Taxes and the tax code

[Michael]

The current tax code is a mess. Huge parts of it are actually social or political goals disguised as tax law but are really means to shift spending or effort via tax incentives (money).

A perfect example of this is tax deductions for mortgage interest in the name of making housing more affordable. The net impact of this is to allow higher levels of leverage (debt) which just bumps housing prices higher and makes them as "unaffordable" as they used to be. The extreme of the "make housing more affordable" theory formed a lot of the underpinnings of the crisis and bubble busting in 2008.

Since so much of the economy is so intertwined with the tax code, a great first step is what Mitt Romney proposed - cap total deductions. I am not so,d at all on his "cut the tax rate" proposal as I really don't think takes are all that high now. I think that lower capital gains taxes and lower taxes on dividends (already taxed incomes at the corporate level) make good fiscal and economic policy. The extremes of this can easily be fixed - cap the lower capital gains rates at a large lifetime level. I don't think that dividend income needs much fixing.

Obama and Romney were 100% right in agreeing that the well off (I am one of them) do not need more help. I disagree with Obama that they need more taxation.

Michael

 

[Suspicious-Teach8788]

Fundamentally I'd like the tax code rewritten. But even if a candidate runs on revamping the tax code, it's not possible.

What we need is a progressive tax system with a much easier deduction system like the $17k Romney mentioned or better yet ZERO deductions.

Just setup the progressive rate well enough so the extreme poor pay 0%, and income taxes don't start applying say til $15-20k or something. Index that rate to inflation or something so the poor don't get screwed. I can't believe no one though to index AMT to inflation. Idiots.

If you setup your rate structure well enough, you don't need a stupidass deduction system. After all the deduction system was to make sure the middle class don't get screwed. Well let's set it up well to begin with.

I do agree with Perry that you should be able to fill out your taxes on a postcard. And like Ron Paul says, lets dismantle the IRS. Why the hell do we need to pay billions to get tax advice every year? Why do we need so many people working in the IRS? If my taxes can get completed on a post card you can have a 100% audit rate with a fraction of today's IRS. You guarantee that everyone pays, and it can all be done easily.

Think of how many hours we spend doing taxes and how that takes away from the economy's productivity. Get rid of this crap.

Social security should belong in a lockbox and so should Medicare. I would push for further reforms, but none of those should be used to pay for the general fund. Federal income taxes, corporate taxes, and capital gains taxes should be used to pay for the general fund. That's it.

I don't see how Dems and Republicans can disagree with this fundamental principle. They can disagree on how the tax rates should be setup, but I think there's no reason why we can't aim for easy taxes.

 

[shira]

Fundamentally I'd like the tax code rewritten. But even if a candidate runs on revamping the tax code, it's not possible.

What we need is a progressive tax system with a much easier deduction system like the $17k Romney mentioned or better yet ZERO deductions.

Just setup the progressive rate well enough so the extreme poor pay 0%, and income taxes don't start applying say til $15-20k or something. Index that rate to inflation or something so the poor don't get screwed. I can't believe no one though to index AMT to inflation. Idiots.

If you setup your rate structure well enough, you don't need a stupidass deduction system. After all the deduction system was to make sure the middle class don't get screwed. Well let's set it up well to begin with.

I do agree with Perry that you should be able to fill out your taxes on a postcard. And like Ron Paul says, lets dismantle the IRS. Why the hell do we need to pay billions to get tax advice every year? Why do we need so many people working in the IRS? If my taxes can get completed on a post card you can have a 100% audit rate with a fraction of today's IRS. You guarantee that everyone pays, and it can all be done easily.

Think of how many hours we spend doing taxes and how that takes away from the economy's productivity. Get rid of this crap.

Social security should belong in a lockbox and so should Medicare. I would push for further reforms, but none of those should be used to pay for the general fund. Federal income taxes, corporate taxes, and capital gains taxes should be used to pay for the general fund. That's it.

I don't see how Dems and Republicans can disagree with this fundamental principle. They can disagree on how the tax rates should be setup, but I think there's no reason why we can't aim for easy taxes.

First of all, for the vast majority of people, taxes are pretty darn simple. You fill the numbers in TurboTax and the results magically appear.

