Credits: REUTERS/Kevin Lamarque
Politicians in Washington have finally struck a deal to avoid the dreaded fiscal cliff. The cliff was a slate of automatic tax hikes and spending cuts that would come into effect in 2013 unless Republicans and Democrats could hammer out an alternative plan.
After all the hype about the looming cliff, all the rejected deals and partisanship jockeying, a deal to avoid this catastrophe was finally reached.
But there were no celebrations or bipartisan camaraderie over this last-minute bill. Congress technically avoided the fiscal cliff, but let’s not be naive — taxes will still be hiked and the fiscal situation in Washington is still on the verge of calamity.
This fiscal cliff bill introduces $620 billion in new taxes, which means more money from the vast majority of Americans in a frail economy.
The top-bracket tax rate will rise from 35% to 39.6%.
Estate taxes (taxes on people who have died) will rise from 35% to 40% on those with more than $5 million in assets. They used to say the only certainty in life is death and taxes. Thanks to President Obama, there is only one certainty in the afterlife: More taxes!
The top tax rate on capital gains and dividends tax will increase from 15% to 23.8%. This discourages investors — the folks needed to grow the economy and build new opportunities — and is devastating to the everyday folks who rely on the stock market for their old-age pension.
More than 80% of households with incomes between $50,000 and $200,000 will see their taxes go up in 2013. The average increase will be $1,635.
Most of the hype around the fiscal cliff was the bargaining process and the supposed unwillingness of Republicans to compromise. Republicans were fighting for spending cuts, while Democrats were fighting for tax hikes to pay for their spending.
Here’s what the two sides eventually agreed on:
$620 billion in new taxes and $15 billion in spending cuts.
That is a 41:1 ratio. For every $1 cut from spending, Washington has increased taxes by $41. Nice “compromise.” Where I come from, being beaten 41 to 1 is not a compromise. It is a one-sided fire sale of America’s future.
This deal carries a price tag of $4 trillion over the next few years. Add that to the $16 trillion federal debt already accumulated.
The U.S. government is spending money so fast that by the end of next month, it will run out of money. Again. And the president will have to go back to Congress to beg for another increase in the debt ceiling, which was raised to $16.4 trillion last year.
Margaret Thatcher used to say, “The problem with socialism is that eventually you run out of other people’s money.” The United States has run out of its own money and will soon run out of China’s money as well.
Americans are about to learn the hard way that they cannot have a European-style socialist government at the same time as they enjoy the prosperity and economic opportunities provided through free-market capitalism.
Low taxes don’t pay for big government.
It’s time Americans start paying for the big government they keep voting for. Maybe they’ll realize it is not good value for money.