Taxes in the Fiscal Cliff

It is becoming increasingly clear that we are not going to make it into 2013 without tax increases. If we go over the fiscal cliff, taxes are going up, but Democrats have made clear that any negotiated deal would include increased taxes as well. Assuming we do go over the cliff, what would those taxes look like?

• New Obamacare taxes would come into effect.
• The Alternative Minimum Tax would return to full strength.
• The Bush tax cuts would expire.
• The payroll tax cut would expire.

Even if Congress reaches a deal to avoid the cliff, taxes associated with Obamacare are likely to stay in place. After all, changing those taxes as part of a deal to avoid taxes would require the Democrats to admit that Obamacare actually contained taxes in the first place. I'm not holding my breath.

On the other hand, even if Congress does not reach a deal to avoid the cliff, I expect a minor deal to avoid the AMT. After all, Congress has enacted one-year patches to the AMT every year for more than a decade, under both Republican and Democratic Congresses, as well as under the split control we've seen since 2010. This year should be no different.

On the Bush tax cuts, Obama was reelected after campaigning to raise taxes on the wealthy. If no deal is reached, Obama gets his wish; the Bush cuts expire and taxes are raised on the wealthy (and everyone else). The Republicans really don't have any leverage on this issue, so I expect any deal would only keep the Bush cuts for those below some income level, probably $200k or $250k.

The real uncertainty is the payroll tax cut. Normally, I would expect Democrats to abhor the cut on the grounds that it undermines Social Security. Republicans should celebrate it, not only as a tax cut, but because it undermines a massive entrenched entitlement. And yet, in some sleight of hand I still haven't figured out, Obama got the Republicans to oppose (and Democrats to support) a tax cut on every worker in the country. Now that the election is over, will the parties stick to these flipped roles, or revert to their principles? Or will the payroll tax cut expire with no one paying attention?

What Republicans Should Do
Whatever happens with the rest of the fiscal cliff, the rich (and people who work for the rich) are going to get hosed. Obama will probably get his way on the Bush tax cuts, and many of the Obamacare taxes are also aimed at the rich. Health costs are also going to go up, but I think the smart insurance companies have already raised their rates to compensate. There may not be a noticeable increase in premiums because the increase has already happened.

Given this, Republicans need to refocus on what good they can still do. Taxes are going up, and with Obama's reelection, that was inevitable. But if Republicans are smart and tactful, they can still keep taxes low for most of us. Give Obama the tax hike on the rich, since that will happen even with no deal, but secure the payroll tax cut and the Bush cuts for the non-rich in exchange. Obama himself is campaigning for the latter, so this should be easy to do, if Republicans are willing to do it.

Final Ballot, Post-Mortem

Now that the election's over*, how did I do? Not well on candidates, but far better on the issues.

Out of 16 races with more than one candidate, the one I voted for won in only three of them. Kim Wyman's victory for Secretary of State is particularly narrow, only ~14k. If she holds onto it, however, she would be the only Republican to hold statewide office. In District 40, Jeff Morris defeated the only non-presidential third-party candidate on my ballot, the Green party's Howard Pellett.

Candidates
U.S. President: Gary Johnson (Libertarian), VP James P. Gray
U.S. Senator: Michael Baumgartner (R)
U.S. Representative: Dan Matthews (R)
WA Governor: Rob McKenna (R)
WA Lieutenant Governor: Bill Finkbeiner (R)
WA Secretary of State: Kim Wyman (R)
WA State Treasurer: Sharon Hanek (R)
WA State Auditor: James Watkins (R)
WA Attorney General: Reagan Dunn (R)
WA Commissioner of Public Lands: Clint Didier (R)
WA Superintendent of Public Instruction: Write-in, Luisa Rey
WA Insurance Commissioner: John R. Adams (R)
WA State Senator, District 40: John Swapp (Ind-R)
WA State Representative, District 40, Position 1: Write-in, Rufus Sixsmith
WA State Representative, District 40, Position 2: Jeff Morris (D)
WA Supreme Court Justice, Position 2: Write-in, Adam Ewing
WA Supreme Court Justice, Position 8: Write-in, Timothy Cavendish
WA Supreme Court Justice, Position 9: Richard B. Sanders
WA Court of Appeals Judge, Division 1, District 3, Position 1: Write-in, Robert Frobisher
Whatcom County Superior Court Judge, Position 2: Dave Grant
Public Utility District 1, Commissioner District 2: Paul D. Kenner

I had far better luck on the issues. Out of ten issues, Washington and local voters agreed with me on eight of them. The exceptions are marijuana legalization and regulation, which passed 55-44 and a new local property tax, which passed 55-45.

Issues
I-1185, Two-Thirds Tax Requirement: Yes
I-1240, Charter Schools: Yes
R-74, Same-sex Marriage: Approved
I-502, Marijuana: No
SJR-8221, Altering the Debt Limit: Approved
SJR-8223, Public Fund Investments: Rejected
A-1, B&O Tax Increase: Repeal
A-2, Petroleum Tax: Repeal
Port of Bellingham, Prop-1, Number of Port Commissioners: No
City of Bellingham, Prop-1, Low-Income Housing Levy: No

*Since Washington is a 100% vote-by-mail state, and the last day for the ballot to be postmarked was election day, there may be up to two million ballots out there floating through the postal system, waiting to be counted. These results are, therefore, only provisional.

