Skip to comments.One Look At This Chart, And You'll Instantly Get Why We Can't Fix The Tax Code
Posted on 11/22/2012 10:52:52 AM PST by SeekAndFind
Hey, let's just simplify the tax code and eliminate loopholes.
It's hard to think of any statement that on its surface sounds less controversial. Eliminating loopholes means more revenue. Everyone likes simplification. Efficiency!
So why doesn't it happen?
This fantastic chart from Credit Suisse's Neal Soss is the answer. It shows the top 20 biggest "Tax Expenditures" which cost the government over $900 billion in the 2012 fiscal year.
So you want to simplify the tax code, what are you going to get rid of?
Are you going to eliminate the incentive to provide employers health insurance? Are you going to get rid of charitable deductions or pension contribution deductions? What about dinging the child credit or mortgage interest? Or how about clipping Social Security benefits for retired workers?
(Excerpt) Read more at businessinsider.com ...
10% flat tax on all income - corporate, dividend, personal income. No deductions.
Forgetting the main reason the tax code will not be simplified: Jobs.
How many accountants and tax preparers would be out of work if a flat tax ever went into effect? Do you seriously think they don’t lobby against a simpler tax code?
Hence why I now think we need to go to a national retail sales tax.
It would capture more of the underground economy, it would tax imported goods the same as US-made goods, and it would provide more direct economic data on how the economy is doing.
It only 'costs' the government money if you believe in static models and assume that all money is the government's, and we are lucky to keep some of it.
RE: How many accountants and tax preparers would be out of work if a flat tax ever went into effect? Do you seriously think they dont lobby against a simpler tax code?
I think I see the reasoning here... let’s complicate the tax code even more to create more jobs for accountants, lawyers and the like...
Why not create more complicated government rules so that more jobs will be generated navigating through these rules?
For that matter, why not encourage unruly kids to break more windows so that glass and window makers can have more businesses and hire more glass and window makers?
How many horn and string players lost their jobs when the Titanic went down?
What I really want them to do is STOP SPENDING, DAMMIT! And NOT perpetually trying to figure out ways to get more tax revenue out of the few remaining productive citizens.
Not to mention the number of IRS employees that would lose their jobs.
Friggin leeches. The whole lot of them.
Simple...now that the government forces you to provide insurance for employees if you have more than 50, there is no need to use the federal tax code as an incentive for you to do so...so get rid of the tax write off for insurance coverage.
Since the government is going to take care of all your needs there will be no need to donate to charity - so there goes the charity deduction.
They will eliminate the tax deduction for the pension plans AND find a way to tax the gains made within those plans before withdrawal ! Plus likely place a 20% across the board tax on the current value to capture all the ill-gotten gains that weren’t taxed previously.
Mortgage deductions will be capped at some ridiculous amount to “punish” the high earners who have “too expensive” houses. They will also eliminate the mortgage deduction on second homes, because in their utopian society NO ONE needs too houses - and if they do have 2 they should be punished tax-wise.
All monies earned belong to the government anyway - just be glad they “let” you keep a little of what your labor produces - pretty soon John Kerry won’t be able to deduct this yacht maintenance - oh wait, they will exclude themselves from the legislation, just like the Obama-case fiasco.
I think that this is indeed one of the objectives of Obamacare to make coverage mandatory then eliminate the deduction.
Make everyone pay something.
“How many accountants and tax preparers would be out of work if a flat tax ever went into effect? Do you seriously think they dont lobby against a simpler tax code?”
You are leaving out all the tax law firms that advertise their availability to “go to bat for you with the IRS.”
we need an ammendment to the consitution that says “any legislation, Rule, regulation, tax code, etc., not understood by the average Chicago High School graduate is null and void”
If you have income of 50k, after taxes that’s about 32k. Multiply it by 2, divide it by 4 then subtract 16 on form I-B-Stupid. Be sure to check the box marked dumdum, then sign under penalty of perjury.
All the above.
Fix it (flat tax) - don’t just tinker with it.
It says that these “tax expenditures” “cost” the government. That language drives me nuts. First they steal our wealth from us, then give us small breaks so we can keep a little bit of the wealth that WE earned is a “cost” to the government or somehow letting us keep a little bit of OUR money is a “tax expenditure” for the government. Only in BizzaroWorld.
