Tax Code Changes

I find this hard to believe:

President Bush’s tax advisory commission indicated on Tuesday that it would not propose replacing the income tax with a national sales tax or a value-added tax, but would recommend limits in the popular tax deductions for mortgage interest and employer-provided health insurance.

The commission, scheduled to make its recommendations to the president by Nov. 1 on how to change the tax system, did not take votes or dwell on details, but its consensus on many important issues was clear.

“We’re getting focused on the income tax as a base,” said the panel’s chairman, Connie Mack, a former Republican senator from Florida.

Many prominent conservatives have argued over the years that the income tax is a drag on the economy and should be scrapped in favor of a consumption tax, a tax based not on what people earn, but on what they spend.

I hate taxes. I think we are taxed too much, I think government spends too much, and I think certain taxes should simply be abolished (property tax being one- it sends me into fits of anger to continue to pay taxes on a car that was paid off years ago).

I love the idea of a flat tax.

But you have got to work a little harder to convince me that after years of cutting taxes and failing to even attempt to control spending, the only tax code revisions this group can come up with is cutting deductions for home owners and health insurance?

Tell me I am reading this wrong. Tell me I am getting worked up over nothing. Tell me I just don’t understand what they are trying to do. Tell me something.






113 replies
  1. 1
    Doctor Gonzo says:

    As a renter, I don’t like subsidizing homeowners to begin with (and renters often pay more property taxes too than homesteaded homeowners, as apartment buildings are often taxed as a higher rate than a similary-valued single-family house). I wouldn’t cry if this tax credit disappeared, even if I do get a house in the future. But yes, there are certainly more deserving tax welfare rules we can get rid of first. How about ending all agricultural subsidies, for example?

  2. 2
    zzyzx says:

    In terms of effect on the economy, getting rid of the interest deduction would be horrible. How many people only can afford their houses because of that? Unless your goal is to collapse housing prices and have people lose their homes, this is such a bad idea.

  3. 3
    Sinequanon says:

    After a 15 hour workday yesterday and little sleep last night, the best I can do is say I too am astonished. On the other hand, the protesters of this move, The Homebuilders Assoc….want their cake and eat it too, as they are involved in supporting the destruction of wetlands, the one natural element that filters our drinking water. The decision is being heard by the Supremes right now. As for taxes, yeah, the middle incomes pay the worst percentages, and it is too much. I don’t mind paying taxes, I just don’t like what they are used for lately.

    PS=I am so damned glad that hideous ad for Coulter is gone.

  4. 4
    Bob says:

    Flat tax? Something proposed by the Flat Earth Society?

    Kinda presumes everything’s flat. The last buck is the same as the first.

    Half a trillion to defend oil wells around the world. Flat.

  5. 5
    Jon H says:

    Obviously, they want to pop the real-estate bubble.

    And, er, the ‘being insured’ bubble.

    That’s all I got.

  6. 6
    Gratefulcub says:

    Really, you still find it hard to believe that they would want to close loopholes designed to help the middle class, so that they could eliminate the ‘minimum tax’ designed to keep the wealthy from reducing their tax burden. This is surprising?

  7. 7
    Mr Furious says:

    After renting for years before finally buying a house four years ago, I hear what Gonzo is saying. But the deduction is not on the principal it’s on the interest only. If you had to pay interest on your rent, it would be one thing, but you don’t. It’s merely a way to structure thirty years of debt, not really a dodge. But without the deduction, buying a house will be much harder. Without an incentive to make home ownership more affordable, there is no point in buying over renting. What happened to the “ownership society?”

    How many people will be absolutely fucked without that deduction? Lots. I cannot believe this is smart politics—particularly in the supposed Republican “exburbs” and McMansion colonies. This is straight at the middle class.
    There will be a flat-out uproar over this as described.

    And don’t even get me started on the health insurance. Is this some bullshit way to force people into using HSAs?

    He’s fucking crazy, unless this is a head fake/trial balloon.

  8. 8
    goonie bird says:

    How about elimnating all these rediclous taxes how about ending all this hogwash how about making the tax form a little less intrusive

  9. 9
    Jim says:

    Though I think it is politically tone deaf, this proposal is not that shocking to me. Before they can push a flat tax, they need to get rid of several popular deductions, most notably the home-interest deduction.

    Amplifying what zzyzx said. Is there a better way to prick the housing bubble than this? Given how much folks have borrowed against their homes, this will have an impact beyond the housing market.

  10. 10
    Mr Furious says:

    Seriously. People make thirty year decisions on housing based on this structure. And every other financial decisiopn after housing is impacted. Saving for anything else will be erased. Health care? No extra money to save for it anymore, and whatever you get taken out of your check is taxed now too. Any money you are able to squirrel away for retirement or colllege is now gone. this is a backbreaker for millions of families who operate on a close budget.

    I can’t actually analyze the financial/tax implications easily—this shit confuses the hell out of me. but that’s true of ninety percent of people in this country—the same ones who will feel this. all of a sudden your paycheck shrinks AND your biggest (only?) tax deduction is limmited otr removed. There are so many ways for them to address revenue less obviously, this is a serious mistake.

    I have to believe this will be a death sentence for the republican party. Maybe that will be worth it?

  11. 11
    Ben says:

    The mortgage interest deduction should be done away with completely… the key is for people to stop spending twice as much as they can afford on a home. We need a flat tax with NO deductions of any kind. No more social engineering via the tax code.

    What I most resent is paying property taxes to fund the educational system (I have no kids) for the children of mostly heterosexuals that want to discriminate against me (gay people). The tax code, as it exists today, is massively unfair to single people.

  12. 12
    demimondian says:

    I would expect that the mortgage interest deduction would be grandfathered, so that the deduction on older mortgages would remain.

    The mortgage interest deduction is a subsidy to the home lending industry. If I’m paying x% face on a loan, I’m actually paying quite a bit less, due to the fact that I know I’ll be deducting the interest from my taxable income. That’s instant backsheesh for Fannie Mae, the federal organization from which most homeowners are renting their houses. (Fannie Mae takes a cut of the interest on the face. If that’s 4% instead of 7%, guess what? They get a cut of a bigger pie!)

  13. 13
    Gratefulcub says:

    We all benefit from society. If we don’t educate our children, our society suffers. So you do get a benefit from funding education. We all get benefit from roads and railways even if we don’t leave the house. We can’t only be taxed on the govermental functions we use.

  14. 14
    stickler says:

    Every time I hear somebody refer to Social Security as the “third rail” of American politics — touch it and you die — I just snicker.

    Social Security is a dangerous program to meddle with, it’s true. But the Mother of All Third Rails is the mortgage interest deduction. This is the heart of the post-1945 social contract for the middle class. Eliminate it? Never happen. Cut it back? It might happen — once. Then, watch the next fall’s election results. Any Congressman fool enough to vote for this is signing his retirement papers.

  15. 15
    demimondian says:

    What I most resent is paying property taxes to fund the educational system (I have no kids) for the children of mostly heterosexuals that want to discriminate against me (gay people). The tax code, as it exists today, is massively unfair to single people.

    Right.

    I tell you what. You can move to a low-property tax state, and wonder why the services you do want…police, fire department, and the like…aren’t there for you when you need them. The reason’s simple: the overwhelming majority of people eventually settle down within a few miles of the place they grew up. Those adults, if uneducated, won’t be competitive, and so they’ll be poor. That means more demand for public safety, and a smaller tax base to pay for it.

  16. 16
    demimondian says:

    But the Mother of All Third Rails is the mortgage interest deduction. This is the heart of the post-1945 social contract for the middle class.

    It’s one of the three original pillars of that contract, anyway. The other ones were employer funded, funcitonally universal, pension benefits and health care. The first has already been largely eliminated — 401(k)’s transfer the risk entirely to the individual. The right has been going after the second for twenty years, with moderate success. Why shouldn’t they go after the interest deduction, too?

