The GOP has better ideas on taxes but is anyone listening?

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Question: if the United States needs to raise more revenue from the federal personal-income tax, how should that revenue be raised? By hiking tax rates or by reducing tax deductions? Democrats prefer higher rates; Republicans prefer reduced deductions. Each side may have its own cynical motives. The Republicans happen to have better arguments.

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The biggest tax preference in the individual tax code is the treatment of employer-purchased health-care benefits ... This exclusion has thrust employers into the role of main buyers of health insurance.

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The exclusion costs the Treasury an estimated $130 billion a year, only a little less than the entire cost of the U.S. Navy. And because low-wage workers often receive no health coverage at all while high-wage workers receive ample benefits, elimination of the exclusion for people earning more than $250,000 would recoup a very big part of that $130 billion.

Another large tax preference is the home-mortgage-interest deduction. This preference is justified by the claim that it promotes homeownership. Yet Canada, which doesn’t have the preference, has roughly the same home­ownership rate as the United States: a little over 60 percent.

Rather than put more people into homes, the deduction puts the same number of people into more home: before the Great Recession hit, new homes in the United States averaged 2,300 square feet; new homes in Canada, 1,800 square feet.

That’s bad economics: Americans end up borrowing more to buy houses and then cutting back on other forms of saving to make up for it.

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The deduction has already been trimmed over the past generation. Americans can claim a deduction only on their principal residence and only on a mortgage of up to $1 million. Time to reduce that cap again.

Finally, there’s the deduction of state and local taxes against federal income tax. That costs $80 billion a year, or about the same as the federal Department of Education.

Why doesn’t it trigger a revolution when California raises its state income tax past 10 percent? Or when suburban communities around New York City hike property taxes to an astonishing 8 percent of median local annual income? The short answer: the people who pay the most local taxes also receive the biggest relief on their federal taxes. Ironically, as federal tax rates rise to 40 percent, the highest earners will receive an even bigger subsidy on their local taxes.

By cushioning the shock of local taxes, federal policy induces local governments to spend irresponsibly.

http://www.thedailybeast.com/newsweek/2012/12/09/david-frum-the-gop-s-strong-arguments-in-the-income-tax-battle.html

Edited December 10, 2012 by ^_^

[Mr. Big Dog 10,747]

I'm all for lower rates and fewer deductions. I am also all for treating all income as income for tax purposes. We could bring income tax rates down quite a bit if we were to treat dividends and capital gains as income. Odd that Frum didn't mention this key component of Simpson-Bowles seeing that this is where a lot of the revenue to offset the lower rates actually comes from in their proposal.

Edited December 10, 2012 by Mr. Big Dog

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I'm all for lower rates and fewer deductions. I am also all for treating all income as income for tax purposes. We could bring income tax rates down quite a bit if we were to treat dividends and capital gains as income. Odd that Frum didn't mention this key component of Simpson-Bowles seeing that this is where a lot of the revenue to offset the lower rates actually comes from in their proposal.

maybe you havent been keeping up but im pretty sure thats the communism

[Mr. Big Dog 10,747]

[quote name=' timestamp='1355170703' post='5864440]maybe you havent been keeping up but im pretty sure thats the communism

I see. Alan Simpson and Erskine Bowles are communists now? Okay.

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I see. Alan Simpson and Erskine Bowles are communists now? Okay.

srsly, keep up. geez.

[Mr. Big Dog 10,747]

[quote name=' timestamp='1355171621' post='5864472]

srsly, keep up. geez.

Keep up with what? With right wing nuttery?

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Keep up with what? With right wing nuttery?

with the ever-changing definitions of what is and what isn't the communism.

the communism is something to be avoided at all costs.

if you don't even know what is or isn't the communism how will you avoid it?

i can't believe they let you vote.

[JohnR! 5,495]

[quote name=' timestamp='1355165333' post='5864268]

Another large tax preference is the home-mortgage-interest deduction. This preference is justified by the claim that it promotes homeownership. Yet Canada, which doesn’t have the preference, has roughly the same home­ownership rate as the United States: a little over 60 percent.

But... but... but... Aren't the Canadians socialist? How can they be better off than us?!?!?!!?!?!?

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But... but... but... Aren't the Canadians socialist? How can they be better off than us?!?!?!!?!?!?

they're not better off. they live in smaller homes. it's terrible. instead of little billy having a bedroom and two gamerooms, he has to make do with a bedroom and sharing the basement with his sister little shaniqua.

[JohnR! 5,495]

[quote name=' timestamp='1355172037' post='5864481]

with the ever-changing definitions of what is and what isn't the communism.

the communism is something to be avoided at all costs.

if you don't even know what is or isn't the communism how will you avoid it?

i can't believe they let you vote.

How can the communism change its definition? And if it can, can the capitalism and the fascism do the same? Isn't that one of the effects of the shift in the Earth's magnetic field?

[Mr. Big Dog 10,747]

[quote name=' timestamp='1355172037' post='5864481]with the ever-changing definitions of what is and what isn't the communism.

the communism is something to be avoided at all costs.

if you don't even know what is or isn't the communism how will you avoid it?

i can't believe they let you vote.

Funny thing is that unlike most people that voted in November, I've actually seen the communism up close and personal. No, it's not pretty. I'm happy to report, however, that I haven't spotted the communism around these parts yet. We're good.

[^_^ 5,021]

How can the communism change its definition? And if it can, can the capitalism and the fascism do the same?

Change is constant. I guess you've never read chicken soup for the soul by ayn rand. You should check it out.

Funny thing is that unlike most people that voted in November, I've actually seen the communism up close and personal. No, it's not pretty. I'm happy to report, however, that I haven't spotted the communism around these parts yet. We're good.

if you ask me, i think you might be a sleeper cell.

[Mr. Big Dog 10,747]

[quote name=' timestamp='1355172186' post='5864486]

shaniqua.

Gesundheit.

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Gesundheit.

dont be a racist.

[Mr. Big Dog 10,747]

[quote name=' timestamp='1355172289' post='5864493]

if you ask me, i think you might be a sleeper cell.