Aftermath: Reflections on Obama's Re-election

Barack Obama has been re-elected President of the United States.

For starters, Gary Johnson was not a spoiler. While the results are still coming in, as of 11:30pm Pacific, there was not a single state won by Obama where Romney would have won even if every Johnson voter had voted for Romney instead.

Second, there is no mandate. While Obama won, he won with a far narrower lead in both the popular vote and the electoral college than he had in 2008. While Democrats increased their lead in the Senate, Republicans increased their lead in governorships, and the House is on track to be more or less the same as it was. This was very much a status quo election.

On the whole, will we be better or worse with Obama as president?

First of all, expect the fiscal cliff to stay in place. After all, we just re-elected most of the people who put it there to begin with. While I haven't spent too much time learning about the fiscal cliff, Wikipedia claims a 19.63% increase in revenue and a 0.25% decrease in spending, or a nearly 80-to-1 ratio of tax hikes to spending cuts. This will not end well-- and even if our new old government leaders manage to avoid the cliff, the re-elected Obama is in a prime position to extract concessions he was unable to before the election. Any compromise will include more tax hikes than spending cuts, if spending is actually cut at all.

Second, Obamacare will be implemented fully over the next few years. Expect the nation's health, freedom and balance sheet to all suffer. Although to be honest, I don't believe Romney would have done any better.

The national debt will continue to grow. If the fiscal cliff causes a second recession, expect more stimulus and bailouts, probably for Europe too. We may look back at $1.5 trillion deficits and laugh about how small they were. On the other hand, the same probably would've happened under Romney, considering his plan to index military spending to 4% of GDP.

On other long-term important issues, I don't expect Obama to do much of anything. He'll keep ignoring space (mercifully), Social Security will continue to stumble forward without reform, trade deals will be forgotten, immigration won't change. We'll mostly withdraw from Afghanistan on schedule, although the lack of attention the war gets these days means we'll probably keep troops there for the long haul, same as we've still got troops in Germany, Japan and Korea. On trade and Afghanistan, at least, Romney would have been even worse. While Romney may have avoided the fiscal cliff, his insistence to go after China on trade might have been just as bad for the economy.

The main difference between the two candidates in terms of our long-term welfare is this: With Obama's victory, 2016 will see another wide-open primary for Republicans, where we'll have another shot at nominating a true spokesperson for liberty. Had Romney won, we wouldn't get that chance until 2020. So hold onto your hats. It's gonna be a rough four years for liberty, but we made it through the last four. We'll make it this time, too.

Final Ballot

One last post about the election before it's all over tomorrow (hopefully): My completed ballot. If you're in Washington, or even Whatcom county or Bellingham, feel free to make things easier on yourself by just voting the same as me!

A note on the write-ins: As a matter of democratic principle, I refuse to vote for anyone running unopposed. Back in Ohio, that meant I just didn't vote in some races. Here in Washington, every race allows write-ins, so I'm writing in some names to register my displeasure with the unopposed candidates.

Candidates
U.S. President: Gary Johnson (Libertarian), VP James P. Gray
U.S. Senator: Michael Baumgartner (R)
U.S. Representative: Dan Matthews (R)
WA Governor: Rob McKenna (R)
WA Lieutenant Governor: Bill Finkbeiner (R)
WA Secretary of State: Kim Wyman (R)
WA State Treasurer: Sharon Hanek (R)
WA State Auditor: James Watkins (R)
WA Attorney General: Reagan Dunn (R)
WA Commissioner of Public Lands: Clint Didier (R)
WA Superintendent of Public Instruction: Write-in, Luisa Rey
WA Insurance Commissioner: John R. Adams (R)
WA State Senator, District 40: John Swapp (Ind-R)
WA State Representative, District 40, Position 1: Write-in, Rufus Sixsmith
WA State Representative, District 40, Position 2: Jeff Morris (D)
WA Supreme Court Justice, Position 2: Write-in, Adam Ewing
WA Supreme Court Justice, Position 8: Write-in, Timothy Cavendish
WA Supreme Court Justice, Position 9: Richard B. Sanders
WA Court of Appeals Judge, Division 1, District 3, Position 1: Write-in, Robert Frobisher
Whatcom County Superior Court Judge, Position 2: Dave Grant
Public Utility District 1, Commissioner District 2: Paul D. Kenner

Issues
I-1185, Two-Thirds Tax Requirement: Yes
I-1240, Charter Schools: Yes
R-74, Same-sex Marriage: Approved
I-502, Marijuana: No
SJR-8221, Altering the Debt Limit: Approved
SJR-8223, Public Fund Investments: Rejected
A-1, B&O Tax Increase: Repeal
A-2, Petroleum Tax: Repeal
Port of Bellingham, Prop-1, Number of Port Commissioners: No
City of Bellingham, Prop-1, Low-Income Housing Levy: No