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Taxes and fiscal cliff

Races for the Senate, U.S. House, etc. and other issues of national importance.

Taxes and fiscal cliff

Postby Huckleby » Thu Nov 08, 2012 12:28 pm

Romney offered one damn good idea during the campaign - close loopholes in tax code by simply capping the total that anybody can claim in deductions.

I think Obama should give-up on pledge to raise tax rates on the wealthy, and instead get the money through the republican plan. It does the same job without "raising taxes", most of the money will come from rich. I see a good bargain in site.

I got thinking about this some more when liberal economist Jared Bernstein, who works with Biden, hinted that administration might be open to idea of deduction cap:
http://video.cnbc.com/gallery/?video=3000127958&play=1
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Re: Taxes and fiscal cliff

Postby HawkHead » Thu Nov 08, 2012 2:02 pm

Huckleby wrote:Romney offered one damn good idea during the campaign - close loopholes in tax code by simply capping the total that anybody can claim in deductions.

I think Obama should give-up on pledge to raise tax rates on the wealthy, and instead get the money through the republican plan. It does the same job without "raising taxes", most of the money will come from rich. I see a good bargain in site.

I got thinking about this some more when liberal economist Jared Bernstein, who works with Biden, hinted that administration might be open to idea of deduction cap:
http://video.cnbc.com/gallery/?video=3000127958&play=1


This won't make that big of a difference.

I just recieved our latest Kiplinger Tax Letter and here is what the most reccent study shows.

Remove All Itemized Deuctions, No preferential tax rates on Cap Gains and Dividens, AMT Repealed.

With all of the above you get to cut tax rates 1 to 1.5%. That's all.

If you want to tackle the fiscal cliff you need to increase tax rates, decrease spending and improve the economy.

The real winner above is improving the economy. Better economy means more personal income means more taxes collect. Better economy means more personal income means less people on Welfare, Food Stamps, Unemployment etc....
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Re: Taxes and fiscal cliff

Postby Huckleby » Thu Nov 08, 2012 2:40 pm

HawkHead wrote:This won't make that big of a difference.

I just recieved our latest Kiplinger Tax Letter and here is what the most reccent study shows.

Remove All Itemized Deuctions, No preferential tax rates on Cap Gains and Dividens, AMT Repealed.

With all of the above you get to cut tax rates 1 to 1.5%. That's all.


I don't know enough about taxes to sort this out. But I heard in one discussion that there is about $1 trillion per year lost to the treasury on "tax expenditures", which is easily a difference maker.

I accept that your information as being right, but there must be more to the story to explain the discrepency. Probably there is some broader definition of 'loopholes and deductions".

HawkHead wrote:If you want to tackle the fiscal cliff you need to increase tax rates, decrease spending and improve the economy.

The real winner above is improving the economy. Better economy means more personal income means more taxes collect. Better economy means more personal income means less people on Welfare, Food Stamps, Unemployment etc....

I agree that growth is everything. All economic philosophies agree that the key to fighting deficits is to get the economy moving.

You say tax rate increases are needed, but the Dem proposal to just raise rates on millionaires+ . That is just politics, it doesn't do nearly enough.
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Re: Taxes and fiscal cliff

Postby Huckleby » Thu Nov 08, 2012 3:06 pm

Image

http://www.taxpolicycenter.org/briefing ... evenue.cfm
in 2010, the feds collected $2.2 trillion in revenue. So that means they are collecting about a trillion in income taxes.

http://www.taxpolicycenter.org/briefing ... argest.cfm
The tax expenditures from 2008 itemized here add up to $650 billion.

So eliminating ALL tax expenditures on income taxes would be equivalent of asking people to pay about 65% more in taxes!

