p ol k p r og re s s u p dat e
DR. JAMES
FARRELL, CFA
FLORIDA SOUTHERN
COLLEGE
C
] O N N E C T
FLSouthern.edu/
PolkProgress
The fiscal cliff
has been averted, at
least until February.
Congress passed a
deal which raises the
marginal tax rate
on income above
$400,000 for single
people ($450,000 for
married couples) to
the pre-2001 level of
39.6%, however it left
the remainder of the
tax rates unchanged.
In addition, they
reinstated the
extended time for
unemployment
benefits from six
months to one year,
permanently tied the
AMT exemption to
inflation and extended
current Medicare
reimbursement rates
to doctors for another
year. The agreement
also ended the Social
Security tax reduction
that acted as a
stimulus for 2011 and
2012. Workers should
expect to see their
paychecks reduced by
2% up to the $113,700
limit as the rate reverts
back to 6.2%.
A large point of
contention of the
2011 Budget Control
Act, however, was
the sequester. This
was issue punted into
February with a twomonth delay put in
place on the $110B
in spending cuts that
were set to take place
this year. Failing to
reach an agreement on
the appropriate level
and timing of spending
cuts along with taxes,
the so-called “Grand
Bargain”, Congress
pushed back the cuts
until February in order
to avoid an immediate
impact. Congress and
the White House have
placed themselves
in a similar situation
to 2011 when the
Budget Control Act
was enacted. As of the
end of 2012 the US has
reached its borrowing
limit and the Treasury
is currently in a period
of “extraordinary
measures” to
temporarily halt
borrowing while a
new debt ceiling
is negotiated. This
negotiation will
likely be intertwined
with the budget cut
negotiations as they
both have a 2 month
window.
Locally, workers
will have to begin the
adjustment to life
without the social
security stimulus that
they have benefited
from for the past
two years. There will
likely be a measurable
economic impact on
the 1st and 2nd quarter
as households adjust
their spending and
saving habits, however
the US economy will
likely continue to
improve otherwise.
We are unlikely to
see another national
recession from the
social security tax
alone, however
the results of the
negotiations between
now and the end of
February will play
a considerable role
in that. Polk County
taxable sales will likely
take a hit as the recent
growth has been slow.
While the 4th quarter
numbers are not yet
available, you can see
in the chart below
that the 2nd and 3rd
quarters of 2012 were
steady, but not strong.
The purpose of the
Budget Control Act was
to create a situation
that would force
opposing viewpoints
to negotiate and make
tough choices about
what we can and
cannot afford and how
much each household
should contribute.
What was supposed
to be hammered out
by the end of 2011,
became an election
year talking point and
is now being kicked
a little further down
the road. Taxpayers,
benefit recipients,
and employers are all
waiting to find out
what 2013 has in store
and will likely remain
on edge until this is
settled.
POLK COUNTY TAXABLE SALES
($1000S - SEASONALLY ADJUSTED)
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
FORUM FOR BUSINESS
|
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