Latest Fiscal Cliff Deal....

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Submitted by flu on December 31, 2012 - 7:45am

Well if this is true it's actually pretty good (for me that is).....

http://finance.yahoo.com/news/two-sides-...


The Democrats made several key concessions yesterday in the Fiscal Cliff negotiations.

As a result, the two sides are absurdly close together. If we don't get a deal at this point, the entire country will be justified in being outraged.

Here's the Democrats' latest offer, as reported by Lori Montgomery and Paul Kane of the Washington Post:

* The Democrats agreed to raise the income threshold for tax increases to $450,000 a year (couples) from the prior $250,000. The Republicans are insisting on $550,000 threshold. This is a massive tax cut for almost the entire country relative to the rates that will otherwise take effect on January 1. (So agree on $500,000 already and call it a day.)

* However, to the Republicans' chagrin, the Democrats insist on raise capital gains and dividend taxes to 20% on households over $250,000 and reducing some of the allowable deductions. Importantly, this, too, is a massive tax cut relative to the scheduled changes, which would boost dividend taxes to 40% on incomes over $250,000.

* The Democrats conceded on the estate tax: They'll keep the threshold for taxable estates at $5 million, with a 35% rate over that level. This, again, is a massive tax cut over current law, in which the threshold will drop to $1 million with a much higher rate.

* The Democrats' offer would permanently protect middle-class households from the Alternative Minimum Tax. No details on how this would work.

* On the spending side, the Democrats' offer would delay the "sequester" (automatic spending cuts) until 2015. This would cost an estimated $200 billion. But it would avoid the cuts to the military budget that the Republicans are so desperate to avoid.

* The Democrats would also extend unemployment benefits for a year, extend farm subsidies for a year, and avoid a 27% cut in Medicare payments to doctors. The Republicans say they want offsets to these spending cuts.

When you boil all that down, the two sides are absurdly close.

The Republicans say they want spending cuts to offset the postponement of the sequester spending cuts, but the Republicans do not appear to have proposed anything in particular. Also, the postponement will only cost $200 billion over two years, which is not much on a government budget of $4 trillion a year. And the postponement of the cuts will avoid a shock to the weak economy, which will likely help on the tax revenue side.

On the tax side, the country will be getting a massive tax cut over the new taxes that will take effect on January 1. The current low income and investment tax rates for 98% of the country would be extended, and the income tax rates would be extended on even more households. The fact that the two sides are still haggling over whether the threshold for a modest income tax increase should be $450,000 or $550,000 is almost comical.

(At some point, taxes are going to have to rise modestly for everyone. If it's this hard to raise taxes even on the richest 1% of the country, imagine what the fight will be like when this increase will hit all Americans).

It's worth noting that this proposed deal would be good for the economy, especially relative to the Fiscal Cliff. The postponement of most of the tax hikes and spending increases would preserve the status quo, avoiding the austerity shock that will otherwise hit growth. The deal would likely boost the deficit over the next two years, but, again, neither side is arguing that the Fiscal Cliff would be preferable to a deal.

Submitted by flu on December 31, 2012 - 7:48am.

kick the can down the road... I like it...

Submitted by ocrenter on December 31, 2012 - 7:53am.

so where is the spending cut part? I'm liking the cliff more and more...

Submitted by flu on December 31, 2012 - 8:19am.

ocrenter wrote:
so where is the spending cut part? I'm liking the cliff more and more...

postponing..Depending on if AMT gets removed, and IF they don't reduce the itemized deduction (for me)... I might end up paying lower taxes next year...lol...

Submitted by flu on December 31, 2012 - 9:32am.

FWIW: payroll taxes look like they are going to go up (well, at least restored) for everyone......


Regardless of the fate of the negotiations, it appeared all workers would experience a cut in their-home pay with the expiration of a two-year cut in payroll taxes....

Submitted by scaredyclassic on December 31, 2012 - 9:58am.

The dickering over what number constitutes wealthy enough to pay higher taxes sounds kind of an absurd basis not to make a deal.

Submitted by SD Realtor on December 31, 2012 - 10:16am.

This is awesome!!

Raise taxes a little bit but don't spend any less.

