Tag Archives: fiscal cliff

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Arizona's delegation splits on 'fiscal cliff' vote

Arizona’s U.S. House delegation split along party lines late Tuesday night as the House passed the so-called “fiscal cliff agreement.

The agreement avoided middle-class tax increases. House approval of the legislation already approved by the Senate sent it to President Barack Obama.

Democrats Ron Barber, Raul Grijalva and Ed Pastor voted for the agreement.

Republicans Jeff Flake, Trent Franks, Paul Gosar, Ben Quayle and David Schweikert voted against it.

86804435

Arizona’s delegation splits on ‘fiscal cliff’ vote

Arizona’s U.S. House delegation split along party lines late Tuesday night as the House passed the so-called “fiscal cliff agreement.

The agreement avoided middle-class tax increases. House approval of the legislation already approved by the Senate sent it to President Barack Obama.

Democrats Ron Barber, Raul Grijalva and Ed Pastor voted for the agreement.

Republicans Jeff Flake, Trent Franks, Paul Gosar, Ben Quayle and David Schweikert voted against it.

Three Things Building Owners Need To Know To Reduce Their Taxes - AZ Business Magazine June 2010

Despite Fiscal Cliff deal, taxes will rise for most

While the tax package that Congress passed New Year’s Day will protect 99 percent of Americans from an income tax increase, most of them will still end up paying more federal taxes in 2013.

That’s because the legislation did nothing to prevent a temporary reduction in the Social Security payroll tax from expiring. In 2012, that 2-percentage-point cut in the payroll tax was worth about $1,000 to a worker making $50,000 a year.

The Tax Policy Center, a nonpartisan Washington research group, estimates that 77 percent of American households will face higher federal taxes in 2013 under the agreement negotiated between President Barack Obama and Senate Republicans. High-income families will feel the biggest tax increases, but many middle- and low-income families will pay higher taxes too.

Households making between $40,000 and $50,000 will face an average tax increase of $579 in 2013, according to the Tax Policy Center’s analysis. Households making between $50,000 and $75,000 will face an average tax increase of $822.

“For most people, it’s just the payroll tax,” said Roberton Williams, a senior fellow at the Tax Policy Center.

The tax increases could be a lot higher. A huge package of tax cuts first enacted under President George W. Bush was scheduled to expire Tuesday as part of the “fiscal cliff.” The Bush-era tax cuts lowered taxes for families at every income level, reduced investment taxes and the estate tax, and enhanced a number of tax credits, including a $1,000-per-child credit.

The package passed Tuesday by the Senate and House extends most the Bush-era tax cuts for individuals making less than $400,000 and married couples making less than $450,000.

Obama said the deal “protects 98 percent of Americans and 97 percent of small business owners from a middle-class tax hike. While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country.”

The income threshold covers more than 99 percent of all households, exceeding Obama’s claim, according to the Tax Policy Center. However, the increase in payroll taxes will hit nearly every wage earner.

Social Security is financed by a 12.4 percent tax on wages up to $113,700, with employers paying half and workers paying the other half. Obama and Congress reduced the share paid by workers from 6.2 percent to 4.2 percent for 2011 and 2012, saving a typical family about $1,000 a year.

Obama pushed hard to enact the payroll tax cut for 2011 and to extend it through 2012. But it was never fully embraced by either party, and this time around, there was general agreement to let it expire.

The new tax package would increase the income tax rate from 35 percent to 39.6 percent on income above $400,000 for individuals and $450,000 for married couples. Investment taxes would increase for people who fall in the new top tax bracket.

High-income families will also pay higher taxes this year as part of Obama’s 2010 health care law. As part of that law, a new 3.8 percent tax is being imposed on investment income for individuals making more than $200,000 a year and couples making more than $250,000.

Together, the new tax package and Obama’s health care law will produce significant tax increases for many high-income families.

For 2013, households making between $500,000 and $1 million would get an average tax increase of $14,812, according to the Tax Policy Center analysis. Households making more than $1 million would get an average tax increase of $170,341.

“If you’re rich, you’re almost certain to get a big tax increase,” Williams said.

Small Businesses getting help in down economy

Senate strikes fiscal cliff deal

The Senate has passed legislation to block the impact of across-the-board tax increases and spending cuts that make up the fiscal cliff.

