 5% of the population have a net worth of over a million. In fact, I just read the median net worth of most Americans is around $57K, including primary residence--really??!!

http://money.cnn.com/2012/09/11/news/eco...

So, you have a very large percentage of the population who are too rich for assistance, yet too poor to sustain themselves long-term, (i.e. through retirement) and, IMHO that's a real concern for our society as a whole.

I realize most of us here are in at least the top 10%, but this is a real eye-opener. Moral: As flu said--take care of your own!!

Submitted by paramount on January 3, 2013 - 2:40am.

Are we certain future generations are going to pay for this all of this debt?

From what I'm reading, about 80% of households will pay around $1600-$1700 more in taxes per year (federal).

And that doesn't include California tax increases.

At least that's my understanding...

Submitted by flyer on January 3, 2013 - 6:50am.

You may be referring to the reinstatement of the 6.2% payroll tax, which will increase taxes for most households.

IMO, this particular source of revenue will amount to a drop in the bucket with regard to offsetting the trillions in debt we are amassing in this country, the bulk of which younger generations will definitely pay for in one way or another.

Submitted by livinincali on January 3, 2013 - 7:44am.

paramount wrote:
Are we certain future generations are going to pay for this all of this debt?

No they probably won't. They'll probably be more than willing to throw granny under the bus, right after they default on their obligations to China.

Submitted by ninaprincess on January 3, 2013 - 7:58am.

They made such a big fuss cutting approximately 5% of the deficit spendings ($65 bil per year compared to $1100 bil deficit spendings). We are in so much trouble.

I was hoping for the fiscal cliff to happen. Cutting 10% of the government is a good starting point. I work for the government and I think laying off 20% of the most lazy peopole in my group would not affect productivity at all.

Submitted by Coronita on January 3, 2013 - 9:07am.

I think what we have here is an opportunity. The majority of Americans are going to piss away money and spend even more money they don't have. A small percentage of Americans will accumulate even more . Especially now we are pretty certain that cheap credit for well qualified people is here to stay for some time. Coupled with what appears to be reinflating asset prices (home and stock market) I think it is going to be great for people who are comfortable with taking a calculated above average risk. Morale of the story.....borrow as much as you can at these ridiculous fixed term rates. Because in a few years this is gonna look cheap.

Submitted by no_such_reality on January 3, 2013 - 9:10am.

Interesting squeeze coming up for the housing market and population centers. I'm seeing a huge 0.5% split between conforming and jumbo.

How I have a choice, do I burn a rental down payment to push my primary to a conforming level?

Submitted by an on January 3, 2013 - 5:17pm.

flu wrote:
Morale of the story.....borrow as much as you can at these ridiculous fixed term rates. Because in a few years this is gonna look cheap.
That's the way I felt when the interest rate I get from a CD drop bellow 3%. It has been working well so far. Here's to hope that we'll see a repeat of 1970-80.

Submitted by The-Shoveler on January 3, 2013 - 5:40pm.

AN wrote:
flu wrote:
Morale of the story.....borrow as much as you can at these ridiculous fixed term rates. Because in a few years this is gonna look cheap.
That's the way I felt when the interest rate I get from a CD drop bellow 3%. It has been working well so far. Here's to hope that we'll see a repeat of 1970-80.

1970-80 U.S.A. Cities looked more like Asia cities as far as smog an most people smoked (it was the cool thing to do) and people were expect to (and generally did) only live 1 or 2 maybe 5 years past retirement.
That would not be kind to the current crop of retirees so there is a lot of resistance right now to ANY!!! inflation.

But yea that is really the only way out baring a major flush down the toilet of the economy.

5-7% inflation is really fairly normal IMO.

Submitted by carlsbadworker on January 3, 2013 - 5:48pm.

flu wrote:
Morale of the story.....borrow as much as you can at these ridiculous fixed term rates. Because in a few years this is gonna look cheap.

I won't over-borrow just because the rates are low.

Couple of years ago when Greenspan first started to offer ridiculous low interest rate, I had a friend who said "I don't care the housing price is high. Couple years from now, maybe the price will drop but the interest rate will move up. And we end up in the same boat". Fast forwarding a couple years, he has now foreclosed his house and moved to Arizona.

