John Key's tax bill

How much tax does John Key pay compared to a minimum wage worker??

By John Minto 

http://thedailyblog.co.nz/2014/08/27/how-much-tax-does-john-key-pay-compared-to-a-minimum-wage-worker/#sthash.xaaLP2lX.6ehiYIp1.dpuf

Yesterday I did some calculations to find out what tax John Key pays compared to a worker on the minimum wage.

Yesterday I did some calculations to find out what tax John Key pays compared to a worker on the minimum wage. And I put out this media release for the Mana Movement:

MANA Movement Economic Justice spokesperson John Minto is calling for a radical overhaul of New Zealand’s taxation system with calculations showing that a minimum wage worker pays a ten times higher tax rate than the Prime Minister.

Minimum wage worker 28% tax

Prime Minister 2.8% tax

The minimum wage worker on 40 hours per week earns $29,640 and pays $4,207 in income tax and $4,149.60 in GST giving a total tax of $8,356.60 or 28% of income.

On the other hand the Prime Minister earns $428,000 from his PM’s salary along with this year’s $5,000,000 increase in his wealth (according to NBR’s rich list) which gives him a total income of $5,428,000. On this total income he pays just $132,160 in income tax and approximately $21,400 in GST giving a total tax of $153,560 or 2.8% of income.

This is a national embarrassment. Those least able to pay are under a heavy tax burden while the super-rich pay peanuts.

The National government and its attack bloggers refer to the working poor as scum, bludgers and ferals but it’s clear the real problem is with the top 1% of income earners who get all the benefits of taxpayer funded facilities and services but don’t pull their weight paying for them.

Cleaners, fast-food workers, hospitality workers and security guards are all heavily subsidising the lifestyles of the superrich.

These figures show we need an overhaul of our tax system so the Prime Minister and his rich-list colleagues pay their fair share.

MANA Movement policy addresses this by -

A robust capital gains tax paid at the same rate as the person’s income tax
A financial transactions tax on currency speculation to replace GST (Note: GST hits families on low incomes the hardest because the poorest 10% of income earners pay 14% of their income on GST while the wealthiest 10% pay less than 5% of their income on GST)

Higher tax on higher incomes

An inheritance tax on estates over $500,000. (National abolished inheritance tax in the early 1990s allowing wealthy family dynasties to flourish at the expense of everyone else.

The tentacles of the Corporate State

No escape from Big Brother

New bank law raises privacy fears

Attempts by the country's banks to comply with new American tax legislation are raising fears about customers' privacy

Radio NZ,

24 April, 2014

.

The United States is one of two countries - the other being Eritrea - that tax their citizens who live overseas, even if their income is generated in a foreign country and they live abroad permanently.

Under the US Foreign Account Tax Compliance Act (FATCA) which comes into effect in July, New Zealand banks will be required to identify accounts in the name of US citizens or residents and report these to Inland Revenue, which will then pass them on to the United States.

The law will apply to all accounts that earn interest, including credit cards, term deposits, savings accounts and some bonds. Banks have until the end of 2015 to review accounts and determine whether they are covered by the US requirements.

ANZ bank has responded by changing its credit card terms and conditions so it can provide cardholder information to any government authority in this country or overseas.

The bank said the government authorities it is referring to are Inland Revenue or the United States Internal Revenue Service. The relatively broad language "does not mean any government authority can collect and use customer information," the bank said in a statement. "We will only be collecting and using customer information where there is a legal requirement or as directed by law as in the present case with FATCA."

It had also used these terms in case other countries decided to implement a similar system. "We understand that global discussions are currently occurring," it said.

Privacy lawyer Kathryn Dalziel told Radio New Zealand's Morning Report programme the bank's move to facilitate handing over information breaches the Privacy Act.

Ms Dalziel said the wording in the new clause is too broad and ANZ runs the same risk as the Accident Compensation Commission did over a privacy waiver which was ruled unlawful.

The Bankers' Association chief executive Kirk Hope said New Zealand banks have no choice but to comply with the US law, but take confidentiality of client's information very seriously.

"New Zealand banks are not just subject to privacy laws. They also have a common law duty of confidentiality, which is an important consideration to remember."

