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 12:16PM
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The Reality of Greed.

Every One Billionaire equals 20,000 FAMILIES based on the average household income in America. That is- for every billion hoarded by one person, 20,000 families go without. To blatantly condemn 20,000 families for every billion hoarded- is crime and criminal intent. When Romney spoke about the 47%, that was terrorism. We have a War on Terrorism. The comment needed to be met with military force and the speaker reduced to nothing. Unhappy with such words? 47% of the nation wants it's opportunities back. That comes from the ELIMINATION of hoarders. It's not limited to billionaires... it's not specifying that families making more that $50,000 are to be treated as hoarders... it's not to say everyone in the 47% can and will justify parity. It says that a FAMILY earning $50,000 annually will participate in the economy of America. It says that people making excessive amounts above $50,000 will also participate in the economy but possess far more that can only harm our economy and may even be used to sabotage it. The most horrific aspect of our bottleneck is-- so many hoarders of wealth actually inherited it. I'm sorry, but as we look back at societies throughout time, ALL of them failed when excessive currency transitioned from founders to flounders and from heroes to zeroes who could not avoid the temptation of correction and omnipotence.

The markets are UP this morning. They are EVERY Monday morning now. They are UP because bad banks sold bad credit to a lame Federal Reserve who refueled fools so they can continue to suppress us. CLOSE THE BANKS. END THE FEDERAL RESERVE. GET RID OF WALL STREET or prepare for the desperate peoples of the world to seek correction. At the end of the day no banker should be free and Congress should have a very short and specific deadline for fixing what their negligence has bore us. Lift families lift Main Street, crush hoarders of currency.

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 12:14PM
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The rich paid 90% income taxes from 1945 until Reagan broke the deal.  The deal of the poor fighting the wars and the rich a least paying for them.  I guess us serfs should be happy to die to keep your dividend tax rates low.  A most noble calling.
Nov 19, 2012 12:11PM
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Check the facts:  There's one other factor to consider.  That married couple making over 250K needs to have it all be earned income and come in over 250K after deductions.  290K gross, 10K for two people's deductions, 15K for mortgage interest tax deduction, 10K for property tax deduction, 7.5K for state income tax, 2.5K for a local income, and they only pay 5K at the increased rate.
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 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 11:54AM
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If you would do some research on your own instead of just believing the right wing propaganda, you would find that in the U.S. the top one percent(1%) own about forty two percent(42%) of all the privately held financial wealth. The bottom eighty percent(80%) of U.S. citizens own about seven percent(7%) of the privately held financial wealth of the nation. The bottom forty percent(40%) of U.S. citizens have no financial wealth assets.

If we enlist the middle class and the most socioeconomically disadvantaged and the most unfortunate members of our society to fight our nation's military battles, then we should be able to enlist the most socioeconomically advantaged, the most fortunate members of our society to help with the nation's deficits and debt.
Nov 19, 2012 11:50AM
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Oh,and now the sad sack oil speculators are back from their lunch break so now we're gonna get screwed for the holidays with ridiculous gas prices.Soon the largest oil producing country and they won't do a thing to cut prices for the American people.PATHETIC !!
Nov 19, 2012 11:49AM
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This is the kickback short trap rally I warned about last week. Hope you folks didn't get caught short or not have lots of reserves of dough in your account.  It will pass shortly and the decline will resume.
Nov 19, 2012 11:47AM
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Gee people -- the fiscal cliff they are taking about is nothing compared to what needs to be done to correct the imbalance in the US economy.

 

The deficit is going to be $2 trillion for the foreseeable future a year.

 

The messy fiscal cliff they are taking about is only a trillion dollar correction spread over 10 years.

 

There is no hope for the USA to correct it's economic imbalance.

 

Heck they can not even agree on a $100 million a year correction not to mention a $2 trillion a year correction that is needed.

 

Basically the USA GDP is probably closer to about $5 trillion a year and not the $16 trillion a year they say it is. Take out housing (you are suppose to be getting rent of like $2,500 a month for your house and living somewhere else for free and spending that $2,500 a month in the real economy) and other jack ups of the GDP numbers and we are looking at about $5 trillion for the real GDP lower than China's real GDP folks.

 

Basically there are like 110,000,000 workers making on average about $38,000 a year which is about $4 trillion a year going to GDP. The US companies still left that make things add about $1 trillion a year to GDP and everyone one else adds nothing.

 

We have a debt of like $2 trillion a year because the super rich pay themselves too much money $250,000,000 a year on average and pay the few Americans they hire too little $14,000 a year minimum wage. This imbalance will not last more than two years.

 

Our debt to GDP ratio is already approaching 3:1 and soon will be 4:1

 

Our collapse is merely months away.

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 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 11:35AM
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Under President Obama's plan only a married couple with an income of more than about $250,000 would see a tax increase and the tax increase would only apply to their income which is above that $250,000. In other words in they had an income of $350,000 per years the tax increase would apply on $100,000 only, the $250,000 would be taxed at the same rate as before. 

Raising taxes on the wealth will not cause a recession, the wealth have plenty of money to spend. Raising taxes on the middle class is what would cause a recession because they are already typically spending most of their income, with very little, if any, left over. They have no income to spare for a tax increase but the wealthy do have the income to spare for a tax increase. This is the conclusion of studies on this matter....See Less
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 11:19AM
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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 11:17AM
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 ALL YOU HALFWITS THAT VOTED FOR OBAMA WILL GET YOUR LITTLE HAND OUTS WHILE THE REST OF US KEEP PAYING FOR THE BUMS YOU PUT IN WASH SO YOU KEEP GETTING YOUR FREE RIDE. I DONT BLAME YOU, IF I WAS A LAZY BAS TARD LIKE YOU I WOULD WANT TO KEEP THOSE SOB RUNNING THINGS. SOME DAY IT WILL ALL BE GONE AND YOU LAZY SOB CAN STARVE TO DEATH.

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 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 11:01AM
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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 10:50AM
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We pay a lot of taxes which is great since we make a lot.I love this country so yes, we feel

should pay rent.Who cares if you`re paying taxes if you`re making 6 figures?Rates are a

lot lower than the 1970`s.Who do the Repubs think should pay taxes?

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