Taxing the rich is the budget's sticking point

You would think that with all that is at stake here, Republicans could bend on this one issue.

By Jim Cramer Nov 19, 2012 10:01AM

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Jim Zook Images com CorbisDo the Republicans have the ability to make a stand only on keeping down the taxes for all who make more than $250,000? Is that a viable position? Is that what this fiscal cliff is coming down to?

 

If you parsed the rhetoric you would think so. There doesn't seem to be any real gulf with the huge compromises that have to be made about the defense budget, the Social Security tax break, the alternative minimum tax, the extended unemployment benefits and even the defense budget. There's no distance between the two sides on holding taxes down for those who make less than $250,000. It just seems like the Republicans are willing to go to their grave defending the right of the wealthiest not to pay higher taxes -- something that is a deal-breaker for President Obama, as reiterated by his minion Nancy Pelosi (D-CA) on the talk shows this weekend.

 

You would think that, with all that is at stake here, this measure could be agreed upon. I mean, the rest of the cliff jump is far more important to the U.S. economy to have it be sacrificed on a no-tax-increase policy, no matter what position. That's particularly so after that position -- which was well-known to the electorate -- held no water in the latest election. The Republican candidate was only able to pick up a few states over the other one, despite the economy being structurally unable to produce enough jobs not to mention worry about going back into recession.

Yet, when you go through the documents for this issue, as I do for my Wall of Shame nominations, it is by far the most important sticking point.

 

I think that's one of the reasons there is so much hope a deal could be done. Logically, this one cohort, which could bring in $40 billion -- the smallest portion of the amount of money that would be raised by the tax increases that are coming -- couldn't and shouldn't be able to trigger a U.S. recession via fiscal cliff. Logically, at least a phase-in could be agreed to, and the Republicans aren't going to have to give up much, given that they are the minority party. You would think that at least this gives them a terrific position to run on in 2014, if they think it is terrific: We kept taxes down even for the richest. If they think they can turn the tide in the blue states with that, and if the Tea Party thinks it can stay alive claiming that it kept rates down, then the U.S. will go over the cliff, plain and simple.

 

  • On Tuesday, November 20 at 6pm ET, TheStreet will host a Trade Credit Insurance webinar with Todd Lynady, Senior Underwriter for Zurich in North America and Mike DeLuca, Senior Partner of One Source. Register now.

 

So, that's the sticking point to watch. It's not the defense budget, or the employment, benefits, or the social security exemption, or the taxes for the middle class or the aversion of the Alternative Minimum Tax for millions.

 

It's all about taxing the rich, and their capital gains and their dividend income and pleasing or displeasing the wealthiest people in the country.

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust.

 

 

 


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137Comments
Nov 19, 2012 11:14AM
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No Jim unfortunateley that is not what anything is about.  This is just one more headfake, one more distraction, one more lie from the Banking Wall Steet Cartel that plain and simply is hiding their true intentions and the intentions of the political sociopaths that claim they actually care.  This is about how to further maintain the lie that the those who have the grip on the power they presently hold over the American economy. I suggest none of these groups have a clue about their goals in that they are nearly always running scared and covering up but spend most of their energy  attempting to avoid the inevitable failure they have authored and the end result of the fraud they commit each day on the masses in this country.  Suggesting any of this fiscal cliff nonsense is anything but self serving aggrandizing  is an insult to every American.  There is no fiscal cliff.  This is the end result of the failure of the political members who all knew they weren't engaged in doing the work of the people but worked for themselves, their friends, and those that have payed them to  either do or not do as per their financial requests. This present situation is plain and simply the result  of a group of politicians who have failed this country.  To attempt to describe anything different is to be part of the problem.  We and future generations are those who have already been pushed over the cliff.  The present situation is but a  snapshot of those attempting to save their own butts and fortunes. The American citizen and their unfortunate plight is not even a minor influence on the process you are describing.  JMHO
Nov 19, 2012 11:19AM
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Taxing the rich 101, here is how it works: Those that reaped unprecedented gains during the recession that almost killed the rest of us have this HUGE pile of money they have been shoveling cash onto. The pile is safe, well sheltered, and still growing; the end of the tax cuts will only be on new shovels full of money the rich are tossing on the pile.

Now, not only the rich, but those that have suffered severely (been fleeced) at their hands are brainwashed into thinking Big Money is the savior to all our woes; if the tax cuts Were the solution, then why are so many regular folks still headed to the poor house? Do a little homework people...
Nov 19, 2012 11:20AM
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Mirrage Guy Said

And it doesn't matter their income.   They SHOULD pay something.   WE need to stop giving these leeches a free ride.   The middle class is tired of supporting their lazy asses.

