Backdoor Taxes To Hit Middle Class – First It Was There, Then It Was Not
In what may be a case for CSI Miami, an article appeared in the media this morning, and shortly later any attempt to read it was replaced with “page not found’.
The first place I saw the article this morning was on the Yahoo news site, I believe it was originally a Reuters article, and Yahoo was just re-broadcasting it. Within minutes it was taken down. So I went looking for it again and I found it still up on the Canadian Yahoo site. That is where I captured the article. Good thing too, later the Canadian article was also removed.
What is with the case of the mysterious disappearing story in the mainstream media????
Here is the article, before it mysteriously disappeared:
NEW YORK – The Obama administration’s plan to cut more than $1 trillion from the deficit over the next decade relies heavily on so-called backdoor tax increases that will result in a bigger tax bill for middle-class families.
In the 2010 budget tabled by President Barack Obama on Monday, the White House wants to let billions of dollars in tax breaks expire by the end of the year — effectively a tax hike by stealth.
While the administration is focusing its proposal on eliminating tax breaks for individuals who earn $250,000 a year or more, middle-class families will face a slew of these backdoor increases.
The targeted tax provisions were enacted under the Bush administration’s Economic Growth and Tax Relief Reconciliation Act of 2001. Among other things, the law lowered individual tax rates, slashed taxes on capital gains and dividends, and steadily scaled back the estate tax to zero in 2010.
If the provisions are allowed to expire on December 31, the top-tier personal income tax rate will rise to 39.6 percent from 35 percent. But lower-income families will pay more as well: the 25 percent tax bracket will revert back to 28 percent; the 28 percent bracket will increase to 31 percent; and the 33 percent bracket will increase to 36 percent. The special 10 percent bracket is eliminated.
Investors will pay more on their earnings next year as well, with the tax on dividends jumping to 39.6 percent from 15 percent and the capital-gains tax increasing to 20 percent from 15 percent. The estate tax is eliminated this year, but it will return in 2011 — though there has been talk about reinstating the death tax sooner.
Millions of middle-class households already may be facing higher taxes in 2010 because Congress has failed to extend tax breaks that expired on January 1, most notably a "patch" that limited the impact of the alternative minimum tax. The AMT, initially designed to prevent the very rich from avoiding income taxes, was never indexed for inflation. Now the tax is affecting millions of middle-income households, but lawmakers have been reluctant to repeal it because it has become a key source of revenue.
Without annual legislation to renew the patch this year, the AMT could affect an estimated 25 million taxpayers with incomes as low as $33,750 (or $45,000 for joint filers). Even if the patch is extended to last year’s levels, the tax will hit American families that can hardly be considered wealthy — the AMT exemption for 2009 was $46,700 for singles and $70,950 for married couples filing jointly.
Middle-class families also will find fewer tax breaks available to them in 2010 if other popular tax provisions are allowed to expire. Among them:
* Taxpayers who itemize will lose the option to deduct state sales-tax payments instead of state and local income taxes;
* The $250 teacher tax credit for classroom supplies;
* The tax deduction for up to $4,000 of college tuition and expenses;
* Individuals who don’t itemize will no longer be able to increase their standard deduction by up to $1,000 for property taxes paid;
* The first $2,400 of unemployment benefits are taxable, in 2009 that amount was tax-free.
(emphasis added)
So just what gives here? Was the original Reuters story just completely wrong and they pulled it off the air? Or did someone ‘urge’ them to pull it? Let’s call in CSI Miami to figure this one out.
UPDATE: Reuters states:
The Feb 1 story headlined "Backdoor taxes to hit middle class" is wrong and has been withdrawn. The story said lower-income families will pay more under tax provisions scheduled to expire Dec 31. The Obama administration’s budget calls for the extension of those tax provisions for households earning less than $250,000. There will be no substitute story.
Why do I feel that this will come up again?
President Obama Will Talk About More Jobs
On Wednesday evening, President Obama will hold his State of the Union address. Advance talk is circulating that President Obama will emphasize a new push to create jobs in America. Short of creating a Works Projects Administration (WPA) type program (established during the Great Depression and was the nations biggest employer before World War II, providing nearly eight million jobs) there is simply not much the President can do.