Submitted by AN on December 31, 2012 - 10:28am.

keep the punch bowl filled.

Submitted by SD Realtor on December 31, 2012 - 10:53am.

Funny because the so called fiscal cliff was in reality what really needed to be done. It cut spending (mostly in defense) and it raised taxes.

Also this mess was the result of yet another cave in on the debt limit. So we get another debt limit debate in another what, 6 weeks?

Hooray!!!

Keep spending baby!!

Submitted by flu on December 31, 2012 - 12:12pm.

uh oh.. The latest news is "cap" on itemized deductions for those earning $250k(single)/$300k household....

Of course, it probably doesn't matter anyway, if you get hit by AMT, because state+property taxes don't count anyway...

Lol....

Submitted by flu on December 31, 2012 - 12:13pm.

Also, I think the latest is estate tax exemption is gonna be $5million ($10million with A/B trust). But rates above that go to 40% (up from 35%)...

Submitted by flu on December 31, 2012 - 1:12pm.

Lol. Reentered stock market last friday...Weeeeeeeee....

Submitted by deadzone on December 31, 2012 - 7:43pm.

Looks like all the fear monguering worked.. kick the can down the road AGAIN. Absolutely predictable.. why didn't I get into the market Friday like FLU? I guess for the most part I have tuned out of the economic news and markets recently because it is literally the same crap all the time. Next year we'll have the same debate all over again, just will have a new name. But same results.

Ultimately this will not end well at all. Most of us on this board know this already, it is just a matter of time. But in the meantime, be happy and play with your new Ipad minis America. Might as well keep enjoying these government/Fed induced good times while you can..

Submitted by flu on December 31, 2012 - 8:52pm.

Lol... you guys check out the latest deal for the fiscal cliff?

http://politicalticker.blogs.cnn.com/201...

The big surprise is estate tax exemption. Basically $5million will be exempted per person ($10 million for couples). BUT, not only that... It will be indexed with inflation. Lol... That is signficant...

Also, looks like the higher tax rates will hit for $400k for individuals, $450k for married couples (so one again, I guess your spouse is expected to stay at home after they get married.) No big deal.

The big question will be that it seems like itemized deductions will be capped. What and when is still unknown..

Oh, and they've decided to postpone the spending cuts for two months, half will be paid for defense cuts and half will be paid by the increased taxes (you know the money they haven't collected yet but decided to spend anyway... Kinda like how most americans do it... Buy now, pay later... lol....)

Oh and medicare care payments for doctors is safe...

Yeah, kicking the can down the road is bad. But if there's anything. The U.S. has proved it has mastered the art of kick the can down the road....
Time to buy more hard core assets, with borrowed/inflated money of course...

Happy New Year Everyone!!!! Spend like it's 1999!!

Submitted by deadzone on December 31, 2012 - 8:58pm.

I agree with FLU that we need to spend our money on hard assets while it is still worth something. But what to buy?

I already bought my dream sports car nearly three years ago so that is checked off. I bought a fair amount of gold bullion around the same time while gold was still around 1200 or less an ounce. But now gold is relatively expensive. As far as real estate, houses are still mostly out of my price range in any area I really want to live even with low interest rates (unless I sold my dream car and gold which I don't want to do). Stock market is pure day trading casino right now and there is no safe way to invest that nets any meaningul incojme

So what else can we do with our money, any ideas? Lately I've just blown a lot going to restaurants, sporting events and concerts, etc. for short term fun. But as far as investing..??

Submitted by bearishgurl on December 31, 2012 - 9:11pm.

deadzone wrote:
I agree with FLU that we need to spend our money on hard assets while it is still worth something. But what to buy?

I already bought my dream sports car nearly three years ago so that is checked off. I bought a fair amount of gold bullion around the same time while gold was still around 1200 or less an ounce. But now gold is relatively expensive. As far as real estate, houses are still mostly out of my price range in any area I really want to live even with low interest rates (unless I sold my dream car and gold which I don't want to do). Stock market is pure day trading casino right now and there is no safe way to invest that nets any meaningul incojme

So what else can we do with our money, any ideas? Lately I've just blown a lot going to restaurants, sporting events and concerts, etc. for short term fun. But as far as investing..??

