Taxes, the Deficit/Debt, and the Fiscal Cliff

[pawnman]

I find it hilarious the democrats aren't willing to just compromise by closing loopholes, which will generate more tax revenue, and insist on raising the tax rates.

The top rate now is 35%, and we're collecting, what, 13%? (Off the top of my head). The GOP answer was "Well, let's collect the 35%". The Democrats' answer was "Let's raise the rate to 39%, then we can actually collect 17%".

What you're quoting I'm assuming is a campaign promise from Obama. So you have to consider what he actually wants to achieve, not just what is possible if nothing gets done. He's advocating leaving rates the same as they are now for those making less than $250K, so if he achieves what he desires, the campaign promise will be fulfilled. The President also basically caved in 2010 and extended the current rates for all earners in order to maintain that campaign pledge since he couldn't secure his desired increase for top earners without letting them all expire. I doubt that will happen again since the political situation is much different, but even if you look to the past 4 years that promise from 2008 has been kept.

There are very, very few people, especially on Capitol Hill, who want to let the Bush tax cuts expire on all earners for any length of time. Some advocate for "going over the cliff" for a week or two so then everyone can vote for "tax cuts" to basically restore the rates we've had for the last decade but that's more of a parlor trick than actually wanting to see higher rates.

Sooo...do you really expect that nothing will get done and all parties will just agree to disagree, sending your rates back up for an extended period of time? I think that is actually the least likely option, but in that case pretty much every politician in Washington will have broken a campaign promise.

Well, we haven't had an actual budget in four years. Call me crazy, but I don't have a whole lot of faith that congress will finally do something that's even MORE difficult than passing a normal budget, with about three weeks left before they break session for the year.

[herkbier]

A national sales tax with a progressive scale. More expensive/luxury items would be taxed at a higher rate than "necessity" items. I know this wold be a hard sell at first, but it seems to me the most fair way to tax. The more you spend, the more you pay. I agree asocial safety net is a good thing, but the size and scope of the current net is getting to be ridiculous, we have a program to give every family a cell phone.. What's next, an Xbox? A car? A cellphone with a data plan..?

[pawnman]

What fucking loopholes? Name them. Or link me to a list of these loopholes (and how much we'll save by closing them). Everyone just says "OMG LOOPHOLES" and the conversation stops there because it's just so obvious that if we close these unnamed loopholes, rainbows and candy will come from the sky. I'm not saying this to be a dick, I just have this nagging feeling that people who say "close loopholes" have no fucking clue what actual loopholes they want to close, or what the effect on revenue will be.

As far as defense cuts goes, well, as a citizen, I really do think the DoD needs to be taken down a peg or two, because, again as a private citizen, it seems like the service chiefs aren't taking the cut (nor Congress' order to say what they will cut) very seriously. A lot of vague sentiments about how the pits of hell will open up and swallow us all if the DoD is cut, but few, if any specifics. It's not that I actually want to see military capability take a hit at all, but the way we play politics with our military-industrial complex is fundamentally broken and I think the Pentagon really needs (and deserves to experience) a nice "come to jesus moment".

As a servicemember, I hope that the DoD grows by 25% every year, and that we raid Medicare and the discretionary budget to fund it. Also, a 10% tax cut. Also, a 10% pay raise. And more OCONUS bases that are not in the desert.

https://articles.latimes.com/2011/nov/09/nation/la-na-super-committee-20111109

The GOP plan would essentially swap lower tax rates — ending the long-running debate over the expiring President George W. Bush-era tax breaks — for new limits on itemized tax deductions used primarily by wealthier households, such as the mortgage interest deduction on second homes.

Republicans estimate that closing or limiting such itemized deductions would generate $250 billion in new tax revenue over 10 years, some of which would be applied to the deficit, with the rest used to lower income tax rates across all brackets.

Or, is Warren Buffett paying taxes at half the rate of his secretary because of his tax bracket?

[Prozac]

A national sales tax with a progressive scale. More expensive/luxury items would be taxed at a higher rate than "necessity" items. I know this wold be a hard sell at first, but it seems to me the most fair way to tax. The more you spend, the more you pay. I agree asocial safety net is a good thing, but the size and scope of the current net is getting to be ridiculous, we have a program to give every family a cell phone.. What's next, an Xbox? A car? A cellphone with a data plan..?

Europe uses a similar model. It's usually called a Value Added Tax or VAT. It works to varying degrees over there. Might not be a bad idea here, but I haven't heard too many politicians suggest it. WRT the phone thing, would somebody please post some concrete data on the whole obamaphone program. My cellphone is getting kind of old and I'd like to replace it. I figure, since I voted for the guy, he owes me some of these "gifts" that I've been hearing about. I went over to this site: https://obamaphone.net/ and filled out a bunch of personal information and I still haven't seen my new phone.

[Guest]

...Value Added Tax or VAT. It sucks.

