I am not a daredevil. I don’t like risk, change, or surprises. Maybe that’s why I’ve never been cliff diving. But, come January 1, 2013, it looks like all Americans will be diving off that proverbial cliff whether we want to or not.
I am, of course, talking about the much-maligned, much-debated “fiscal cliff.” The basic premise is that if Congress fails to come up with a solution to the debt by the start of 2013, then the automatic budget cuts outlined when lawmakers passed the debt ceiling extension in August of 2011 will go into effect. At the same time, the Bush-era tax cuts and payroll tax cuts would expire, a double-punch to the economy’s gut. Republicans have even added health taxes – a result of the Patient Protection and Affordable Care Act – to the list of factors contributing to this cliff. The Democrats want to see higher taxes on the rich, while Republicans want to cut entitlement programs designed to help the poor. Neither side wants to budge.
But what would the impact be? Phil Izzo at the Wall Street Journal points to charts from the nonpartisan Congressional Budget Office (CBO), and the news isn’t good. If politicians fail to find an alternative fiscal solution, we could be looking at another recession, with the American economy contracting 0.5% in 2013. With the dip in GDP would also come a new spike in unemployment, with a projected jobless rate topping 9% by the fourth quarter of 2013. The U.S. debt situation would improve, though – but potentially at the expense of economic stability.
Darwin over at Darwin’s Finance says the fiscal cliff is no reason to panic in his post The Fiscal Cliff Is Looming! You Should Just Yawn. Here’s Why. He argues that while the cliff may look scary, it’s really just a political ploy both sides are attempting to use to gain an advantage heading into the November elections.
Conveniently, this occurs right after the next presidential election, so we have to pretty much vote on faith this November that we can elect the right president to actually show some leadership and get something done.
Now, as they like to say, there are only two certainties in life: death and taxes. So let’s look at some more links about the obviously more painful of the two.
4 Reasons We May Be Headed for a Recession [Thousandaire]
William is guest posting over at Thousandaire this week, and he’s focusing on what could be another recession in 2013. While the fiscal cliff is on the list, it’s actually all the way at the bottom.
Save Money and Reduce Taxes at the Same Time [Cool to Be Frugal]
“Tax laws allow for a number of deductions and benefits that can help you keep more of your earnings. These deductions are perfectly legal,” writes Cathy. Well, you don’t have to tell Mitt Romney twice! But the fact is, we all do our best to minimize the amount of taxes we pay to Uncle Sam. Find out if you’re making the most of these legal deductions.
Ignore the Politicians and Take Control of Your Financial Freedom [Free Money Finance]
Feel like you’ve handed your financial future over to the politicians and the candidates running for office? You’re not alone – but you’re also wrong. “During elections the political dialogue assumes that the wellbeing of your future is out of your control and in the hands of politicians. This is simply not true,” writes this week’s guest poster at Free Money Finance.
26 Companies Paid CEOs More Than They Paid in Taxes [The Big Picture]
This title speaks for itself, and you’re probably dying to know which companies are included on this list. You’ll be amazed at how many big-name corporations paid so little in taxes – if anything.
Federal Taxes as a Percentage of Household Income [Saving to Invest]
We’ve all heard that the rich have grown richer over the past 30 years, but that’s only a part of the story. “Unlike the lower income groups, the rich also had the largest relative drop in income after the 2008 financial crash,” reports Andy. He’s got the stats to back it up too.
How Much Tax do the Most Profitable Companies Pay? [Money Talks News]
“Many high-profit American companies don’t pay close to 25%, even when you combine what they paid both here and abroad,” writes Brandon at Money Talks News. Have you paid a higher effective tax rate than Apple, a company that just became the world’s all-time “richest” in August? You may want to put your iPad down now before you get too angry.
Tax-Gain Harvesting [The Oblivious Investor]
I’ve heard a lot about tax-gain harvesting in the news lately – specifically as it applies to Mitt Romney – but I really didn’t know how it worked. A huge thanks to Mike for providing a simple, easy-to-understand refresher on what can otherwise be a complicated topic.