Skip to comments.Which tax "loopholes" will the Rats try to close? (vanity)
Posted on 01/21/2013 12:03:01 PM PST by reaganaut1
Several Rats, including the head Rat, have said they want more "revenue" beyond the tax increases already passed this year. What do you think they have in mind? Here are a few "tax breaks" (anything which lets people keep more of their own money) I can think of.
tax deductions for IRA and 401(k) contributions
untaxed employer-provided health benefits
tax-free status of municipal bond interest (reducing this I could live with, since it would raise the cost of borrowing for local government)
income tax-free build up of cash value in life insurance policies
Start by eliminating all refundable credits. Then eliminate the EITC.
There are NO loop holes, there ARE legal deductions and credits.
Then, after we have stopped using the income tax as a system of welfare payments, we can talk about what the supposed definition of taxable income is.
Problem is if one seriously considers that wages are an even trade for labor, and the definition of income, or gain has been turned on its head, all of this is trite.
I think the employer paid health insurance is at the top of the list, they already have it listed on the W-2s.
You’re probably right, but its a terrible idea. Credits are far more insidious than deductions. One is an expense, the other is not.
Tax expenditures without a “blue state” or union bias wear the big target. This means tax deferrals and tax exemptions on personal retirement savings (IRA, 401k) and life insurance, as well as capping the tax benefit of Schedule C business deductions the underlying business expenses reflected in K-1s
(or at least subjecting them to all the floors and ceilings of Schedule A deductions). Tax expenditures with a “blue state” bias will remain, even though they have a HUGE disproportionate benefit to the “rich” as defined by Obama — those with $250,000 to $1 million in ordinary incomes from work — this means deductibility of state and local taxes and interest on high balance mortgages. There are very few Republicans with $900,000 mortgages paying $75,000 in state and local taxes (Republicans are richer, poorer, or live in low-tax localities). The permanent AMT patch passed earlier this month was a giant Obama “thank you” to the corporate lawyers and anesthesiologists of the New York suburbs and the mid-level tech and entertainment executives of California.
I think Carter tried to put his hooks into tax-free munis, and Obummer has proposed the idea several times, but that is not likely going to happen, because it would immediately put into crisis all of the free spending blue cities around the country. And not just the cities, but all the other blue investment projects as well.
“Potential issuers of municipal bonds include cities, counties, redevelopment agencies, special-purpose districts, school districts, public utility districts, publicly owned airports and seaports, and any other governmental entity (or group of governments) below the state level.”
Without tax free munis, nobody is going to loan any of them squat, and the ratings agencies will immediately drop them to low order junk. And all the unions that work on these deals are suddenly out of work. The NEA, Teamsters, AFL-CIO, etc., would get badly burned.
Right now, munis are very solid, because as long as the issue can pay the interest, a fraction of their value, there is no pressure to default, even if they are in near bankruptcy.
And the math bites hard. Say a muni pays 5% annual return. That is the equivalent to about 11% taxable return. But then, this would slam the price of bonds into the basement to get those yields, so if somebody bought them, and their price went up, on their sale the investor would have to pay capital gains tax as well.
So the muni issuers would get squeezed like a grape.
All of them. And, then the idiot republicans will compromise and the dems will accept whatever they get. Then, they'll start the process all over again.
Wasn’t getting rid of HSAs on the Rat list?
No loopholes in Hollyweird or Media Center New York will be closed....
That's an excellent point. Those "loop holes" were all voted on and passed by a majority of the clowns we call Congress, and passed by a President at some point in time.
The point is, as of today, one does not pay taxes on it as it is a tax free benefit. The employer deducts the cost as a cost of business so from the perspective it is a cost of employment.