The association estimates 1.5 percent of customers will be affected. It said New Zealand banks source funds through the US and failing to comply would have a significant impact on this country's economy.

David Tripe, from Massey University's School of Economics and Finance, said every bank in New Zealand has to be compliant, regardless of whether they do business with the United States.

ANZ said that under FATCA regulations it is not required to notify customers of any change, but had done so as a matter of customer service.

New Zealand as a tax haven

Money trail leads home to New Zealand

Leaked documents reveal one of New Zealand's richest families was for a time at the heart of a major international tax haven company that hit the news in the United States last week.

Nicky Hager

The Spencer family – which now runs Waiheke Island’s Man O’War Bay winery and vineyard – set up TrustNet, one of the companies at the centre of the tax haven leak.

Stuff,

7 April, 2013

John Spencer, New Zealand's richest man in the 1980s and still incredibly wealthy, was - with his family - majority owners of the company called TrustNet, whose extremely secret client records have been leaked en masse to a Washington DC-based journalism organisation. The leaks reveal the identity of tens of thousands of people who use tax havens: some involved in dodgy activities and evading tax, others in lawful activities including companies doing business across political borders and individuals living in multiple countries or legitimately minimising their tax.

Surprisingly, the leaks show New Zealanders are involved extensively in this shadowy world of offshore companies and secret bank accounts.

The company at the centre of the Washington leaks was set up by New Zealanders, has been staffed by many New Zealanders and for 14 years was majority-owned by the Spencers.

The Spencers have courted controversy. John Spencer waged a 19-year battle to stop public access to the Stony Batter gun emplacement on his Waiheke Island farm, including barricading a public road. The Star-Times revealed in 2005 that his son Berridge and daughter Mertsi were secret National Party donors. And now Spencer is the Kiwi connection to secret tax haven records that may be the largest leak of financial information in history.

They expose the hidden activities of wealthy, secretive or criminal people in around 150 countries and territories. In total, about one-and-a-half million documents were leaked to the International Consortium of Investigative Journalists (ICIJ), an independent network of reporters who work together on cross-border investigations. There is currently hot debate around the world about corporations which don't pay tax and the respectable bankers and lawyers who assist them.

The Tax Justice Network and other organisations are pushing for governments like New Zealand's to stop tolerating tax havens and work together to close them down. TrustNet has helped set up and manage companies, trusts and bank accounts in tax havens for about 80,000 individual clients.

According to overseas news stories based on the leaks, they include the mega-rich, corrupt regimes, corporations dodging tax, fraudsters, companies shifting wealth out of poor countries, companies with controversial or secretive business, mercenaries and spies, and also many ordinary people who want to move their money and business "offshore".

The Tax Justice Network estimates that about one-third of the world's wealth is held offshore and about half of all the world's trade flows through tax havens. New Zealanders have had occasional glimpses of the offshore world. Star-Times stories have exposed:

* Geoffrey Taylor, and his sons Ian and Michael, setting up companies in New Zealand for North Korean arms trading and organised crime;

* an Auckland Burger King cook was a director for some of these companies;

* and a Nelson woman who supposedly owned a Moldovan TV station, again through a chain of Taylor companies.

Mostly these people and their shell companies have been pawns in a much bigger system.

KIWIS IN KEY ROLES

The TrustNet leaks show New Zealanders in key roles helping to run the system. TrustNet markets itself today as the largest independent offshore services company in Asia. It was set up 25 years ago by Kiwis in what was then the newly established Cook Islands tax haven.

In the early 1980s business lobbyists from New Zealand and Australia persuaded the Cook Islands government that becoming a tax haven would bring riches to the small island group. These lobbyists included New Zealander lawyer Trevor Clarke, "father of the Cook Islands tax haven", who with others used the new tax haven laws to build a company called European Pacific.

Documents about European Pacific's tax schemes were leaked and tabled in the New Zealand Parliament by MP Winston Peters, igniting the Winebox scandal (see breakout).

Another key figure was New Zealand lawyer Mike Mitchell, the Cook Islands solicitor-general in the early 1980s and main government adviser as the tax haven was established. He resigned from that role in 1986 to move into the offshore business himself. On April 29, 1987, he established an offshore services company called Pacific Trustee Company. The company was later renamed TrustNet, the company at the centre of last week's leaks.

