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On February 26 2019 11:59 xDaunt wrote:Show nested quote +On February 26 2019 11:56 Doodsmack wrote:On February 26 2019 11:31 xDaunt wrote:On February 26 2019 09:15 Nebuchad wrote:On February 26 2019 00:40 DarkPlasmaBall wrote:On February 25 2019 23:37 FueledUpAndReadyToGo wrote:
Watch the well oiled machine and top deal maker at work. President and The United States Trade Representative Robert Lighthizer seem to have completely different views on what they have agreed on. Ending with 'ok ok we'll never use the term memorandum of understanding again'
Meanwhile the Chinese vice premier Liu He sitting there can't hide a chuckle of laughter at this absurd situation.
Never thought I'd actually say this, but Trump is right and the other guy is wrong about an MOU. "In business, an MOU is typically a legally non-binding agreement between two (or more) parties, that outlines terms and details of a mutual understanding or agreement, noting each party's requirements and responsibilities -- but without establishing a formal, legally enforceable contract (though an MOU is often a first step towards the development of a formal contract).[1][2]" https://en.wikipedia.org/wiki/Memorandum_of_understanding From the very same page: In international relations, MoUs fall under the broad category of treaties and should be registered in the United Nations treaty collection. In practice and in spite of the United Nations Office of Legal Affairs' insistence that registration be done to avoid 'secret diplomacy', MoUs are sometimes kept confidential. As a matter of law, the title of MoU does not necessarily mean the document is binding or not binding under international law. To determine whether a particular MoU is meant to be a legally binding document (i.e., a treaty), one needs to examine the parties’ intent as well as the signatories' position (e.g., Minister of Foreign Affairs vs. Minister of Environment). A careful analysis of the wording will also clarify the exact nature of the document. With this in mind the conversation becomes much clearer, and, to the surprise of nobody except perhaps xDaunt, Lighthizer is the one who is correct and Trump is the one who is ignorant. Let me interpret that for you: a document titled a "memorandum of understanding" is not binding under international law unless it reads like a treaty, at which point it is the same thing as a treaty. Let me just state as an aside that this is a beyond idiotic use of terminology. Going back to the video, Trump tells Lighthizer that he wants a binding agreement -- ie a treaty -- and objects to Lighthizer's use of MoU as a term until Lighthizer tells Trump that he is going to get a treaty out of it. So again, the problems are Lighthizer's use of terminology, not Trump's intent, and Lighthizer feeling compelled to open his mouth in the first place for no good reason. This is a very Trump friendly interpretation but the other possibility is that China is only willing to commit to a MOU, Lighthizer wanted to spin a MOU as a binding agreement, and Trump then cut in and destroyed the spin narrative. And presumably the reason Trump would cut in in that way is that Trump was unaware that China is only willing to commit to an MOU (which wouldn't be surprising that Trump is unaware). Trump has been caught being unaware of what his people are negotiating over in the past. He stated in a televised meeting that he would support a "clean DACA bill" before being corrected by his Republican colleagues. You could be right that China does not intend to enter into a binding agreement. We'll just have to wait and see. Regardless, Trump has made his intentions clear. He just needs to follow through with sanctions/tariffs if China doesn't play ball.
Again, Lighthizer says that you already have a binding agreement, and that agreement was called a MoU and is now called something different because Trump didn't like the word. Any takes on how China is unwilling to commit to more rely on Lighthizer lying about what you already have.
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United States41991 Posts
On February 26 2019 11:57 xDaunt wrote:Show nested quote +On February 26 2019 11:44 KwarK wrote:On February 26 2019 11:38 xDaunt wrote:On February 26 2019 10:45 KwarK wrote:On February 26 2019 10:25 Wegandi wrote:On February 26 2019 10:17 NewSunshine wrote:
My return was smaller this year than last, and I don't make much. I dunno if the tax cut passes the smell test.
