Why does Congress INSIST on writing retarded tax laws?

BaliBabyDoc

Lifer
Jan 20, 2001
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It appears the GOP Congress created a tax credit for Babs, Leo, and Al Gore.

SF Chron

If you are among the 150,000-plus proud purchasers of a hybrid gas-electric car during 2006, please sit down. I have bad news. Many of you will not receive the full tax credit that you expected.

To recap, in 2005, Congress passed an energy bill with numerous incentives to encourage conservation. One of these provisions provided a tax credit, beginning January 2006, for purchasers of approved hybrid gas-electric automobiles. This tax credit can be substantial -- up to $3,150 for the Toyota Prius, perhaps the best known hybrid.

Unfortunately, unless you earn more than $750,000 a year, you can't be sure you will qualify for the full published credit for your vehicle.
My understanding of the legislation is that it was a 'simple' credit. Meaning every person that purchased a qualifying vehicle would get the credit.

In English, you can't get the full $3,150 credit for purchasing a Toyota Prius unless your regular tax obligation exceeds your Alternative Minimum Tax (AMT) obligation by at least that amount. As a reminder, the AMT is a parallel tax system that excludes many common deductions. By law, every taxpayer must calculate both their regular tax and their AMT obligation, and pay whichever is higher.
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If you manage to escape owing AMT in 2006, because your regular tax liability is, say, just $10 higher, then $10 is all the hybrid tax credit you will be able to claim So here's the key question for most hybrid car purchasers: by just how much will you escape owing AMT in 2006?
It's pretty obvious that either Congress is filled with idiots and/or some numb nut hack staffer INTENTIONALLY rigged the legislation to MINIMIZE eligibility.

It's pretty ridiculous that the only people essentially guaranteed a credit are the well-off . . .
 
Jun 27, 2005
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In the context of our bizarro tax code, it makes perfect sense. It's only when you step out of the funhouse and back into reality that it looks as asinine as everything else in the tax code.


<obligatory>flat tax</obligatory>
 

BaliBabyDoc

Lifer
Jan 20, 2001
10,737
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It's not that hard to have a simple AND progressive tax code. But there should be an investigation to find out who is responsible for producing this garbage legislation.

IMHO, everyone (except tax attorneys/accountants) would love to just start over.

1) Exempt the first 40k of income (regardless of source).
2) 10% 40k - 100k
3) 20% 100k - 200k
4) 30% 200k - 500k
5) 40% 500k+
6) all income is taxed regardless of source
7) no exemptions, no deductions

Low to low-middle income families get a tax cut. Middle to upper middle see minimal change depending on current exemptions/deductions/credits. Upper income (which has done quite well since 1980) would see a tax increase. Further, it will be SO much easier for the IRS to track down the cheats . . . many of which are upper income.
 

GroundedSailor

Platinum Member
Feb 18, 2001
2,502
0
76
As they always say, the devil is in the details.

Taxes are meant to strengthen society and make it fairer for everyone. But the last few years have seen the tax code used to create a more unfair environment, where the poor and middle income get the most liabilities. The tax code has become a self perpetuating monster and it's going to take a lot of work to redo it. The partisan divide will preclude any real changes.

 

newmachineoverlord

Senior member
Jan 22, 2006
484
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Originally posted by: BaliBabyDoc
It's not that hard to have a simple AND progressive tax code. But there should be an investigation to find out who is responsible for producing this garbage legislation.

IMHO, everyone (except tax attorneys/accountants) would love to just start over.

1) Exempt the first 40k of income (regardless of source).
2) 10% 40k - 100k
3) 20% 100k - 200k
4) 30% 200k - 500k
5) 40% 500k+
6) all income is taxed regardless of source
7) no exemptions, no deductions

Low to low-middle income families get a tax cut. Middle to upper middle see minimal change depending on current exemptions/deductions/credits. Upper income (which has done quite well since 1980) would see a tax increase. Further, it will be SO much easier for the IRS to track down the cheats . . . many of which are upper income.

I'm going to have to agree on all points with respect to income taxes, although those brackets should be automatically adjusted for inflation annually.

With respect to number seven, that works fine for income tax with those brackets, but with respect to sales tax (which is always regressive unless it's on true luxury goods) necessity items such as food and high mpg (45+) vehicles should be subject to reduced sales tax. This is because society as a whole benefits when people drive efficient vehicles, and even the poorest people have to buy necessities to survive. I'm drawing the line at tax breaks for energy efficiency products such as insulation, CFLs, and high efficiency vehicles, and food. Items with a high cost to society should of course be subject to luxury taxes, such as oil, pollution (including carbon dioxide), alcohol, vehicles that get less than 20mpg, and marijuana. A lot of the burden on the emergency infrastructure is sourced from alcohol and marijuana. In any case, any tax incentives or disincentives should be dealt with on the price tag through the sales tax, not later on through some convoluted tax credits that nobody knows if they're really going to benefit from or not. Sales tax should also be required to always be included on the listed price, not tagged on at the register.
 

senseamp

Lifer
Feb 5, 2006
35,787
6,197
126
Good. Hybrid tax credit is retarded to begin with. If you want a hybrid, get it with your own money, not the taxpayers'.
 

techs

Lifer
Sep 26, 2000
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Makes perfect sense if you're a Republican and want to appear to be doing something to reduce oil imports when you really want to keep the status quo to protect your constituency of the oil companies and super rich.
 

JD50

Lifer
Sep 4, 2005
11,754
2,344
126
Originally posted by: techs
Makes perfect sense if you're a Republican and want to appear to be doing something to reduce oil imports when you really want to keep the status quo to protect your constituency of the oil companies and super rich.

