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Thread: More Bad News For Dancers - The "Fiscal Cliff"

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    Default More Bad News For Dancers - The "Fiscal Cliff"

    Bad news on many levels. both personally and professionally. On January 1, 2013 we will get the largest tax increase since FDR. According to the CBO it will put us back into recession and cause unemployment to go from 8.2 % to at least 9.1%. More than 100 million Americans will see their taxes go up.

    The Social Security tax rate goes up from 4.2% to 6.2%
    The 10 % bracket expires and will be replaced by 15%.
    The 25% rate rises to 28%.
    28% goes to 31%.
    33% goes to 36%.
    35% goes to 39.8%.
    The Earned Income Tax credit is eliminated.
    The child tax credit is reduced from $1000 to $500.
    The AMT goes back to 2001 levels.
    Long Term Capital Gains tax rate goes from 15% to 20 %.

    In more practical terms a working mother making $37,000 a year will see her taxes go up 76%.

    Plus Federal spending will be cut by $100 billion.

    The NYC area will be hurt more than most. There will be at least 1 million jobs lost in the Tri-State Area. The marginal tax rate for N.Y. and N.J. will be effectively 50%.

    Asset values will decline. Drastically. Why ? Because there is going to be a HUGE sell-off of to lock in long term capital gains under the "old" rate.
    Charitable giving will be lower this year because the deduction will have greater value next year.

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    ^^^ also where you're talkiing about 'independent contractor' dancers and camgirls, the SSI + medicare 'self-employment' tax rate will go from 13.3% to 15.3%. This takes the place of the 4.2% 'employee' SSI tax rate going to 6.2%.

    Also, for self-pay uninsured medical costs ( i.e. most dancers and camgirls ), next year those costs must exceed 10% of earnings ( versus this year's 7.5% ) before dollar one of medical costs can be listed as a tax deduction.

    And if you happen to be a 'serious professional' dancer or camgirl earning > $200,000, you really don't want to know the effects of the new 2013 'tax the rich' surtaxes.

    Also, the above all refer to 'federal' tax increases. In addition to federal tax increases, states are also proposing to hike personal income tax rates.

    Additionally, there some particular changes worth noting in regard to the 'trigger' levels for Alternative Minimum tax, phase-out of tax credits for college tuition payments, phase-out of tax deductible interest payments on student loans etc. As it stands now, single dancers with no children who earn as little as $45,000 per year will exceed the 2013 'trigger' level.

    And for dancers with significant investment 'nest eggs', in 2013 the tax rate on capital gains is slated to go from 15% to 20%. Perhaps more importantly, in 2013 the 15% tax rate on 'qualified' dividends will be discontinued, with dividend income then being taxed at 'ordinary income' tax rates ( 25-28-31% ? ).

    Indeed for a successful full time New York dancer, federal, state and local tax increases could indeed push the marginal tax rate above 50% next year.
    Last edited by Melonie; 08-28-2012 at 01:10 PM.

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    Congress lacks the sand to let it happen. After the election, they will pull some last minute bullshit to bail out the doners, keep near status quo and keep the ship afloat a few more years.
    Nope silly, its just a persona that entertains the masses, yourself included. - KS_Stevia

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    ^^^ that remains to be seen ^^^ The only reliable prediction I'm willing to put money on is that, in order to 'beat' the capital gains and dividend income tax increases, we'll see a major stock market sell-off before the end of this year.

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    Veteran Member Doc Holliday's Avatar
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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    If it happens I'll clap. It'll be the first time they took our finances seriously in a decade. Yeah, it'll be a rough patch, but it's better than going on ignoring the problem.
    Nope silly, its just a persona that entertains the masses, yourself included. - KS_Stevia

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    ^^^ well, from a purely economic standpoint, there ARE alternate methods to address gov't budget problems besides major increases in federal and state tax rates. However, that discussion would run afoul of the SW 'Politics Ban'. Suffice it to say that the odds of significant tax increases going into effect on the first of January, at both the federal and state level, are near 100%. And those tax increases will have a disproportionately large effect on full time dancers in high tax rate states like NY and CA and IL.
    Last edited by Melonie; 08-29-2012 at 11:45 AM.

