The fallout from the fiscal cliff



Don C. Brunell

Last month, an inspector general for the Treasury Department revealed that from 2010 to 2012 the Internal Revenue Service handed out $1 million in bonuses to 1,150 workers who owed back taxes.

Over the same period, the IRS paid out an additional $1.8 million in bonuses to workers with disciplinary problems, including misusing government credit cards, drug use, threats of violence and unemployment benefits fraud.

Give us a break! Apparently, IRS workers don’t have to follow the same rules as the rest of us who pay their salaries. According to the inspector general’s report, the IRS doesn’t take bad conduct into account when awarding employee bonuses.

Adding insult to injury, more than 75 percent of Americans paid higher taxes for 2013, thanks to the “fiscal cliff” deal passed in Congress on New Year’s Day. Ironically, while warning of government insolvency and Congress haggled, President Obama spent $4 million of our money on his annual Christmas vacation in Hawaii.

The average tax increase from the deal is expected to be $1,257, but that figure belies the wide disparity in impact, according to the Tax Policy Center.

Those making less than $10,000 a year paid an average of $68 more in federal taxes, while those making between $50,000 and $75,000 saw an $822 jump. Filers with incomes of $1 million paid $170,341 more.

Who says the rich aren’t paying their share?

In addition, the tax rate for the wealthy increased to 39.6 percent. Millionaires will pay $122,560 more a year from this one provision alone, according to the Tax Policy Center. And the tax on capital gains and dividends increased from 15 percent to 20 percent.

Those are only a few of the tax hikes from the so-called fiscal cliff negotiations.

So what does it all mean? Can government hike taxes this much without negatively affecting our economy and jobs? Of course not.

Families with incomes of $100,000 account for 40 percent of all consumer spending. Because consumer spending makes up 70 percent of the GDP (Gross Domestic Product), economists are very concerned that consumers will slow their spending, putting a further drag on our moribund “recovery.” Added to that are the 21 new taxes associated with Obamacare, which are phasing in this year.

Making matters worse, spending watchdog Sen. Tom Coburn (R-Oklahoma) estimates that the federal government loses $200 billion of our money each year to fraud, waste and mismanagement.

For example, the National Endowment of the Humanities gave nearly $1 million of our money to The Popular Romance Project to study romance in novels, films and the Internet. While NASA has shelved the space shuttle program, it’s spending $3 million to study how Congress works. And as the U.S. pulls out of Afghanistan, the military has decided to destroy $7 billion worth of useable equipment rather than sell it or ship it home.

On Cinco de Mayo, the national debt stood at $17.475 trillion, meaning every man, woman and child in the United States currently owes $57,514 for their share of the U.S. public debt.

According to the U.S. Debt Clock, our total long term unfunded liabilities are at $126 trillion, a $1.1 million liability for each U.S. taxpayer. The main drivers of that astronomical number are our two major entitlement programs: Social Security and Medicare.

Where will it end?

Senate Republican Leader Mitch McConnell has introduced legislation to prohibit the IRS from awarding bonuses to workers who haven’t paid their taxes or who have committed serious misconduct.

That’s a start, I guess. That leaves only $199,997,000,000 of our money that’s wasted each year by the federal government, while we pay higher taxes.

-Don C. Brunell is a business analyst, writer and columnist.


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