Getting rid of deductions isn't going to simplify things for anybody whose taxes are already complicated. For example, if you run an ongoing business, it's absurd to not allow the costs of doing business to be subtracted from the revenues of the business. Are you really going to disallow the transportation costs of a salesperson who travels all over the country? Are you really going to disallow the cost of spoiled inventory to a retailer?

What about those who invest in securities? Eliminating most deductions isn't going to simplify their bookkeeping burden.

"Simplifying" the tax code via overly-simplistic "solutions" just randomly creates a different set of winners and losers. And since Romney says he wants his changes to be revenue-neutral, none of the changes will have a bottom-line effect on the federal deficit, government spending, or the nation's economy.

Frankly, tax "simplification" is just a feel-good, do-nothing distraction from America's real economic problems.

 

[Anarchist420]

A perfect example of this is tax deductions for mortgage interest in the name of making housing more affordable. The net impact of this is to allow higher levels of leverage (debt) which just bumps housing prices higher and makes them as "unaffordable" as they used to be. The extreme of the "make housing more affordable" theory formed a lot of the underpinnings of the crisis and bubble busting in 2008. Since so much of the economy is so intertwined with the tax code, a great first step is what Mitt Romney proposed - cap total deductions. I am not so,d at all on his "cut the tax rate" proposal as I really don't think takes are all that high now. I think that lower capital gains taxes and lower taxes on dividends (already taxed incomes at the corporate level) make good fiscal and economic policy. The extremes of this can easily be fixed - cap the lower capital gains rates at a large lifetime level. I don't think that dividend income needs much fixing.

I want way more deductions there (specialized and general) and the current marginal rates... I also want the AMT to be abolished. I do want the marginal corporate tax rate lower... 15% (if not 1/8) would be reasonable especially if there are personal deductions for all medical expenses and no subsidies like negative taxation. They should maybe cap the personal mortgage interest deduction at maybe $20/year (starting with new home buyers at least) but give unlimited principal and rent deductions. That would boost the economy and tighten up credit because people would save more, causing a stronger dollar and saving for a house would go further.

I'm pissed because the TRA of 1986 made things worse and Romney wants to bring it back because it makes everyone pay their "fair share" and because it could help balance the budget. I do think that a flat tax with capped deductions will give the govt a lot more revenue and artificially boost GDP.

Anyway, Reagan didn't build the TRA of 1986; Reagan had (good and logical) intentions, but he didn't really even figure out who he was in his lifetime due to bullies like the Bush family and Hinckly Senior (maybe Reagan wanted Hinckly to shoot him because the former didn't even want the latter's ass executed or even jailed)... Mr. Reagan lived in a state of confusion and it was only made worse when Bush 41 ordered his ass shot. I think Buchanan didn't care if he sabotaged Bush 41's chances when he made his obnoxious culture wars speech to "get a rise out of people for shits and giggles". That's one thing I don't like about Pat is that he's an attn whore but that's not his fault and at least he's funny.

 

[nehalem256]

First of all, for the vast majority of people, taxes are pretty darn simple. You fill the numbers in TurboTax and the results magically appear.

If your taxes require a computer to do it then it is not simple.

 

[Engineer]

If your taxes require a computer to do it then it is not simple.

They don't require a computer, its just very convenient to do so. Much easier, fewer mistakes and don't have to mail the damn thing. I have done my taxes by hand (for 15 years) and love the cheap, online filing and preparation that I get. For "most" people, taxes are not that hard if they would read a little.

 

[Michael]

The dream of a "postcard" tax return is a little too simplistic. Anyone with a decent number of stock transactions or a small business will need more than a post card, but the current 1040 does require a computer to complete for even fairly uncomplicated returns as they are very long and you need to be pretty exact.

I'm about to head home from a beach vacation, if I am not too tired tonight I will make a list of common deductions and tax breaks.

Michael

 

[Suspicious-Teach8788]

First of all, for the vast majority of people, taxes are pretty darn simple. You fill the numbers in TurboTax and the results magically appear.

Getting rid of deductions isn't going to simplify things for anybody whose taxes are already complicated. For example, if you run an ongoing business, it's absurd to not allow the costs of doing business to be subtracted from the revenues of the business. Are you really going to disallow the transportation costs of a salesperson who travels all over the country? Are you really going to disallow the cost of spoiled inventory to a retailer?