TrustNet's first chief executive was another New Zealand lawyer, Steve Breed, who was joined a few years later by fellow Auckland law school graduate David Sceats. Early staff included people who'd worked on the Cook Islands Winebox schemes. The European Pacific tax expert accused in court of leaking the Winebox documents, New Zealand lawyer George Couttie, had moved on to work for TrustNet in Hong Kong. But soon after this accusation was made, according to internal documents, senior TrustNet staff recorded a terse company resolution that "accepted" his resignation "effective from the date hereof".

In contrast, European Pacific's former senior executive Geoff Barry was later hired by TrustNet and rose to become the chief executive officer. Today, 10 years later, he is executive director of TrustNet's Hong Kong office.

Spencer's ownership of TrustNet was never publicised. It came to light only during analysis of the leaked records. A note about an obscure offshore entity says "Client is our big boss, John Spencer".

Spencer, who had inherited his family's Caxton toilet paper empire, owned, with his family, a majority share of TrustNet from July 1990 until September 2004, through a Bahamas company called International Trustee Holding Company Limited. John and Berridge Spencer also used TrustNet to place some of their own money and investments in a complex web of offshore companies and trusts. These were based in the British Virgin Islands and Cook Islands, with names such as Northern Lights Trust, Star One Trust and Tristar Capital Service Limited. A spokesperson for the Spencer family said neither John nor Berridge Spencer have been New Zealand residents since the 1990s and in those circumstances it was hardly surprising that the family have assets invested outside of New Zealand.

With the Spencers' backing TrustNet grew quickly, opening offices in Hong Kong in 1991, the British Virgin Islands in 1993 and Singapore in 1994. The early clients included a controversial Indonesian rainforest logging tycoon named Prajogo Pangestu, who had four British Virgin Islands companies.

TREVOR CLARKE

Another TrustNet client was the former European Pacific manager Trevor Clarke. He had his own set of offshore companies and trusts administered by TrustNet. They were home to millions of dollars of assets, the leaked documents reveal, and TrustNet staff were given special instructions about keeping them secret. One document reads: "We are to contact Trevor by phone only unless otherwise instructed . . . No documents are to be kept here. All docs are to be held in our Hong Kong office."

Clarke was appointed chair of the Cook Islands' new Financial Supervisory Commission from 2003 until 2010, which was set up to oversee the offshore industry. Throughout those years he had the secretive offshore trusts and companies. Clarke responded that he was not "a user of any Cook Islands entities" - his companies and trusts were in Samoa and the British Virgin Islands - and said these were set up well before his role as FSC chair. He had disclosed them to a number of authorities. He said there were lots of reasons for people to want to have assets outside the country where they live. The secrecy instructions did not come from him, he said.

The TrustNet files also show a close relationship between the company and the BNZ and ANZ banks, which had dedicated staff for offshore banking. The leaked documents show bank staff routinely helping TrustNet move money in and out of its clients' offshore bank accounts held at the BNZ Singapore branch and ANZ Cook Islands branch.

In September 2004, the Spencers sold TrustNet to a Singaporean offshore lawyer named David Chong. But many of the New Zealanders, especially lawyers, continued to work in the company and be part of tax haven politics.

Lawyers created the offshore world and lawyers and accountants run it. They lobby in each tax haven for special laws to attract clients and often actually write the laws themselves. The leaked Trust#dhNet papers show this clearly in the minutes of the Cook Islands Trus#dhtee Company Association. The offshore services company heads are seen sitting around deciding what laws they want, putting the hat around for money to have them drafted and then arranging to pre#dhsent the new laws to the Cook Islands government. The same lawyers then use these laws to help their clients.

They also deal with the problems when things go wrong. One of Trust#dhNet’s New Zealand lawyers Penny Purcell was on duty, for instance, when two officers from the Hong Kong Commercial Crime Bureau turned up on August 20, 2007, at TrustNet’s harbour-front offices. They were investigating a fraud case involving a British Virgin Islands company called Sound Financial Management Limited.

