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.


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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.




More from

Nov 19, 2012 7:16PM
MG....This attached article accurately articulates the need to address and re-set the disparity between the tax rates for labor vs capital.  Please check it out.

PS, and No..I  do not 'date myself'....Mrs LOM wouldnt hear of it !

Nov 19, 2012 6:41PM

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 5:00PM
"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
"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 4:47PM

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 4:08PM
Zackly stric!  Bring back Alias Barely Slowtero !!  Turns out he was the Dems best secret weapon ever. 

Thank you, Jim Cramer for illustrating why the GOP is eventually going to be an extinct entity.  That the only issue remaining in the fiscal fix consists of protecting the net worth of the Uber Wealthy against the horrors (yes, horrors of another 3+ pct) of greater taxation speaks volumes about them. And it demonstrates why the elections turned out the way they did. 

So many people have finally seen through the opaque packaging of the Hard Right's rancor
and rhetoric to perceive what was there all along - the need to serve their 1-2 percent (masters) by adhering blindly to preserving their top spots in society, over and above helping to guarantee equality of opportunity to the remainder born without the silver spoons, etc.  This is fundamental unfairness, regardless of the specifics in the definitions. 

Its not that the D Party represents so many more people. In fact, Obama received about 4 more percentage points than the other guy.   However the vote was so much more an expression of perseverance in the face of dogged determination to undermine plebiscites with pecuniary advantage, as well as an expression of the people to uphold the true values of what made America great- its unique pledge to 100 Percent of its citizens, not just the wealthy few.  

Nov 19, 2012 3:36PM
Evil Chris

XX said...........


Actually it no longer matters what "XX said". The Republican party has a 0% chance of ever regaining enough power to ruin our economy again. People with opinions and views like theirs are nothing more than a remnant of a bygone era of greed and lack of empathy. Their voices will be reduced to little more than static on a radio in the coming months/years.

But for now, let them continue, please, let them continue... so that they turn what's left of their already dwindling numbers against them.

Nov 19, 2012 3:31PM
Like taxing cigarettes or booze...   We need to tax the poor so they don't want to be poor....
NOBODY WANTS TO BE POOR !!!!!!!!!!!!!!!!!!!!
Nov 19, 2012 3:23PM

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 3:21PM

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 3:18PM
The harsh reality is simply this: Sooner or later we need to go over the so-called fiscal cliff in that we need to reduce spending and increase government revenue so as to begin seriously paying down the accumulated national debt. There seems to never be a good time to do these things. We must bite the bullet and just do it. Of course a recession will be one result, but that is necessary and unavoidable since a good chunk of our economy the past 30+ years has been dependent on cheap credit and heavy borrowing, both by government and private citizens.  This can't continue. 
Nov 19, 2012 3:15PM

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 3:14PM
Why should the Republicans give in to higher taxes on the wealthy when Obama & the Democrats won't give in on shrinking the size of government and government expenditures for unnecessary programs and entitlements?  Obama and the Democrats are turning to the wealthy to bail out the deficit so why shouldn't the government and the Democrats give up something as well?  Fair is fair.
Nov 19, 2012 3:11PM
"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 3:10PM

Illinois needs 96 Billion to fund it's pensions.  There are roughly 13 million people in Illinois.  That means Illinois needs to confiscate $7,400/person or 29,600/family.

Wouldn't it be easier to flee Illinois than to have almost 30K stolen from you?   LOL, looks like I left at just the right time!

And it is growing at 8-10 billion a year!   Obamaville economics are coming to the USA...  hang on to your wallets!
Nov 19, 2012 3:01PM

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 1:04PM
Cramer the damage is already done.  The economy is wrecked for a generation because the conversation is about carving up the pie rather than making more.  What an embarrassment to think our country is focused on taking from hardworking succesful families for government stewardship.  Just look to the Post Office and GM for a demonstration of failure.  GM is building new factories in China with the taxpayer dime.  Unbelievable.
Nov 19, 2012 12:58PM
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.


I'm middle class and frankly I'm tired of giving the 1% a FREE RIDE.

All you hear from these LEECHES is rhetoric and EXCUSES.

Let's see now.... You took those tax breaks (ENTITLEMENTS) and invested it over seas? You can bet the 47% spent their ENTITLEMENTS right here in AMERICA.

Nov 19, 2012 12:48PM
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. 
Nov 19, 2012 12:44PM
After all the blowhard posturing they will come up with acceptable semantics to raise taxes on the wealthier Americans and foreigners in this country. They will have a sliding percentage scale starting at 1% "revenue enhancement" and go up to 4% for those making over 5 million. They will increase tax on dividends the same with a scale so that the middle class will not have an increase up to $ 10-15,000 in earned dividends and Romney types will pay 10-15% more on 1 million+ earned in dividends.  Build 1 less carrier battle group that would cost 100 billion over its life time for support ships, armamen, fighters,t and personnel. If America can't stop it's enemies with the nuclear subs, battle groups and missles all over the worls]d, what the hell will 1 more carrier really do.
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