  17. 17
    Ben says:

    Gratefulcub,
    Libertarians would disagree. The “society benefits” canard just doesn’t cut it as a justification any longer. There are now tax benefits for breeding (the per-child tax credit) that is increased damn near every year. My company funds health care for an entire family… the guy in the cube next to me has 7 people on his health care policy compared to my 1… I make less money due to this. Married people have lower insurance costs. There is nothing in the constitution that provides for unequal/beneficial treatment of married people with children. Just like the mortgage interest deduction, people have gotten used to it and like it because it benefits them. That doesn’t make it inherently fair… what it does is make it an entitlement for people with children.

  18. 18
    Mr Furious says:

    I just read the article, and my head is spinning.

    There is no question, that in many ways he tax system for this country needs to be blown up and started over.

    Ben, Gonzo & others—you may very well be right. The mortgage deduction, dependants, etc and others are not “fair”—not for renters and single people for sure.

    With these two issues in particular however, there couldn’t be two scarier tax alterations to most middle class families (right or wrong) even if the impact is less than at first glance. After reading the article (which I hadn’t done when I commented upthread), I realize that it might not be as harsh for me as it sounded. But for others it will be. Any politician who comes out in support of this is committing suicide IMO.

    This truly is the “bold” leadership we keep hearing about finally materializing. If Bush and the Republicans want to take the hit on this, fine, fuck ’em. As I mentioned before, it might be worth it.

    I already had a hard time believing anything this Party did wasn’t directly motivated to be benificial to the wealthy. Accurate or no, this proposal will drive that point home to every middle class homeowner in the country.

  19. 19
    Jim Allen says:

    To be fair, the flat tax would have to be a flat tax on everything — not just on income. Any monies made, be they from salary/wages, interest income, dividends, capital gains, etc., would need to be applied. Otherwise, those “with means” are going to get away with even more murder than currently, and those whose only income is their salary/wages will get whacked.

    If that’s what you mean by “flat tax”, maybe it’s not such a bad idea to investigate. But not unless it’s on all forms of income.

  20. 20
    TarHeelCP says:

    The mortgage interest deduction is one of the biggest ruses in the tax code. For most Americans in the end it saves them only a $150-300 in taxes on every $1000 they spend on interest. So essentially, this tax is just a give away to the mortgage industry by encouraging Americans to take on more mortgage debt than they really should.

  21. 21
    JKC says:

    The GOP will persue this only if they wish to follow the Whigs into oblivion. This is mere think-tank game playing.

  22. 22
    demimondian says:

    Any monies made, be they from salary/wages, interest income, dividends, capital gains, etc., would need to be applied.

    Ah, but you see, that isn’t fair, either. Consider stock appreciation.

    On its face, that’s obviously not income. I can’t spend unrealized capital gains, after all — my portfolio is just paper. (Well, actually, it’s spin-changes in iron crystallization domans these days, but the effect is the same.) So I shouldn’t pay taxes on that.

    Unfortunately, that opens a huge loophole. I can take out a loan backed by those assets, and use that money. The loan certainly isn’t income. And then, I can slowly whittle away the portfolio paying the loan off. Paying off the loan is a cost of doing business, so it cuts into my income.

    See what I’ve just done? I’ve just avoided all the taxes which should be levied against my portfolio’s appreciation.

  23. 23
    Gratefulcub says:

    I don’t understand the hatred of taxes. Taxes are necessary. Government is important, and it does provide services needed for our society to prosper. The American society, political system, consumer economy, etc, provide each of us the ability to prosper and live a comfortable life. Good ol’ amurikan ingenuity wouldn’t get anyone very far without roads, schools, energy, security, and many of the other things paid for with taxes.

    Saying taxes are too high is another issue. Obviously, money needs to be spent more wisely.

    And why NO social engineering through taxes. The wealthy in this country became wealthy be benefitting from our society as a whole. They benefitted from the US being ‘the world’s wealthies country in history.’ I am not saying they stole money from the poor, I am not saying that they were somehow wrong to have benefitted as they have. I am simply stating my opinion that Bill Gates would not have become a millionaire/billionaire if he had to start his business in Libya, Liberia, Thailand, or almost anywhere other than the US (I did say almost). So for me, a little social engineering, that forces the wealthy to forgo a bit of their wealth, so that the rest of the population can share benefit a little more from living in the world’s wealthiest country in history is a good thing.

    Ben,

    I wasn’t defending the tax code. I am single, but we have cohibitated for 6 years. I should not be penalized, nor should I be rewarded for getting married. But the social benefits canard is not BS. I don’t want to live in a society in which there is no public education system, no social safety net, no medicaid/care, no type of social security, and on and on. Government isn’t the problem, bad government is the problem.

  24. 24
    TarHeelCP says:

    Libertarians would disagree. The “society benefits” canard just doesn’t cut it as a justification any longer. There are now tax benefits for breeding (the per-child tax credit) that is increased damn near every year.

    Your confusing two seperate arguments here. Yes you’re right, the tax is used for social engineering.

    But, the “society benefits” was used to rebut you resentment for paying taxes to support schools. Which by the way, do you really think that the rise in productivity and output in the US just happened to coincide with the strengthening of our public school system by accident?

  25. 25
    Jim says:

    Maybe if “The single/gay tax penalty” sounded worse than “The marriage tax penalty” we would have a different tax policy.

  26. 26
    Gratefulcub says:

    I can’t believe I agree with someone that uses tarheel as part of his name. I was raised to hate just a few things, and UNC is one of them. Sad day.

  27. 27
    Shygetz says:

    Ben,

    Terrible examples to prove your point. The child-tax credit has nothing to do with societal benefits, in that it doesn’t promote anything other than have more kids than you can afford. Your examples of company family health coverage and higher insurance rates have nothing to do with the government; libertarians would embrace it as the market at work. Because your company offers health benefits to families, they can attract better employees than if they didn’t. And the insurance rates are based on actuarial tables; people with families are less likely to drive like idiots. Better examples are schools, roads, waterway projects, etc.; all of which you benefit from either directly or indirectly. The ability to fund and complete projects like these are a large part of the reason to form societies in the first place.

  28. 28
    TarHeelCP says:

    Gratefulcub, you wouldn’t happen to be a dukie would you?

    Government isn’t the problem, bad government is the problem.

    I love it, but try and fit that on a campaign poster!

    Seriously, if someone tried to use that in a campaign it would go up there with “I voted for it before I voted agaisnt it.” It so full of nuance.

  29. 29
    Shygetz says:

    demimondan–Stock appreciation is income in the same way that any property appreciation is income, and any non-monetary compensation is income. Just because you didn’t get your increase in personal wealth through a cash intermediate doesn’t mean that you don’t have more wealth. Example–You own $100 of stock in Company A. You earn money from a job and invest another $100 into the stock, giving you $200 of stock. Everyone would agree that the extra $100 you invested came from income, and the fact that you put it into stock (or a car, or Pokemon cards) doesn’t eliminate that fact. So, why is it different if you invest $100 into stock, and it appreciates in value to $200? You still own the same stuff, so why can’t you be taxed on it? Just because there wasn’t a cash intermediate in between you owning $100 of stock and you owning $200 of stock? I disagree.

  30. 30
    Ben says:

    Grateful,
    Good discussion… The problem is bad government is all that exists today. I would much prefer taxes to deficit spending… but now we have both.

    On paper, I agree with you. I don’t want to live in a society completely without safety net(s), education, SS, etc. The problem is that these “programs” disproportionately benefit certain segments of society. Rich people don’t pay any taxes at all via the gazillion loopholes that exist in the tax code. Poor people don’t pay anything either. Everyone should pay something so that they have a stake in the political process in this country.