The vote was an overwhelming 89-8 and came well after midnight on New Year’s Day.

A House vote is expected before Wednesday.

The White House-backed legislation would prevent middle-class taxes from rising, and raise rates on incomes over $400,000 for individuals and $450,000 for couples.

It also blocks spending cuts for two months, extends unemployment benefits for the long-term jobless, prevents a 27 percent cut in fees for doctors who treat Medicare patients and prevents a spike in milk prices.

A last-minute addition would also prevent a $900 pay raise for members of Congress from taking effect in March.

Proactive Investing vs. Reactive Investing

Arizona could get revenue boost from ‘fiscal cliff’

Legislative budget analysts say the federal budgetary “fiscal cliff” may have a bright side for the Arizona state treasury, at least in the short term.

The joint Legislative Budget Committee staff says it appears that investors and companies are taking steps to respond to the possibility of higher federal income tax rates in January.

Those steps include locking in capital gains now and paying higher dividends in the last quarter of 2012.

According to the analysts, that could substantially increase personal income in the 2012 tax year and produce higher income tax collections for the state in April.

However, the analysts say a downside would be lower than expected income liability in future years.

making decisions out of fear

What Are You Afraid Of? How To Avoid Making Decisions Out Of Fear

I think business owners, managers and employees are about to let out a collective sigh. We did it! We made it through 2012. It has not been an easy year for several industries. As I look back on 2012, I realize many of my most challenging experiences were because of the unknown that lies in the future — the fear of not knowing the outcome of offering a new service, trying to fill an opening with the right person, making sure employees are happy in their current position.

So what do we do? We take deep breaths; we plan out as much as possible and buckle up for the ride.

I’ll admit it; I am one of those people that is more comfortable when I can safely see the end from the beginning. When I have a realistic goal whether business or personal, I feel comfortable, but how often does staying within your comfort zone lead to greatness?

There are several unknowns that we face every day. It can be stressful at times, right now we’re hearing a lot about the fiscal cliff, several business owners throughout the country and even here in Arizona are doing things simply out of fear. Acting out a fear is the wrong choice.

At times, we’ve all been guilty of making a rash decision based on fear. However, consistently making decisions out of fear will change you and your business.

What are you afraid of? What is your worst case scenario? Make a list. When you know what you’re afraid of, it doesn’t seem as scary anymore. If you don’t already have one and fear persists, find a business mentor that you both trust and respect. It helps to have someone you can share your concerns with.

Recently I was hiking in Tucson, the area was beautiful, and I was excited about my first solo hike in a while. I started on the path, and soon realized I couldn’t see the other side. The mountain trail had me twisting back and forth, and I constantly felt like I was going in the wrong direction. I felt uneasy. I recognized I had had some of these same thoughts and feelings previously, but they weren’t about hiking — they were about my business. Once I took inventory of my surroundings and what I needed to do to have a safe climb, I felt secure again. I knew I had to have faith to continue the trail and that it was going to lead me to the right place. The same goes for business, sometimes you have to take a step or two into the dark before we know we’re headed in the right direction and results come in.

Next time you find yourself and or your business in a fearful situation, take a moment to examine and take inventory on what you can and can’t change. Determine a path and more forward with faith. Remember, your future is as your faith.

For more information about Benjamin Franking Plumbing, visit benfranklinplumbingaz.com.

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Fiscal Cliff: Impact Scenarios for the Commercial Real Estate Industry

 

Cassidy Turley released research examining the impending “fiscal cliff’s” impact on commercial real estate markets across the country.

The fiscal cliff refers to the combination of tax increases and spending cuts that will take effect in January 2013, assuming no change to the current law. Economists’ general consensus is that if the fiscal cliff is allowed to occur, the U.S. economy will slide back into recession in the first half of 2013.

Cassidy Turley’s report summarizes the various scenarios related to fiscal policy and then draws the link to commercial real estate.

Cassidy Turley’s research reveals that Metro Phoenix is the 13th most exposed U.S. market to potential fiscal cliff cuts and would relapse into recession in the worst-case scenario, which research projects at a 30% probability.