The secret TrustNet files include Purcell’s written record of the meeting. Detective Sergeant Steven Lam produced a formal letter from the Hong Kong commissioner of police requesting ‘‘all relevant documents’’ about Sound Financial Management Limited and details of the company’s director and shareholder. Purcell replied that the officers would need to contact TrustNet’s British Virgin Islands office and, according to her own notes, assured them ‘‘we do not keep any files or records here’’.

She said the police ‘‘were surprised’’ the office had no records and asked how this could be ‘‘if the client is based here in Hong Kong’’. ‘‘I then explained,’’ Purcell wrote, ‘‘that we acted as a marketing/secretarial office but that all information including the registers of the Company were kept in its registered office.’’

Detective Sergeant Lam tried one last time, she wrote, asking if they kept any information there in Hong Kong, including correspondence. ‘‘I said no,’’ Purcell wrote. A few days later TrustNet repeated the denial by letter. ‘‘Portcullis TrustNet (Hong Kong) Limited does not hold any corporate or statutory records of the Company, nor is it required to,’’ the letter said. However, the details the police were looking for would have been instantly available on Pur#dhcell’s computer. The leaked Trust#dhNet documents show that she routinely used the company’s Offshore Management Information System (OMIS), which was available in all the TrustNet offices and contained all the client records.

The OMIS database, which was leaked to ICIJ, lists Sound Financial Management’s director and shareholder as Glen Douglas Crankshaw, a Canadian living near Bangkok. TrustNet helped his company open a bank account at the Standard Chartered Bank, Hong Kong branch, located on the ground floor of the same building as TrustNet. According to Purcell’s notes, she told them none of this. Two years later the Hong Kong police issued an arrest warrant for Crankshaw for ‘‘dealing with property known or reasonably believed to represent the proceeds of indictable crime’’. They had traced him through a different offshore company, with the similar name ‘‘GS Sound Management Limited’’.

Purcell has since returned to help run TrustNet’s office on Auckland’s North Shore. She remains part of a network of New Zealand offshore lawyers scattered in tax havens around the world. They include former TrustNet lawyer Barry Mitchell who, according to court documents, gave assistance during the setting up of the Trinity investment scheme, New Zealand’s largest tax avoidance case; and Act Party-aligned blogger Cathy Odgers (‘‘Cactus Kate’’) who has worked as an offshore lawyer in the British Virgin Islands and Hong Kong.

Various offshore lawyers have brought their skills home, taking advantage of New Zealand’s loose company and trust law. The original TrustNet lawyers, Breed and Sceats, came home and set up Nexus Trust, promoting New Zealand’s tax haven potential to foreign clients. Two other former Cook Island lawyers, Nick Shepherd and (former European Pacific executive) Mike Reynolds set up Anchor Trustees which offers services to ‘‘non-resident families and corporates’’.

Long-term TrustNet client Tim Brears on Auckland’s North Shore offers clients advice on the ‘‘advantages of moving ownership and control of assets and investment offshore out of New Zealand’’. #

Nicky Hager has worked in a multi-country team for the past 15 months analysing the leaked materials and #co-ordinating local journalists in Asia, Africa and part of Europe who collaborated in the International Consortium of Investigative Journalists project, www.icij.org.

Last year 60 Minutes did a report on New Zealand as a tax haven. To view the video GO HERE

Australia - robbing the citizens

The Next Domino: Australia Doubles Tax On Retirement Savings

Zero Hedge,

8 April, 2013

Submitted by Simon Black of Sovereign Man blog,

Though Australia’s national balance sheet is comparatively quite strong, the government has been running at a net deficit for years... and they’re under intense pressure to balance the budget.

The good news is that Australia now has a goodly number of investor-friendly immigration programs designed to bring productive foreigners into the country, similar to the trend we’re seeing across Europe.

On the flip side, though, the Australian government has just announced new rules which penalize citizens who have responsibly set aside savings for their own retirement.

Any income over A$100,000 drawn from a superannuation fund (the equivalent of an IRA in the United States) will now be taxed at 15%. Previously, all such income was tax-free.