You know, assuming you woke up today and didn't notice what was written into the alleged "tax cut" in the first place. You do know your "tax return" has zero to do with your tax rate, right? Also, while I certainly don't like taxes, there is some primordial satisfaction with the people in progressive states that have high tax rates which have been subsidized with SALT deductions no longer able to. You get to see the economic reality of what you vote for in your state. Can't say I'm crying a river there. SALT deduction isn’t a tax break and it’s certainly not a subsidy, it just means you’re not paying taxes on your taxes. You should know better than that. How can you not call it a tax break? That's exactly what it is. SALT taxes are wholly separate from federal taxes. All that the deduction does is let people reduce their federal tax burden by some amount to partially compensate for whatever they're paying in SALT taxes. For this reason, the SALT deduction encourages higher SALT taxes, thereby indirectly subsidizing SALT taxes. You can bet that state and local governments are going to be pressured to reduce the tax burdens on their citizens now that the citizenry is bearing the full brunt of those taxes. Cuomo is already sounding the alarm in New York. I don't call it a tax break because the people in high tax states pay higher taxes than the people in low tax states after the SALT deduction has been taken into account. What kind of tax break results in higher taxes? If I make $100k and the state takes $20k off the top of that then I shouldn't be taxed on the $20k I never got, I should be taxed on my $80k that take home income. It's perfectly consistent with not taxing you on stuff like health insurance contributions that come out of your paycheck before you see a penny of it.
If I make $100k in a state like Texas then the Feds take 20% then I pay $20k in tax. If I make $100k in a state with a 20% tax rate then I pay $20k to the state and $16k to the Feds (20% of the remaining $80k). That's not a tax break, that's considerably more tax paid than before. It'd be silly to simply apply both in parallel for a combined 40% share of the $100k. You do realize that this is an artificial construct that is not an accurate reflection of the financial/statutory reality, right? First, SALT taxes (including deductible ones) aren't limited to income taxes. Second, the marginal income tax schemes applied at the local, state, and federal levels are wholly independent from each other. Each constitutes a separate tax burden by design. Third, (and correct me if I'm wrong on this) the federal income tax burden isn't a singular entity, either. There are multiple components to the tax burden beyond the marginal rate. The cleanest way to deal with the cumulative taxation is to simply eliminate the SALT deduction, commensurately reduce federal taxes, and then let the states and localities figure out how much more that they want to rob from the citizens. It doesn't make sense to have the feds control those purse strings.
SALT deduction works the exact same way all of the deductions for socially valuable things does. If the income doesn't enrich you but instead goes to your church/cancer treatment/retirement savings/state taxes/college fees then the government tries not to tax you on that money because you don't have that money, it's already gone on something the government wanted you to do.
It's a pretty foundational concept as far as the US tax code works. Getting rid of the SALT deduction would be opening a gaping hole in the foundation that would leave a lot of cleaning up to do. You'd have a weird situation where if you gave money to Planned Parenthood you'd have a deduction but if you paid taxes to fix potholes in your town you'd not.
I'd correct you if you're wrong on the other components but I'm honestly not sure what you're trying to say. I'm trying to keep this at a super basic level though. That's why I'm using even effective tax rate amounts and presuming just two levels of taxation, state and Federal.
The long and the short of it though is that the SALT deduction is an integral part of the basic framework of "we're not going to tax you on money you don't have because you did something good with it" and if you're not going to get rid of that then it's here to stay.
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United States41991 Posts
On February 26 2019 11:59 Introvert wrote:Show nested quote +On February 26 2019 11:55 KwarK wrote:On February 26 2019 11:51 JimmiC wrote:On February 26 2019 11:48 KwarK wrote:On February 26 2019 11:46 JimmiC wrote:
I'm down with that, zero deductions mean zero loop holes. It would be a far simpler and be a much less expensive system to administer. The people who currently can pay top tax accountants to pay basically 0 taxes would lose that ability. Might be one of the best ways to have the rich pay more taxes. And have the brackets get higher and higher % wise as the people get richer, with no deductions.
The bad news is that tax accounting is a HUGE employer. Not just the accountants but all the Government workers as well. lol Are businesses still allowed to deduct their operating costs? The cost of their inventory? Because if not then it's unworkable. And if so you're straight back onto the "well no, obviously some deductions make logical sense" that got us here. Tax law got the way it did for a reason. This is a classic example of someone isn't intimately familiar with the situation deciding that it could all very easily be simplified if we just stopped making it so unnecessarily complicated. Yeah business would be able to deduct their costs. So there would still be accountants just not on the personal side. There would still be the IRS as well just much smaller. I also get that this idea though simplistic would have tons of issues in practice. It would. Are there any specific individual deductions you can point to and say "this one obviously doesn't make sense" or is it more of a feeling that there are too many deductions being abused? I'll bite, why does it make sense for federal taxes to be deductible, but not the reverse (maybe state taxes ought to be deductible from the feds). There is a strange issue here with owing tax to distinct and separate sovereigns. In this light, the most sensible course does seem to be to simply tax the income as it is. edit: i guess we could just roll this into xDaunt's post.