    Unfortunatley, what has happened in recent years is that our government and elected representatives have been sold to the highest bidder. We are a country being run by special interests: Big corporations, big labor unions (less so now than 10 years ago) and big religion. What is really sad is the national discussion is no longer what is good for this country but what is politically expedient.

  31. 31
    slide says:

    Again, I’m amused at the surprise. The middle class has consistantly gotten screwed by this administration’s tax policies even if they dont’ realize it. How anyone in the middle class could every vote for these clowns is beyond me. When are you going to get it? Bush and company only care about their rich friends and corporations.

  32. 32
    Geek, Esq. says:

    JC: The Republicans have a standard algorithm for tax ‘reform.’

    1. Cut taxes on the very affluent and wealthy. In this case, that means doing away with the Alternative Minimum Tax.

    2. Fuck middle and working class taxpayers in the ass (bye bye home deduction and employer-provided health insurance tax breaks). See also crippling deficits and debt load.

    The Republicans NEVER deviate from this policy. Never.

  33. 33
    demimondian says:

    Stock appreciation is income in the same way that any property appreciation is income, and any non-monetary compensation is income.

    You think it’s so simple, eh?

    Let’s consider the question of a retail store, then. I go out to my wholesaler, and buy 10 flats of 100 widgets each, at $137/widget. I take those widgets off the pallets, and move them into my stock room. I take fifteen of them, and put them on the shelf at an asking price of $274/widget.

    According to your logic, I just made $137,000.

  34. 34
    Gratefulcub says:

    Tarheel,

    No, not a Dukie. I reside in the mediocre state of Kentucky. I still see Christian Laettner turning around shooting a jumper in my sleep. And every time ABC shows a college basketball game, or every time Billy Packer opens his mouth. I grew up with a father who taught me very little, but it was ingrained in me from an early age that:
    “Dean Smith is the most over-rated coach of any sport of any time.”
    “Anyone that would wear that color blue doesn’t deserve to play basketball.”
    “Michael Jordan should stay in school because he will never make an NBA roster.”
    “Don’t listen to your mother, she is full of Shit.”
    I just held on to the ‘I don’t like Carolina’ part.

    As far as ‘government isn’t the problem, bad government is’ goes……I hear you. I typed it for my own amusement more than anything else. But, I do believe it. I don’t know how to make it happen, I wish I could be that intelligent. As campaign slogans go, maybe “Government isn’t the problem, Corrupt Government is the problem” would be better for 2006.

  35. 35
    Kirk Spencer says:

    I’m about to edge into flameland here, but it’s not intended to anger as much as demonstrate a point.

    There’s a somewhat accurate claim that the essence of libertarianism is “I’ve got mine, screw you.” The above comment about how the person with five kids and a spouse is getting all that insurance and lowering the poster’s income is an example. In actual fact, your salary is all yours. His is divided among seven people. So if you make (just for example sake) $60,000 and he makes $70,000, he gets to spend $10,000 on “him” while all $60,000 is yours. Yes, that’s a simplification – the cost of housing is shared, and there are cost benefits in buying food in bulk – but the core is sound.

    Oh, he chose to have children? Then you have chosen not to have children. What, you’re homosexual? Big deal, you can adopt.

    Any single element considered in isolation is inevitably inequitable. The goal is to balance all elements so as to attain near equitability while at the same time enhancing society as a whole. It isn’t going to happen, not perfectly, but it’s the goal. If you consider everything solely in light of whether it hampers/harms one’s self without any consideration of gains to others or to society as a whole, then you are a libertarianism. Or selfish, depending on who’s dictionary you’re using.

  36. 36
    TarHeelCP says:

    Unfortunatley, what has happened in recent years is that our government and elected representatives have been sold to the highest bidder. We are a country being run by special interests: Big corporations, big labor unions (less so now than 10 years ago) and big religion. What is really sad is the national discussion is no longer what is good for this country but what is politically expedient.

    Your exactly right, Ben. Unfortunately, our founding fathers forgot to include some clause in the First Amendment allowing us to limit speech when it becomes a tool to benefit the overly priviledged.

    Personally, I think the best way to reign in campaign finance issues is to find a creative way to eliminate the need to raise barrels of cash. Or, we need to admit that political campaigns are not fair. Then decide if this is a case where the greater good is served by exempting campaign from the first amendment.

  37. 37
    TarHeelCP says:

    “Government isn’t the problem, Corrupt Government is the problem”

    I see huge bumper sticker sales in the future for this one!!

    “Dean Smith is the most over-rated coach of any sport of any time.”
    “Anyone that would wear that color blue doesn’t deserve to play basketball.”
    “Michael Jordan should stay in school because he will never make an NBA roster.

    Did your dad have a warped sense of reality?

  38. 38
    demimondian says:

    The various child tax credits can be viewed as paying parents to work. Don’t lie to yourself: choosing to be a parent in our society is a terrible economic decision. To give a real example: a couple of years ago, I got a job offer from a company that would have roughly doubled my annual income. I couldn’t take it, because there were services my children needed that weren’t available there. (For that kind of money, you can be sure that FDDD and I looked very hard indeed.) That’s a common trade-off: parents accept significantly reduced economic success to protect their kids.

    If you want anyone to be around to support you when you get too old to work, you need to not discourage people from having children to any greater extent than they already are. Look at Europe and Japan for examples of what happens when parents aren’t adequately compensated — in Sweden, with huge parental benefits, the population is stable. As the parental benefits fall, moving through France, to Italy, to Japan, the population falls, too.

  39. 39
    jobiuspublius says:

    Imagine if all taxes were eliminated. Stick with me it’s a thought experiment. If it helps, imagine that the government prints money whenever it needs to spend. Add what ever else makes this experimant palatable to you. OK, ready?

    How many people would become millionairs in a reasonable time? Would those earning the median income become millionaires due to 0% tax rate? No. Which goes to show how stupid it is for the working class to get so caught up on tax policy as if it meant as much to them as it does to the investor class.

    I’m not saying that people should have no concern for tax policy, or spending. I’m criticising the myopic focus on it from some people who are better served by a raise.

  40. 40
    Ben says:

    Heel,
    I don’t believe any campaign finance limitations are going to work. We need to simply impose term limits on our representatives. If these LSOS knew that after 3 terms (for Reps) and 2 (for sen) that they had to go back home and get a job and rejoin their community it would drastically change Congress. The biggest issue, in my mind, is that 99% of seats are safe… COngressional elections are essentialy lifetime appointments for the winner. Corruption ensues and then they are officially for sale. Perhaps with term limits we could get back to discussions on public policy and away from “politics”. When the Dems/Repubs are talking about “politics”, American’s are going to get F’d.

    Kirk,
    You don’t think my corporation gets any tax benefits/breaks from the health care that they offer? You, my friend, are a socialist.

  41. 41
    Gratefulcub says:

    Ben,
    I agree completely. Which is why it infuriates me that the nation never has the conversation that is needed. To me it is obvious, so everyone please beat me up when you disagree, that the key to good governance is to remove the money from the process.

    Of course pols are beholden to big business, THEY HAVE THE MONEY. You can’t get elected without raising boatloads of money, and you can’t raise that amount of money from individuals. (I think that was the issue that attracted people to Dean, they thought they could support a politician instead of him having to raise money from big business; of course they were wrong).

    Those that own wealth, own politics. Their politicians work on their behalf and support policies that promote their wealth. The wealth increasingly becomes the property of a smaller and smaller group.

    What I really don’t understand is this:
    Our prosperity as a nation is based on a consumer economy. The consumer economy is fueled by a prosperous middle class. As the disparity of wealth increases, the middle class shrinks. The poverty class can’t supply the needed fuel to allow our economy to grow. It seems counter-productive for the wealthy to support non-progressive policies. It’s the ole rhetoric: a rising tide lifts all boats. Always used by republicans telling me that I will join them one day. But the reverse seems to actually be true. A rising tide in the middle class would raise their yachts.

