Monday, October 17, 2011

Do Nothing And OWS Gets What It Wants

One of the ongoing themes from the Occupy Wall Street protests is that the wealthy aren't paying their fair share or that they should be paying and doing more to make up for the federal government bailouts that helped keep the credit markets afloat.

Well, here's something that people probably don't realize.

If Congress does nothing, the tax rates will increase to their pre-2001 levels in 2013, just after the 2012 Presidential elections. If President Obama is reelected, this means that he will be able to thwart Republican attempts to further roll backs of the end of the Bush-Obama era tax rate reductions.

The reduced rates were initially scheduled to expire after 2010, but Congress extended the lower rates as part of plan to avoid tax hikes in to the teeth of a recession, but it didn't generate the kinds of job growth that one should have expected.

So, now if the OWS protesters that continue to grab attention at Zuccotti Park are paying attention, they'd know that doing nothing and making sure that Congress is divided and fractured to the point of stalement will make sure that the tax rate reductions expire and are replaced by the top tax rate of 39.6%, and a whole slew of other tax adjustments expire at the same time.

It would be a huge infusion of tax revenues - but not nearly at the rates that some of the protesters would want.

Complicating matters some is the deficit committee that is expected to give their recommendations this November. There are some on the panel who refuse to even consider tax hikes, even though no plan of spending cuts alone will cause the budget situation to improve. It will take a combination of tax increases and spending cuts to bring the budget into alignment (along with a healthy economy on which everything rides). Lower energy costs would also provide a boost for the economy, but there are now concerns that heating energy costs are likely to be 25% above last year's already high levels. I've seen that first hand as my oil contract is significantly higher than last year's levels and while I had some measure of price protection based on my contract, it's going to be hellish for millions living in the Northeast, particularly those reliant on oil heating.

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