Tuesday, January 01, 2013


You may recall that Obama called for a "balanced" approach of spending cuts and tax increases.  I remember when President Reagan accepted a deal for $2 of spending cuts for every $1 of tax increases in TEFRA.  The tax increases hit immediately, the promised spending cuts never materialized.

So perhaps we've become a bit more honest in our presentation. The newest deal includes $1 of alleged spending cuts for every $41 of tax increases, according to the CBO.  One wonders why they even bother.

This will be why many Republicans will vote against the deal in the House, but most of the Democrats will get on board. I think it likely to pass.

I also think it's a good time to buy some tax-free munis, and take a wait and see posture on stocks.  After-tax stock returns are about to be hammered, and the value of tax free income will soar.

After all this struggle, will Congress return to meaningful tax reform later this year? Given that the new rates and that AMT patch would be permanent, I seriously doubt it.

Here is the Senate bill.

I'd like to know the federal estate tax exemption for 2013, if anyone sees it.  From my reading of the Senate bill, the exemption is $5 million indexed for inflation since 2010, so it should be higher than the $5.12 million we had in 2012. 


JLM said...

Aren't the across-the-board spending cuts already enacted and scheduled to be made March 1?

Jim Gust said...

Would you like to buy some shares in the Brooklyn Bridge?

JLM said...

Next you'll be telling me the income tax changes aren't really "permanent."