If you've got money to blow, deadzone, consider investing in rental property. It wouldn't need to be located in an area YOU would be willing to live in.

Submitted by AN on December 31, 2012 - 9:32pm.

Flu, i wish its as easy as you make it out to be. Like we've been saying, inventory sucks balls right now.

Submitted by flu on December 31, 2012 - 11:44pm.

AN wrote:
Flu, i wish its as easy as you make it out to be. Like we've been saying, inventory sucks balls right now.

I agree inventory sucks. But even more reason to keep trying. I'm actually entertaining looking in parts of LA. Some of the nicer areas haven't recovered (yet).

You know what really concerns me? Holding cash will suck bigtime and so will depending on a regular paycheck. If we really have a devaluation that is severe in the future, buying overpriced home(s) right now my end up looking like a no brainer few years later...

And me thinks it's just gonna get harder and harder for individuals to own in more than one ways. A lot of these tax changes is probably a precursor to what will happen to more people... The job market isn't gonna get better in terms of pay. Pay isn't gonna go up inflation adjusted. You might have a nominal higher salary, but inflation adjusted not really. Fixed income people are gonna eat it, and I suspect we'll have a lot of those people as they approach retirement.. And then some tax rules probably won't end up being inflation adjusted, so you end up with less money then before in your pocket. It's gonna make it that much harder for people to "save", on top of how in America savers are already punished...

Meanwhile, people who have accumulated RE,stock, etc can probably more easily borrow cheaper credit (as it is now) with asset collateral for cheap loans, and this will most likely continue... Just look at this current predicament. Some folks use cash to buy up an investment property, and then 6 months later cash out refi at a relatively low interest with high LTV, with still a decent return on the property..Then the take the cash and put into another investment property, probably at near all cash offer too or close to it...

Let this thing run for a few years, how is this really going to be a good environment for first time home buyers? So despite what some political diehards are you have from both parties, I haven't seen anything material that suggests that either party is really doing anything to restore the middle class, or help people starting out.. And this sort of cliff compromise I think suggests that, same old, same old. Kick the can down the road. The divide between rich and poor is gonna get a lot wider...And some of the bottom rich are gonna end up being the new middle class.

So I guess just to survive, start by keeping your living costs down...Rent isn't gonna get cheaper either most likely in the forseable future.

Submitted by AN on December 31, 2012 - 11:45pm.

I'm just afraid that price will sky rocket (10%+) in the next year and that would really squeezes out the margin, unless rent rises as well. I don't think I would ever consider LA. If I can't find any condo in MM, I might consider small SFR in MM instead. We'll have to wait and see but cap rate for SFR is not nearly as good and you need more capital per transaction.

Submitted by flu on December 31, 2012 - 11:53pm.

AN wrote:
I'm just afraid that price will sky rocket (10%+) in the next year and that would really squeezes out the margin, unless rent rises as well. I don't think I would ever consider LA. If I can't find any condo in MM, I might consider small SFR in MM instead. We'll have to wait and see but cap rate for SFR is not nearly as good and you need more capital per transaction.

What if rates fall lower :). If rates drop another .5% from this point, how much worse do you think inventory is gonna be?

Also, the more I think about it....How long do we expect pitiful savings rates in a CD?

I predict we'll see 30 years below 3% and and 15 years around 2% before we seem them rise. Well, at least over the next 4 years. The fiscal policy appears to be same old same old. I'm refinancing and counting on another one 6 months from now.

Also, primaries will look like excellent rentals in the forseable future so it would be a good time to upgrade.

Submitted by AN on December 31, 2012 - 11:53pm.

I agree about hording cash sucks. I was under that assumption when saving returns dips below 3%. I'm already minimizing my spending as much as possible (well as much as I wanted to) and now, I'm in the accumulating stage for hard assets. The writing is on the wall. We're not going to see inflation sooner or later and I don't really care if my income matches inflation (although in our profession, I think it would), as long as hard assets and stocks outpace inflation. Lets hope for high inflation soon. Here's for a 1970-80 repeat.