What about those who invest in securities? Eliminating most deductions isn't going to simplify their bookkeeping burden.

"Simplifying" the tax code via overly-simplistic "solutions" just randomly creates a different set of winners and losers. And since Romney says he wants his changes to be revenue-neutral, none of the changes will have a bottom-line effect on the federal deficit, government spending, or the nation's economy.

Frankly, tax "simplification" is just a feel-good, do-nothing distraction from America's real economic problems.

Businesses are taxed on net profit no? Your company should be compensating you for travel to begin with.

Simplifying the tax code is good for everyone. Your taxes may be easy if you don't have jack crap worth deductions to go through. You're right. Mine are easy. I punch a few numbers in and I'm done. I spend more time going through my stocks and investments and working out the capital gains taxes and claiming losses, etc. But for people like my parents I can see them spending multiple weekends figuring things out, calling H&R block, etc.

I don't think there's a single American against simplification of the tax code. You're just too lazy to act on it, and so you claim my view is ludicrous. I don't claim that tax code simplification will solve America's problems, but there has got to be an easier way of doing things.

 

[Fern]

The current tax code is a mess. Huge parts of it are actually social or political goals disguised as tax law but are really means to shift spending or effort via tax incentives (money).

But since Congress has, e.g., figured out that they can label welfare-type payments as "tax cut" for political expediency/popularity and administer it through the tax system I don't see this unfortunate trend dying off anytime soon.

Propose a welfare payment and get booed. Propose a tax cut and you'll generally be cheered.

Also, the power to tax is Congress's strongest (Constitutional) power. That's why the FF didn't want to give it that power. That is why Congress uses it so much. And this is why you saw Chief Justice Roberts contort the crap out of his ruling. He had to turn the 'penalty' into a tax somehow or it would have been stricken down as a power Congress didn't hold.

A perfect example of this is tax deductions for mortgage interest in the name of making housing more affordable. The net impact of this is to allow higher levels of leverage (debt) which just bumps housing prices higher and makes them as "unaffordable" as they used to be. The extreme of the "make housing more affordable" theory formed a lot of the underpinnings of the crisis and bubble busting in 2008.

Well, yeah. But the deduction for your mortg interest and R/E taxes can help with cash-flow to help with mortg payments.

But I'm thinking the real reason we aren't going to mess with the home mortg interest deduction is the likely downward pressure on home values if it's eliminated.

Since so much of the economy is so intertwined with the tax code, a great first step is what Mitt Romney proposed - cap total deductions. I am not so,d at all on his "cut the tax rate" proposal as I really don't think takes are all that high now. I think that lower capital gains taxes and lower taxes on dividends (already taxed incomes at the corporate level) make good fiscal and economic policy. The extremes of this can easily be fixed - cap the lower capital gains rates at a large lifetime level. I don't think that dividend income needs much fixing.

Many think our corp rates are too high. We're the highest in the world now AFAIK. In my career I've seen times where the corp and individual rates were different and it's always seemed to result in tax shenanigans. I also think some people find it objectionable for both political and moral reasons that "the big rich corporations pay less tax than me".

For those reasons lowering individual rates to match lowered corporate rates is probably a good idea.

Obama and Romney were 100% right in agreeing that the well off (I am one of them) do not need more help. I disagree with Obama that they need more taxation.

Michael

It's not clear to me if Romney wants to actual cut taxes, or just rates. I.e., what's his (net) revenue target? In watching the debate I was given the impression he wants it revenue neutral, in which case it's not a tax cut (at least not in the aggregate).

But we need substantial and sweeping reform. The last time we did it was 1986. The economic priorities and incentives in the tax code need to be restructured for today's economy.

Fern

 

[Michael]

Well, yeah. But the deduction for your mortg interest and R/E taxes can help with cash-flow to help with mortg payments.

But I'm thinking the real reason we aren't going to mess with the home mortg interest deduction is the likely downward pressure on home values if it's eliminated.

Fern

I think the deductions just push the prices higher which, net, net does not help at all. I agree that removing the reduction will further pressure already low prices.

Michael