Aspiring to Not Expire with the Expiring Tax-Cuts

Holly tax-rate Tax-man! The Bush-era tax-cuts are going to expire unless Congress does something.

We can conclude from this that even in Congress the laws of physics hold despite their wishes, desires and efforts in hoping that they don’t. There are cause and effect relationships in the actions or the in-actions that Congress takes, and time mores forward in its unrelenting and uni-directional passage into the future. And the expiration of the tax-cuts that expire on January 1^st will happen if Congress doesn’t explicitly act to re-create or restructure them.

But just because the current law expires and the tax-rates will rise doesn’t mean that the consequences are fixed and unalterable. The expiration date is a point in time on which the conditions are set to change the rules, but they are not violating any physical laws. Light will still travel at a constant speed in the universe. The hardships that the tax-rates would impose are only required to happen if Congress does nothing. Yes, Congress usually does nothing, at least nothing useful and nothing that serves the nation; but in this case Congress has to do something if they are correct that increase in taxes will be more harmful to the economy than taking some steps to mitigate that situation.

Now as long as we are going to expect Congress to act to some advantageous purpose for the country, we might as well expect Congress to act intelligently. It is a lot to expect, but with some help Congress might be able to react in a manner that will at least feign intelligence.

If the tax-rates are allowed to rise and go into effect on January 2^nd 2013, the impact to tax-payers is still capable of being adjusted. Congress could pass a tax-rate bill on January 7^th that reduced taxes to levels lower than they had been, to the same level as they were, or somewhere else. Net result is that tax-payers don’t have to be punished because Congress couldn’t get their job done.

So why can’t Congress just avoid the expiration boogey-man issue altogether and pass the same bill before the deadline? Isn’t this the simple solution? Well, no actually it’s not. To pass a bill that will pass before the deadline requires that compromises be made between the parties; and to some this is a dirty word. So before hand the leaders are afraid of their backers being unhappy with Congress acting responsibly. Because their electorate is no more intelligent than Congress itself is.

It’s much easier to wait for the current law to expire, create a ‘now you have the actual problem’ condition and reacting to the problem rather than just to the threat. Now to an intelligent person this is a stupid strategy, but to Congress this is one of the smartest things that they can deal with. What politician would have a problem promoting how they championed the restoration of a new tax-cut policy once the public is actually exposed to the taxes that they so don’t want to have to pay. Additionally, those in Congress who refuse to allow any accommodation to higher rates for any segment of the public do not have any ground to stand on once the higher rates are a fait accompli.

How do you avoid the fiscal cliff? Simple, you turn it into step toward your strategic objective.