{"id":5531,"date":"2013-01-02T13:08:36","date_gmt":"2013-01-02T21:08:36","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=5531"},"modified":"2016-12-21T07:30:48","modified_gmt":"2016-12-21T15:30:48","slug":"five-post-fiscal-cliff-facts-to-consider","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/five-post-fiscal-cliff-facts-to-consider\/","title":{"rendered":"Five Post \u2018Fiscal Cliff\u2019 Facts to Consider"},"content":{"rendered":"

In the final hours, right up to the deadline (naturally), we got a vote out of the House. America won’t plunge over the so-called “fiscal cliff.”\u00a0Taxes\u00a0will go up on some of the wealthiest but also across the board on everybody else, thanks to the expiring break on Social\u00a0Security\u00a0withholding.<\/p>\n

We punted on the spending cuts \u2014 for now. The market seems to be celebrating \u2014 for now.<\/p>\n

\"\"<\/a><\/p>\n

Does any of this matter?\u00a0As I have argued recently, not in the least<\/a>. But here are five post “fiscal cliff” facts to remember in the coming weeks:<\/p>\n

1) Nothing about how Congress works has changed. If you expected a rational bill with equal parts tax increases and spending cuts, you don’t know Congress, do you? The final bill included extensions of\u00a0corporate tax breaks worth a reported $77 billion<\/a>. Among them: A deal that helps NASCAR tracks depreciate their investments faster. Tax benefits for Puerto Rican rum. Breaks for movie producers. And so on.<\/p>\n

2) We’re already\u00a0up against the debt ceiling \u2014 again<\/a>. This latest round of brinkmanship is not the end of it, hardly. The House GOP was dragged kicking and screaming to the table by a loudly ticking clock, one somewhat amplified by the media, but it’s just one clock in a room full of them.<\/p>\n

3) We didn’t dodge the massive spending cuts ahead. We\u00a0just put them off for two months<\/a>. We get to do this all over again in the new Congress.<\/p>\n

4) The $24 billion in cuts and tax increases in the Senate bill is a literal drop in the bucket when the country owes $16.4 trillion. In fact, the\u00a0Congressional Budget Office figures the cliff deal adds almost $4 trillion to the debt<\/a>\u00a0over a decade. A sobering thought.<\/p>\n

5) \u00a0The paychecks of millions of voters are about to shrink. The deal allowed a temporary cut in the Social\u00a0Security\u00a0tax to expire, so withholding will rise to 6.2% from 4.2%. Experts figure\u00a0taxpayers are out $115 billion in 2013 as a result<\/a>, money which will go toward shoring up Social\u00a0Security. What’s less clear is how loudly wage earners will howl once they realize their pay has shrunk overnight.<\/p>\n

The serious retirement investor should keep all of this in perspective. A 230-point rally out of the gate in the Dow was impressive in the sense that it was vertical, but the fact remains that the market rose less than 2% on the news by midday. It closed up 2.35%.<\/p>\n

Stocks\u00a0could retrench tomorrow. Nobody should be investing on or around headlines out of\u00a0Washington, D.C.<\/p>\n

The fix in the Alternative Minimum Tax (AMT) is probably\u00a0the biggest “real” news<\/a>\u00a0in this bill. For retirement savers in the middle income to low six-figures range, this is a very important change. The AMT is now indexed to inflation, reducing the risk of suddenly higher taxes on those folks.<\/p>\n

The other notable news for savers is that the Congress expects to raise some money in the short term byallowing more people to convert 4o1(k) savings into Roth IRAs.<\/a><\/p>\n

Details on this are sketchy, but if you’re concerned about future taxes, a Roth is generally a good way to build wealth that will be tax-free in retirement, presuming you can pay the taxes due on the conversion today.<\/p>\n

Tax ‘the other guy’<\/h2>\n

As for the rich, taxes have been higher and they have been lower. You will hear a lot of complaining about the rise in rates from the higher-income folks.<\/p>\n

In fact, get ready for a lot of complaining from everyone who pays taxes, period. We all love taxes other people pay, but when you owe this much money as a nation, “the other guy” is all of us. This is a fact that the politicians would prefer to ignore for now.<\/p>\n

Nevertheless, getting this compromise out of the way at least helps tax planners begin their work, with the IRS deadlines just a few months away.<\/p>\n

Dow rally aside, the bottom line for investors is, “to be continued…”<\/p>\n

It’s not a satisfactory ending to the fiscal cliff story, but at least we can turn the page and start into 2013 with a bit less drama and, one hopes,\u00a0a clearer understanding of what’s to come<\/a>.<\/p>\n

Unless growth suddenly accelerates and tax receipts rise with it, “what’s to come” is more compromise.<\/p>\n","protected":false},"excerpt":{"rendered":"

In the final hours, right up to the deadline (naturally), we got a vote out of the House. America won’t plunge over the so-called “fiscal cliff.”\u00a0Taxes\u00a0will go up on some … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":5532,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[47],"tags":[],"yoast_head":"\nFive Post \u2018Fiscal Cliff\u2019 Facts to Consider | MarketRiders.com<\/title>\n<meta name=\"description\" content=\"Does any of this matter? As I have argued recently, not in the least. 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