FIFY

[herkbier]

From what I've seen of the VAT here in Germany, it's a flat 19% on everything. I'm thinking of something more like a state tax where different items are taxed at different rates or not at all. And, items in the same category are also taxed at different rates, cheap Walmart plates have a lower rate while the expensive Tiffany's china is not only more expensive but also has a higher rate.

I think the VAT sucks because one, I am already paying an income tax, and two, I am not a resident of the country, so the tax revenue doesn't always directly benefit me. If we institute this in the US, number one is no longer a player and as for number too, I don't care if foreigners have to help pay for defense spending and public works. Plus, everyone gets to pay, even those who are payed under the table..

What am I missing Rainman?

[Guest]

What fucking loopholes? Name them.

Start with this.

Google the rest yourself.

[Learjetter]

A national sales tax with a progressive scale. More expensive/luxury items would be taxed at a higher rate than "necessity" items. I know this wold be a hard sell at first, but it seems to me the most fair way to tax. The more you spend, the more you pay. I agree asocial safety net is a good thing, but the size and scope of the current net is getting to be ridiculous, we have a program to give every family a cell phone.. What's next, an Xbox? A car? A cellphone with a data plan..?

Fairtax.org

[Guest]

What am I missing Rainman?

You can start with the fact that it is regressive.

[Vertigo]

Europe uses a similar model. It's usually called a Value Added Tax or VAT. It works to varying degrees over there. Might not be a bad idea here, but I haven't heard too many politicians suggest it. WRT the phone thing, would somebody please post some concrete data on the whole obamaphone program. My cellphone is getting kind of old and I'd like to replace it. I figure, since I voted for the guy, he owes me some of these "gifts" that I've been hearing about. I went over to this site: https://obamaphone.net/ and filled out a bunch of personal information and I still haven't seen my new phone.

You mean the Lifeline program that was expanded in 2008 under the Bush administration to include mobile phone coverage?

You people do realize the Lifeline program only offers discounted phone service, not actual cell phones—any free cell phone would be provided and paid for by a private company, not by the Lifeline program or funds from the universal service fee.

I particularly like how you try to equate the $8 Bushphone with a car... nice touch.

https://www.radioshac...ductId=13097267

Edited November 26, 2012 by Vertigo

[Prozac]

Vertigo - check sarcasm detector.

[TreeA10]

Solving this problem certainly is due to the complexity of the tax code. Currently, we have 73,608 pages of tax code as of April 12th. Surely, we do not need this many. I figure 71,000, maybe 72,000 max.

[HossHarris]

I may be dense (likely), but why are we hell bent on a progressive tax system? Why should I pay a higher PERCENTAGE for making more money? If the rates were flat, I would contribute more actual dollars the more I make .... But I still don't get why I should pay a higher percentage for being successful.

What's the history/genesis of this line of thinking?

[Vertigo]

Vertigo - check sarcasm detector.

Yep- good call.

[Guest]

Google the rest myself? No, I'm not going to dig up evidence to reinforce your point because you're just too damn lazy to do it yourself.

Fine by me.

Quite frankly, I could give a shit about you learning about the complexities of the tax code.

Just FYI, your question/challenge about loopholes is childlike. And sad.

That "nagging feeling" you describe having is probably a result of a combination of ignorance and apathy. That feeling will likely linger until you make an effort to educate yourself since I doubt anyone will have the patience to spoon feed you nearly 80k pages of spaghetti.

I mentioned in another post that I was fortunate to have dinner with Erskine Bowles a couple weeks ago in DC and we discussed his work as the co-chair of the National Commission on Fiscal Responsibility and Reform. It is a pretty solid plan for reducing the deficit by $4trn over the next ten years using a combination of tax reform and spending cuts. That might be a good place for you to start if you really want to learn something, especially since many elements of the Bowles-Simpson plan will likely (hopefully) be part of the eventual compromise.

https://www.taxpolicycenter.org/taxtopics/Bowles_Simpson_Brief.cfm

https://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdf

That's the full extent of spoon feeding you're going to get from me. You're going to have to spend a couple minutes educating yourself if you really give a shit.

Good luck with that.

[Vertigo]

I may be dense (likely), but why are we hell bent on a progressive tax system? Why should I pay a higher PERCENTAGE for making more money? If the rates were flat, I would contribute more actual dollars the more I make .... But I still don't get why I should pay a higher percentage for being successful.

What's the history/genesis of this line of thinking?

You can thank Saint Abraham Lincoln for signing the forerunner to our current progressive tax system into law (Revenue Act of 1862). Yet another one of his great deeds.

Edited November 27, 2012 by Vertigo

[Fuzz]

Also, reforming the estate tax would be nice too with Obama's plan to exempt the first $3.5 million.

How about we get rid of it?

https://www.foxnews.com/politics/2012/11/16/ranchers-farmers-brace-for-death-tax-impact/?intcmp=trending

"But according to the American Farm Bureau, up to 97 percent of American farms and ranches will be subject to an estate tax where the exemption is set at $1 million."

