Journal / here’s what i don’t understand about the ‘fiscal cliff’

warning: an update about politics and money..

here's what i don't understand about the 'fiscal cliff' (which happens january 1st if republicans and democrats can't agree on a federal budget).

simply: republicans won't sign off on a budget that raises taxes on people making more than $350,000 a year. keep in mind, the democratic plan calls for a 4% tax increase on the wealthiest americans. so, for example, someone making $1,000,000 a year would pay an extra $40,000 a year in taxes. which for someone making that much money really doesn't amount to a lot, relatively speaking.

but here's what i truly don't understand: if we go over the fiscal cliff the stock markets will drop considerably. so, for example, someone with a multi million dollar stock portfolio could stand to lose hundreds of thousands, or even millions, of dollars.

i mean, if the choice is:

a – 4% tax increase(the democratic plan). or

b – 15% loss in the value of stocks and investments (the republican plan, if we go over the fiscal cliff).

wouldn't rich people prefer a 4% tax increase?

not to mention that if the republicans pass a responsible budget then the stock market will actually go up considerably. so yes, the very rich would have to eat a 4% tax increase if we avoid the fiscal cliff, but most likely the value of their investments would go up roughly 10%, or possibly more.

so why are house republicans holding the world's economy hostage in order to prevent a 4% tax increase on millionaires? it's absurd and unethical and irresponsible on the part of republicans.