You've got it backwards, state taxes are deductible on the Federal side (after the standard deduction, in reality very few people actually get to deduct SALT now), Federal taxes aren't deductible. The situation you think ought to be is the situation that is. The situation you're asking me to justify to you wouldn't make any sense and isn't the actual situation.
Think about how Federal taxes being deductible would work for a second. You'd have Zeno's tax rate. You make $100k, pay 20%, owe $20k. Deduct the $20k, your income is now $80k. Now you only owe $16k. Add back in the $4k, your income is now $84k, and so forth.
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On February 26 2019 12:03 Nebuchad wrote:Show nested quote +On February 26 2019 11:59 xDaunt wrote:On February 26 2019 11:56 Doodsmack wrote:On February 26 2019 11:31 xDaunt wrote:On February 26 2019 09:15 Nebuchad wrote:On February 26 2019 00:40 DarkPlasmaBall wrote:On February 25 2019 23:37 FueledUpAndReadyToGo wrote:Watch the well oiled machine and top deal maker at work. President and The United States Trade Representative Robert Lighthizer seem to have completely different views on what they have agreed on. Ending with 'ok ok we'll never use the term memorandum of understanding again' Meanwhile the Chinese vice premier Liu He sitting there can't hide a chuckle of laughter at this absurd situation. https://twitter.com/economics/status/1099357290791022593 Never thought I'd actually say this, but Trump is right and the other guy is wrong about an MOU. "In business, an MOU is typically a legally non-binding agreement between two (or more) parties, that outlines terms and details of a mutual understanding or agreement, noting each party's requirements and responsibilities -- but without establishing a formal, legally enforceable contract (though an MOU is often a first step towards the development of a formal contract).[1][2]" https://en.wikipedia.org/wiki/Memorandum_of_understanding From the very same page: In international relations, MoUs fall under the broad category of treaties and should be registered in the United Nations treaty collection. In practice and in spite of the United Nations Office of Legal Affairs' insistence that registration be done to avoid 'secret diplomacy', MoUs are sometimes kept confidential. As a matter of law, the title of MoU does not necessarily mean the document is binding or not binding under international law. To determine whether a particular MoU is meant to be a legally binding document (i.e., a treaty), one needs to examine the parties’ intent as well as the signatories' position (e.g., Minister of Foreign Affairs vs. Minister of Environment). A careful analysis of the wording will also clarify the exact nature of the document. With this in mind the conversation becomes much clearer, and, to the surprise of nobody except perhaps xDaunt, Lighthizer is the one who is correct and Trump is the one who is ignorant. Let me interpret that for you: a document titled a "memorandum of understanding" is not binding under international law unless it reads like a treaty, at which point it is the same thing as a treaty. Let me just state as an aside that this is a beyond idiotic use of terminology. Going back to the video, Trump tells Lighthizer that he wants a binding agreement -- ie a treaty -- and objects to Lighthizer's use of MoU as a term until Lighthizer tells Trump that he is going to get a treaty out of it. So again, the problems are Lighthizer's use of terminology, not Trump's intent, and Lighthizer feeling compelled to open his mouth in the first place for no good reason. This is a very Trump friendly interpretation but the other possibility is that China is only willing to commit to a MOU, Lighthizer wanted to spin a MOU as a binding agreement, and Trump then cut in and destroyed the spin narrative. And presumably the reason Trump would cut in in that way is that Trump was unaware that China is only willing to commit to an MOU (which wouldn't be surprising that Trump is unaware). Trump has been caught being unaware of what his people are negotiating over in the past. He stated in a televised meeting that he would support a "clean DACA bill" before being corrected by his Republican colleagues. You could be right that China does not intend to enter into a binding agreement. We'll just have to wait and see. Regardless, Trump has made his intentions clear. He just needs to follow through with sanctions/tariffs if China doesn't play ball. Again, Lighthizer says that you already have a binding agreement, and that agreement was called a MoU and is now called something different because Trump didn't like the word. Any takes on how China is unwilling to commit to more rely on Lighthizer lying about what you already have.
This is wrong. Lighthizer said that there was no agreement yet and that there was a lot of work to do if there was going to be one.