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    Most of the experts agree that there will NOT be a last minute fix.
    Forgive me in advance for getting slightly "political" but I can't go over the most likely scenarios without some brief mention.

    1. Romney wins and Obama is a lame duck. The House is still Republican and the Senate is still Democrat. Most likely the House will pass a renewal of the Bush tax cuts returning to status quo ante. Will the Senate approve it ? Very unlikely regardless of whether or not the Republicans re-take the Senate. If they did, would Obama sign it ?
    Who knows ? I doubt it very much.
    If Romney wins and the Republicans take both houses of Congress, we will get some sort of a fix, next year. Will we get the kind of serious tax reform that I would really like to see ? The kind that would cause the sidewalks of K Street in D.C. to be littered with the corpses of lobbyists who jumped out of their office windows aka " a good start " lol . I kinda doubt it.

    2. Obama wins and the Congress goes Republican. Obama will not sign off on a renewal of the Bush tax cuts.

    3. Obama or Romney wins and the Congress stays much as it is. Nothing will get done UNLESS some sort of "Schumer option" i.e. compromise is agreed to. Schumer proposed that only those making more than $1 million per year pay more in taxes. Would the Republicans go along ? Tough to say. Technically it would violate their Grover Norquist "No Tax Increase " Pledge. But there is an easy way around that; an easy finesse if you will : "We didn't vote to increase taxes , we voted to cut taxes for 99.9 % of Americans. " Would they have the guts to do it ? Who knows ? Maybe.

    As I have repeatedly posted : These proposed tax increases are bad enough. What is just as bad if not even worse is the UNCERTAINTY. Nobody knows what is going to happen.

    What I am doing is culling my portfolio and taking my LTCG's now. I am holding off on charitable and other contribs that I can make NEXT year. Basically what you want to do, as much as possible, is to fast forward income into 2012 and delay deductions into 2013. As Melonie notes this will cause a MAJOR correction in all the markets so fasten your seatbelt and be ready for a bumpy ride.

    With your health insurance it gets tricky. Sit down with your accountant and insurance broker and see if you can pay forward for your coverage. Most likely you can't but the worst the carrier can do is say : "No".
    Last edited by Eric Stoner; 08-29-2012 at 11:56 AM.

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    .

    If it happens, we are talking about a 2-2.5 point drop in GDP and a 1 point increase in unemployment, but for that cost we can cut the 2013 deficit by 40%.

    What's disappointing, looking at that chart, are the spending cuts are not near to the amount of the taxes increases (EDIT: it's a mere $65 billion in spending cuts to $221 billion in tax increases, why they didn't make it equal 1:1 I don't know). It's not the best solution, but it is the best one congress has put forward in over ten years from a financial perspective. And funny enough, it will be done through the one thing congress is good at - inaction.

    What are the 'no politics' rule? I don't want to overstep my bounds, here.

    .
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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    The Social Security tax rate goes up from 4.2% to 6.2% (Should say will go back to 6.2% as it has always been the whole time - we got a break for about 2 years I think - this is not earth shattering)..

    Basically taxes are the lowest they've been ever and so are interest rates - this did not cause the trickle down boom economics we were expecting. Lets go over why taxes are a good thing on "investments" for the middle class..

    If it's cheaper to hire people to my company then to gamble it on stocks and bonds - that might actually create jobs..

    People making money spend money - and the economy could recover.. This theory is about as sound as trickledown economics was -(not sound at all because not everyone participates.).

    The bottom line is even at the above mentioned tax rates it will be less then it has been in years prior.

    There are only two ways to get rid of debt (or grow wealth)
    1) More revenue (make more money)
    2) Spend less

    We are going to spend 700 billion less on medicare now that there is a requirement for everyone to be insured. That's a good start - What else can we do?

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    Quote Originally Posted by richdummy View Post
    The Social Security tax rate goes up from 4.2% to 6.2% (Should say will go back to 6.2% as it has always been the whole time - we got a break for about 2 years I think - this is not earth shattering)..

    Basically taxes are the lowest they've been ever and so are interest rates - this did not cause the trickle down boom economics we were expecting. Lets go over why taxes are a good thing on "investments" for the middle class..

