Envision “chestnuts roasting on an open fire.”
Most of us have never actually done that, but we at least entertain the thought when Nat King Cole sings that phrase.
Now, using the same tune, substitute these words — “Hauteans falling off the fiscal cliff.”
Somehow, it feels less festive.
Yes, it is tempting to dive into the partisan bickering over the federal fiscal cliff. The arguments in Washington, in newspapers, on TV, online and on Facebook are truly heart-warming, in the same sense as eating a plate of fresh habaneros. The geekier, less noisy option is to crunch a few numbers, before crunching those roasted chestnuts. That way, you get to the bottom line that Ray Kinsella faced in the movie “Field of Dreams.”
For those who’ve never seen the flick — really? — mysterious voices told Kinsella, a struggling Iowa farmer, to carve a baseball diamond out of his valuable cornfield. After doing so, Kinsella feels snubbed by a team of baseball-legend ghosts and confronts its ringleader, “Shoeless” Joe Jackson. Kinsella tells Jackson, “I did it all. I listened to the voices, I did what they told me, and not once did I ask what’s in it for me.”
“What are you saying, Ray,” Jackson asks.
Kinsella, stumbling, answers, “I’m saying … what’s in it for me.”
And, truth be told, that is what many Americans want to know about the outcome of the fiscal cliff debate.
“I think that’s what people are asking — how is it going to affect me?” said Roberton Williams, senior fellow at the Tax Policy Center, a joint venture of the nonpartisan Urban Institute and Brookings Institution in Washington, D.C.
Instead of wading into the political fray to find the answer, the Tax Policy Center has created one of the best fiscal cliff tax calculators online. (You can find it at calculator.taxpolicy
center.org.) This calculator lets you compare four different outcomes to the negotiations between President Obama and Congress concerning the fiscal cliff. The fiscal cliff buzzword refers to the penalty for congressional inaction on the federal budget, which will impose automatic tax increases on most Americans in 2013, coupled with deep spending cuts to the military, education and other domestic programs on Jan. 1 if Congress and the president can’t agree on a deal.
So, pop in Tony Bennett’s “Snowfall” Christmas album, pull out your 2011 tax returns (to be as accurate as possible), plug in the numbers and let the tax calculator do the math.
The program offers four different fiscal cliff scenarios — a status-quo extension of the current 2012 law; failure to reach an agreement, thus, triggering the automatic fiscal cliff actions; the Senate Republican proposal (offering to close tax loopholes but not to raise tax rates); and the Senate Democratic proposal backed by the president (trimming spending while increasing taxes on the wealthiest 2 percent), which gained momentum as last week progressed. The calculator allows you to compare two outcomes at a time, as in your taxes under the Republican idea vs. your taxes under the Democratic plan.
The calculation may surprise some. About 90 percent of the Republican and Democratic plans mirror each other, Williams said. The primary difference, in terms of a household’s tax calculation, is that lower-income earners would pay more in taxes under the GOP proposal, while top-2-percent earners would pay more under the Democratic plan. The middle-income bracket faces a lesser impact.
Also, it’s important to remember the two-year reduction in the payroll tax — which funds Social Security and Medicare — expires at year’s end, under all four scenarios. (This week, a few members of Congress mentioned adding a payroll-tax-cut extension to the fiscal cliff deliberations, so its inclusion could revise tax calculations.)
The Tax Policy Center’s tax calculator site also summarizes the macro-economic effect of the varying plans, “but it’s really painful to work through that,” Williams said by telephone from Washington on Wednesday. “Therefore, I don’t recommend that.” Instead, the calculator puts the numbers an average person needs to know at the top, such as total tax liability, income-tax liability, average income-tax rate and marginal income-tax rate.
Just to keep the mood light, punch in the tax for a millionaire, Mitt Romney or the president. (The latter two are available online.)
As the calculator crunches on, you also may want to sip egg nog and linger over the alternative minimum tax calculation. In a chestnut shell, the number of middle- and upper-middle income Americans paying the heftier “AMT” could grow from 4 million now to 30 million if its usual adjustment for inflation gets altered by the fiscal cliff bargaining.
“Those are the things that are going to hit people on the fiscal cliff,” Williams said.
All the more reason for Congress to stop arguing, let signs of Republican-Democratic cooperation take root, and get the mess resolved. The gap between the two sides, especially the hard-liners, remains wide. A response from Larry Bucshon, the U.S. House rep from Indiana’s 8th District, to last Sunday’s Tribune-Star editorial exemplified the division. The editorial urged Bucshon and other signers of the Grover Norquist no-tax-increase pledge to find common ground with Democrats and the president through compromise, and back away from the pledge’s rigid stance.
“The Norquist pledge is not holding up anything,” Bucshon answered in an email to the Tribune-Star. “People like myself hold those values or we would not have signed. I don’t sign pledges in general for the reasons many have outlined. What is holding up the process is the President’s envy and divide campaign to raise taxes on the very people we expect to create jobs. The American people should not take the bait, stick together, and help find solutions that work. Raising taxes on the so-called rich to pay for government programs is the holy grail of liberalism. This is a very slippery slope that will ultimately lead to higher taxes on everyone. When they wake up and look at the facts of the case on government spending and the course of our entitlement programs, we might get somewhere. I will not support any taxpayers sending more money to D.C. Both parties for decades have avoided the tough choices that are necessary when you are a leader.”
Some issues, obviously, can’t be solved by the calculator.
Mark Bennett can be reached at 812-231-4377 or email@example.com.