  42. 42
    TarHeelCP says:

    Ben, I don’t see how term limits help with Congress. Often when Congressmen retire, the successor is little more than a new face with the same political philosophy. You may lose a little corruption, but I would imagine that system becoming abused by retiring Congressman essentially appointing a successor by who they choose to endorse (What happens now anyway).

    Like much of life, we have a really complicated problems. Public policy solutions to complicated problems are hard to understand. Most Americans become disinterested when they here the details of policy. We want it digested for us and spit back in the simplest terms possible. That’s the step where politics has done the most damage. We rarely get the whole picture from our politicians, just the picture they want us to see.

  43. 43
    cl says:

    I just wanted to say I’m happy to find a discussion between people on different sides of the aisle that is rational and intelligent instead of a screaming match.

    I have to agree with many here that this proposal, which if you look at it the way Republicans traditionally do, represents functionally a new tax on our homes and health –and is unconscionable.

    This is coming at a time when the middle class is already reeling from the rising cost of gasoline — and when we are about to be hit by record home heating prices.

    Also, if employers do not get a deduction for offering health insurance to their employees, what will be their motivation to do so? If this administration had set out purposefully to destroy the middle class, they couldn’t be doing a better job. Maybe they have.

  44. 44
    Gratefulcub says:

    Tarheel,

    Did your dad have a warped sense of reality?

    Just drunk.

    Unfortunately, our founding fathers forgot to include some clause in the First Amendment allowing us to limit speech when it becomes a tool to benefit the overly priviledged.

    They also forgot to include in the first amendment that a corporation was to be considered an individual. I don’t know the legal explanations, and I am in no way trying to pretend to know how it all works, but the supreme court decided that this was the correct way to interpret the 1st A. To me, that is the problem. If we could remove the money from business that floods politics, things would start to change. If you don’t need campaign contributions from oil, you can objectively look at energy policy. BigPharma and HMO’s, healthcare policy. And the beat goes on, and the beat goes on.

  45. 45
    Mr Furious says:

    Ben, term limits aren’t the answer. Publicly financed elections are.

  46. 46
    TarHeelCP says:

    If we could remove the money from business that floods politics, things would start to change.

    Unfortunately, this parallels the war on drugs (campaign donations may in fact be more addictive!!). So the problem I see is that no matter how you try stem the supply (i.e. passing laws to make this or that illegal), money will always find a loophole. So we would also have to make some sort of impact on the demand for campaign cash as well (providing free airtime for candidates to run their ads for one idea) to be succesful in cleaning up campaigns and rooting out the money.

    Perhaps, there’ll need to be a thorough rehab for those already addicted as well!

  47. 47
    jobiuspublius says:

    TarHeelCP Says:

    So the problem I see is that no matter how you try stem the supply (i.e. passing laws to make this or that illegal), money will always find a loophole.

    So, it’s like white collor crime? How about murder, armed robbery, etc.?

  48. 48
    TarHeelCP says:

    Gratefulcub, perhaps I can make you feel a little better about UNC. Please, if you remember nothing else, know that the University (not the Athletic Dept) does an extremely good job of installing a sense of civic and social responsibility into it’s students. The UNC system has done a good job of maintaining leaders that truly see themselves and the universities as public servants.

    I’ll start a job within the UNC General Alumni Association next week. A big reason I’m taking that job is because of the conversation I had with the President of the GAA about civic responsibility. I owe a very large debt to UNC for taking a lower middle class rural boy and teaching him how to open doors that would otherwise be shut.

  49. 49
    rayabacus says:

    If we really wanted to help the lower and middle class what we should do is make all mortgage interest income on residential property tax free. We would not then need the mortgage interest tax deduction.

    Mortgage lenders would seek to lend based on the “tax free income” factor, mortgage rates would decline significantly (even lower than today), more people would be part of the “ownership society” and equity (due to the lower rates) would be built quicker. Just as “tax free municipal bonds” are sold at a lower rate and are attractive to “high tax rate” investors, so would mortgages.

  50. 50
    TarHeelCP says:

    So, it’s like white collor crime? How about murder, armed robbery, etc.?

    More like human nature. If I really want to do X and I really believe that X is the right thing to do, it won’t matter whether it is illegal, socially unacceptable, or even just plain stupid, I’m going to do X.

  51. 51
    Gratefulcub says:

    Perhaps, there’ll need to be a thorough rehab for those already addicted as well!

    That’s the problem. Those that are benefitting will have to stop their own gravy train. How many people go to their boss and say “So, you have offered me $100,000 to do my job. I think I can do it for $18,000.”

    The other option is some sort of revolution led by the masses. That only happens in desparate situations that do not raise their ugly heads in the first world.

    So, is there an answer? To me it sounds like I started by saying: “Government is not the problem, corrupt government is the problem.” Then through my truly awesome debating skills, I have made the point that “We are screwed; corrupt government is the only kind of government available without the US going through another great depression.” Of course, that wasn’t my objective, my awe inspiring writing ability just got in the way of the point I was trying to make.

    (just in case – the self back patting was sarcasm)

  52. 52
    TarHeelCP says:

    If we really wanted to help the lower and middle class what we should do is

    Those that are benefitting will have to stop their own gravy train.

    The other option is some sort of revolution led by the masses.

    Their are revolutions that happen more quietly. For instance, we could all stop voting for elites and elect middle class folks to represent us. Then pray to the deity of our choice that the system doesn’t corrupt them before they can change it.

  53. 53
    demimondian says:

    I don’t see how term limits help with Congress. Often when Congressmen retire, the successor is little more than a new face with the same political philosophy. You may lose a little corruption, but I would imagine that system becoming abused by retiring Congressman essentially appointing a successor by who they choose to endorse (What happens now anyway).

    The key point is that empty seats are always competitive. Endorsements help, but are not sufficient, at the primary and the general election levels.

    “Throw the bastards out every twelve years” has the potential to create better government. It certainly reduces the appearance of corruption.

  54. 54
    Gratefulcub says:

    Tarheel,

    Come on!!!!! Don’t try to steal my hate. I need it to keep me warm at night. One day W will be out of the white house, and my hatred will fade. If I don’t have a good hate on for that powder blue, I might freeze to death. Or, I might vote Santorum for president, but I don’t know if I can handle that much warmth.

    Obviously I was just being flip from the beginning. The older I get, the harder I find it to take sports seriously. And I find it almost impossible to hate a sports team. The insignificance of it all. UNC has always been known as a great institution of higher learning……you know……what colleges are supposed to be!!!! Best of luck to you, and congratulations on taking a job that you obviously care about.

  55. 55
    Kirk Spencer says:

    Ben, I didn’t discuss corporation benefits at all, so that came from way out of left field.

    As a matter of fact, based on the fact that GM claims the main expense leading to its current financial difficulties is paying for health benefits, I suspect that you’re mistaken. In fact I’ll add another bit of reason: if companies gained as much if not more tax benefits/breaks from providing health care then more of them would do it. Empirically, however, we know that providing health care is far from high on the list of benefits companies want to provide. ergo, any tax benefits gained are less than the cost. That’s not socialism, it’s raw capitalism.

  56. 56
    scs says:

    I’m not a real big fan of the mortgage deduction as it is regressive. If you live in a modest house and have a modest income, your savings are not that much anyway. The mortgage deductions you get are not much more than your standard personal deduction. The people who really take advantage of this are the rich with huge McMansions, and they are the ones who least need it. Now that the prices of houses have skyrocketed, the government can’t afford to keep giving away this handout to the rich. Ideally, there should be some sort of income limit or income sliding scale before you get a mortgage deduction, but I know that will never happen.

  57. 57
    Mr Furious says:

    For instance, we could all stop voting for elites and elect middle class folks to represent us. Then pray to the deity of our choice that the system doesn’t corrupt them before they can change it.