He can spent more stimulus funds that create a slew of temporary projects which give the illusion that the jobs market is improving, but creating real jobs that last is something that is nearly impossible for the Government to create.
It is often said that unemployment lags the real economy. But, it is different this time. Yes, it really is different this time. How do we know it is different?
The chart below depicts how many weeks people are unemployed. At no time has the duration of unemployment been as high as it is now. The chart says it all…
The President will probably try to convince the people that his administration has already created or saved nearly 1 million or more jobs from the stimulus package last year. But if it is based on the calculations discussed in my previous post on the subject (President Changes Definition), then I would be worried about any promises of new jobs.
All through the late 70’s and the 80’s American’s were told how great it would be in a ‘new global economy’. And many others warned that America’s strength in manufacturing would suffer. And suffer it did, today the United States makes very little. Everything from steel processing, electronics, and even customer support for your American bank is in another nation.
For America, the ‘new global economy’ has been a bust. As consumers we want everything to be cheap, and in that demand for lower and lower priced products they are being manufactured in countries where their employees can be paid just a fraction of what it would cost to be made here in America. Some companies even resort to manufacturing products in third world countries where child labor is used and unsafe working conditions prevail. This is what we get when the Wal-Marts of the world take over and push family run business out, and push cheap products made in China and other countries on the consumer while paying their employees here next to nothing.
Cheap products are one thing, but what are we really sacrificing just so we can get that toy for $5.00 cheaper, or the cheap products (with some even being unsafe) from the million dollar stores across America?
As Americans, are we guilty of creating the demand for cheaper and cheaper products? Are we responsible for the decline of America’s once great dominance in the world as a manufacturer? Or has all of this been a result of a global economy that seized the United States consumer with the enticement of cheap products? All good questions and no easy answer. But I would like to see some large American corporations actually make their products here for a change.
Take Apple (AAPL) for example. Not one product they sell is made here in America that I am aware of. Because everything revolves around ‘more profits’ they have to keep finding ways to make the products cheaper so they employ cheap labor in other nations. We can’t force American companies to manufacturer their products here because they would just move the company to another nation. Perhaps the only way to restore America to a goods producing powerhouse is to boycott any company that does not make their products here at home. But even that would be nearly impossible, because not much is made here anymore so we have little choice.
American’s are held hostage by every company that sells us our televisions, sneakers, clothes, and even the toys for our children.
Where does it end?
Banks Are Worried Their Free Lunch Is Over
“Never Again Will the American Taxpayer be Held Hostage by a Bank that is ‘Too Big to Fail’"
Wow, my ears are still ringing from the sudden and shocking statement made by the President today. All of my readers know all to well that I am a strong advocate for bringing back the Glass-Steagall act.
The statements made by President Obama today, while falling short of actually reinstating Glass-Steagall, still has many merits that I strongly support. It is a good start.
Wall Street – Watch out, your free lunch may be coming to an end.
As I have written and voiced in my market videos over the past many months, the advances have been a bear market rally within a broader secular bear market. The rise in equity prices over the past six months has been, for the most part, a result of easy money at the expense of the tax payers. And a free lunch card is no way to create a healthy and organically robust economy. Today, President Obama has threatened to cancel the free lunch card for good.
The White House
Office of the Press Secretary
For Immediate Release
January 21, 2010
President Obama Calls for New Restrictions on Size and Scope of Financial Institutions to Rein in Excesses and Protect Taxpayers
The proposal would:
1. Limit the Scope – The President and his economic team will work with Congress to ensure that no bank or financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit.
2. Limit the Size – The President also announced a new proposal to limit the consolidation of our financial sector. The President’s proposal will place broader limits on the excessive growth of the market share of liabilities at the largest financial firms, to supplement existing caps on the market share of deposits.
In the coming weeks, the President will continue to work closely with Chairman Dodd and others to craft a strong, comprehensive financial reform bill that puts in place common sense rules of the road and robust safeguards for the benefit of consumers, closes loopholes, and ends the mentality of “Too Big to Fail.” Chairman Barney Frank’s financial reform legislation, which passed the House in December, laid the groundwork for this policy by authorizing regulators to restrict or prohibit large firms from engaging in excessively risky activities.
