Word is that the Republicans have flown the coop on Joe Biden's debt confab, and that they are now "demanding" to meet with the President on the subject. While highlighting the President's distance from the process is helpful, the Republicans are playing this wrong. Don't "demand" anything. Wait them out. Make the President "demand" a meeting with you. Remember--he's got more to lose than you do.
Everything seems to revolve around Republicans' stand on taxes--that is, no tax increase will make it through the House, so don't even consider one. Here are two tax increases I'm willing to support:
1. The "Super-rich" tax. This would be 3% surcharge on all income--or capital gains--realized over the amount of $10M in any one year. Several facets of this tax appeal to me. The first is that it treats capital gains like income, which i believe it ought to be in the regular tax code. Secondly, my Spidey senses tell me that it will disproportionately impact liberals and Democrats, or at least those who are so rich that they have the luxury and time to "care" about issues like social justice, poverty, the environment, and public eduction without ever giving a crap about the consequences of their largess.
2. The creation of a "1% bracket". What does that mean? It means that the very first thing one would do on a tax return is figure out what 1% of one's taxable income is. That figure would then be THE FLOOR. Everyone earning a wage would AT LEAST pay 1% of their income to the continuing operations of a government from which they draw continuing succor and from which they continue to demand an increasing flow of benefits.
VP Biden had this bit of fatuity for our listening pleasure:
“The only way to make sure we begin to live within our means is by coming together behind a balanced approach that finds real savings across the budget — including domestic spending, defense spending, mandatory spending, and loopholes in the tax code,” Biden said in a statement. “We all need to make sacrifices, and that includes the most fortunate among us.”
All of us, Mr. Vice President? All of us? Then stop weeding out "the middle class" from consideration. Stop fencing off the elderly. If there truly is to be shared sacrifice then LET IT BE SHARED. This notion that we can get what we need by simply soaking the rich is loony.
Friday, June 24, 2011
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11 comments:
Don't taxes on capital gains punish those who are wisely investing money? Sure the rich can pay it but does that make it right... taking from private sector to the public sector doesn't guarantee its wise use.
Great question.
Let's start with one fundamental truth. Taxes are painful to pay, whether they are on "earned" income or on capital gains. Fundamentally, taxation is government sponsored confiscation.
So in my view--ALL taxes are punishing. the question then, is to what degree do we wish as a society to punish hard, honest work, vs the questions of how to punish wise investing. Doesn't strike me as a great choice--in both cases, punishing something good and wholesome (work, saving).
But that's what our system depends upon. A citizenry which agrees to confiscation of its property in order that certain fundamental services are provided. In my view--there should not be a distinction between the tax rate applied to one's income or the tax rate applied to one's investments and saving.
So--what I would advocate are fewer, lower, and more simplified tax brackets in which ALL income--active or passive--is treated the same.
Additionally, I would get rid of the home mortgage deduction, which I believe to be the primary, "root cause" of much of our economic woe--creating a class of investment (real estate) so incredibly favored by tax law that an irrational amount of individual investment dollars flowed into that class.
Also, what about corporate income taxes? They are just hidden taxes on everyone are they not? Could one fairly describe them as a clandestine way for government to skim money while raising costs across the board for everyone. And the fact is corporations don't pay tax, they just raise prices. The end user pays at the register, where co-incidentally more tax is paid.
Our corporate tax rate is one of the highest in the world. Do you think that helps us compete globally? Do you think that helps our productivity or job creation? Of course not, so why do we do it?
fairtax.org
I'm always baffled when people who don't own a home and therefore don't carry a mortgage, advocate eliminating the mortgage tax deduction. That must be a very easy position to take.
I fail to see the logic in this proposal. Taxing mortgage interest will NOT change behavior in Washington. It will simply give the Congress access to additional funds that they will spend on social programs. This was proven when just about every interest deduction was eliminated years ago - the debt wasn't reduced. The only outcome from that was that Congress had additional revenue to spend. Those who advocate for this new tax seem to be very similar to those who advocate taxing the "rich". It is an us against them mentality. You don't have a mortgage and you feel like your being screwed - so, get the government involved to extract some money from the people who have an unfair advantage.
Additionally, through the law of unintended consequences, eliminating the tax deduction on mortgage interest will CRUSH home ownership and drive many otherwise faithful mortgage holders into defaulting on homes that now have no redeeming value. If you think that home values are low and that mortgage defaults are high...wait until the government removes the ONLY benefit of home ownership.
Stop advocating this other form of class warfare. There are FAR more regular people who own homes that would be damaged by this tax law change than any benefit that would be derived from taxing the investment dollars.
Your Spidey sense is right on the nose as far as the super rich goes. In "Richistan: A Journey Through the American Wealth Boom and the Lives of the New Rich" the author points out that the uberwealthy are more Democrat than Republican and willing to spend millions to get liberals elected.
