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Sonoma County weighs in on ‘fiscal cliff’ repercussions


If the country heads over the fiscal cliff Tuesday, Californians will be slapped simultaneously with a slew of federal tax increases and higher state income and sales taxes from Proposition 30.

Absent a last-minute deal, the federal tax increases alone will hit the average family with more than $3,500 in higher taxes in 2013.

“I’m totally worried,” Julie Stites, a 40-year-old nurse practitioner and mother of two from Penngrove, said Friday. “It makes a huge difference to us.”

The increases set to hit Jan. 1 could plunge the nation back into a recession just as it seems to be clawing its way out of a three-year economic morass, said Stites.

“I feel like we’re getting kicked again,” she said.

Also, extended federal unemployment benefits are set to expire for 400,000 Californians if no deal is struck.

The benefits have been extended several times as the unemployment rate remained stubbornly high following the last recession. But in November, the state Employment Development Department sent out notices that benefits for more than 6,600 North Coast residents would expire Dec. 29.

In Sonoma County, 4,140 people are set to lose benefits. In Napa County, payments are ceasing for 996 workers. In Lake County 755 people are affected, 728 in Mendocino County.

Officials in Washington continued last-ditch efforts to avert or soften the most damaging measures of the cliff, which in addition to steep tax increases includes about $1.2 trillion in federal spending cuts over the next 10 years.

Retired nurse Carol Rivkin of Santa Rosa said she believes a deal will get worked out, if not by Jan. 1 then soon thereafter.

“I still have faith they are going to do it,” said Rivkin, 68.

If they don’t, however, Rivkin says she’s not sure what the impact would be on her. As a retiree, she doesn’t have the same level of income she once did, but she does worry about continuing to qualify for certain tax exemptions, like the mortgage deduction.

“I’m a little confused as to what’s safe and what isn’t,” Rivkin said.

What is clear is that without a deal, the list of state and federal tax increases that would go into effect Tuesday is daunting.

Proposition 30, Gov. Jerry Brown’s voter-approved effort to help balance the state budget by generating new revenue for school funding, triggers two separate tax increases.

The base state sales tax rate will increase a quarter of a percent, from 7.25 percent to 7.5 percent, for four years. That means a $100 jacket will cost an extra quarter, a $30,000 car will cost an extra $75.

State income tax rates will go up for people making more than $250,000 per year. Currently, all single filers earning more than $48,000 and all joint filers earning more than $96,000 pay a marginal rate of 9.3 percent. Prop. 30 created a 10.3 percent rate for single filers earning $250,000 to $300,000 and joint filers earning $500,000 to $600,000; an 11.3 percent rate for single filers reporting $300,000 to $500,000 and joint filers with $600,000 to $1 million; and a 12.3 percent rate for single filers reporting over $500,000 and joint filers with more than $1 million income.

Those increases are happening regardless of the cliff.

But if the nation does take the plunge, on Jan. 1 federal taxes will go up on just about everyone, increasing total tax revenue by $500 billion, or 20 percent.

A household earning $20,000 to $30,000 would pay an extra $1,100, according to the Tax Policy Center. Those earning $75,000 to $100,000 would pay $3,700 more, while folks earning $500,000 to $1 million would pay an extra $39,000, according to the nonpartisan organization.

The increases would largely be the result of the expiration of tax breaks. The main one is the Bush-era tax cuts of 2001 and 2003, which if allowed to lapse would cause rates to revert to the levels under former President Bill Clinton.

For example, a married couple filing jointly with an income of $72,300 to $145,900 would see their rate increase from 25 percent to 28 percent. The top tax rate, for those making over $397,000, would increase from 35 percent to 39.6 percent.

In addition, families with children under 17 would have their child credit cut from $1,000 to $500. The capital gains tax would increase for 15 percent to 20 percent, a change primarily affecting higher income earners.

The temporary payroll tax cut, which in 2010 reduced contributions to Social Security from 6.2 to 4.2 percent, will also expire, reverting to the higher level.

Employers will begin taking out the higher payroll taxes right away, but income tax withholding is another story. Since employers don’t know how much to withhold, the IRS is advising companies to continue withholding at 2012 levels for the time being.

But that means the amounts withheld from paychecks will initially be artificially low, and will need to increase later in the year to compensate, according to the American Payroll Association.

A series of tax cuts pushed by President Obama also are set to expire. These include expansion of the earned income tax credit for families with three or more children and the expansion of tax credits for college tuition.

The estate tax also would jump. Instead of covering estates of $5 million with a top tax rate of 35 percent, those of as little as $1 million could pay rates as high as 55 percent, according to the tax center.

Wall Street was down sharply Friday on fiscal cliff fears, but financial advisers were urging clients to ride it out.

“I don’t think anybody should be running for the exits or running scared,” said Montgomery Taylor, a Santa Rosa wealth management planner. He said the stock market has largely built in the uncertainty of the fiscal cliff, and when a deal is struck, markets could rebound nicely.