    If it's cheaper to hire people to my company then to gamble it on stocks and bonds - that might actually create jobs..

    People making money spend money - and the economy could recover.. This theory is about as sound as trickledown economics was -(not sound at all because not everyone participates.).

    The bottom line is even at the above mentioned tax rates it will be less then it has been in years prior.

    There are only two ways to get rid of debt (or grow wealth)
    1) More revenue (make more money)
    2) Spend less

    We are going to spend 700 billion less on medicare now that there is a requirement for everyone to be insured. That's a good start - What else can we do?
    You are forgetting a few things :

    1. We are in a recession. O.K. technically the economy is "growing" but at an anemic rate of 1.5%.
    2. These tax increases are going to encourage hiring how ? Their impact on small business ( where most of the new jobs come from ) will be devastating. We have posted on this numerous times.
    3. Taxes are low because growth is so low.
    4. Tax cuts worked for Coolidge ; for JFK and Johnson ; for Reagan; for Clinton and even for Bush The Dumber. Tax increases by Hoover and FDR prolonged the Depression.
    Under Eisenhower we had balanced budgets AND three ( 3 ! ) recessions !
    5. We have discussed the $700 billion "theft" , "hi-jacking " from Medicare numerous times. The payments to doctors and hospitals have been cut and thus fewer will even see Medicare patients.

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    Quote Originally Posted by Doc Holliday View Post
    .

    If it happens, we are talking about a 2-2.5 point drop in GDP and a 1 point increase in unemployment, but for that cost we can cut the 2013 deficit by 40%.

    What's disappointing, looking at that chart, are the spending cuts are not near to the amount of the taxes increases (EDIT: it's a mere $65 billion in spending cuts to $221 billion in tax increases, why they didn't make it equal 1:1 I don't know). It's not the best solution, but it is the best one congress has put forward in over ten years from a financial perspective. And funny enough, it will be done through the one thing congress is good at - inaction.

    What are the 'no politics' rule? I don't want to overstep my bounds, here.

    .
    With regard to the "no politics" rule - try to be as FACTUAL and objective as possible ; avoid advocacy and opinion as much as possible and try to keep your posts oriented toward the economic. You can discuss Obama's economic policies ( or the Republican alternatives ) without advocating for either. With a lot of this stuff, some "politics" is inevitable and unavoidable. It used to be that we tried to observe the "50% rule" i.e. at least half the post was economic in thrust and nature. Under the " no politics" rule now in effect, that is no longer good enough. Most, if not all, of the post is SUPPOSED to be "economic" and any "politics" is supposed to be oblique and incidental to the economic issues. In a nutshell, the more factual and objective your post, the better. Put another way, the more practical and informative your post, the better. Does some general philosophy ( Eagle prefers the term "ideology" ) sneak into the posts ? Of course it does. So long as you are taking a "free market" or "socialist" approach ( or something in between ) without ADVOCATING for a particular candidate or party, you should be OK. If you are reviewing facts from economic history rather than just posting "Reagan was great " or "Carter sucked", you are within the guidelines as best I understand them. Do some of us editorialize a bit ? Yeah but so long as it's in fun and the gist of your post is economic, you can get away with it. I suppose I am technically guilty of minor violations with my own use of "Bush The Dumber" ( which I ONLY use to distinguish him from his father lol ) , "DumDum Brown" and the like but I just can't resist and afaic they've earned those sobriquets on merit. Nobody has complained or stuck up for Bush or Brown yet so I have to assume it's OK.

    Frankly, I think most of us do an excellent job of self-policing. On those occasions when someone does step over the line and gets too political, the other posters put up the caution flags and remind the miscreant of the "no-politics" rule. So far it seems to be working out just fine.

    Btw, your last post was well within the guidelines.
    Last edited by Eric Stoner; 08-29-2012 at 11:59 AM.

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    Basically taxes are the lowest they've been ever
    That's technically true purely in terms of published federal tax rates. However, it isn't necessarily true once the effects of available tax deductions / tax credits / legal tax shelters are netted out. It also isn't necessarily true for individuals or businesses in all income / size ranges. And it definitely isn't true in terms of state and local tax rates.


