Call it what you want — the
“fiscal cliff” or “the biggest onetime
tax increase in history” —
that’s what the economy faces on
Jan. 1, 2013, unless Congress acts
to extend the “Bush tax cuts.”
Many market watchers are talking
about it like this is something
“new” that’s been flying under
the markets’ radar. If you were at
a Profit Briefing Seminar last winter,
you know it’s something
we’ve been talking about for
quite some time.
While it seems likely Congress
will extend most (if not all) of the
cuts, the best option being
pushed is a short-term extension
to give post-election leaders time
to clear the air and get a workable
tax package in place. That
could include a timeline for
major tax reform. Until then,
uncertainty heightens the risk of
ongoing economic struggles.
Still, many analysts are now issuing
their 2013 economic outlooks
and many focused on the potential
for another U.S. recession if the tax
cuts are not extended.
What’s going generally unnoticed
at the federal level is that
as outlays are cut, state and
local taxes are increasing. So,
unfortunately, everybody’s tax
burden is likely to be heavier in
2013 than this year. That’s bad
news for the economy and for
commodities in general.