In fact, 18% of Metro Phoenix’s Gross Metropolitan Product (GMP) is exposed to sequestration cuts, and those potential cuts would lead to 8,300 job losses, 7.5% unemployment and 1.45% GMP growth. Sequestration also would yield 348,000 SF of negative net absorption, 27.3% vacancy and rent declines of 2.5% for Metro Phoenix’s office market.

Cassidy Turley places the most probable scenario, which involves a short-term deal between Congress and the president, at 70%, and that scenario is much more favorable to metro Phoenix – 3.9%% GMP growth, 42,200 new jobs, 1.7 MSF of office net absorption, 24.9% vacancy and unemployment at 7.1% in 2013.

“The Phoenix metro area is well on its way to an accelerating recovery, and will do so exponentially if policymakers come to an agreement,” said Chris Jantz, Vice President Research of Cassidy Turley Arizona. “It’s imperative that Congress and the president resolve this fiscal crisis with a long-term solution, reduce the federal deficit and create an environment where businesses in Phoenix, Arizona and the U.S. can achieve robust, sustainable growth.”

For U.S. commercial real estate markets, especially cities and regions with clusters of federal contractors, going over the fiscal cliff poses dire consequences.

“Going over the fiscal cliff, and continuing to free-fall is an unlikely scenario, but from a real estate perspective, it’s potentially a devastating scenario,” said Kevin Thorpe, Cassidy Turley’s Chief Economist.

“When you examine our study’s details, you quickly realize how damaging the fiscal cliff will be for so many markets across the country. Washington, D.C., has an obvious bulls-eye on its back, but our study finds that the majority of metros – 23 out of the 30 metros tracked – will experience a recession in 2013 if the tax hikes and spending cuts are not scaled back significantly.”

Cassidy Turley’s report finds that the spending cut’s impact on government contractors will have a direct, adverse correlation on commercial real estate and demand for office space. Sequestration in 2013 would result in actual spending cuts, meaning discretionary defense spending and non-defense spending would be reduced by 9% in 2013 from 2012 levels.

According to the study, the top 100 government contractors occupy a total of 208 MSF of office space in the U.S. – equal to the total office inventory of the entire Dallas metro area. Under the sequestration scenario, the top 100 government contractors would potentially shed 18.7 MSF of office space across the U.S. as the government is forced to tighten its belt on various projects.

“Government contractors are a major tenant in many office markets across the country,”  Thorpe said. “Sequestration is essentially an immediate 9% drop in revenues for the government contracting world. Contractors would invariably need to cut staff, which would create numerous holes in many real estate markets.”

According to Cassidy Turley’s Fiscal Cliff report, the most likely scenario assumes that lawmakers will sign a short-term budget resolution in late December that will extend the Bush administration’s tax cuts for most and resume similar federal spending levels for three to four months. A short-term deal will set the framework for a longer-term budget agreement, and even if an agreement is not reached by the end of 2012, Congress may return in January 2013 and change policies retroactively.

The stalemate still leaves Congress and the President to address the debt ceiling limit, but the Treasury will run out of accounting gimmicks in 1Q or 2Q 2013, again forcing the government’s hand to either finally deliver a “grand plan,” slash spending or default on certain debt obligations.

Despite current uncertainty, resolution would propel the U.S. economy and office market in 2013 and 2014 as 2012 closes relatively strongly. Third-quarter GDP was revised upward to 2.7%, and the U.S. economy has created 173,000 net new jobs per month on average since the summer slowdown.

In November, the Conference Board’s Consumer Confidence Index rose to its highest level in five years, and home-price increases delivered similarly, with increases in 100 out of 132 metros tracked.

“There is a positive script buried in here,” Thorpe said. “If lawmakers can work it out, the U.S. economy appears poised to take the recovery the rest of the way. Real GDP of 2.5% for 2013 is attainable, and 3% or 4% in 2014 is not a stretch given the latest trends in the U.S. economy. Against such a backdrop, demand for office space could be 30% to 40% higher than it has been throughout this recovery. We just need policymakers to get it done.”

 

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Avoiding the fiscal cliff

The Obama administration and House Republicans have unveiled their opening offers in talks to avoid the so-called fiscal cliff. Details are scant but the White House estimates its plan would carve $4.4 trillion from the deficit over the coming decade, including previously enacted cuts ($1 trillion) and savings from reduced costs for overseas military operations ($800 billion), as well as interest payments on the national debt ($600 billion).