Get rid of the income tax and go with a 20% ish consumption tax with some modest exempt amount of spending sent via quarterly checks to each tax payer.
This exempt amount needs to be modest to avoid the issues we have not with so few paying income taxes.
Whewn I began work in the 1950s, it took me ten minutes to make out my federal tax return.
It is the government that is a "cost" to us, not the other way around. And the way "we" reduce costs is by eliminating spending. So let's get on with it.
It is the government spending that is choking our economy with huge bureaucracies churning out endless regulations and harebrained "investments".
Who said? “9 9 9”
Corporations do not pay taxes, they pass them on.
Wrong answer. You are describing a “refundable tax credit,” which as we see from the EITC is a recipe for fraud. A flat tax on income (not on consumption) and no rebate is a better way to go. Even setting aside fraud, your suggestion still requires a massive bureaucracy to administer the rebate scheme and to combat fraud.
A no-deduction flat tax has much to commend it (provided “income” is analogous to profit not revenue), but I’m not sure you can get there from here politically.
Romney’s much ignored suggestion of capping deductions and credits has much to commend it both politically — it doesn’t eliminate any deduction or credit that has as — and in terms of increasing the tax base — it encourages maximally productive use of capital in place of tax avoidance as the main consideration in investment. On the other hand, it was both too draconian (his $25K suggestion was too low and including charitable contributions in the capped deductions goes a long way toward destroying the non-state civil society) and not radical enough: what should be capped is the aggregate amount of income (understood as after expenses of producing income) which can be shielded from taxation at normal rates by any means other than charitable contributions.
That would mean fixing a cap, say $100K per individual not claimable as a dependent and say $50K for those claimable as dependents, and adding together the exemptions, all deductions other than cost-of-producing-income and charitable deductions, all income from tax exempt sources, the amounts of all tax credits divided by the taxpayer’s top marginal rate, and the amount of all income taxed at lower rates times the difference in the lower rate and the normal rate, subtracting the cap and if the amount is positive adding it to the income before finding the tax. This scheme should replace the AMT (it does the same thing more effectively without catching the middle class in the net and, as you can see from my description would be shorter to file than the AMT).
In the sort run, if we could replace the AMT with what I just described, I’d be happy to let the marginal rate on incomes over $1M (for an individual and $2M for couples filing jointly) rise to the Clinton-era rate, so long as there were serious spending cuts in the current year and all out years included in the deal. (Alternatively, I’d settle for the abolition of baseline budgeting and the abolition of funding for government agencies to calculate the “baseline” together with one last round of the ephemeral “cuts” Washington has produced intermittently since baseline budgeting was introduced.)
Hmm... editing glitch there.
The first remark between dashes should have read
“it doesn’t eliminate any deduction or credit that has a substantial constituency”.
I agree. But the rate would probably have to be higher than 10 percent with the deficit as it is
How about the Federal Gov’t just quits spending money for functions not authorized by the Constitution?
Bye bye Energy Prevention Agency, Dept. of Indoctrination, Dept. of Constricting Commerce, etc...
If government employee/contractor/vendor/welfare spending is not cut (welfare is almost equal to the entire deficit), then tax policy changes will not help anything.
If the changes result in less revenue, the deficit grows faster.
If the changes result in more revenue, it’s just spent anyway.
Back during Reagan’s terms, the relative size of government debt to Gross Domestict Product was about 40%. Now it’s over 100%. The prosperity boost that lower taxes provided to the economy back then was not overshadowed by a Federal government that was insolvent on such a grand scale as it is today.
IMHO, the only way out is radical reduction of goverernment agencies. Social Security and Medicare need not be affected at all to fix this, nor should they be for those at or close to retirement. For those younger than that, they should be given the option to not participate in the program and it should be phased out for younger citizens over decades.
“What I really want them to do is STOP SPENDING, DAMMIT!”
Well, as the last 3 of 4 elections have shown us, the sheeple want Uncle Sugar to be Santa Claus. There is no turning back now.
Go Galt while you still can.
How about spending less?
"Congress is not empowered to tax for those purposes which are within the exclusive province of the States." --Justice John Marshall, Gibbons v. Ogden, 1824.