WRT to rates falling, I'm betting on that too. I don't know how much worse inventory will be. In MM, there's only 20 houses and 5 condos for sale right now. So, it can't possibly get much worse. Those active ones are over prices as well, which is why they're there. If it gets worse, that would mean we'd have to see price increase another 20%, because those lingering are 10-20% above market price today.

I'm going to continue this negative points refi for a few more years and hoping we'll see a 1970 repeat after the $h!t hits the fan.

Submitted by AN on December 31, 2012 - 11:57pm.

flu wrote:
Also, primaries will look like excellent rentals in the forseable future so it would be a good time to upgrade.

Yep, my primary is a pretty decent rental today with cap rate around 4-6%. If rates drops some more, that might be 5-8%. There are only a handful of places I want to upgrade to, and they're not for sale right now and I'm not sure when they'll go on sale since the owners bought it many many years ago. So, I'm sitting tight waiting for one of them to come online. All the while, I'm trying to scoop up as many rentals as I can.

Submitted by flu on December 31, 2012 - 11:58pm.

AN wrote:
I agree about hording cash sucks. I was under that assumption when saving returns dips below 3%. I'm already minimizing my spending as much as possible (well as much as I wanted to) and now, I'm in the accumulating stage for hard assets. The writing is on the wall. We're not going to see inflation sooner or later and I don't really care if my income matches inflation (although in our profession, I think it would), as long as hard assets and stocks outpace inflation. Lets hope for high inflation soon. Here's for a 1970-80 repeat.

WRT to rates falling, I'm betting on that too. I don't know how much worse inventory will be. In MM, there's only 20 houses and 5 condos for sale right now. So, it can't possibly get much worse. Those active ones are over prices as well, which is why they're there. If it gets worse, that would mean we'd have to see price increase another 20%, because those lingering are 10-20% above market price today.

I'm going to continue this negative points refi for a few more years and hoping we'll see a 1970 repeat after the $h!t hits the fan.

Well, I'm sure if prices were adjusted 5%-10% in MM, we'd see a lot more inventory right now....And then people would get use to it, and then if rates dropped another 0.5%, you would have another buying frenzy... I predict that people are kinda still sticker shock with 1/1 going for $150, 2/2 going for $220, and some MM SFH that went for $350 going for $400. Rates fall again, people won't care (again).

Submitted by flu on January 1, 2013 - 12:06am.

oh oh.. Senate voting on the deal now... Time to turn on C-SPAN...

Submitted by flu on January 1, 2013 - 12:18am.

Senate passes cliff deal 89-8...

Submitted by flu on January 1, 2013 - 12:12am.

....Itemized deductions capped, starting at a threshold of $250,000 for individuals and $300,000 for households.

Submitted by flu on January 1, 2013 - 12:23am.

delete.

Submitted by flu on January 1, 2013 - 12:16am.

...higher taxes income taxes >$400k individual, $450k household: 39.6%....

If you're a couple making >$450k...Morale of the story, get a divorce....

Submitted by flu on January 1, 2013 - 12:18am.

...AMT... permanently adjusted for inflation... (I'll see it when I believe it)..

..Unemployment benefits extended for another year... Cool, time to blog more...

Submitted by SD Realtor on January 1, 2013 - 12:34am.

Good times man! No spending problem here dude. At some point in the future historians will look back and marvel at the stupidity of our leadership.

Submitted by AN on January 1, 2013 - 1:31am.

flu wrote:
Well, I'm sure if prices were adjusted 5%-10% in MM, we'd see a lot more inventory right now....And then people would get use to it, and then if rates dropped another 0.5%, you would have another buying frenzy... I predict that people are kinda still sticker shock with 1/1 going for $150, 2/2 going for $220, and some MM SFH that went for $350 going for $400. Rates fall again, people won't care (again).
I'm not so sure. We'll have to wait and see. The way I see MM, you either have people who bought in the 70s-90s who have no intention of selling or those who bought near peak who are under water and most likely already SS or foreclosed. So, I'm not sure if you see a lot more inventory if price goes up 5-10%. Price did go up around 13% in 2012 and inventory declined drastically. So, I don't know if another 5-10% would change anything.

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