    Brilliant. Sincerely. It’s perfectly obvious, yet unattainable? Many people who voted for Bush, thought he was a regular guy… How can we get an actual regular guy/gal through?

  58. 58
    Mr Furious says:

    For instance, we could all stop voting for elites and elect middle class folks to represent us. Then pray to the deity of our choice that the system doesn’t corrupt them before they can change it.

    Brilliant. Sincerely. It’s perfectly obvious, yet unattainable? Many people who voted for Bush, thought he was a regular guy… How can we get an actual regular guy/gal through?

  59. 59
    TarHeelCP says:

    I know Mr. Furious, it was meant in jest!

  60. 60
    Cyrus says:

    Just to add to Tarheel’s “really complicated problems” thing, I read somewhere about a glaring problem with term limits. A new Congressman can learn a lot from formal education and advisors and time in state legislatures, but they wouldn’t have any actual experience with Congress. Ethical politicians would be great, of course, but it’s not much good if they don’t know what they’re doing. Which they wouldn’t, considering that they’d all be relatively new if the term limit was short enough to be meaningful. And who would have the monopoly on intelligence in that situation? As far as people interested in policy-making goes, only private interest groups would.

    Simply put, imposing term limits would suddenly make the lobbyists the only experienced people in Washington. Forget about them having to slip amendments into bills, they would be writing the original versions.

  61. 61
    Patrick Briggs says:

    The flat tax is not socially just. You can call it social engineering when a tax code is made progressive, but I call that justice.

    Those that benefit the most from a stable society where contracts are honored, crime and corruption are relatively low (except at the highests levels of government/large multi-nationals), and opportunity exists to move up socio-economically, MUST pay their fair share.

    I’m a liberal and person of faith. I take it seriously when Jesus said to “take care of the least of these”. I don’t believe that the right-wing “Christians” version of doing this in personal relations is enough. We have institutional obstructions designed to keep people down and make it easier for the wealthy to retain what they have. This requires government intervention and the tax code is one of the best ways to do it.

    I think you can tweak the tax code when it comes to home mortgage deductions but eliminating the deduction is a transparent attempt to further eliminate the middle class which I am very much a part of.

  62. 62

    Don’t worry. This is just a ruse to shake down the National Association of Realtors. They are learning a harsh lesson about paying political mobsters. Once you give them money they keep coming back for more. Soon they stop saying please.

  63. 63
    les says:

    To the renters: since your landlord also deducts the interest on his/her debt, the mortgage interest deduction has nothing to do with the cost of your lodgings. You’ve chosen to not assume the risk of owning real estate, or aren’t in a position to do so, and so you are paying a third party a profit for providing you a home. That’s the principal difference in costs.

  64. 64
    demimondian says:

    Forget about them having to slip amendments into bills, they would be writing the original versions.

    You mean like the current energy and bankruptcy bills that the oil and gas and consumer bredit card companies wrote and are pushing? Yeah, it’s a good thing those will get rewritten in committee.

    Oh. They *didn’t*? You’re joking, right?

  65. 65
    Sojourner says:

    I think this is fabulous. Another nail in the coffin of the Bush administration.

  66. 66
    p.lukasiak says:

    has anyone here bothered to read the proposal? Its actually quite reasonable.

    First off, they are not proposing to eliminate the mortgage deduction, but to eliminate the deductability of interest on mortgaged funds greater than the amount that the Federal government insures. (Currently, the national average is about $244,000, IIRC, but the amount is based on regional housing prices, so in areas with high housing costs the limit would be higher….) In other words the interest on the first $244,000 would be deductible, the rest would not. And it would be phased in over time (not grandfathered, however.)

    This makes sense, IMHO, not only in terms of taxes, but in terms of the housing market — it will lead to an increase in the construction of affordable (and, environmentally friendly) housing. Housing prices have gone through the roof in part because there is no limit on the deductability of the mortgage (there currently is an income-based limit on how much of a deduction one can take, however.)

    That’s the good news. The bad news lies in why this is being proposed in the first place —

    The tax reform commission that came up with this has to come up with “revenue neutral” proposals, and this is one of the ways it is coming up with to offset the massive loss of revenue that will realized if its pet recommendation — complete elimination of the Alternative Minimum Tax — is realized.

    The AMT was designed to ensure that the rich paid their fair share of taxes, and although the AMT needs adjustment (its income limits do not take inflation into account, and as a result upper middle families are now being subjected to it) eliminating it entirely would be nothing more than one more fat cat tax cut — only this one will come at the expense of the middle and upper middle class who will lose the deductability of some of their interest payments. (The rich will be able to liquidate some of their assets to pay cash if it proves to be advantageous in terms of their taxes and overall income.)

    In other words, as a general tax policy the proposal is not a bad way to raise new revenues in a manner that makes overall sense in terms of public policy, but as a means of raising revenue to offset a fat cat tax cut, it sucks.

  67. 67
    Ben says:

    Cyrus,

    You state: “Simply put, imposing term limits would suddenly make the lobbyists the only experienced people in Washington. Forget about them having to slip amendments into bills, they would be writing the original versions”.

    Talk to any member of Congress and this is the argument they will use (which should tell you something). The real experience for the inexperienced member is Congressional staff… every member (and I mean every) has the ability to hire very smart, experienced staff members that are experts in whatever field they choose. Do you really think that because a member has held office for 20 years that he/she is more experienced in matters or just more corrupt? How did experience help with the recent highway bill? Does one really need extensive experience for anything other than pork barrel “ear marks”?

  68. 68
    les says:

    John–do you quit driving your car on public streets when it’s paid off?

  69. 69
    tzs says:

    Actually, one of the reasons the birth rate in Japan is so low is it’s not very supportive of working parents. Used to be that when women got married, they were encouraged to quit their jobs–now it’s at the birth of their first child.

    Add to this the cost of education per child (mainly for cram schools) and the weird female-male interaction set up, and we see a society where….

    A. women aren’t getting married because they don’t want to, and
    B. women aren’t having kids.

    It’s always fun to listen to the old guard (mainly old geezers from the LDP) sputter about how unfeminine modern Japanese women are and how they should all be getting married, staying home, and having babies.

    Result? Japanese women continue to vote with their feet.

  70. 70
    Henk says:

    “the only tax code revisions this group can come up with is cutting deductions for home owners and health insurance”

    Bush hates the middle clase. He’s an east coast elitist at heart and they hate the middle class. He’d prefer that we were all low wage serfs that will work cheaply at the family compound in Kennebunkport and his faux ranch in Tejas.

  71. 71
    demimondian says:

    Result? Japanese women continue to vote with their feet.

    Exactly — and there is ample evidence that the pattern of low-parental-benefits iff low-fecundity is repeated again and again.

    I’m always amused that libertarians don’t understand this. If your basic presumption is that adults are rational economic actors, then the more irrational it is to have a child — and all societies do — then the fewer people will do that. As things stand now, and will always stand in a rational economy, the costs of raising kids are so high that the society as a whole needs to subsidize those who bear their cost.

  72. 72
    eddie says:

    Of course, nobody wants to pay taxes. And of course, the government spends to much money.

    But there’s a lot of apples and oranges analyses bouncing around this blog.

    First: Is this really a discussion about taxes and fairness or is it another discussion of the size of government? In any event, tax policy should not be the means to decide the latter question. This is the typical conservative ploy of starving the government in order to shrink it. This is a totally unreasoned and irresponsible way to lead or have a government. If government is to be for the common good, then let’s first discuss the boundaries of that task and then determine how to pay for it.

    Second: Let’s talk about one tax at a time. If you are unhappy about property taxes, then you must decide that you really do not want any municipal services, especially public schools. Or perhaps move to a locality that is so remote that such services are unnecessary or impossible to provide. Let’s at least all be honest about this discussion: There is no free lunch. So does that mean individuals will be forming localized mercenary police departments and those not using private schools will be home-schooling?