What are the Democrats going to do about it?

 

senseamp

Lifer
Feb 5, 2006
35,787
6,197
126
People paying AMT are already having the government subsidize their house, now they want the government to subsidize their car too. They think that because of their purchasing and family planning decisions, they should not even have to pay the minimum tax for the government services they use and the national defense from which they benefit.
 

bctbct

Diamond Member
Dec 22, 2005
4,868
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I have always been dissatisfied with tax payers footing the bill for this program. In reality someone who does not own a vehicle period uses less fuel and therefore contributes more to conversation.

If I was a hybrid buyer I would sure be asking myself how the manufacturers didnt know the ins and outs of this program. I wonder how many buyers were sold on this car by sales people touting this program to close the deal.

Does it seem possible that the manufacturers didnt know? Hard to believe that.
 

BaliBabyDoc

Lifer
Jan 20, 2001
10,737
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Sales tax is certainly regressive but just like income tax, the society is better served with a FEW prudent rules . . . and then leave it friggin' alone . . . instead of trying to micromanage behavior.

It makes more sense to tax the fuel than:
1) tax the fuel, PLUS
2) gas guzzler tax, PLUS
3) offer tax credit for purchasing a particular vehicle, PLUS
4) write other laws exempting certain vehicles from mileage standards b/c a special interest stuffs Congressional pockets (Dingell, etc)

If gas was taxed at 50%, our society would get all the benefits of fuel efficiency seen in Europe or Japan. But CONSUMERS would make the choices. Some would take public transit, some would carpool, some would buy different vehicles, some would move closer to where they work, and MOST would reduce unnecessary travel. If someone REQUIRES a SuperDuty that gets 13mpg for work, why should they be punished for vital use while the one kid household with a V12 twin-turbo diesel Q7 (not available in the US, yet) and drives EVERYWHERE pays no penalty for their 500hp, 700ftlb monster? By the same rationale, shouldn't our stump-pulling Audi family get special consideration since their beast has the highest fuel economy among large vehicles, meets ULEV2 standards, is running on biodiesel from McDonalds waste oil, and is the neighborhood carpool vehicle of choice?

As for 'luxury' consumption taxes, I'm kind of on the fence. It defeats the purpose of simplifying income tax structure ONLY to replace it with a convoluted sales tax structure. If you exempt food, then fat Americans pile their grocery cart with sausage, Lil' Debbie snack cakes, and ice cream but pay no taxes . . . while a meal of baked chicken (no skin), steamed broccoli, and a garden salad is taxed at 10% b/c it's a 'prepared' meal? Reasonable options lie in-between but would you trust OUR Congress to find it?

You might have a fighting chance with alcohol (incl beer) or other drugs, but it's only a matter of time before some 'genius' decides they are going to 'extinguish' a behavior by jacking up the taxes. Before you know it, a criminal enterprise develops in response to tax policy.

While an argument can be made on the 'collective' merit of encouraging individuals to eat better, exercise more, drink less (and otherwise 'alter' themselves responsibly) and stop smoking . . . using tax policy as the intervention is just plain dumb.

On the otherhand, its abundantly obvious that reducing the consumption of fossil fuels for transportation will have personal, local, state, federal, and global ramifications . . . virtually all of them positive . . . unless of course you make a living feeding the American addiction. It's pretty easy to say it's 'obvious' b/c even the moron at 1600 PA can see the light through his dry drunk haze of a mind.
 

techs

Lifer
Sep 26, 2000
28,559
4
0
Originally posted by: JD50
Originally posted by: techs
Makes perfect sense if you're a Republican and want to appear to be doing something to reduce oil imports when you really want to keep the status quo to protect your constituency of the oil companies and super rich.

What are the Democrats going to do about it?
I would hope they would change it. Give them a break, they have only been in power less than a month.
As to the AMT they have pledged to raise the amount so it doesn't affect the middle class and does what it was designed to do.

 

BaliBabyDoc

Lifer
Jan 20, 2001
10,737
0
0
Originally posted by: bctbct
I have always been dissatisfied with tax payers footing the bill for this program. In reality someone who does not own a vehicle period uses less fuel and therefore contributes more to conversation.

If I was a hybrid buyer I would sure be asking myself how the manufacturers didnt know the ins and outs of this program. I wonder how many buyers were sold on this car by sales people touting this program to close the deal.

Does it seem possible that the manufacturers didnt know? Hard to believe that.

My guess is that the manufacturers did know . . . Ford and GM . . . b/c they (or their advocates) wanted it that way. The domestic automakers were behind the 8-ball. The credit was going to be popular, yet they had few (or no) options on the market and few in the pipeline . . . particularly in comparison to Toyota and Honda. The train had left the station . . . but there was ample opportunity to derail it.

On the front end, you cap sales (60k) and then begin to reduce the credit. The primary effect being that 'popular' vehicles (stylish, high fuel economy, plenty of features) and their manufacturers would be punished for their success . . . thereby leveling the playing field for lesser competition.

On the back end, you tweak eligibility so that many of the dual income, middle to upper middle income households that can buy your vehicle . . . will be discouraged from buying a hybrid.

If Toyota/Lexus continues to dominate with it's offerings, I expect little change in the law. But if GM or Ford develops decent entry-luxury car, SAV, or SUV offerings, they will scream bloody murder if the law isn't changed.

Now the gap between EPA-cycle fuel economy and 'likely' fuel economy . . . that's a place where manufacturers were definitely complicit.