But may I also add another tax suggestion? Ignoring your idea for the super rich and just considering the tax rates as they now are; how about taxing all public employee pensions (local, state, federal) at the same rate as the highest bracket imposed upon "the rich". Tax the entirety of a teacher's or federal retirees pension at the 35% rate
Anonymous, I'm always baffled when those who make comments put words or thoughts into my mouth or brain.
My desire to end the mortgage interest deduction has little to do with changing behavior in Washington--it has everything to do with changing behavior everywhere else. Your attempt at justification for your point makes my point perfectly. Far too many people have far too much of their wealth tied up in one asset--their homes. They see it as a retirement plan and an ATM. It is neither. It is shelter. The extent to which investments in personal real estate are privileged under the law is the extent to which we grow even more dependent upon artificially propping up real estate values--setting the state for future bubbles. We learn nothing.
I have no interest in home ownership, for me or anyone else. You seem to be convinced that high rates of home ownership are important, or critical. I believe they are neither. In fact, lower home-ownership rates and more diverse investment portfolios would be far better for the long-term solvency of the country. The disaster you foretell did not happen in Great Britain when they eliminated their subsidy, as they did it over ten years and folks had a chance to react.
This isn't "us against them". I don't have a mortgage, but I have had three of them. I understand the benefits and the costs, and I believe for society, we have way overprivileged real estate.
Sad to say CW, but if you wish to impact behavior through punitive taxation, you may in fact be an emerging liberal.
Simply because you don't have interest in home ownership doesn't mean that the concept of ownership is rotten. One might also question whether your motivation to tax mortgage interest would be so vigorous if your current shelter situation were not as it is. You have owned three homes and presumably taken full advantage of the tax break afforded to those who own real property. You don't have a mortgage now, because you found a woman who owns her large and growing home outright. Good for you. (Sounds a little like John Kerry) It's not like your sole residence is a one-bedroom studio over some guy's garage. You live in a house, and through good/bad fortune or planning, it is paid for. Would you own a home if your romantic situation was not as it is? Would you forego the interest deduction on your taxes so that the government could put your money to good use on a welfare program or "the arts"?
Do you lease the big cat? Do you think that leasing is a better monetary decision than buying?
Why would renting be a better choice for this society than owning with a 4% mortgage? I see no rational justification for paying someone else for 30+ years the same amount of money that I pay for a mortgage, and having nothing to show for it. If that is the society that you advocate, then I plan to be one of the guys who own the houses. Sounds like a feudal society, but if you insist on forcing it on me, I'm going to be the one owning the land (and I have a sneaky suspicion that you would be an owner as well).
In addition, those EXACT people that you wish to punish with this tax are the ones with the means to buy multiple properties and become the land-owning class in your new society. They will have greater power, despite whatever taxes you choose to impose on them - they will simply pass the cost on to those who took your advice and decided that renting would be a better choice.
Eliminating the deduction in 1 year or 10 years will be disastrous for many reasons:
1. Roughly 75MM people own homes in the US. Over 28% of those are currently under water on their mortgages. Eliminating the interest deduction would immediately impose a multi-thousand dollar tax increase on most of those 75MM owners. Many would not have the means to come up with that money and I posit that this one tax alone would drive most of that 28% to abandon their mortgages along with a significant number of those who weren't underwater but without significant equity. Who will be left to buy those homes or salvage those banks left holding worthless notes (it won't be Joe six-pack the little guy - it will be the real estate investors)? What about the resulting drop in home values?
2. Mass exodus from home ownership will concentrate the land holdings in ever smaller number of hands, while driving up the demand for and cost of rental property.
3. Taxing interest income without first reigning in spending habits would be giving Congress free money with which to spend on frivolous social programs. This is the monetary equivalent of increasing the credit card limits on a family who is already burdened with $100K in credit card debt.
4. Comparing the US to Great Britain is a non-starter for me. If I wanted Great Britain taxes, I'd be getting free healthcare. You really can't use a socialist system to justify increasing taxation in the US and still hope to maintain your Conservative moniker.
I suggest that you may have lost focus on the target. Why would a Conservative NOT focus on changing spending behavior in Washington? Before finding ways to provide Congress with more access to steal from our citizens, we should focus on reigning in their voracious appetite for spending other people's money.
CW - I'm a big fan. Just not sure this plan is grounded in conservative values or in sound fiscal policy.
Anonymous--thanks for a well put together string of thoughts. Obviously, you either know me personally or have formed a fairly coherent view of my life from the trail left on this blog--so you know enough to make some reasonable--though incorrect assertions.
And if you know me, you're probably aware of my tendency to see the world, "...all about me..." Guilty, most of the time. Though I think not here. I'll take your comments as they were presented.