As part of the previously announced reform program, the proposals announced today will help put an end to the risky practices that contributed significantly to the financial crisis.
I am truly impressed. Now the question is will it ever see the light of day? Almost immediately following Obama’s statements came a whole bunch of opposing opinions. Some view the measures, if made into law, would prevent the big Wall Street firms from being able to compete on an international level. My response to that is – tough shit.
Some have said that the new rules could hamper the banks from operating efficiently in the future. My response to that is – too bad, learn how to make money the old fashioned way, by earning it, not placing tax payer funds at risk.
And various congress critters are chiming in and they think it will destroy the banking system. My response – It has already been destroyed, now lets fix it.
The markets sold off significantly today as the idea of the free lunch card may be taken away. Some will criticize President Obama for crashing the stock market. Sorry, it is not his fault the market tanked today. The reason it sank is that it was being propped up on air in the first place. Reality sucks, doesn’t it. If the free lunch is cancelled then equities will be forced to price to reality, not goosed by the taxpayer being robbed every day.
Now we have to make this become a reality. Any senator or representative that opposes the new constraints on Wall Street will be showing his or her cards, and those cards will have been paid and supplied by Wall Street. In that case throw the bum out!
If any financial institution, who has been sucking on the taxpayer teat for the past two years does not like the proposed changes, then I have only one thing to say to them – Live with it, or fail. We won’t shed a tear if you go out of business.
Sphere: Related ContentPresident Obama Gets Tough With Wall Street – Or Just More Empty Promises?
President Obama is expected to announce on Thursday new limits on the size and risk that is allowed to be taken by the country’s biggest banks. If true, and not some watered down nonsense, then this would truly be a step in the right direction.
President Barack Obama on Thursday is expected to propose new limits on the size and risk taken by the country’s biggest banks, marking the administration’s latest assault on Wall Street in what could mark a return – at least in spirit – to some of the curbs on finance put in place during the Great Depression, according to congressional sources and administration officials.
The proposal represents a sharply different philosophical shift from the view of banking over the last decade, which saw widespread consolidation among large financial institutions to create huge banking titans. If Congress approves the proposal, the White House plan could permanently impose government constraints on the size and nature of banking.
Mr. Obama’s proposal is expected to include new scale restrictions on the size of the country’s largest financial institutions. The goal would be to deter banks from becoming so large they put the broader economy at risk and to also prevent banks from becoming so large they distort normal competitive forces. It couldn’t be learned what precise limits the White House will endorse, or whether Mr. Obama will spell out the exact limits on Thursday.
Mr. Obama is also expected to endorse, for the first time publicly, measures pushed by former Federal Reserve chairman Paul Volcker, which would place restrictions on the proprietary trading done by commercial banks, essentially limiting the way banks bet with their own capital. The goal, as described by administration officials, would be to prevent banks from using federally insured deposits to finance "speculative activity." […]
[…] The White House’s proposal, one aide said, would not resurrect the exact limits put in place by the Depression-era Glass Steagall Act, which essentially walled off commercial banks from investment banks and was repealed in 1999. Instead, the White House proposal would seek to return the "spirit of Glass Steagall," meant to limit large banks from becoming too big and complex that create enormous risk.[…] WSJ
White House aide says it will be in the ‘spirit’ of Glass-Steagall. Spirit? Now I know this is going to be nothing but BS. As I have opined numerous times, unless Glass-Steagall is reinstated anything else is just more flapping of the gums.
I suspect the tough talk from Obama is in response to the beating the democratic party is taking for being too comfy with Wall Street. Could it be that the Senate election of republican Scott Brown last night finally has President Obama waking up and learning that there are actually people in this nation he has to answer to? Probably not, but it was a nice thought that lasted all of two microseconds.
Anyone care to wager that this never sees the light of day (becoming law), and that it is just ‘tough talk’ on the heels of the massive slap in the face from the defeat in the Massachusetts senate race.
“Alex, I’ll take EMPTY PROMISES for $200 please”
Sphere: Related ContentMatt Taibbi – Obama’s Sellout
Matt Taibbi has written some amazing articles in the past year, and each one has been spot on in accuracy through his intensive research. Today we get another stark and eye opening article.