The really offensive part about this is that the government is going to tax people’s savings ‘on both ends,’ meaning that people are taxed on money they move INTO the retirement fund, and now they can be taxed again when they pull money out.

The Cyprus debacle drew a line in the sand– fleecing people with assets, or income, in excess of 100,000 dollars, euros, etc. is now acceptable. This is the definition of ‘rich’ in the sole discretion of governments.

And make no mistake– if it can happen in Australia, which still has reasonable debt levels despite years of deficit spending, it can happen in bankrupt, insolvent nations like the US.

As you may know, US tax code allows for several different types of retirement accounts… and there has been a lot of talk lately about a ‘Roth conversion’.

This is to say that a US taxpayer can convert his/her traditional IRA to a Roth IRA. And the implications are enormous.

A traditional IRA is not taxed on the way in, but it’s taxed on the way out. So if you contribute $3,000 annually to your IRA, you won’t pay income tax on that $3,000. But the accumulated retirement savings is taxed in the future when you withdraw the funds at retirement.

Conversely, contributions to a Roth IRA are taxed each year with the rest of your income. But the accumulated savings are NOT taxed when you withdraw the funds at retirement.

A few years ago, Congress inked a deal to allow US taxpayers to CONVERT their traditional IRA to a Roth IRA. In doing so, Americans were allowed to pay tax on the accumulated gains in their traditional IRA up through that point, then switch to a Roth.

Congress was essentially saying, “We promise that we will only tax you now in exchange for not taxing you later.”

It certainly begs the question: How much do you trust your government?

Can we really expect the country that has racked up more debt than any other in the history of the world to keep its word? Can we really expect that 5 or 10 years from now, they won’t make another grab for cash?

If the Australian government can unilaterally change the rules and start double-taxing retirement accounts, so can the US. And the trillions of dollars in retirement savings in the Land of the Free is far too irresistible for them to ignore.

The artistic taxi driver

The bedroom tax an obscene ideological Govt attack on the vulnerable

UK: Hitting the poor

Hitting the poorest’: 
UK-wide protests against ‘Bedroom Tax’

Thousands have protested in 57 cities across the UK against the 'Bedroom Tax.' Starting in April, more than 600,000 low-income Britons will either lose housing benefits or be forced to move out if their residence has a spare room.

RT

16 March, 2013

According to the new law, tenants of working age who receive housing support will lose 14 percent of their benefits if they have one spare room, and 25 percent if they have more than one. Critics, who dubbed the measure the 'Bedroom Tax,' have argued that the definition of 'spare' is narrow and contentious.

“The government is saying they won’t have a tax on big mansions, but they are having a bedroom tax on the poorest people in the country,” MP Helen Goodman told RT.

Campaigners gathered across Britain to rail against the law, which they say targets the most vulnerable.

"This is a cruel policy that primarily hits single parents, and the adult disabled,” Huffington Post reported, quoting the protest's national organizer, Eoin Clarke. “Even children deemed disabled but not 'severely' so, are affected. Carers, the terminally ill, battered wives and husbands are all affected.”

The 'Bedroom Tax' is expected to affect 660,000 people when it is enacted next month.

RT spoke with Brian Ryder, who suffers from osteoporosis and cannot work, and is one of thousands who will find themselves in a Catch-22 next month. Under the new law, Ryder will lose £50 of his housing benefits every month – money he needs for food and heating. Otherwise, he would have to move out of the apartment where he has been living for 14 years. He has asked to be provided with a smaller apartment, but was told that none were available.

“People are being told they should move to a smaller flat, but in my constituency there are fewer than 100 places people could move to and that’s fairly typical across the country as a whole,” Goodman said.

The government has argued the proposal is “an excellent policy which will lead to more efficient use of taxpayer-subsidized housing.”

Taxpayers subsidise corporations

One in four of the UK's top companies pay no tax while we give THEM millions in credits

Daily Mail,

26 January, 2013

Almost one in four of Britain’s biggest listed companies paid no corporation tax in this country last year – and almost half fail to disclose their tax payments to the UK at all, according to research by The Mail on Sunday.

Analysis of the latest annual reports and accounts of all the companies in the FTSE 100 found that 47 companies gave no obvious figures for tax paid in Britain.