Clearly there is room to get equivalent of a 10% tax increase by squeezing down tax expenditures.
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Re: Taxes and fiscal cliff

Postby Henry Vilas » Thu Nov 08, 2012 3:14 pm

Cutting taxes during wartime (I'm looking at you, GWB) was unprecedented. Less revenue while we were (and still are) spending trillions on wars is just plain unpatriotic. Most of the tax cuts were for super wealthy individuals and large, profitable corporations. That must be reversed.
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Re: Taxes and fiscal cliff

Postby HawkHead » Thu Nov 08, 2012 3:34 pm

Huckleby wrote:Image

http://www.taxpolicycenter.org/briefing ... evenue.cfm
in 2010, the feds collected $2.2 trillion in revenue. So that means they are collecting about a trillion in income taxes.

http://www.taxpolicycenter.org/briefing ... argest.cfm
The tax expenditures from 2008 itemized here add up to $650 billion.
So eliminating ALL tax expenditures on income taxes would be equivalent of asking people to pay about 65% more in taxes!

Clearly there is room to get equivalent of a 10% tax increase by squeezing down tax expenditures.


You are looking at apples and oranges.

*Employer Contributions For Medical Costs - $131B Not an Itemized Deduction
*Exclusion of Pension Contributions - $117B Not an Itemized Deduction
*Accelerated Depreciation - $56B Not an Itemized Deduction
*Deduction of State and Local Taxes - $49B High Income People in AMT get no deduction for State and Local Taxes Paid, this hits middle income earners

So 3 out of the top 4 on that list don't have anything to do with itemized deuctions or personal tax rate.
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Re: Taxes and fiscal cliff

Postby Huckleby » Thu Nov 08, 2012 6:40 pm

HawkHead wrote:You are looking at apples and oranges.

*Employer Contributions For Medical Costs - $131B Not an Itemized Deduction
*Exclusion of Pension Contributions - $117B Not an Itemized Deduction
*Accelerated Depreciation - $56B Not an Itemized Deduction
*Deduction of State and Local Taxes - $49B High Income People in AMT get no deduction for State and Local Taxes Paid, this hits middle income earners

So 3 out of the top 4 on that list don't have anything to do with itemized deuctions or personal tax rate.


ya, your point is valid. The "cap" that was proposed is only on tax expenditures in the form of deductions.

Taxes are endlessly complicated.

One confusion is that Romney proposed cutting taxes 20% across the board and making up difference by closing deductions. That is absurd idea and very different from the current proposition: making progress on the deficit while keeping Bush Tax Cuts in place across the board. That goal may be realizable by a deduction cap, or at least that's what some pundits are suggesting.

All tax expenditures have same effect as deductions. I'm not sure if all tax expenditures are on table for compromise.

IF a deduction cap does in fact work mathmatically, it's a solution of beauty. It allows a face-saving way for Republicans to compromise on revenues weighted towards the rich. It greatly devalues deductions, and is a significant blow to the corrupt lobbying culture. It's easy to do politically because it doesn't target any individual groups. And keeping upper tax rates down is good for some small businesses.
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Re: Taxes and fiscal cliff

Postby pjbogart » Thu Nov 08, 2012 10:24 pm

Forgive the humorous tone of this all-too-serious analysis of the fiscal cliff fight, but Glenn Greenwald pretty much nails it here.

STEP SIX: Once the deal is enacted with bipartisan support and Obama signs it in a ceremony, standing in front of his new Treasury Secretary, the supreme corporatist Erskine Bowles, where he touts the virtues of bipartisanship and making "tough choices", any progressives still complaining will be told that it is time to move on. Any who do not will be constantly reminded that there is an Extremely Important Election coming – the 2014 midterm – where it will be Absolutely Vital that Democrats hold onto the Senate and that they take over the House. Any progressive, still infuriated by cuts to social security and Medicare, who still refuses to get meekly in line behind the Party will be told that they are jeopardizing the Party's chances for winning that Vital Election and – as a result of their opposition - are helping Mitch McConnell take over control of the Senate and John Boehner retain control of the House.
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Re: Taxes and fiscal cliff

Postby Stella_Guru » Fri Nov 09, 2012 8:21 am

pjbogart wrote:Forgive the humorous tone of this all-too-serious analysis of the fiscal cliff fight, but Glenn Greenwald pretty much nails it here.

