Cliff Walk

December 3, 2012

12.03.12

All we hear about these days is the fiscal cliff, which we’re heading for come January 2013.  We read about Obama’s “offer” of $1.6 trillion in tax increases and choke, or we learn that the Republicans want the Democrats to start “acting like adults” and we cringe.  One reason for concern is the estimate that going over the fiscal cliff will reduce economic activity by 1 ½ percent. This on top of an already sluggish economy.

But what would happen if Congress fails to act in time? One prediction is that the 2013 democrats would push through a tax cut for all but the $250,000+ income group.  Additionally, the spending cuts outlined in the fiscal cliff will not hit all at once, mitigating their impact in the early months.

If it makes you feel any better about taxes, the 2010 tax rates are lower than any year in the 1980s.

Also if you look around the world we find that U.S. taxes as a percent of GDP are near the bottom.  Keep in mind the ingenuity of Americans to find ways to reduce their taxes through deductions and loopholes.  Next year is the 100 year anniversary of the federal income tax system.  We can also celebrate 100 years of finding ways to keep our taxes down.

Let the battle begin!!

“Those who are too smart to engage in politics are punished by being governed by those who are dumber.”
– Plato