Numbers matter Mirrage

Mirrage the average family of 4 in the bottom 50% of Americans makes about $24,000 a year.  We all know about the cost of living, the rising food and gas prices.  Imagine trying to provide some type of life for a family on that, what the hell are you going to take from them, 30 bucks.  It would cost more to pay the IRS to process it then the income it would bring in. 

The 1% is out of touch, period.

Nov 19, 2012 11:15AM
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Cramer if you want to "tax the rich" then let's leave the rates on the $250k crowd alone and raise them on the over $1 million crowd.   Now, THAT'S  an income that would land in the "rich" crowd. 
Nov 19, 2012 12:02PM
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"In America today we have the most unequal distribution of wealth and income of any major country on earth. The top 1 percent owns 42 percent of the nation's wealth, while the bottom 60 percent owns 2.3 percent. In the last study done on income distribution we learned that 93 percent of all new income generated between 2009 and 2010 went to the top 1 percent while the bottom 99 percent split the remaining 7 percent. This extraordinary unfairness is not only morally reprehensible, it is bad economics. It will be very difficult to create the jobs that our people need when so many Americans have little or no money to spend."


 - Bernie Sanders, November 19, 2012


Nov 19, 2012 3:21PM
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MG said

So you stand in favor of "Fair" treatment, instead of EQUAL treatment under the law?


I have already started treating people 'Fair' rather than 'Equal'.  I hire NO democrats.   I replace any democrats with real workers I find on my payrolls.  I don't do business with democrats.  

I treat them Fair...  Like Jew would a Nazi...
 
My response
So we have a different view of the meaning of fair, how about the legal?  Like it's illegal to to fire based on political affiliation.  Do rich people have a different set of rules to go with their values?  Oh wait that was what the last election was about.
As far as rich people threatening to lay off or move money over seas?????  What else is new?  You did that the last 30 years.  Take your dirty money and get the F out, see how "fair" the Chinese will be with your money.
Nov 19, 2012 4:47PM
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Mirage GUY:You really hate this country don`t you?Just because you fell hook,line and

sinker for a corporate raider like Romney you can`t put the election to rest.Years ago

when me and hubby were teens we worked our butts off for minimum wage and yes,

we still paid taxes, we didn`t forget our roots.Now we have 6 figure wages,we still

love this country and respect people making less.Usually, they work harder than most.

Nov 19, 2012 3:23PM
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The Issue at hand is simply.....Takebacks on "tax give-aways" and "spending cuts.."

And "elimination of fraud and wasteful spending."

 

Real "no-brainer stuff"...Doesn't take 3 pages or 5,000 pages of rhetoric...To discuss it...

 

Takes a couple lines....And a "we can do-it attitude."

Nov 19, 2012 3:15PM
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GOMO.....Pretty sure that the results for Hurricane Sandy's effect on  Home Depot and Lowes' bottomline......Will SHOW UP in their 4th. quarter's filings ??

 

Time to get a little more investment money into Home Improvement Stocks...Kapish..??

Probably even Cramer would agree to that...?

Home Improvent has been one of the better investments, over the last couple years..or so.

And is one group we have done very well with....HD alone, has more then DOUBLED and pays about a 2.5% dividend...

I attribute that to the Housing sector improving, along with the Recovery progressing, AND finally Babyboomers Retiring and Remodling their abodes....Cramer might agree with that also ??

Nov 19, 2012 3:01PM
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I'm not opposed to paying a little...More or less on Divs or Cap Gains...Even being Retired I can control some of that...

So I can only imagine what the Rich and/or Elite can get away with, using a Battery of Accountants and Tax Lawyers..

Somewhat upsetting is what others have alluded to...Is basically the Middle Class supporting these goddamn tax evaders and rich beyond your wildest dreams group, the 1-5% percenters..

 

The Middle Class and the Working poor suffered the most in this downturn..

The Well to do, recovered(most) and have prospered once again...

Anyone who says different is a goddamn liar...

Nov 19, 2012 12:16PM
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How many gazillion times have you heard the term "congress must" or the politicians must.  "Must" for a politician is just another phrase for an opportunity to extract cash for favor.  These musts are but opportunities for them to do even less for the masses and more for themselves and those they favor. Congress must hehehehe. The rich will now be even more willing to pull out their wallets and by necessity buy more protection for their bounty.  Nothing will change for you and me.
Nov 19, 2012 3:11PM
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"The rich paid 90% income taxes from 1945 until Reagan broke the deal."