[Guest]

Oh, wow, you mean there was an actual commission where they figured out how to solve all this stuff? The Bowles-Simpson plan? Do you mean to tell me that when someone says "let's close loopholes", that should be taken as "I support tax reform as outlined in the Bowles-Simpson plan"? Because now that's actually stating a specific plan you support, that actually outlines the ways and means in which loopholes are closed! It's like we actually have something concrete to talk about instead of "lol close loopholes". Was that really so hard? I hope my attempt to civilize the savages has not been taken in vain.

Do you have anyone who can supervise you wrt taking your meds?

Wow.

[TreeA10]

From the WSJ, an interesting look at the much deeper problem regarding our debt.

https://online.wsj.com/article/SB10001424127887323353204578127374039087636.html?mod=WSJ_Opinion_LEADTop

[Guest]

Wealth redistribution is a feature of almost any conceivable tax system, as well as any government benefit that is targeted or means-tested.

As you see it.

A progressive tax system and public policies that aim to reduce inequality are different concepts than wealth redistribution or socialism even if there is some simplistic common ground al la whale and elephant.

A system that allows for socio-economic mobility must allow for some degree of inequality in the form of merit based rewards.

There is a difference between providing opportunities and taking care of those in need and redistribution of wealth for the purpose of reducing inequality.

The difference in mindset alone is going to lead people to take very different approaches wrt public policy.

[Guest]

What I'm saying is you cannot come up with a governing system other than total anarchy that does not involve collecting money from people and using it to pay for things that may or may not directly benefit those very same people perfectly equally or in proportion to what they contributed.

That's a political science question.

I don't really think so.

Ok. I think there is.

What I don't like is when people don't just acknowledge honest policy differences and instead try to twist language to make the other side seem scary.

That's what bothers you most? People should be scared. In fact, they should be terrified. You are talking about inequality when you should be talking about insolvency. All of us should.

The people who believe we aren't subject to what happened to Greece are simply fools or foolhardy. Tree pointed out an excellent article in the WSJ. The UNFUNDED $87 trillion of federal government liability for SS, Medicare and pensions (including mine) should absolutely terrify people.

Ignorance is far more dangerous than "language twisting." Ignorance and apathy is what allows special interests to influence the politicians and the politicians to buy the electorate. I am talking about both parties here.

We simply cannot afford to keep ingoring this deficit issue.

This is very, very serious shit. No one survives it intact unless we face the brutal facts and get real. Immediately.

Taxing the "rich" and giving to those less fortunate in the name of reducing inequality isn't going to solve it, BTW.

[AnimalMother]

Just in case anyone hasn't seen this little gem:

https://www.amazon.com/The-Creature-Jekyll-Island-Federal/dp/091298645X/ref=sr_1_2?ie=UTF8&qid=1354061297&sr=8-2&keywords=the+creature+from+jekyll+island

This sheds some light on how our economic system really works. Fiscal cliff or not, we have some interesting economic times ahead. And by interesting I mean disasterous.

[Guest one]

This is a very good book. I think it is funny so much blame is put on the lowest earning Americans when the system was designed by the elite to serve the elite (with all of the US

benefitting in the process). Our problems are much deeper rooted than too many people asking for hand outs.

It is also interesting that people that were tremendously wealthy would design a system that relies on building debt in the first place.

Edited November 28, 2012 by one

[Fuzz]

It is also interesting that people that were tremendously wealthy would design a system that relies on building debt in the first place.

Why? They get rich off it and when it collapses they aren't crippled by it, like you and me would be. They own the companies so they only way they are out of a job is if the company folds. I remember visiting Hearst Castle as a kid (which was started in 1919 and finished in 1957), we were walking through what could best be described as a treasure room (collections of all sorts of antiques and historical items) when the tour guide remarked, "Hearst used to have a very large collection of Ancient Egyptian artwork and antiques but sold it during the Great Depression". Yep the Great Depression certainly kicked him in the balls, he lost his Egyptian collection, but still managed to continue building Hearst Castle and live very well.

Edited November 28, 2012 by Scaredfuzz21

[Guest one]

Why? They get rich off it and when it collapses they aren't crippled by it, like you and me would be. They own the companies so they only way they are out of a job is if the company folds. I remember visiting Hearst Castle as a kid (which was started in 1919 and finished in 1957), we were walking through what could best be described as a treasure room (collections of all sorts of antiques and historical items) when the tour guide remarked, "Hearst used to have a very large collection of Ancient Egyptian artwork and antiques but sold it during the Great Depression". Yep the Great Depression certainly kicked him in the balls, he lost his Egyptian collection, but still managed to continue building Hearst Castle and live very well.

i said interesting, not surprising.

I would like to give the group of men that helped create our economic system the benefit of the doubt and assume they created this system to benefit the entire country and not just their own interest. That being said, they could have done a lot better job. Maybe they never imagined how big our economy would get?