House Republicans say their plan would cut deficits by $2.2 trillion over 10 years, but they don’t claim previous cuts, war savings or interest costs toward that total. Both plans would block automatic spending cuts set to hit the economy in January and renew Bush-era tax cuts set to expire at the end of the month.

The two plans both draw upon ideas from 2011 talks between President Obama and House Speaker John Boehner, including a secret plan by top Obama aide Rob Nabors that was made public by author and Washington Post writer Bob Woodward.

Here are the highlights of all three approaches:

TAXES

Obama: Increase taxes by $1.6 trillion over 10 years, raised by permitting tax rates on individual income exceeding $200,000 and family income over $250,000 to return to Clinton-era levels of 36 and 39.6 percent, up from 33 and 35 percent now. Increase taxes on dividend income and reduce the value of deductions and exemptions for those earning above $200,000 and 250,000. Renew the 2 percentage point payroll tax holiday or a similar tax cut for workers. Return taxes on large estates to 2009 levels. Permits tax reform to replace the existing code so long as it maintains the $1.6 trillion tax hike.

House GOP: Increase taxes by $800 billion over 10 years, raised through a comprehensive overhaul of the tax code that would curb various unspecified tax breaks while lowering tax rates overall. Extend all expiring Bush-era tax cuts on income, investments, married couples and families with children. Maintains the estate tax at current, more generous levels exempting estates up to $5.1 million from tax and sets a top rate of 35 percent. Permits payroll tax cut to expire.

Obama 2011: Raise taxes by $1.2 trillion over 10 years through overhauling the tax code along similar lines advocated by House Republicans, including lowering each tax rate by reducing tax breaks and deductions.

HEALTH CARE

Obama: Cut $350 billion over 10 years from federal health care programs Medicare and Medicaid, including lower Medicare drug costs and other cost curbs on health care providers.

House GOP: Cut $600 billion over 10 years. Includes unspecified cuts to health care providers and assumes an increase in the eligibility age for Medicare and increased Medicare costs for higher-income beneficiaries.

Obama 2011: Cut $360 billion over 10 years, including at least $250 billion from Medicare, in part through savings from raising the eligibility age and increased premiums for doctors’ visits and the Part D prescription drug program.

OTHER SPENDING CUTS

Obama: Cut the deficit by $250 billion through other spending cuts and new fees. Options include requiring federal workers to contribute more to their retirement, cut farm subsidies, increase airline security fees, overhaul Postal Service operations, and increasing fees on some enrollees in the military’s Tricare health care plan. Leaves in place existing “caps” on agency budgets passed by Congress each year.

House GOP: Deficit cuts of $300 billion through such cuts and fees from miscellaneous programs. Cut another $300 billion over the decade from agency operating budgets.

Obama 2011: Cut $200 billion from such programs. Several items on the list have been subsequently used to pay for other legislation.

GOVERNMENT INFLATION MEASURE:

Obama: No proposal.

House GOP: Reduce deficits by $200 billion over 10 years by replacing the current inflation adjustment for Social Security and income tax brackets with a less generous “chained CPI” that, on average, is 0.3 percentage points less than the current measure. Doing so would reduce Social Security cost-of-living increases and cause a greater portion of taxpayer income to be taxed at higher rates.

Obama 2011: Apply less generous inflation measures to both Social Security and tax brackets, but boost benefits for the oldest Social Security beneficiaries with low incomes.

NEW SPENDING

Obama: $200 billion in new economic “stimulus” initiatives, including payroll tax cuts, continued write-offs of business equipment purchases, extended unemployment benefits, help for borrowers “under water” on their mortgages, and new spending on infrastructure.

House GOP: No proposal.

Obama 2011: $43 billion to extend unemployment benefits to the long-term jobless.

DEBT LIMIT

Obama: Permit the president to obtain increases in the government’s borrowing cap, currently set at $16.4 trillion, without approval by Congress.

House GOP: Retain longstanding requirement that debt limit increases be enacted by Congress.

Obama 2011: Immediate unspecified increase in the debt limit and additional increase not subject to congressional approval.