Revenooer Rants: Media all wet with ‘default’ hysteria
October 21, 2013
That's right: wetter than an old dishrag, and just downright misleading in the never-ending effort to protect Obama.
The recent Wall Street Journal article by David Rivkin and Lee Casey (partners in Baker Hostetler LLP, and former White House and Justice Department pooh bahs) pointed out for all to see precisely what we have thought all along: The probability of any government "default" was always zero, and the (at least initial) refusal of Congress to go along with a debt ceiling lift as an automatic default condition was always a red herring.
First of all, a congressional refusal to permit "new" borrowing by raising the debt limit would not, in and of itself, necessitate a default.
To quote Rivkin and Casey, "A failure to raise the debt ceiling — to prevent new (emphasis added) borrowing — does not and cannot put America's current creditors at risk … Congress can reduce a wide range of payments to various beneficiaries at any time by amending the statutes that authorize them or simply by failing to appropriate sufficient funds to pay for them. Not does Congress have any legal or constitutional obligation to borrow money to pay for entitlements."
And as we ease toward the end of 2013, then turning the corner toward next April 15, it is quite possible that many folk will be caught a little off guard when it comes to the magnitude of their 2013 tax bill, given the "fiscal cliff" tax increases (mostly on the more well to do) orchestrated by Obama.
It's never too early to start planning for the inevitable, which include this year:
• Additional 0.9 percent payroll tax applicable to wages and salaries with respect to employment income in excess of $250,000 for joint filers.
• Additional 3.8 percent Medicare levy on the lesser of net investment income or excess of adjusted gross income over $250,000 for joint filers.
• Higher individual income tax rates (up to a new 39.6 percent rate) for income of joint filers over $450,000.
• Higher long-term capital gain and dividend top tax rate of 20 percent (up from 15 percent last year) for joint filers with income over $450,000.
• Less available itemized deductions for high earners — potential reduction of itemized deductions by 3 percent of the excess of their adjusted gross income over $300,000.
Start pushing your pencil now — lest ye get caught a little short next April.
Or maybe a lot short.
CONSULT YOUR TAX ADVISER – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation. Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He may be reached at 831-7288, welcomes comments at email@example.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.