A few short excerpts from Matt Taibbi’s article:
Barack Obama ran for president as a man of the people, standing up to Wall Street as the global economy melted down in that fateful fall of 2008. He pushed a tax plan to soak the rich, ripped NAFTA for hurting the middle class and tore into John McCain for supporting a bankruptcy bill that sided with wealthy bankers “at the expense of hardworking Americans.” Obama may not have run to the left of Samuel Gompers or Cesar Chavez, but it’s not like you saw him on the campaign trail flanked by bankers from Citigroup and Goldman Sachs. What inspired supporters who pushed him to his historic win was the sense that a genuine outsider was finally breaking into an exclusive club, that walls were being torn down, that things were, for lack of a better or more specific term, changing.
Then he got elected.
What’s taken place in the year since Obama won the presidency has turned out to be one of the most dramatic political about-faces in our history. Elected in the midst of a crushing economic crisis brought on by a decade of orgiastic deregulation and unchecked greed, Obama had a clear mandate to rein in Wall Street and remake the entire structure of the American economy. What he did instead was ship even his most marginally progressive campaign advisers off to various bureaucratic Siberias, while packing the key economic positions in his White House with the very people who caused the crisis in the first place. This new team of bubble-fattened ex-bankers and laissez-faire intellectuals then proceeded to sell us all out, instituting a massive, trickle-up bailout and systematically gutting regulatory reform from the inside.[...]
[...]Now here’s where it gets really interesting. It’s three weeks after the election. You have a lame-duck president in George W. Bush — still nominally in charge, but in reality already halfway to the golf-and-O’Doul’s portion of his career and more than happy to vacate the scene. Left to deal with the still-reeling economy are lame-duck Treasury Secretary Henry Paulson, a former head of Goldman Sachs, and New York Fed chief Timothy Geithner, who served under Bob Rubin in the Clinton White House. Running Obama’s economic team are a still-employed Citigroup executive and the son of another Citigroup executive, who himself joined Obama’s transition team that same month.
So on November 23rd, 2008, a deal is announced in which the government will bail out Rubin’s messes at Citigroup with a massive buffet of taxpayer-funded cash and guarantees. It is a terrible deal for the government, almost universally panned by all serious economists, an outrage to anyone who pays taxes. Under the deal, the bank gets $20 billion in cash, on top of the $25 billion it had already received just weeks before as part of the Troubled Asset Relief Program. But that’s just the appetizer. The government also agrees to charge taxpayers for up to $277 billion in losses on troubled Citi assets, many of them those toxic CDOs that Rubin had pushed Citi to invest in.[...]
A short video of Matt Taibbi discussing his findings : CLICK HERE
The entire article can be read on the Rolling Stone site HERE. It is an excellent work of journalism, and it is refreshing to see some real journalism once in a while.
Sphere: Related ContentPresident Obama Speech From Federal Hall – Full Text
Full text of President Obama’s speech today from Federal Hall…
President Obama speech at Federal Hall –
Obama The SuperMan
President Obama Talks About The Auto Warranty Program
Some satire this evening on President Obama’s plan to use tax payer funds to perform warranty repairs on General Motors and Chrysler vehicles.
P.S. – I know, it is ‘kind of creepy’. I only wanted to poke some fun at the ‘auto bailout’ plan. The video may be ‘creepy’ but my view is not. Using tax payer funds to backstop auto warranties is just ridiculous.
Sphere: Related ContentMarket Update – 1:15pm
At 1:15pm (US EST) the United States has a new President and the U.S. markets are still selling off. On the S&P 500 futures we are at this moment testing key support in the 810-820 region.
Financial stocks are selling off by large amounts today with growing fears of banks becoming insolvent and/or requiring much more capital to survive (on top of what they already received). We are also seeing some aggressive action in the bond markets as U.S. Treasuries are being sold today.
Today the risk aversion trade is the movement into cash (as evidenced by the bond market selling and equities simultanesouly).
810-820 remains an important support level for the S&P 500 E-mini futures today. This is a very volatile market today, it is also possible to see a rally attempt heading into the close. But, at this time that likelihood is fading.
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