STEP SIX: Once the deal is enacted with bipartisan support and Obama signs it in a ceremony, standing in front of his new Treasury Secretary, the supreme corporatist Erskine Bowles, where he touts the virtues of bipartisanship and making "tough choices", any progressives still complaining will be told that it is time to move on. Any who do not will be constantly reminded that there is an Extremely Important Election coming – the 2014 midterm – where it will be Absolutely Vital that Democrats hold onto the Senate and that they take over the House. Any progressive, still infuriated by cuts to social security and Medicare, who still refuses to get meekly in line behind the Party will be told that they are jeopardizing the Party's chances for winning that Vital Election and – as a result of their opposition - are helping Mitch McConnell take over control of the Senate and John Boehner retain control of the House.

The price of all the private money in our political system is coming due early. A raft of business friendly legislation along with an attack to start the austerity drive is in cue.
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Re: Taxes and fiscal cliff

Postby DCB » Fri Nov 09, 2012 1:47 pm

And of course, if the progressives do go along with it, the 'tough choices' will hit the poor, the elderly, the minorities and women the hardest - aka, the alleged 'base' of the Democratic party. And likely bring on another recession, which everyone will correctly blame on the Democrats. Which will hand control of Congress over to McConnel and Boehner.

Meanwhile, the Very Serious People are saying nonsense like this:
Peter Orzag wrote:So the most promising approach may be to compromise on Social Security -- even though it is not a significant driver of our long-term deficits.


I thought one of the big lessons of the election was 'math works'.
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Re: Taxes and fiscal cliff

Postby Henry Vilas » Fri Nov 09, 2012 2:17 pm

Conservatives complain that a small raise in the federal income tax on amounts earned above $250,000 will hinder small business growth. I ask how? If the small business owner wants his/her company to expand, I doubt if they would take much more than a quarter million in profits out of that business for personal income. Instead they would reinvest those profits in the business so it can grow.

Am I missing something here?
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Re: Taxes and fiscal cliff

Postby Huckleby » Fri Nov 09, 2012 2:20 pm

I spoke to my brother last night, who unlike me knows something about how the tax system works. He says that deductions for the very rich are already capped in the tax code. Who knew? His thought is that the only way to make a dent in the deficit through tax reform is to raise capital gains rates and change the way dividend income is treated.

My brother works in a role similar to Mitt Romney's Bain Capital years. He is a fiscal conservative and economics guy. Raising capital gains rates is not exactly in his personal interest, so if he says that the capital gains are out of whack, he would know.

It may be that our system of politically-charged tax expenditures is unreformable. Maybe we will have to have a VAT tax added someday to address the deficit.
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Re: Taxes and fiscal cliff

Postby Huckleby » Fri Nov 09, 2012 2:29 pm

Henry Vilas wrote:Conservatives complain that a small raise in the federal income tax on amounts earned above $250,000 will hinder small business growth. I ask how? If the small business owner wants his/her company to expand, I doubt if they would take much more than a quarter million in profits out of that business for personal income. Instead they would reinvest those profits in the business so it can grow.


I agree with the way you think about it. I think there may be an explanation, perhaps profits have to be taxed BEFORE decisions can be made on re-investment? I too would like to hear an explanation.
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Re: Taxes and fiscal cliff

Postby Donald » Fri Nov 09, 2012 3:35 pm

I'm not afraid of the fiscal cliff. I'd love to see the rich get wiped out. If the Republicans want to play chicken, I'd just let them. One or two days of the stock market crashing would affect the hedge fund managers and super wealthy far more than a simple 3 percent increase in taxes. Go over that cliff for a week and we could wipe the rich out completely. If we're all going down, we might as well take the rich out.
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Re: Taxes and fiscal cliff

Postby HawkHead » Fri Nov 09, 2012 5:03 pm

Donald wrote:I'm not afraid of the fiscal cliff. I'd love to see the rich get wiped out. If the Republicans want to play chicken, I'd just let them. One or two days of the stock market crashing would affect the hedge fund managers and super wealthy far more than a simple 3 percent increase in taxes. Go over that cliff for a week and we could wipe the rich out completely. If we're all going down, we might as well take the rich out.


That is an interesting idea. I bet after day 3 the willingness to come up with a "real" solution would increase dramatically.
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