In other words, Congress cannot lay taxes for anything that it cannot justify under Section 8 of Article I of the Constitution, SS and Obamacare being glaring examples.
And the only reason that corrupt Congress has been able to establish constitutonally indefensible taxing and spending programs is the following imo. Voters abused their voting power when they repeatedly elected FDR in support of his constitutonally indefensible New Deal federal spending programs as a consequence of likely widespread ignorance of constitutional limits on Congress's powers to regulate domestic government services.
In fact, defense issues aside, one of very few federal government services that citizens should be unquestioningly paying taxes for is the postal service (1.8.7).
Key Points to remember.
1) DON’T PAY TAX FOR RIGHTS
2) NO DOUBLE TAXATION
After being suggested several hundred million times by those in the private sector, those in government still laugh hysterically at this question.
All the Chicago High School graduates are way too old for the rule to be effective.
“How many horn and string players lost their jobs when the Titanic went down?”
Net effect zero because those who lost their jobs were removed from the labor pool.
I should have mentioned the following concerning Congress’s limited power to lay taxes in my previous post. Belows is my rough estimate for how much Section 8 of Article I should be costing taxpayers per year.
Given that the plurality of clauses in Section 8 are defense related, and given that the Department of Defense (DoD) budget for 2011 was $600+ billion, I will generously round the DoD figure up to $1 trillion, probably much less, as an estimate as to how much taxpayers should be paying Congress annually to fulfill its Section 8 duties.
In other words, we shouldn’t be seeing these multi-trillion dollar federal budgets that the corrupt media, including Fx News is reporting without mentioning Justice Marshall’s clarification of Congress limited power to lay taxes in federal public policy discussions.
“we need an ammendment to the consitution that says any legislation, Rule, regulation, tax code, etc., not understood by the average Chicago High School graduate is null and void”
That ought to eliminate at least ninety nine and forty four one hundredths percent of all the laws.
OK, let us say that they do away with the “Charitable Deduction”, who will fill the gap that this cessation of funds will cause? Many charities operate with volunteers, will they be replaced with government ‘paid’ employees? Compare the actions of FEMA with Salvation Army and Red Cross, then imagine FEMA doing it all.
Many of these tax law ‘safe harbors’ were created to encourage good social actions and the jury is still way out on the net effect of wholesale changes. Remember the AMT was originally brought in to ‘punish’ about 200 tax payers who legitimately ‘loopholed’ their income for $0 tax burden in 1968. Now a return of the full unadjusted AMT stands to force 30 million taxpayers into paying AMT.
As a seasonal tax preparer, I take hours of education and training to be prepared for the coming tax season. Yet increasingly, my confidence in my knowledge is offset by my equal knowledge that the tax law is complex and frequently contradictory. I would love to see this “disgrace to human history” be put out of our mutual misery, but when every jot and tilde of it has enthusiastic adherents, only a whole-scale replacement has a chance, which is slim to none!
Dude you realize it would be in ADDITION to an income tax right?
Repeal the 16th Amendment(no more income tax) Institute a 5% NRST and a 10% import tariff.
This is one of the “fix it or die” problems we’re facing.
There is no “we can’t”.
Right away I see two deductions that could be greatly modified or eliminated.
First would be the mortgage deduction. Ideally, it should be eliminated. Those people who rent should not be subsidizing homeowners. At the very least, the deduction should be limited to a certain amount and then only on a primary residence.
Just about every one of those deductions is for a right or to increase jobs and GNP in the US or to avoid double taxation.
As soon as they are eliminated, more jobs will disappear and less rights defended.
The present move is to pay Fed income tax, then state income tax on the same income, then paying sales and property taxes additionally. In many cases this becomes double and triple taxation.
We won’t be paying a 10% tax but everybody will be looking at about a 40% tax. This also implies all merchants and landlords will have to increase their prices to keep up with the additional taxes.
All this does is shuffle the cards as to who gets paid, with the govt getting paid first without incentive to decrease spending.
It would be smarter to make a 10% flat tax distributed between all government. (2% sales local municipal level, 2% county/parish level, 3% state level and 3% state level).
Your status quo keeps a intact a massive bureaucracy namely the IRS. A consumption tax is certainly a better way to go than having to report to the government all sources of your income.