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  • Congress Needs to Act Now on Taxmageddon

    A few weeks ago, around Tax Day, Heritage started warning of Taxmageddon—a one-year, $494 billion tax hike that slams the economy on January 1, 2013, unless Congress and President Obama act to stop it.

    At that time, Taxmageddon was merely a blip on Washington’s radar, because the conventional wisdom was that Congress and the President would deal with it in the lame duck period after the November election. We argued then that this was a bad idea.

    The uncertainty plaguing the economy today because of Taxmageddon lingering in the near future is slowing economic growth right now, and as today’s jobs report reminds us, the economy remains very weak, with unemployment stuck above 8 percent. And there is no telling what could happen in that lame duck session, which could lead to the unsettling proposition that Taxmageddon would indeed occur.

    The drag on growth that Taxmageddon is causing now, combined with the unpredictable environment of a lame duck session of Congress, is more than enough reason for Congress and President Obama to act right now to prevent Taxmageddon.

    In what should be a rattling and action-inducing wake-up call, Mohamed El-Erian, CEO of Pimco, the world’s largest bond investment firm, reiterated in an article in The Washington Post what we’ve been saying for weeks.

    …few think the fiscal cliff will materialize. After all, the deadline was always meant to act as a catalyst for serious revenue and expenditure reforms — including revamping the federal tax code, streamlining entitlements and realigning incentives to favor production and investment rather than consumption and operational avoidance of U.S. tax jurisdictions. But complacency has continued to reign, leaving the country exposed to unnecessary economic trauma and renewed political dysfunction.

    Markets are discounters of the future, and prolonged political inaction is likely to encourage companies to postpone building plants and purchasing equipment and to discourage them from hiring.

    All this speaks to the importance of acting now to avoid getting too close to the cliff’s edge. (emphasis added)

    The markets are now alert to the dangers of Taxmageddon. It seems the only people left who don’t see the pressing need to stop Taxmageddon right now are the politicians in Washington.

    It is time they wake up and realize what is obvious to everyone else: They need to stop Taxmageddon soon, and certainly long before election day.

    Posted in Economics [slideshow_deploy]

    6 Responses to Congress Needs to Act Now on Taxmageddon

    1. Joe Gause says:

      This unfortuneately will not happen during a heated election season. There is not enough spirit of compromise between the two political parties. Sure the Republicans should call for it, and hammer the Democrats on espousing tax increases during the worst recession since the Great "D". But nothing will be
      done until after election day, if even then. And yes, this uncertainty about the business climate will continue
      to depress the economy.

    2. SAC_Crewdog says:

      Seriously? By Election Day? There is no way that this administration is going to do anything at all to jeopardize the 0's re-election, and neither party in congress is interested in making commitments that may prove "embarrassing" later. There's no altruism, just self-interest, and it's disgusting, saddening, and pathetic.

    3. JustDamnMad says:

      I believe that the POTHUS is set on playing a game of "chicken" with the American taxpayers! He and his Senate cohorts will wait until the 11th hours on Christmas eve to finally do SOMETHING about the tax situation that will befall a majority of American . . . . and that is IF he wins the election. If he doesn't I wouldn't plan on any form of legislation to be passed until the NEW Prez takes office the end of January! I firmly believe that if the current POTHUS can't see a significant measure of gain for him or his cronies, he is NOT interested!!!

      The Prez's game of chicken: how many ways can the progressives find to terrorize the American people before they will give in and say, "just do whatever you want, please don't destroy our jobs, destroy our families and freeze us to death! Do you KNOW what the difference is between this guy and the current leader of Ven*zu*la? ABSOLUTELY NOTHING!!!!!

    4. steve h says:

      Crazy to think anything will happen on this before lame duck. GOP refuses to compromise to deal with deficits and debts, they want to use spending cuts along to handle the problem. The Dems now have leverage (tax cuts expiring/sequester hitting defense spending) to make sure the GOP has to compromise and come to table to work out a balanced approach. To think the Dems will let go of the one or two pieces of leverage they finally have after all the leverage GOP had over last 2 years is wishful thinking. If anything, the Dems will offer extension of tax cuts under 250k and that's it. As we have seen in Europe, austerity measures don't work, they hurt the economy…yet GOP just keeps pushing for them. I don't want to see any spending cuts or tax increased with a fragile economy – but with the neocons out there, it's going to happen.

      • Bobbie says:

        thats right, steve h. the democratic party refuses to compromise on their mistakes they've created that shouldn't ever be a compromise! Adults of good nature, correct the problem and discipline delinquents so they learn to stand accountable or choose a field productive to their unfit for America, nature! I do want to see all trash, waste, fraud, corruption, ignorance, dereliction and incompetence within the control of government prominently on the democratic side, CUT to rehash America's strong, ethical, dignified economy. CRAZY isn't it?

    5. BIggbear says:

      Quite simply we all need to force the Gov. to implement the 16th amendment and vote on a flat tax system that worked super well before the induction of Fed income tax circa 1862. Demand it be put on the general ballot and vote YES on it!

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