    Frankly, I am shocked that no one is protesting the not so sneaky privatization of our defense department and the exorbitant prices being paid for such outsourced services. But, I have strayed from the core of this discussion (yet in straying I illustrate the difficulty of getting a handle on taxes–each of us has pet peeves with particular expenditures made in our name; but does the aggregate of such peeves really have anything to do with fairness in our tax system.

    Simply put, the government should be required to balance the budget, end of story. Instead of playing politics with the issue of taxation and spending, the government should be required to do what every individual is required to do, viz. living within its means. But make no mistake, tax reform that is merely being used to affect separate social or governmental policy is simply a distraction.

    This whole discussion is pure politics and in the end everyone is promising the world, but not willing to pay the cost.

    There also needs to be a separate discussion of the disparate treatment between individuals (for whom the government is meant to serve and protect) and corporate entity (which are merely creations of state convenience and really should have no rights at all). Perhaps a good way to start the “flat tax” experiment is for the entire corporate tax code to be thrown away and one simple tax across the board applied. Where is everyone’s trust in the market system? Where is the outrage at the bankruptcy of an energy policy that proposes, in spite of record profits being made on a daily basis with no end in sight, the poor hand-in-hat oil companies need further “incentives” to earn yet even more money.

    A pox on all of your houses: These discussion are based on parochial and shortsighted concerns. The whole budget process is similarly stricken with a political virus and with this “conservative” congress has been transformed into a completely unreasoned and I would say immoral process.

    Please spare us all discussion about how wonderful a flat tax would be. That’s reverse engineering: We need to agree on what government should be doing for the common good and then have the guts and integrity to pay for it.

    It is shameful that in spite of having a pretty good idea what the war in Iraq (has and) will cost, this item is being treated off of the books, only to hide the unconscionable debt that is being accumulated directly as a result of such costs.

    Finally, can we have a little more common sense and a lot less economic philosophy in how this government deals with money. I’m still wait for all of those trickle down benefits. And just you wait until the courts become clogged with bankruptcies: Will there be a simply call to arms against these plaintiffs’ attorneys. If the government lives beyond its means, why would its citizens feel any incentive to do so?

  73. 73
    jg says:

    Taxes on the rich are abolished or severley cut back. For the rest of us the administration is looking into ways to cut back one of the few tax breaks the non-rich have and I hear defenses of it. Unbelievable. I don’t care about the details. For years we’ve been cutting tax revenue by removing taxes that primarily affect the rich. Nwo that the fed needs to stop hemoraging money the solution is to remove a tax break for middle and lower class citizens. Why do I lose my interest deduction but Paris Hilton gets to inherit tax free?

    Bush wants to fight a war but won’t tax his base to pay for it. Bush wants to rebuild New Orleans but won;t tax his base to do it. He will however, tax me. And coincidentally a lot of Wal Mart workers who voted for him. And they’ll accept it. Rush and FOX will convince them this is the right move because taxes are icky.

  74. 74
    Shygetz says:

    demimondian Says:

    Stock appreciation is income in the same way that any property appreciation is income, and any non-monetary compensation is income.
    You think it’s so simple, eh?

    Let’s consider the question of a retail store, then. I go out to my wholesaler, and buy 10 flats of 100 widgets each, at $137/widget. I take those widgets off the pallets, and move them into my stock room. I take fifteen of them, and put them on the shelf at an asking price of $274/widget.

    According to your logic, I just made $137,000.

    Sorry, no. Stock price is set directly by the market. If the market says that your stock is worth $10/share, and you refuse to sell at below $100/share, it doesn’t mean that your stock is worth $100/share. It is worth the market price of $10/share. If you buy your widgets at $137/widget and hold it until they are worth $274/widget (although why you used those numbers for a hypothetical argument is beyond me), then yes, you did increase your worth by $137 per widget you held. This is the same idea behind all valuation taxes, including sales tax; if you do all of your commerce by barter instead of money, you still must pay sales tax on the value of the purchased goods.

    Sorry for the late reply.

  75. 75
    Kimmitt says:

    would recommend limits in the popular tax deductions for mortgage interest and employer-provided health insurance.

    God is not this kind to me. Let the re-proletarization of the American middle class commence!

    This is just a ruse to shake down the National Association of Realtors.

    Ooh, good thought.

  76. 76
    Mr Furious says:

    John—do you quit driving your car on public streets when it’s paid off?

    If you mean John Cole, he doesn’t drive—at all!

  77. 77
    Jeff says:

    First of all, even if certain individuals do not want to reproduce, society as a whole wants people in general to reproduce. Otherwise, no “society” after a while, right? Someone has to raise the kids (kids which cultural survival demands), and either it’s going to the parents, privately contracted caregivers, or the state. Any way you slice it, it will cost money. Most people agree that primary responsibility for raising the kids should fall on the parents, and that parents will generally do a better job than strangers, all things being equal. Hence, government subsidies for a public good produced in what public consensus holds to be the optimal fashion. You may disagree with subsidies generally, but as they go, a child tax credit seems better than most– better than farm subsidies or friggin’ refinery subsidies, for sure.

    As to the original topic, dumping the mortgage interest deduction when a big chunk of our economy and personal wealth is riding housing like a whipped pony, and dumping the health care deduction at a time when health costs are spiralling, when a more Draconian bankruptcy code will soon be sticking it to broke people who have more bills than they can pay (including health bills), and when health insurance for most people is entirely dependent on their continued employment (so that unemployement represents at least a double whammy)– well, if I didn’t know better it would seem like some people in our government do not much care for those of us who work to earn a living. Who’d have thunk it?

  78. 78
    Lee says:

    I would not have a problem removing the interest deduction (I’m a homeowner) if it occurs at the same time as flat tax. Removing the deduction while under our current system is the worst scenario.

    I’m voting for this is a shake down of the National Assoc. Of Realtors.

  79. 79
    Kimmitt says:

    Man I hope the realtors don’t blink; they have to know that the Administration will not possibly follow through on this.

  80. 80
    demimondian says:

    Stock price is set directly by the market. If the market says that your stock is worth $10/share, and you refuse to sell at below $100/share, it doesn’t mean that your stock is worth $100/share. It is worth the market price of $10/share. If you buy your widgets at $137/widget and hold it until they are worth $274/widget (although why you used those numbers for a hypothetical argument is beyond me), then yes, you did increase your worth by $137 per widget you held. This is the same idea behind all valuation taxes, including sales tax; if you do all of your commerce by barter instead of money, you still must pay sales tax on the value of the purchased goods.

    $137/unit in n=1000 is the current volume price of a particular CPU today. $274 is 100% retail markup, which is fairly common. (And, no, it isn’t unreasonable — the cost of stock maintenance is quite high, particularly for sales at n=1.)

    Thus, for a $137 CPU, the market almost certainly will bear $274 at retail. How is retail stock different from corporate common stock? (Answer: historically, they aren’t.)

  81. 81
    Mr Furious says:

    Over at Kos, there’s a big thread on this topic. Wade into the triple digit comments if you like, but Kos pointed out this comment sub-thread that does an excellent job delving into the particulars.

    I don’t know if they’re right or not, but they certainly know more about it than me.

  82. 82

    les Says:

    John—do you quit driving your car on public streets when it’s paid off?

    I can’t wait to find out.

  83. 83
    Veeshir says:

    Okay, where the hell am I? I was trying to get to Balloon Juice but I must have mis-clicked. No flame war? C’mon people, there’re enough attempts to hijack the thread above and you people ignored them. Where’s ppGaz when you need him?

    I like the flat tax but I should read up on Boortz’ Fair Tax plan. He claims that prices would go down as corporations wouldn’t be paying taxes on income so even though everything sold would be taxed, it wouldn’t raise the price of the goods as the cost of making it would go down.