    There are only two ways to get rid of debt (or grow wealth)
    1) More revenue (make more money)
    2) Spend less
    Actually, there is a major option #3 ... print new US dollars out of thin air to inflate ( = devalue ) debt repayment dollars ( along with inflating prices for all global commodities as a side effect). And there is also an option #4 ... file for bankruptcy ( which inflicts a loss on the 'creditors' / bondholders / insurers ). It would appear that #3 has been pursued in earnest at the federal level, while #4 is increasingly being pursued at the local gov't level
    Last edited by Melonie; 08-29-2012 at 12:43 PM.

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    Quote Originally Posted by Melonie View Post
    ^^^ well, from a purely economic standpoint, there ARE alternate methods to address gov't budget problems besides major increases in federal and state tax rates. However, that discussion would run afoul of the SW 'Politics Ban'. Suffice it to say that the odds of significant tax increases going into effect on the first of January, at both the federal and state level, are near 100%.
    If I remember correctly, you predicted taxes would be going up in January 2011. Instead, taxes were cut.

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    Quote Originally Posted by eagle2 View Post
    If I remember correctly, you predicted taxes would be going up in January 2011. Instead, taxes were cut.
    Yes Eagle. Taxes were scheduled to go up as the Bush tax cuts expired but Obama agreed to a temporary fix. He could have done so again but he is determined to raise taxes on "rich folks" i.e. those earning more than $250,000 per year. In fairness, the Republicans are just as determined to give EVERYONE lower tax rates.

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    ^^^ actually Obama advocated a 'new wrinkle' ... reducing 'employee' social security taxes ( as well as self-employment SSI taxes ) by 2%. This resulted in a tax cut for those Americans earning less than $100,000 ( where the SSI cap kicks in stopping the collection of additional SSI taxes in any case ). It also resulted in the Social Security administration being unable to fund current SSI benefit check outflows ... forcing the Social Security administration to start drawing down it's 'surplus' of past tax overcollections ( intended to compensate for baby boomer retirements ) by 'cashing in' some of its general tax revenue fund backed US gov't bonds. The US gov't's general fund then paid 'cash' for those SSI bonds via increased borrowings from the Japanese, Chinese etc.

    This in turn resulted in lower interest earnings for the Social Security administration ( since their bonds were cashed in ) as well as higher interest payments by US taxpayers to the Japanese, Chinese etc. owners of the newly issued US treasury bonds which were 'printed up' to provide 'cash' to the Social Security administration. Or put another way, this was a double whammy for future US taxpayers.

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    I did not anticipate this but Moody's has said that without a budget deal it will join Standard & Poor's and take away the Triple A rating from U.S. debt.

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    ^^^ when that happens, it will trigger a major new loss of 'purchasing power' for the US dollar ... with an associated major increase in energy prices, food prices, prices of all other global commodities. It is also likely to trigger the de-facto end of the US dollar's use as the world's reserve currency, and in the process vastly reduce foreign exchange profits of Wall St. banks. The potential consequences of such a downgrade are incredibly large and widespread - with foreign media now expressing concerns by the Germans etc. regarding the potential consequences to THEIR economy if the US is downgraded. Yet thanks to domestic media, all we get is a small blurb about Moody's statement, with near zero discussion of the potential consequences.

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    ^^^ We both KNOW the reason for that Mel but "policy" prevents us from discussing it. The best I can do is drop a hint : 2012 is an election year.

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    Quote Originally Posted by Doc Holliday View Post
    Congress lacks the sand to let it happen. After the election, they will pull some last minute bullshit to bail out the doners, keep near status quo and keep the ship afloat a few more years.
    It looks like I was wrong and nothing is getting passed tonight. The IRS did delay the tax tables, however, so congress has a few more days.

    RE:

    We have horrible, lazy, narrow-minded legislators, I hope you all vote them out.
    Nope silly, its just a persona that entertains the masses, yourself included. - KS_Stevia

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    All i can do is... *beats head against wall*

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    Default Re: More Bad News For Dancers - The "Fiscal Cliff"

    Well, here's the gist of this week's 'fiscal cliff' deal ...
    Last edited by Melonie; 01-02-2013 at 04:37 PM.

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