The Tax Reform Act of 1986 was authored by Republicans. Previously, businesses and individuals making excessive windfalls paid up to 93% tax on them. The average consumer could write off lots of things, businesses could not. The Act initiated hyper-appreciation in housing and is undeniably the starting point for our current housing woes. 1986 marked the last year corporate America paid fair taxes.

It is widely accepted that with the Tax Reform Act came the infusion of hired-in CEO positions and elimination of Founders. According to a study by Carola Frydman of MIT, from 1936 to the early 2000s there has been a rapid increase in the share of MBA graduates acting as CEOs; from approximately 10% of CEOs in 1960 to more than 50% by the end of the century. Earlier in the century, top executives were more likely to have obtained technical degrees in science and engineering or law degrees. Notably, the MBA circumnavigates any actual business exposure but does require complete financial manipulation abilities. Ergo... ban the MBA and mandate a CEO to have actual self-employment experience in substance (no financial, paper or buttons) and we likely restore balance in business.
Nov 19, 2012 11:36AM
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Sadworld said

You're glossing over the fact that the 47% pay sales, state, and local taxes.  There are also a lot of millionaires who pay $0 in Federal taxes.  Demonizing the $250K+ earners is just as myopic as bashing "the 47%" .  Also, MirageGuy, $250K+ earners are most certainly not "middle class".  What really needs done is the tax system should be completely overhauled because it his highly flawed.

 

Hey you stole my next post!!!!!!!!

Agree x 1000

Nov 19, 2012 11:01AM
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Stocks rise on strong earnings and hopes of a compromise on the fiscal cliff ! More "B" S" from the PRESSTITUTES ! Spin it all you want but here comes the worst holiday season for business since the Great Depression !
Nov 19, 2012 6:41PM
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VL.. I fail to see the problem.  In many industries government is embraced by the MBAs running the show because they put up barriers to additional competition.  Every new air quality regulation that current players have make it more expensive to get in the market and establishes a standard to meet instead of continuing to invest unnecessarily.  The regs give the ability for a business to say "We followed the rules" as a shield for civil liability. 

 

Why do you think business exists except to maximize profits?

 

Finally.. if there are ways to avoid taxes and minimize your tax bill.. why wouldn't you?  At the end of the year it's time to look at the losers and decide what, if any, losses to take to offset gains.  In February, I can buy the same ones without suffering a wash sale issue.  I can opt to put my own money into a 401K instead of take it in cash and put it in mutual funds on my own.  I'll vote for rule changes as I think they make sense, but you play by the rules of the game with the established rules, not ones you wish were there.

Nov 19, 2012 12:03PM
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"Congress must address the deficit situation and the fiscal cliff, but we must do it in a way that is fair. At a time when the wealthiest people in this country are doing extremely well and their effective tax rates are low (think Romney), the people on top must pay their fair share of taxes to help us deal with the deficit. We must also end the outrageous loopholes that allow one out of four large profitable corporations to pay nothing in federal corporate income taxes. Further, it is absurd that current tax policy allows the wealthy and large corporations to avoid paying over $100 billion a year in federal taxes because they stash their money in tax havens in the Cayman Islands and elsewhere.

We must also take a hard look at wasteful spending in the Defense Department, where we now spend almost as much money as the rest of the world combined. Significant savings can be found at other federal agencies, too."


 - Bernie Sanders, November 19, 2012

Nov 19, 2012 5:00PM
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"MBA's are a dime a dozen today.  Back in the day it was a very rare degree.   America easily produces the worlds best managers.  We are adept at avoiding government, maximizing profits, and avoiding taxes."

Sounds like a recipe for loser stew.
Nov 19, 2012 4:58PM
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"MBA's are a dime a dozen today.  Back in the day it was a very rare degree.   America easily produces the worlds best managers.  We are adept at avoiding government, maximizing profits, and avoiding taxes."

Pretty much a confession for abolishing the degree and dashing those who used it to gain a pariah role. 
Nov 19, 2012 11:42AM
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Vineyard said it best !This fantasy rally is based on words,rather the hope of words and nothing else period !!Lowes and Home Depot are up,well yeah,Sandy is the reason for that.Take away storm damage and you have nothing.If you remember,back in August-September the market took off based soley on what BB &The Fed were going to say,going to say,going to say and then they gave WS what they wanted and the market barely rose after that.It's all about words not REALITY !
Nov 19, 2012 12:48PM
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MG said
These special tax breaks make no sense.  We have 77,000 pages of them in the tax code.   Eliminate them all.
There is a case for that.  Perhaps starting over and only putting deductions in that are vital is the right course.  Maybe no deductions, but I think we can all agree this is a great starting point.
 
Also use a dictionary, yes they are still out there, fair does not mean equal.  Fair is a matter of opinion.  = in math means the same. 
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