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.

Fiscal Cliff for Idiots (Think Congress Here)

The politicians are franticly seeking a path for avoiding the ‘fiscal cliff’ so that they can be the saviors of the nation. Republicans are beginning to explain how they are willing to consider abandoning their pledge against any new taxes in the context of thinking about raising the tax-rates as being their duty and responsibility to the nation and the public. Democrats are making their case for having to address changes to the entitlement programs that are a major factor in America’s spending deficit. The entitlement programs include not only Medicare, Medicaid and Social Security; but also the Defense Department budget.

The politicians are ranting and raving about the impending disaster, catastrophe and Armageddon that will surely destroy the economic recovery, plunge the nation into a recession and produce wide-spread misery and suffering across the nation. Yes they are up to their old tricks, preparing the masses for the political brinksmanship that they will tout simultaneously as both a partisan and bi-partisan victory that they managed to accomplish to save us all.

 Now here’s the part that the politicians aren’t promoting. The fiscal cliff was the bi-partisan agreement reached last year in order to prevent the doom and gloom scenario that we were all collectively facing. And by the way the financial world has indicated that the prior cliff that the politicians caused because well their just incompetent cost the country even more in interest charges due to their inability to compromise on a good solution. The politicians aren’t explaining that this is a crisis of their own making and is a direct result of their not finding solutions to the obvious problems because their ‘principles’ and ‘values’ get in the way. In other words, they can’t do their jobs because they have to adhere to some strict code that is at odds with their duty and responsibility to the country and the people.

So let’s examine one of the ‘principles’ that prevents success: no increase in tax rates (even for a small select group of citizens). Many of the Republicans took a pledge to not raise taxes as a central tenet of their political philosophy and commitment. Now some Republicans are explaining that they may have to terminate their commitment to their prior oath to this principle, for the good of the nation. Considerations of some limited increase in tax rates may be necessary to address the problems facing the country. This would all be reasonable if there wasn’t a flaw in the logic. Now perhaps they will claim and argue that there is no flaw, no error or self-denial at work here; but it’s not what they think or claim at this point, it’s what you think.

In 2011, Congress passed the Sequestration bill that committed Congress to reduce the 2013 budget if they don’t come up with a plan to replace the $900 billion in cuts with which they threatened themselves. Now are approaching the deadline that will evoke the Sequestration consequences because Congress is demonstrating their inability to do their jobs. So the ‘Bush era’ tax-cuts will expire and tax rates will rise across the board for everyone in 2013. Let’s get this straight, Congress agreed to allow the tax-cuts to expire for everyone. So the difference between letting the current tax rate cuts expire and raising tax rates actively is that in one case the public will pay more in taxes and in the other the public would pay more in taxes. This distinction is a very important and significant difference indeed.

So Republican Congressmen/women voted on a bill that would not raise tax rates it would only allow tax-cuts to expire. How exactly do you think they can show the financial difference, or the difference in costs to the tax payer, or the difference in its impacts on the economy? Wasn’t Sequestration a vote for raising taxes? I am not saying it wasn’t for a good reason or that it’s not something that they shouldn’t have done; but how is it not doing the very thing that supposedly they would not do? I suppose that they perhaps made a mistake and in the spur of the moment they thought first about the needs of the country before they thought about their party’s political rhetoric.

So now we have tax rates about to rise, and Congress is desperately looking for a solution that doesn’t make them have to accept the consequences of the unthinkable agreement that they made.

Tomorrow, a simple view of how easy it is to deal with this particular problem.