Monday Headlines

Fiscal Cliff Discussions Slow As Lobbying Speeds Up
The Obama administration is aggressively encouraging its supporters to lobby congressional members on behalf of its plan to increase tax rates on the top earners. The tactic is reflective of the new strategy being employed by Obama, who is trying to seize on his victory in November to push a harder stance in negotiations.

The issue of adjusting tax rates, as opposed to increasing revenue through elimination of tax loopholes, is at the center of the fiscal cliff discussions.

Small Businesses Hold Negative View Post-Election
Small businesses are often seen as the engine of the American economy due to their role in job creation. But many owners are looking toward 2013 with a pessimistic attitude, according to a Gallup poll. In fact, the poll finds that small business owners are the most pessimistic they have been since 2010.

Owners’ expectations for their financial situation, cash flow, capital spending, and hiring over the next 12 months all worsened significantly in November.

  • One in five small-business owners (21%) expect the number of jobs at their company to decrease over the next 12 months, the highest percentage Gallup has measured to date.
  • One in three owners (34%) expect their company’s capital spending to decrease over the next 12 months — the highest recorded since July 2010.
  • Twenty-eight percent of owners expect to be in a “poor” financial position 12 months from now — the highest Gallup has measured to date.

Did The Oracle Fail Economics 101?
Swaminathan S A Aiyar writes in Forbes, that Buffett’s plan to tax the top 2 percent would not pass the Econ 101 test, primarily because it equates to double taxation.

“Taxing transfers (like dividends) amounts to double taxation. The IRS first taxes profits earned by a corporation, and again taxes the proportion of profits distributed as dividends. Asking whether a fair tax rate for dividends is 15 percent or 30 percent misses the point that any double taxation at all is unfair. In principle, taxing dividends is no different from taxing the allowance you give to your kids, which is also a transfer,” he concludes.

A Balanced Approach Must Include Entitlement Reform
Robert Samuelson argues in The Washington Post that the Obama administration has to include reform of Social Security and Medicare if it wants to really solve the deficit and debt problem.

“Deficit reduction should include higher taxes on the richest Americans. But there are practical limits. Already, Obama’s proposals would, in combination with state taxes, raise some top marginal tax rates to about 50 percent. As taxes rise, so do risks of adverse economic effects and more tax avoidance. Spending must be addressed. Government has other responsibilities besides sheltering the elderly,” says Samuelson.



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