Of the 53 who did, 12 showed they paid no tax at all and, of these, six actually received a tax credit.

The 12 with no tax bill in the UK last year were: British American Tobacco, Experian, G4S, IMI, Intertek, Rolls-Royce, RSA Insurance, Smiths Group, Tate & Lyle, Tui Travel, Vodafone and Vedanta. The 12 paid £5.6 billion in corporation taxes in other countries.

The figures revealed today are likely to fuel the debate about tax. Revenue & Customs has been criticised for naming and shaming small firms dodging their tax bills, while doing nothing to tackle big tax avoiders such as Starbucks, Amazon and Google.

The news also comes as politicians in Europe agreed new rules to force banks to reveal how much tax they pay in each country they operate. Euro politicians are now planning to widen the plans and force all corporates to lift the veil on their tax payment, country by country.'

For rest of article GO HERE

The Fiscal Cliff

Putting America's Tax Hike In Perspective

Zero Hedge,

1 January, 2013

One of those occasions when one picture really does speak a thousands words.

Houston, we may have a spending problem.

Fiscal cliff negotiations

Fiscal Cliff: Eleventh-hour tax deal on table

Final offer ... Barack Obama. Photo: AP

the Age,

30 December, 2012

THE US President, Barack Obama, and Senate leaders are on the verge of an agreement that would let taxes rise on the wealthiest households while protecting the vast majority of Americans from tax rises set to hit next month.

The development on Friday evening marked a breakthrough after weeks of paralysis. After meeting Mr Obama at the White House, the Senate majority leader, Harry Reid, a Democrat like the President, and its minority leader, Mitch McConnell, a Republican, said they would work through the weekend in the hope of drafting a fiscal cliff agreement they could present to their colleagues on Sunday afternoon.

As the Senate began haggling over critical details, the emerging deal faced an uncertain fate in the House of Representatives, where the Republican Speaker, John Boehner, failed a week ago to persuade his adamantly anti-tax caucus to let taxes rise even for millionaires.

On Friday, Mr Obama pronounced himself ''modestly optimistic'' at a brief news conference at the White House. The ordinarily dour Senator McConnell said he was ''hopeful and optimistic''. And Senator Reid immediately began preparing Senate Democrats for what could be a difficult vote.

''Whatever we come up with is going to be imperfect. Some people aren't going to like it. Some people will like it less,'' Senator Reid said in the Senate. But ''we're going to do the best we can for … the country that's waiting for us to make a decision.''

Sources said the developing package would protect nearly 30 million taxpayers from paying the alternative minimum tax for the first time and keep unemployment benefits flowing to 2 million people who would otherwise be cut off next month.

But the two sides were still at odds over a crucial issue: how to define the wealthy. 

Mr Obama has proposed letting tax rates rise on income over $US250,000 ($241,000) a year. Senate Republicans have in recent days expressed interest in a compromise that would raise that threshold to $US400,000 a year, an offer Mr Obama made to Mr Boehner before the Speaker abruptly broke off negotiations last week.

There was no agreement on how to handle roughly $US100 billion in automatic spending cuts that are scheduled for the Pentagon and other departments in the fiscal year that ends in September.

Mr Obama and Senate leaders have concluded time is too short to work on a package of significant cuts to federal health and retirement programs, the top priority of many Republicans.

Without big changes to those programs, the deal will not include an agreement to raise the limit on government borrowing, setting up another fierce battle in the next two months.

Senators Reid and McConnell pledged to work together to craft a package that could win significant bipartisan support.

''I believe such a proposal could pass both houses with bipartisan majorities as long as those leaders allow it to actually come to a vote,'' Mr Obama said.

If that failed, Mr Obama said, he had asked Senator Reid to press ahead with a bill to keep the President's campaign promise to raise taxes on income greater than $US250,000 and extend benefits for the long-term unemployed.

The Fiscal Cliff

Lawmakers: We're Likely to Go Over the 'Fiscal Cliff'

Top U.S. lawmakers voiced rising fear on Sunday that the country would go over "the fiscal cliff" in nine days, triggering harsh spending cuts and tax hikes, and some Republicans charged that was President Barack Obama's goal.

