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A few thoughts on Fiscal Agreement
Calculated Risk Blog ^ | 11/09/2012 12:33:00 PM | Bill McBride

Posted on 11/11/2012 7:34:05 AM PST by ExxonPatrolUs

As I've noted before, there is no "cliff" and January 1st is not a drop dead date.

There are a few things that appear certain (but you never know with policy):

1) The top marginal tax rate will increase from 35% to 39.6%.

2) The payroll tax cut is probably going away. This was the 2% payroll tax reduction that workers received in 2010 and 2011.

3) The Alternative Minimum Tax (AMT) relief will probably be extended (it is every year).

4) Given that the top marginal tax rate will increase - and that certain politicians can't vote for any bill with a tax increase - the agreement will probably be voted on in January after the Bush tax cuts expire.

I doubt we will see the current scheduled defense spending cuts (aka "sequestration"), but there will probably be some defense cuts.

Probably the most controversial issue, and least economically important (minimal drag on economy) is raising the top marginally tax rate. High income earners have a propensity to save, and raising their marginal rate a few percentage points will not have much impact on the economy - but it will significantly reduce the deficit.

TOPICS: Chit/Chat
KEYWORDS: cliff; fiscal

1 posted on 11/11/2012 7:34:10 AM PST by ExxonPatrolUs
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To: ExxonPatrolUs

I don’t believe you are correct in asserting that raising the marginal tax rate on the rich will significantly reduce the deficit. Please provide your calculations.

2 posted on 11/11/2012 8:49:52 AM PST by rcofdayton
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To: rcofdayton

I can’t believe it either. Just reposting some unique thoughts from a website I respect - The Calculated Risk Blog.

3 posted on 11/11/2012 9:19:37 AM PST by ExxonPatrolUs (The Ameritopian Motto: Gov The Sheeple, Buy The Sheeple, Bore The Sheeple)
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