“I do believe that in the final hours they will come to some resolution that they can agree upon and put us on track for recovery,” Taylor said.

If that doesn’t happen, some worry about taxes being a drag on the economy. “I think we’re going to see in a real-life laboratory the impact of some of the tax increases on the economy of the nation and the state,” said Jack Atkin, president of the Sonoma County Taxpayers Association.

But others say higher taxes are an inevitable reality if the nation is going to get serious about tackling its ballooning debt. Yet smaller government budgets will mean more labor cuts, which may hold back growth, said Robert Eyler, professor of economics at Sonoma State University.

Whatever happens, the fiscal cliff will “cast a long shadow” that will make late 2013 and 2014 feel “more like recession than recovery.”

“Some pain is coming, and needs to come,” Eyler said.

10 Responses to “Sonoma County weighs in on ‘fiscal cliff’ repercussions”

  1. R.B. Fish says:

    Obama wants the US to fail and he has paid off the 50% ignorant electorate to get elected. Control their health, wealth, debase and weaken military, undermine the constitution, critize the christian phenomena that created America and you have a nice little third world dictatorship. Printing money will help in short turn but the some of world countries will eventually bail out.

    The locals are the last to know about their quaility of life. The SMART train will absolutely destroy the north coast except for some business. Just think what’s next. If the liberals control the house the constitution could done away with and abandoned. Obama because the world needs his leadership will be voted in for another term. They are already signed petitons to list Catholics asa hate group. There will be no spending limits until the wealth producing companies stop. Alone with the UN global initative which is how Bill Clintion(who making $40K a year in 1988 as Governor of Arkawherever) is worth hundreds of millions of dollars with the help of failed SOS who travels allot). It’s how the spoiled brat Al Gore took the climate change fiasco got $550 million from US to start an electric car country in Finland and sells a obscure TV station to known foreign antagonists of America for $100M. I wonder if OBama knew about this. Within 10 years Obama will be worth $100M.

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  2. James Bennett says:

    The fiscal cliff ir real Their efforts to prevent it in the media is pure charade. This coming crash will hurt and these traitors are complicit in it’s orchestration. The tiny cuts they argue about are inconsequential.
    Ron Paul submittedan authentic outline to get us right ride up in 3 or 4 years. He’s been spearheading an effort to audit the FED and OUR gold (which was already stolen).
    Instead they want another “quatative easing” print fest.

    The whole idea is to crash us.

    Crash the old, usher in the New World Order.


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  3. Jim says:

    I’m with Mockingbird on this one. The worthless government used the threat of a “cliff” to pass nothing that addresses the trillions upon trillions in federal deficit. It also does NOTHING to address Obama’s annual $1.5 trillion in deficit spending.

    The solution is obvious. No tax breaks for the rich. And everyone should pay their fair share. The ONLY way EVERYONE can pay their “fair share” is with a flat tax. You make $10,000 you pay $1,000 (10%). You make $100,000 you pay $10,000. Simple. No more massive “loopholes”. No more IRS funded WELFARE via EITC (that’s the earned income tax credit, the refundable credit that millions claim and receive a refund greater than what they paid in…do some research on it). With the flat tax you encourage people to succeed and earn more. This is in sharp contrast to the punishment of the current progressive tax system where you pay a higher rate as you earn more money.

    I know the response from the left…a flat tax means the “rich” will pay less than they do now and the “poor” will pay more. That’s not FAIR. Well, how is it FAIR that the rich pay the vast majority of the taxes and benefit very little from the social services they pay for? How is it FAIR that almost half the country pay ZERO while getting endless handouts from the ever expanding welfare state we’ve become?

    Fair is equality, right? Since people in different industries earn different income. And people in different states doing the same work earn different incomes because of the cost of living, you can’t have people pay the same dollar amount. BUT, if everyone paid the same exact rate on every dollar earned, how can someone say it isn’t ‘fair’? Everyone pays the same. You benefit from working hard and earning more. No more deceitful political rhetoric about “millionaires and billionaires” not paying “their fair share”. No more last minute bills passed on weekends that give tax breaks to politically connected groups like Hollywood (read through the “fix” that was just passed and see for yourself).

    I’ve offered a solution that addresses the issue of “fairness”. What a concept. Unfortunately the weasels in office would rather keep half the country dependent on handouts rather than encourage them to better themselves (give a man a fish and you control them).