Reuters,

23 December, 2012

It's the first time that I feel it's more likely that we will go over the cliff than not," Senator Joe Lieberman, an independent from Connecticut, said on CNN's "State of the Union."

"If we allow that to happen it will be the most colossal consequential act of congressional irresponsibility in a long time, maybe ever in American history," Lieberman added.

The Democratic president and Republican House of Representatives Speaker John Boehner, the two key negotiators, are not talking and are out of town for the Christmas holidays. Congress is in recess, and will have only a few days next week to act before Jan. 1. (Read more: Stop-Gap Fix the Most Likely Outcome)

On the Sunday news shows, no one signaled a change of position that could form the basis for a short-term fix, despite a suggestion from Obama on Friday that he would favor one.

The focus was shifting instead to the days following Jan. 1 when the lowered tax rates dating back to the George W. Bush administration will have expired, presenting Congress with a redefined and more welcome task that involves only cutting taxes, not raising them.

"I believe we are," going over the cliff, said Republican Senator John Barrasso of Wyoming. "I think the president is eager to go over the cliff for political purposes. I think he sees a political victory at the bottom of the cliff," Barrasso said on Fox News Sunday.

Some Republicans have said Obama would welcome the fiscal cliff's tax increases and defense cuts, as well as the chance to blame Republicans for rejecting deal. Obama has rejected that assertion.

Congress started the clock ticking in August of 2011 on the cliff. The threat of about $600 billion of spending cuts and tax increases was intended to shock the Democratic-led White House and Senate and the Republican-led House into bridging their many differences to approve a plan to bring tax relief to most Americans and curb runaway federal spending.

Economists say the harsh tax increases and budget cuts from the fiscal cliff could thrust the world's largest economy back into a recession, unless Congress acts quickly to ease the economic blow.

The most immediate impact could come in financial markets, which have been relatively calm in recent weeks as Republicans and Democrats bickered, but could tumble without prospects for a deal. (Read More:Markets Teetering on Edge of Cliff)

Markets will be open for a half-day on Christmas Eve, when Congress will not be in session, and will be closed on Tuesday for Christmas.

Wall Street will resume regular stock trading on Wednesday, but volume is expected to be light throughout the week with scores of market participants away on a holiday break.

If Congress fails to reach any agreement, income tax rates will go up on just about everyone on Jan. 1. Unemployment benefits, which Democrats had hoped to extend as part of a deal, will expire for many as well.

In the first week of January, Congress could scramble and get a quick deal on taxes and the $109 billion in automatic spending cuts for 2013 that most lawmakers want to avoid.

Once tax rates go up on Jan. 1, it could be easier to keep those higher rates on wealthier taxpayers while reducing them for middle- and lower-income taxpayers. Lawmakers would not have to cast votes to raise taxes.

Some lawmakers expressed guarded hope that a short-term deal on deficit-reduction could be reached in the next week or so, with a longer more permanent deal hammered out next year.

But a short-term deal would need bipartisan support, as Obama has said he would veto a bill that does not raise taxes on the wealthiest Americans.

Democratic Senator Kent Conrad, chairman of the Budget Committee, said Obama and Boehner are not that far apart and that both sides should keep pushing for a long-term big deal.

"I would hope we would have one last attempt here to do what everyone knows needs to be done, which is the larger plan that really does stabilize the debt and get us moving in the right direction," Conrad of North Dakota told Fox News Sunday.

Stop-Gap Fix Most Likely Outcome of US Fiscal Talks

The "fiscal cliff" deadline is days away and the U.S. Congress and President Barack Obama have left town for Christmas.

CNBC,

23 December, 2012

But even if they were still here, it wouldn't have mattered, according to Steny Hoyer, the second-ranking Democrat in the House of Representatives. He says they were going nowhere to resolving the disagreement over how to fix the nation's fiscal problems.

Last month's dreams of a "grand bargain" of tax hikes and spending cuts seem long gone. They had been reduced to more modest bargains in mid-December, and as 2013 approaches, are on the verge of relegation to a "stop-gap measure," at best the sort of temporary fix that Congress undertook in 2011.