    I like the idea, absolute equality. It should make lefties happy too as the rich pay more in taxes as they spend more so they buy more so they pay more in taxes. Also, no more IRS, that’s interesting to say the least.
    I just don’t know if that’s how it would work.

  84. 84
    Kimmitt says:

    Um, any tax causes the price buyers pay on an item to go up. This is Econ 101 here. If you can find a way for the government to pay its bills without actually getting any money, then you’ll have solved the problem.

  85. 85
    les says:

    Mr. Furious, my question came from the statement in the post about hating to pay property tax on a car after it’s paid for. If there’s no driving going on, paying property tax on a car at any time would be a bite. But, paying for it would be even worse. You got me. I guess.

  86. 86
    Veeshir says:

    Kimmitt, if that was directed at me,
    Yes, adding taxes raises prices. But eliminating other taxes taxes should lower prices.
    According to Boortz, what happens is that the corporation no longer has to pay income tax.
    So in theory, the actual cost of making the goods goes down so the pre-tax cost is lower so the taxed cost is the same. Exept that now you’re getting your whole paycheck.

    It seems like smoke and mirrors to me, but he claims it’s so.

    So if you want to read up on the fair tax to bash it or defend it intelligently, click the link above. I figure it has a chance somewhere between nil and zero so I haven’t really looked all that closely at it. The people who would decide this seem to like the system the way it is.

  87. 87
    Veeshir says:

    a quote from a description linked from the above link.

    The extensive research behind HR 25, The FairTax Bill, shows that the average embedded taxes in every consumer product or service is about 22%. In some industries, such as leather goods, the embedded tax is smaller. In other industries, such as homebuilding and construction, the embedded tax is higher, but it averages out to somewhere between 22 and 23%. With the passage of The FairTax Bill, those embedded taxes disappear. These embedded taxes include the combined tax burdens of all entities involved in bringing those goods or services to market, and that includes you, the employee, and the taxes you incur as a result of your employment.

    We write in The FairTax Book that the competitive pressures of the marketplace will force prices down when embedded taxes disappear from the cost of retail goods and services, and we cite 22% as the average amount of those embedded taxes. Does this 22% include the income and payroll taxes that are paid by employees? Yes, it does. So … what does this mean to your paycheck after the FairTax becomes law?

    When the FairTax is implemented, and when business and personal income and payroll taxes disappear, your employer is going to have to make a decision. He will either take some or the entire amount he had been withholding for federal income and payroll taxes and add it to your weekly check, or he will readjust your pay figures so that your entire paycheck will be equal to what you used to call “take home pay” before the FairTax. The employer may also decide to do a little of both. Either way, you can see that the amount of money you actually receive as pay – the amount you can put into your bank account – will not decrease, and may actually increase.

  88. 88
    jg says:

    It should make lefties happy too as the rich pay more in taxes as they spend more so they buy more so they pay more in taxes.

    The rich aren’t hamstrung by high taxes so reducing taxes won’t open up their wallets and make them go on a buying spree. Killing their income tax with the idea that you’ll make up for it when they buy a yacht is idiotic.

  89. 89
    Lars Gruber says:

    Anyone in the middle class who actually wants a flat tax deserves what they get. A flat tax is advocated by the top 1% at the expense of the other 99% (America). We (librhuls) said in 2000 that any bush tax cut was only going to help the rich and would ultimately bite the middle class in the butt. Guess who will be paying back the lion’s share of the deficit. Get out your checkbooks all you hillbilly bush lovers!

    Now that our predictions have proven true, who do you think will benefit from the new bush tax proposals?

    In 2000, conservatives could have the excuse that they actually believed bush boy wouldn’t lie to them, but what excuse do they have now that bush is a proven and dangerous liar? Only an idiot would believe bush boy now.

    What’s your excuse?

    bok bok Chicken Hawk

  90. 90
    Kimmitt says:

    It seems like smoke and mirrors to me, but he claims it’s so.

    It’s smoke and mirrors; there are interfering effects, but there is no reason to believe that a tax on corporate profits and a tax on consumption would have precisely the same incentives and therefore precisely the same effects. Indeed, a tax on corporate profits does nothing to decrease the costs of making a good; what it does do is increase the effective cost of capital. That is, it’s a fairly closely targetted tax on shareholders, who skew disproportionately wealthy. He’s trying to shift a part of the tax burden from the wealthy (people who own lots of stock) to the less wealthy (people who spend more of their income on consumption). I teach this stuff for a living. He’s either extremely stupid, deliberately ignorant, or trying to pull the wool over your eyes. I think it’s option (3), and one really shouldn’t listen to people who use their background to try to fool people who don’t have the same background.

    To say it somewhat less politely, it is my considered opinion that Boortz is a lying sack of shit.

  91. 91
    Tim F says:

    The only revenue-neutral way to implement a flat tax would hose the shit out of the low and middle incomes without affecting the lives of upper incomes perceptibly. If you want a simple tax, super. I could write a workable progressive taxation scheme on one page.

    The problem is that congress has line-item control over our tax code and that they’re, well, congress. If I gave them line-item control over what I ate for dinner tonight I’d have seventeen courses, beginning with dessert and ending with motor oil from a powerful Senator’s district.

  92. 92
    Tim F says:

    I like the flat tax but I should read up on Boortz’ Fair Tax plan. He claims that prices would go down as corporations wouldn’t be paying taxes on income so even though everything sold would be taxed, it wouldn’t raise the price of the goods as the cost of making it would go down.

    There’s your problem. I could write a tax plan and claim that it evened out the Earth’s orbit and made farts smell like peppermint, and I could probably write it up complicated enough that you couldn’t figure out whether I was telling the truth. Find an independent expert whom you trust and see what they have to say about Boortz’s plan.

  93. 93

    […] Every now and then, some of you say something in the comments that just makes me laugh, and then makes me sad because it is so accurate. This is one of those comments, regarding the debate about the flat tax: […]

  94. 94
  95. 95
    Tim F says:

    exclamation pointe –> !!!

  96. 96
    Tim F says:

    I give up. Your software is eating my exclamation points and I am too far gone on the Yom Kippur wine to know what to do about it.

  97. 97
    joshua says:

    If I gave them line-item control over what I ate for dinner tonight I’d have seventeen courses, beginning with dessert and ending with motor oil from a powerful Senator’s district.

    Now that’s funny. Also, Boortz is among the many “I’m-not-a-Republican” Republican radio commentators that have totally lost their shit in the wake of the Iraq War lasting longer than a day and not turning up any WMDs who would have gotten funnier by the day if it wasn’t sad like watching an Alzheimer’s patient look for the keys to a car he sold twenty years ago. The point is, he’s full of shit, and although he (at least used to) admits that he might be lying to you so you should read up on anything he says on your own, he’s still a liar.

  98. 98
    joshua says:

    That last sentence was horrible and I apologize.

  99. 99
    Mr Furious says:

    Joshua:

    That last sentence was horrible and I apologize.

    It’s okay, we’re all still basking in the glow of Tim F’s wit….

  100. 100
    Bob says:

    Stephen Pizzo, who wrote the best book on the S & L scam, suggests the 1% solution. That is, roll back the tax cuts to the top one percent of taxpayers.

    It’s simple and it would bring in over a half trillion dollars. In fact, roll back all the fucking tax cuts.

  101. 101
    Anandakos says:

    Folks,

    Here’s an a version of the flat tax which would probably be close to fair and possible to implement. I don’t know exactly what percentage would be required to make the change “revenue neutral”; that would require investigation.

    1) Exempt the first $12,000 of income per taxpayer and dependent from taxation. (The actual number could vary around that figure and is subject to negotiation; it should be indexed to inflation).