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  4. frank matyus says:

    Sad The welfdare State (now with a one party majority ) so depended on the feds,
    The sheeple galdly vote there rights away everytime
    the State with it’s moonbeams, Huffmans, Evens, woodsy, poloseey types clearly violate the peoples sovereign right.
    the hardworking taxpayers given rewards with more taxes, more rules and regulations pulg along and still they harvest the oyster, fish, wheat
    the chip munchin remote clicking Mockingbird types ( finger pointing milk and cookie brigade )are given and rewarded the hardworking farmers oyster everyday
    were not running out of Oysters just hardworkers who are fed up with policies that outlaw business’s
    will it be this year that browns sign default

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  5. MOCKINGBIRD says:

    I was hoping we went over that fiscal cliff. I can see the Wallstreet numbers faltering then shooting up with confidence once they knew that the deficit was being managed with more tax revenue. We got NO infrastructure stimulus for jobs. Those people making $400,000/$450,000, that’s AFTER all their deductions and tax breaks are done, their adjusted gross-they could have made MILLIONS or BILLIONs, should be paying more in taxes. That’s over $33,000 per month for heaven’s sake. This was a rich tax break. And all that “unearned” income should be taxed the same as “earned” income. Why should workers be taxed more than people who make money off of investments?

    I was hoping the Republicans would rightfully be blamed for the mess, the voters would then have their say at their being ignored by the Republicans and voted in a progressive CONGRESS in 2014. I was so looking forward to that.

    From my perspective, Obama gave in again and has lost much of his good poker hand to the party that is destroying the middleclasses’ health and welfare.

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  6. Jim says:

    Thank goodness those idiots in Washington who created the cliff swooped in at the last minute to save us from it. Front page news, just like they wanted. Both sides claiming they did what they said they would. Re-elect them all…again!!

    What a bunch of lemmings the people are. How much deficit reduction was included in this deal. N-O-N-E! Ho hum, what’s $15 trillion anyway? Especially when the REAL deficit, not the one the all powerful Big Government claims, is upwards of $50-65 trillion.

    You see, government accounting is different than GAAP accounting. GAAP accounting is what the government requires businesses to use when they report their quarterly financial statements. The financials are required to be audited by independent accounting firms, at a massive cost. That cost is passed on to the consumer by the companies. The government doesn’t require that they follow the same rules. They don’t have to report the unfunded liabilities they are on the hook for. How do you think CA is able to ignore the $500 BILLION unfunded pension liability? They don’t report it because the rules THEY make say they don’t. The Feds are the same.

    At least we were saved by Big Government from this cliff. Too bad the cities, states and country has already driven off a bigger one, one that they’re hiding from the Sheeple.

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  7. Follower says:

    Arguing over this ridiculous farce is like arguing over how to fix the leak in your basement with a tsunami on the horizon.
    It REALLY is!

    And the voters have spoken…
    “Never mind the tsunami, FIX THIS ANNOYING LEAK!”

    “And forget about going to Home Depot to buy new pipes, my wealthy neighbor has perfectly good pipes in his house that he doesn’t even use!

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  8. RAW says:

    True Dan,
    Working class states will be hit hard and welfare states will hardly be hit. Since CA is #1 or #2 welfare state in the country, we’re doing great. God help us.

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  9. Jim says:

    I’m sick of this whole fiscal cliff garbage. The politicians constantly pass temporary laws, tax rates, etc because they like the attention they get when the expiration date nears. More press for their egos.

    Think about it…the “revenue” the Democrats want is $160 billion OVER 10 YEARS. The Republicans are only willing to agree on $80 billion OVER 10 YEARS. The freaking deficit is $1.5 TRILLION PER YEAR!!! This is a couple arguing about generating $1,600 vs $800 while they blow $15,000 more than they earn. The national debt would be $150,000. How does the $1,600 or $800 change anything???

    Yet the mathematically challenged voters don’t understand the facts. Neither deal will do anything to reduce the $15+ TRILLION deficit. Neither deal will do anything. What will happen is BOTH sides will walk away with something that they can lie to their voters about so they get re-elected.

    The media loves this because it is more doom and gloom they can put in the headlines. The endless doom of guns added to the “fiscal cliff” and the media is in a frenzy. Toss in a few articles on where Obama spent Christmas, him joking and laughing as the country is held hostage to the decision of Congress on the ‘cliff’. Oh I hope they come to our rescue! Oh please Big Government save us from the disaster YOU created!!!

    As the days pass, the gullible voter hangs in the balance. Who will Big Government decide is the “rich” and thus not entitled to what they earn? Those who make $245,000 are entitled to keep more of their money than those who make $250,000? Yeah, makes sense. Someone else deserves the money I earn more than I do. Makes perfect sense. Why should I make any effort to earn more money? In my small business I’ve avoided hiring employees because of the taxes, Obamacare and the absurd regulations forced upon us by the most corrupt, inept Legislature in the country.

    The CA voters decided the government deserves more of our hard earned money when we spend it (Prop 30), after they took the highest percentage in the country when WE earned it. Then, they spend 50% more than they take from us. Luckily next election we’ll get to vote for them to take even more.

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  10. Dan Drummond Sr says:

    The Pew Research Center’s Data Visualization – The Impact of the Fiscal Cliff on the States: Sequestration, seems to show that the spending cuts agreed to by Congress will mostly impact Romney/Ryan states. California appears to be one of the least impacted states!


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