A stop-gap that puts everything off for a while but resolves nothing is now the most promising alternative, if there is to be one, to the across-the-board tax hikes and spending cuts described as a "fiscal cliff" because they threaten to send the U.S. economy plunging into another recession.

It is also the way fiscal showdowns have ended in Washington in recent years.

Such a fix, at best, would delay the spending cuts and tax hikes further into 2013 as well as work to address in a long-term way a government budget that has generated deficits exceeding $1 trillion in each of the last four years. Even worse, it would set up a huge fight in January and February over raising the U.S. debt ceiling, which controls the amount of money the federal government can borrow.

Dysfunction in Washington was specifically cited as one of the reasons rating agency Standard & Poor's cut the U.S. debt rating to AA-plus after a battle over the debt ceiling in 2011. That alone - not to mention going over the cliff - could lead to another rating cut.

At worst, the new year could start with a full-fledged jump off the 'cliff,' with an understanding, communicated to financial markets, that Congress and the White House would come back and try again for a solution.

Given the apparent deadlock, some congressional aides this week said that Washington needed to begin telegraphing to Wall Street that markets should not panic if a "fiscal cliff" deal is not struck in December.

The goal, one aide said on condition of anonymity, is to avoid starting 2013 with a steep stock market drop like the one the U.S. suffered in 2008, when the country's financial industry was falling apart and Congress was divided over what to do.

On Friday, Obama acknowledged that only small steps might be possible with so little time remaining.

Those, the Democratic president said, would consist of extending benefits for the long-term unemployed and keeping income tax rates low for 98 percent of Americans - meaning raising taxes on households with net incomes above $250,000 a year but not for those earning less.

He held out the possibility of something "comprehensive," as he put it, but it had a hollow ring at the close of a work week that saw House Speaker John Boehner step back from negotiations and pursue a partisan plan that even some of his fellow Republicans could not stomach.

Market Pressure

The steps that Obama outlined were immediately rejected by Republicans, who have given ground on their previous steadfast opposition to any tax hikes but are still demanding that the White House agree to more substantial spending cuts.

"The president has failed to offer any solution that passes the test of balance," declared Boehner spokesman Brendan Buck, minutes after the end of Obama's statement on Friday.

On Saturday, a spokesman for Senate Republican leader Mitch McConnell was similarly dismissive, noting Obama's call had neither bipartisan support nor spending cuts to ride along with tax increases.

McConnell, on Friday, suggested bringing up a House-passed bill that extends current tax rates for all Americans, including the top earners, and then pushes for comprehensive tax reform next year that theoretically could raise new revenues to help cut deficits.

But Obama has promised repeatedly to veto any extension of the expiring Bush-era tax cuts that fail to hike rates for the wealthy.

And Democrats, who control the Senate, have dismissed the McConnell idea, arguing that Obama ran his successful 2012 re-election campaign on a promise of forcing the wealthy to bear more of the burden of deficit reduction.

Democratic aides in Congress think their own bill implementing Obama's $250,000 income threshold, which passed the 100-member Senate in July with 51 votes, could breeze through this month, or next year after the "fiscal cliff" is breached.

The prospect of a breach is being discussed far more seriously now, and not just as a bluff or to set up the other side for blame.

"I think we're going to go over the cliff," said Republican Representative Patrick Tiberi of Ohio. "I don't see something getting done."

In an MSNBC interview Friday, Hoyer, a 31-year veteran of Congress from Maryland, said it wouldn't matter if everyone was in Washington instead of on holiday.

"Frankly, we've been in town for four weeks and members haven`t been doing much," he said, calling it "one of the least productive times that I've been in Congress."

Even Obama speaks of "a mismatch" between how people are thinking about the looming tax hikes and spending cuts "outside of this town and how folks are operating here. And we've just got to get that aligned," he said in his statement.

ITG Investment Research Chief Economist Steve Blitz on Saturday said sliding the "fiscal cliff" negotiations into the new year was not a huge deal. "I think markets will pressure for a deal in January," he said.

The "pressure" could be in the form of a significant stock market drop, which would hit workers' retirement plans, threaten to deter consumer and business spending, and possibly rattle other countries' economies at a time when the global economy is far from robust.