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On The New Definition Of "Rich", A $620 Billion Tax Hike Offset By $15 Billion In Spending Cuts, And Much More

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Tue, 01 Jan 13 12:19 PM | 597 view(s)
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Submitted by Tyler Durden on 01/01/2013 09:49 -0500

Debt Ceiling
Gambling
Gross Domestic Product
New Normal
Ohio
President Obama
Real estate

We greet the new year with an America that has a Fiscal Cliff deal. Actually no, it doesn't - not even close. What it does have is an agreement, so far only at the Senate level which voted a little after 2 AM eastern in an 89-8 vote (Nays from Democrats Bennet, Cardin, Harkin, and Republicans - Lee, Paul, Grassley, Rubio and Shelby), to delay the all-important spending side of the Fiscal Cliff "deal" which "can is kicked" in the form of a 60 day extension to the sequester, to be taken up "eventually", but hopefully not on day 59 at the 11th hour, the same as fate of the all important US debt ceiling, which remains in limbo, and which now effectively prohibits America from incurring any new gross debt as the $16.4 trillion debt ceiling was breached yesterday. In other words, America's primary deficit sourcing mechanism is now put on hiatus, and all new net debt will come at the expense of defunding various government retirement funds as the 60 day countdown to the real showdown begins: the debt ceiling, as well as the resolution of the spending side of the Fiscal Cliff deal.

What did happen last night was merely the legislating of the inevitable tax hike on the 1%, which was assured the night Obama won the presidential election, something not even the most rabid Norquist pledge signatories had hope of avoiding. This was the first income tax hike in nearly two decades. A tax hike which, regardless of how it is spun, will result in a drag in consumption. It was also the brand new definition of rich, with the "$250,000" income threshold now left in the dust, and "$400,000 for individuals ($450,000 for joint filers)" taking its place. If you make more than that, congratulations: you are now "rich". You will also

http://www.zerohedge.com/news/2013-01-01/new-definition-rich-620-billion-tax-hike-offset-15-billion-spending-cuts-and-much-mo

Cursive
Cursive's picture

@mikla

How so? I find the whole tax code odious, but how do these provisions target S-corp filers? They could always revoke the S election, too.

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Tue, 01/01/2013 - 10:40 | 3111958 mikla
mikla's picture

Because S-corp includes the business profit/loss on the personal return (there is no filing for the business separately), a small-business owner receiving $50K in "income" (salary+ bonuses) would appear to *also* have received all of the profits from the business, even though the small-business-owner did not actually receive that money to buy yachts (that money is re-invested into the business, and not actually received as "income" to the owner; but it is considered income, so it is taxed).

This is especially important/painful to any small-business that needs to build a "capital-reserve", since any "lines-of-credit" from banking institutions to small businesses are no longer reliable (cannot be gotten, nor trusted, because they are commonly being "withdrawn" by the bank without notice and for no reason).

Note that C-corp Google and Apple don't have this problem -- they can move the business income to ensure that it is not "received" (is not counted as "dividend" nor "profit"), and thus not "taxed".

Yes, many small businesses might be able to move from S-corp to C-corp, with restrictions, and expense (different and more costly rules now apply), but not retro-actively.

This is probably part of the intended effect. The current government *hates* small business, because only "large" businesses hire lobbyists. Large businesses are easier control, and to shake-down for cash. (I'm not joking here.)




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Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.




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