    2) Remove any consideration for marriage from the tax code, either “penalty” or “subsidy”. Each person’s income would be taxed using the same formula as any other’s. If a family has children or aged dependents, allow the taxpayers to split the deductions as they choose.

    3) Beyond the exemption tax ALL income from whatever source equally at a rete which makes the net income from the system equal the statutorially required expenditures of the government: interest, entitlements, federal employee and military pay and retirement, revenue sharing, etc. This rate should be recomputed annually to ensure that the budget is balanced, but to prevent Congressional “runaway spending” and increase should be limited to in percentage increase in personal income.

    4) To ensure Social Security solvency remove the “cap” from the deductions; if we’re going to have a “flat tax”, it should be equitable in all ways; the government needs to retain some progressivity in its taxation.

    5) Add a significant carbon tax to fund the “discretionary” portion of the budget, especially public transportation works to reduce the national dependence on imported hydrocarbon fuels.

    Fire away!

  102. 102
    Anandakos says:

    Oh, I forgot my view on the estate/”death” tax.

    6) Exempt the first $5 million of an estate

    7) Tax the next $20 million at 25%.

    8) Tax the next $75 million at 50%

    9) Tax the next $900 million at 75%.

    10) Take the rest. This means that the maximum amount transferable from an estate would be $282,500,000.

    11) This money would not go into the general fund but rather an independently managed fund similar to the Alaska Permanent Fund which would dedicated to providing higher education to academically qualified and financially limited students. “Higher education” could certainly include vocational training. We need to invest more in education to improve our skills in the face of the challenge from Asia.

  103. 103
    David Rossie says:

    An argument for the largest group of taxpayers paying the largest share of taxes is that such a scheme would encourage political interest in greater government efficiency. If most of the burden is placed on a wealthy minority who have little political clout, what incentive is there for government to economize? Today the middle class does not have enough of a financial incentive to demand better use of tax revenue. A variable flat-tax, notwithstanding whatever other repercussions it may bring about, would encourage voters to demand a better organized government.

  104. 104
    Veeshir says:

    . Indeed, a tax on corporate profits does nothing to decrease the costs of making a good; what it does do is increase the effective cost of capital. That is, it’s a fairly closely targetted tax on shareholders, who skew disproportionately wealthy.

    You say you teach this stuff and yet you still wrote that sentence?
    First off, there would be no tax on corporate profits. There would only be sales tax.
    Second, if by that sentence you mean that taxing profits doesn’t add to the cost of making something, well, that’s just funny. Taxes are just another line on the debit side of the account page. Sales are on the credit side. If the debit side is higher, the credit side must be higher too.

    Corporations don’t pay taxes. They pass them on to the people buying their stuff. That’s elementary economics. So we’re paying the taxes already.

    For you people calling Boortz a liar and saying that the idea is stupid, have you read the link? Have you read anything except what I wrote here?

  105. 105
    Shygetz says:

    David Rossie–Oh my God, did you just say that the wealthiest 1% of Americans have little political clout? That had to be the funniest thing I have ever heard. Seriously, you should go on Letterman with an act like that.

    I’ll tell you what–I will strongly fight for your flat tax if (and only if) you will strongly fight for a 100% estate tax for all inheritances/gifts above $500K. I mean, if we’re going to be fair with taxation here, let’s make sure everyone starts out on a level playing field.

  106. 106
    Shygetz says:

    Veeshir–If you would read Kimmitt’s sentence carefully, you should be able to understand that he is right and you are wrong. In a for-profit corporation, a tax on corporate profits does NOT increase the cost of making a product. If it costs you $10/widget to bring your widgets to market, then regardless of the tax on corporate profits, it will cost you about $10/widget to bring your widget to market. What it does is increase the price you must charge to generate a certain percentage profit.

    The problem with a consumption tax is it does not tax labor or capital gains. As such, it allows the already wealthy to accumulate obscene amounts of wealth without taxation (this is all from the Americans for Fair Taxation website that Boortz recommends). This gives an even more unfair advantage to those who are already wealthy, as they can become more wealthy through manipulation of their superior capital than those just starting. As such, this system would only be fair if we instituted a strict 100% estate/gift tax with a very low cut-off, to prevent generational accumulation of wealth and the formation of an entrenched economic oligarchy.

  107. 107
    Veeshir says:

    What it does is increase the price you must charge to generate a certain percentage profit.
    It raises the cost of making something. Taxes are a debit, sales are a credit. Credits must exceed debits for a company to profit. You can argue semantics all you want, but the taxes a company pays are included in the price of everything you buy.

    As for this
    The problem with a consumption tax is it does not tax labor or capital gains. As such, it allows the already wealthy to accumulate obscene amounts of wealth without taxation

    Yeah, but the rich also spend obsene amounts of money on things, all of which would be taxed. They spend far more money than a poor person on luxury goods and a rich person can afford a tax attorney or CPA who could help him avoid the taxes he does owe. There is no such loophole if purchases are taxed.
    Or are you saying that the evil rich will put all that cash into a room ala Scrooge McDuck?

    I’m not trying to advocate it, but at least understand it.

  108. 108
    Kimmitt says:

    Corporations don’t pay taxes. They pass them on to the people buying their stuff. That’s elementary economics. So we’re paying the taxes already.

    I am sorry, but you clearly are not familiar with what what you are discussing here. If you go to:

    http://www.hawaii.edu/~kimmitt

    And go to the Chapter 6 slides, you will see a discussion of tax incidence.

    Now, when corporate profits are taxed, we have to ask ourselves: what, precisely, is being taxed? With a bit of thought (and a glance at the Circular Flow Diagram from the slides in Chapter 2), we come to the conclusion that since profits belong to shareholders, shareholders are the persons being taxed. Effectively, we are looking at the market for funds being saved; the demand for such funds is being shifted downward by the amount of the tax. Thus, those selling stock effectively receive less, while those buying the stock effectively pay more (due to the corporate profits). Since savings behavior tends to be highly inelastic, the savers end up paying most of the tax (as per the discussion of incidence in Chapter 6).

    That was fairly complicated, but the gist of it is this: Not all taxes are created equal. A tax on profits creates different incentives than a tax on inputs. In this case, the incentives generated by a tax on profits cause the vast majority of its effect to fall on wealthy households.

    I’m not trying to advocate it, but at least understand it.

    Seriously, I understand it completely. This is my field, and I’m telling you that you’re being lied to.

  109. 109
  110. 110
    David Rossie says:

    “As such, this system would only be fair if we instituted a strict 100% estate/gift tax with a very low cut-off, to prevent generational accumulation of wealth and the formation of an entrenched economic oligarchy.”

    Fair in a warped sense. Not fair if you believe that people are somewhat entitled to have a say about their property.

  111. 111
    Veeshir says:

    we come to the conclusion that since profits belong to shareholders, shareholders are the persons being taxed

    They pass the cost onto the buyers of their products. If you don’t agree with that statement then I guess we will have to just disagree. There’s absolutely nothing you can say that will make me change my mind on that. I understand that stockholders make money because of profits, but the cost of everything a corporation pays out in order to produce their product affects the cost of the product. If you lower taxes you lower costs so you can lower the price of your product.

  112. 112
    Kimmitt says:

    There’s absolutely nothing you can say that will make me change my mind on that.

    Okay, but understand: we are not agreeing to disagree. You are stridently holding that the sun rises in the west, that mice with parents whose tails are cut off will have no tails, and that maggots spontaneously generate from meat. There is science and fact, and there is your opinion, and they do not match.

    the cost of everything a corporation pays out in order to produce their product affects the cost of the product.

    Taxes on profits are not paid out to produce their products. I don’t know how much more simply I can say this. If one lowers taxes on profits, one does not make it any cheaper to produce the product.

  113. 113
    Nelson Muntz says:

    It’s got to be the right thing to do, I mean, yours is the party of fiscal responsibility.

    Ha Ha!

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