Maybe the rate will become cheaper again...after the initial bond price hike kills corporate America which is now very addicted to cheap debt. And if unemployment is 25%, I don't know how one (household or corporation) can pay back the principal regardless of the interest rate.

Submitted by flyer on January 3, 2013 - 6:05pm.

livinincali wrote:
paramount wrote:
Are we certain future generations are going to pay for this all of this debt?

No they probably won't. They'll probably be more than willing to throw granny under the bus, right after they default on their obligations to China.

Actually, you may be right, and I wouldn't be surprised if either of those things happened. In many ways the younger generations have been thrown under the bus with regard to well-paying jobs, affordable housing, retirement, etc., so turnabout is fair play.

My kids who are all in their late 20's were lucky, but the great majority of their friends around their age and younger, seem to be fighting an uphill battle on all fronts, and it doesn't look like it's going to get better for them any time soon.

On the plus side, as flu and AN mentioned, for those of us who have the funds, the past few years have been a fantastic time to further cash in on some great buying opportunities with regard to real estate, etc. In that way, it's actually been a great time to accumulate even more wealth that can be passed on to your kids.

Submitted by an on January 3, 2013 - 6:07pm.

The-Shoveler wrote:
1970-80 U.S.A. Cities looked more like Asia cities as far as smog an most people smoked (it was the cool thing to do) and people were expect to (and generally did) only live 1 or 2 maybe 5 years past retirement.
That would not be kind to the current crop of retirees so there is a lot of resistance right now to ANY!!! inflation.

But yea that is really the only way out baring a major flush down the toilet of the economy.

5-7% inflation is really fairly normal IMO.

I'm not talk about a way for the US economy. I'm just saying that I'm set up to reap the most return if we see a repeat of 70-80. If we don't, I'll do fine but not as well.

Submitted by an on January 3, 2013 - 6:16pm.

carlsbadworker wrote:
flu wrote:
Morale of the story.....borrow as much as you can at these ridiculous fixed term rates. Because in a few years this is gonna look cheap.

I won't over-borrow just because the rates are low.


I doubt flu mean max out borrowing regardless of reason. So, even if we don't see massive inflation, the rental income would more than suffice.

Submitted by SD Realtor on January 3, 2013 - 7:06pm.

Maybe it will be an inverted sellout. That is, the younger generation that is screwed by our selfish behavior now, will perhaps in 15 or 20 years massively slash medicare and social security for senior citizens and simply say, sorry we cannot afford your care... so since you put us in this mess, we will create mega sized institutions with nominal care that will be a fraction of the cost of your care. You can go there to live and be cared for, or your families can take care of you.

Wouldn't that be a laugh!

Submitted by The-Shoveler on January 3, 2013 - 7:14pm.

Robots,

or maybe they will hook us up Matrix like so we think we are living in shady acres retirement community,

Or

Retirement communes,

some combination of the above,

Submitted by flyer on January 3, 2013 - 7:36pm.

SD Realtor wrote:
Maybe it will be an inverted sellout. That is, the younger generation that is screwed by our selfish behavior now, will perhaps in 15 or 20 years massively slash medicare and social security for senior citizens and simply say, sorry we cannot afford your care... so since you put us in this mess, we will create mega sized institutions with nominal care that will be a fraction of the cost of your care. You can go there to live and be cared for, or your families can take care of you.

Wouldn't that be a laugh!

Actually, it would be a laugh, since everyone will be old someday, and unless they are independently wealthy, something like this would ultimately effect their own grandparents, parents, and, eventually even themselves.

That's why I, and most everyone I know have planned their lives so we won't be dependent on medicare or social security. Along with our own financial assets, we'll receive pensions and healthcare from our employers. Darn unions.

Submitted by SD Realtor on January 3, 2013 - 9:19pm.

Well yes flyer and you are not unlike most people on this board. Unfortunately that level of preparation is representative of a very very very small fraction of the population. The other hundred or so million people who will be 60 or older in about 15 to 20 years are pretty screwed wouldn't you say?

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