Dec. 21 passed and thankfully the doom some predicted did not materialize. With such hyped predictions, it may desensitize people about what is speculation and things they should really be concerned about and planning for, such as the "fiscal cliff."
Now, less than a week away, the "fiscal cliff," also known as "taxmageddon," looms. Should it become reality, it will represent the largest federal tax hike in American history and strike us across the board. Americans and businesses will pay more in taxes, and automatic federal spending cuts will go into effect, impacting the budgets of major economic sectors, including military, manufacturing, agriculture, university research and more.
According to a story by NBC News, a congressional deal on "fiscal cliff" would water down deficit reduction, and "the average U.S. household would see a tax increase of about $68 a week, adding up to $3,500 if Congress fails to act over the full year."
CNBC's story, "Who Gets Hurt the Most If US Goes Off 'Fiscal Cliff' " looks at state and local impacts of the "fiscal cliff," noting that local impacts are often obscured by the higher level discussion. In this report, Pew Research Center data is cited that show there are huge differences in the way states will be hit.
Pew's chart indicates state of dependency with federal spending as a percent of state gross domestic product, with defense and nondefense spending. The data note that "while defense spending accounts for 3.5 percent of total state GDP, it's around 15 percent for Hawaii."
Hawaii is listed second on the chart at 15.8 percent after a combined Maryland, Virginia and Washington, D.C., at 19.8 percent. With Hawaii receiving substantial federal funding, primarily based in military spending, the planned cuts are a major concern. Pew further comments that "because many states have their own fiscal challenges, they have limited capacity to absorb further fiscal and economic pressures." We concur.
Numerous businesses are also putting off expansion plans because it is hard to grow when the "fiscal cliff" hovers and key factors important to decision-making are left unresolved. Businesses could be hit with a 2 percent tax increase for workers; a 25 percent capital gains tax (up 10 percent from what it is now) that will hamper long-term investments that help stimulate the economy and create needed jobs; and another possible recession.
As a result, businesses are saying:
* "The uncertainty over taxes and health care legislation have me thinking about selling my company. I've spent much money building it, but the tax burden and indecision have me seriously considering a sale."
* "We are fortunate to get new projects, but chose to work longer hours instead of hiring more people given the possible fiscal cliff."
* "Any increase in my taxes will decrease what I can pay in labor or business improvements."
* "Business taxes are just hidden taxes on my customers."
* "My dad is 84 now and is still involved in the company, but I'm doing the lion's share of the work at 46. It's a family-run business, and we've invested everything into it. We're all in and paid taxes already. When my dad passes away, I get to pay taxes on that again at a rate that will absolutely destroy my business and all the jobs I create."
* "As a small, new retail business with three employees, I already have a heavy tax burden. If my taxes are raised further, I will be forced to close my doors."
We cannot languish in a holding pattern. Call on Congress to act now and prevent the fiscal cliff.
* Pamela Tumpap is president of the Maui Chamber of Commerce.