[quote=joec]We may go off the fiscal cliff to make it easier to get a deal. It’s reported at many places where once we go off the cliff and taxes are going back to 39.6% federal for income and dividends, massive defense cuts, etc…
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Let’s add some more accurate perspective to this. Tax rates would not go back to 39.6% for income, including dividends and capital gains. Very few people would be subject to these rates, only the top 2 or 3% of taxpayers. It would only apply for married couples with income in the $300K range and up, and single filers with income around $250K and up. Capital gains would still have preferential treatment. Instead of a max tax rate of 15%, the rate could be as high as 20%. Still better than ordinary income.
Similar changes like these have historically had lead to no significant changes in the economy. The more drastic changes, as far as the economy is concerned, are the higher taxes on lower income levels. These would be taxpayer’s whose marginal income losses (unlike those at higher income levesl) lead directly to reductions in consumer spending.
It isn’t a cliff because these changes wouldn’t happen overnight. But combined with the draconian cuts to federal spending, would cause the US to follow Eurupe into a similar austerity driven second recession. There is no good that can come of it. It is not short term pain in exchange for long term stability. There is no long term stability at the end of the rainbow. Just more short term pain, until the path is reversed.
