President Obama announced at 1:00 p.m. Friday, that he is hesitant to increase taxes on medium and small businesses. His reason is in harmony of experts across the nation that realizes that businesses may have to choose between paying a tax and paying an employee.
Causing a tax hike on small and medium businesses now would increase unemployment to 9%. For middle income earners a tax freeze has been put in place today.
Obama is instead looking at Scenario 3; persons that earn $250,000 per year and up, who can afford to pay a little more tax for a while to offset the deficits. Individual state income taxes are decided per state legislature at this time there has been no notice of increases.
He conceded that he is open to new ideas that may be worth considering and has already consulted with many financial experts. For now the most likely three scenarios are keeping or expiring the existing tax cuts for all tax payers or expiring the tax cuts for high income earners.
At this time the existing plan is pending negotiations for better proposals. He left the podium to join Republican congressional leaders to listen to their ideas.
The president invited Boehner, Senate Majority Leader Harry Reid of Nevada, House Democratic Leader Nancy Pelosi of California and Senate Minority Leader Mitch McConnell of Kentucky to discuss the legislative agenda for the remainder of 2012.
Obama announced to congressional leaders that U.S. voters “sent a message in yesterday’s election that leaders in both parties need to put aside their partisan interests and work with common purpose to put the interests of the American people and the American economy first.”
Current tax cuts that will expire on January 1, 2013:
- Eliminate itemized tax cuts, personal exemptions, capital gains.
- Social Security tax will rise up 2%.
- Medicare tax will increase .09 percent.
- Tax on Cadillac healthcare insurance.
- Personal income tax would go up 10%.
- Middle class Americans would pay $3,500 more per year in tax.
Proposed spending cuts:
- Long term unemployed benefits will be eliminated.
- 9% of the military budget.
- $55 billion deduction in Medicare spending.
- Federal Aviation budget reductions could decrease airports.
- Park rangers would be laid off and as a result parks may close.
- A $55 billion, 9 percent cut in defense spending next year and another $55 billion in cuts to domestic programs, including a 2 percent cut to Medicare providers.
- The expiration of unemployment benefits for the long-term jobless and a sharp cut in reimbursements for doctors participating in Medicare.
- The expiration of Obama’s temporary 2 percentage point cut in payroll taxes.
The new budget crunch is sure to do one thing; send government employees to the unemployment line.
Hopefully the Republicans will contribute valuable solutions to the problems. President Obama is open to all ideas.
If you have a unique idea to resolve the fiscal cliff send your idea to your U.S. Senator or House Representative.