"Simply because you don't have interest in home ownership doesn't mean that the concept of ownership is rotten." Who said that? Did I say that? I'm not sure I did. In fact, I'm positive I didn't. Do too many people own homes? Yes. Did the "ownership societey", easy money, lax mortgage standards and a perfect storm of policy on both sides of the aisle create a situation in which a ton of people bought homes who never should have been lent money in the first place? You betchya. Did you not live through the last 3.5 years? Are you unaware of the nearly disastrous systemic failure of our economy that almost occurred, driven largely by the residential real estate market--propped up as it is by the notion of a tax advantage which incents people to buy who would be better off saving money elsewhere? No--this isn't an "all about me" situation--though if you were to accuse me of that prior to the melt-down--you might have been on more solid ground. I felt about it this way then, and I feel about it this way now--with considerable evidence supporting my assertions.
"You live in a house, and through good/bad fortune or planning, it is paid for." It is not paid for. We have an annual payment to the Kitten's mother that amounts to a fair approximation of a mortgage payment for the assessed value of the property--but it is not a mortgage and we derive no tax benefit therefrom. Perhaps this adds fuel to your fire, that my animus to the home mortgage deduction is driven by entirely (or mostly) personal reasons--but I defer to my previous answer on that one. It's a matter of the systemic reliance on one class of investment that bothers me.
More to follow.
"Would you own a home if your romantic situation was not as it is? Would you forego the interest deduction on your taxes so that the government could put your money to good use on a welfare program or "the arts"?" I might, and I might not. I don't know. Depends on what I could afford, my cash flow situation, where I would want to live, and how long I'd want to live there. The "opportunity" to build equity in a house would be a primary driver though--although we've all seen how that is--like any other investment--a risk (which means I would weigh such a risk against the balance of my portfolio to determine whether it was a good one). Would I forego the deduction? No, I would not. Just as I do not forego my VA compensation, which I believe to be excessive. I would not however, complain if it were decreased.
"Do you lease the big cat? Do you think that leasing is a better monetary decision than buying?"
I do not lease it, but that is ONLY because I drive 36000 miles a year and I found the lease deals for that kind of mileage were ridiculous. All things considered, I would have preferred to lease. Building equity in a depreciating asset is not a path to wealth.
"Roughly 75MM people own homes in the US. Over 28% of those are currently under water on their mortgages. Eliminating the interest deduction would immediately impose a multi-thousand dollar tax increase on most of those 75MM owners." So what if they are under water? Investments go down all the time, and all we do is bitch about it, we don't seek gubment assistance to overcome it. Oh yeah--sorry, we want it for mortgages because we are so incredibly overinvested in them--sorry, I forgot about that--having not mentioned it in only five or six paragraphs, I seem to have forgotten. Being underwater is only an issue 1) if you want to move or 2) if you are without character and feel no problem in walking away from a mortgage. Risk is a part of any investment. As for the "immediate" impact of "eliminating" the deduction--you either have missed, haven't read, or have chosen to ignore my suggestion that it be phased in over ten years.
"Mass exodus from home ownership will concentrate the land holdings in ever smaller number of hands, while driving up the demand for and cost of rental property." First you assume there would be a "mass exodus". I don't see that. People would still see an equity investment that would be attractive to them. Marginal buyers would not, and they would rent. Would there be an increase in the demand and price of rental properties? Why yes. What's wrong with that? Additionally, for the good of the economy, people would be more likely to diversify their investments, if they weren't so heavily leveraged in real estate.
"Taxing interest income without first reigning in spending habits would be giving Congress free money with which to spend on frivolous social programs. This is the monetary equivalent of increasing the credit card limits on a family who is already burdened with $100K in credit card debt." They should be tied to each other.
"Comparing the US to Great Britain is a non-starter for me. If I wanted Great Britain taxes, I'd be getting free healthcare. You really can't use a socialist system to justify increasing taxation in the US and still hope to maintain your Conservative moniker." Wow, that one hurt. Um, just because Great Britain has national healthcare does not mean they do everything wrong. To suggest otherwise perhaps disqualifies you as a reader of a blog written at this level (sorry, that was defensive and mean.)
"Why would a Conservative NOT focus on changing spending behavior in Washington? Before finding ways to provide Congress with more access to steal from our citizens, we should focus on reigning in their voracious appetite for spending other people's money." Because I advocate ONE revenue side policy, I am not concentrating on spending? I don't get that--not at all. I'm actually more interested here not in the revenue/spending equation but in trying to use sound policy to ensure that our SYSTEM isn't rocked by another real estate driven bubble, propped up by the perception of the soundness of a class of investments driven by the twin evils of tax preference and government intervention in the markets (Fannie, Freddie). Who is the Conservative here, friend? The guy who is advocating the government thumb on the shelter market scale, or the guy who wants to remove it?
"Mass exodus from home ownership will concentrate the land holdings in ever smaller number of hands, while driving up the demand for and cost of rental property."
Future generations will be less interested in owning their homes because they will see how much good that did for their underwater parents and grandparents. We'll all end up being landlords because selling our homes will be near impossible.
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