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On February 26 2019 12:09 xDaunt wrote:Show nested quote +On February 26 2019 12:03 Nebuchad wrote:On February 26 2019 11:59 xDaunt wrote:On February 26 2019 11:56 Doodsmack wrote:On February 26 2019 11:31 xDaunt wrote:On February 26 2019 09:15 Nebuchad wrote:On February 26 2019 00:40 DarkPlasmaBall wrote:On February 25 2019 23:37 FueledUpAndReadyToGo wrote:Watch the well oiled machine and top deal maker at work. President and The United States Trade Representative Robert Lighthizer seem to have completely different views on what they have agreed on. Ending with 'ok ok we'll never use the term memorandum of understanding again' Meanwhile the Chinese vice premier Liu He sitting there can't hide a chuckle of laughter at this absurd situation. https://twitter.com/economics/status/1099357290791022593 Never thought I'd actually say this, but Trump is right and the other guy is wrong about an MOU. "In business, an MOU is typically a legally non-binding agreement between two (or more) parties, that outlines terms and details of a mutual understanding or agreement, noting each party's requirements and responsibilities -- but without establishing a formal, legally enforceable contract (though an MOU is often a first step towards the development of a formal contract).[1][2]" https://en.wikipedia.org/wiki/Memorandum_of_understanding From the very same page: In international relations, MoUs fall under the broad category of treaties and should be registered in the United Nations treaty collection. In practice and in spite of the United Nations Office of Legal Affairs' insistence that registration be done to avoid 'secret diplomacy', MoUs are sometimes kept confidential. As a matter of law, the title of MoU does not necessarily mean the document is binding or not binding under international law. To determine whether a particular MoU is meant to be a legally binding document (i.e., a treaty), one needs to examine the parties’ intent as well as the signatories' position (e.g., Minister of Foreign Affairs vs. Minister of Environment). A careful analysis of the wording will also clarify the exact nature of the document. With this in mind the conversation becomes much clearer, and, to the surprise of nobody except perhaps xDaunt, Lighthizer is the one who is correct and Trump is the one who is ignorant. Let me interpret that for you: a document titled a "memorandum of understanding" is not binding under international law unless it reads like a treaty, at which point it is the same thing as a treaty. Let me just state as an aside that this is a beyond idiotic use of terminology. Going back to the video, Trump tells Lighthizer that he wants a binding agreement -- ie a treaty -- and objects to Lighthizer's use of MoU as a term until Lighthizer tells Trump that he is going to get a treaty out of it. So again, the problems are Lighthizer's use of terminology, not Trump's intent, and Lighthizer feeling compelled to open his mouth in the first place for no good reason. This is a very Trump friendly interpretation but the other possibility is that China is only willing to commit to a MOU, Lighthizer wanted to spin a MOU as a binding agreement, and Trump then cut in and destroyed the spin narrative. And presumably the reason Trump would cut in in that way is that Trump was unaware that China is only willing to commit to an MOU (which wouldn't be surprising that Trump is unaware). Trump has been caught being unaware of what his people are negotiating over in the past. He stated in a televised meeting that he would support a "clean DACA bill" before being corrected by his Republican colleagues. You could be right that China does not intend to enter into a binding agreement. We'll just have to wait and see. Regardless, Trump has made his intentions clear. He just needs to follow through with sanctions/tariffs if China doesn't play ball. Again, Lighthizer says that you already have a binding agreement, and that agreement was called a MoU and is now called something different because Trump didn't like the word. Any takes on how China is unwilling to commit to more rely on Lighthizer lying about what you already have. This is wrong. Lighthizer said that there was no agreement yet and that there was a lot of work to do if there was going to be one.
Yes, sorry. The deal that they are in the process of making.
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You can’t compare SALT deductions to other deductions. SALT taxes are involuntary takings. Charitable donations are not.
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United States41991 Posts
On February 26 2019 12:14 xDaunt wrote:
You can’t compare SALT deductions to other deductions. SALT taxes are involuntary takings. Charitable donations are not.
What about cancer treatments? Are those voluntary? Rebuilding your home after a hurricane?
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On February 26 2019 12:14 KwarK wrote:Show nested quote +On February 26 2019 12:14 xDaunt wrote:
You can’t compare SALT deductions to other deductions. SALT taxes are involuntary takings. Charitable donations are not. What about cancer treatments? Are those voluntary?
Yep, from the perspective of whether they are government-compelled taxes, they are.
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On February 26 2019 12:09 KwarK wrote:Show nested quote +On February 26 2019 11:59 Introvert wrote:On February 26 2019 11:55 KwarK wrote:On February 26 2019 11:51 JimmiC wrote:On February 26 2019 11:48 KwarK wrote:On February 26 2019 11:46 JimmiC wrote:
I'm down with that, zero deductions mean zero loop holes. It would be a far simpler and be a much less expensive system to administer. The people who currently can pay top tax accountants to pay basically 0 taxes would lose that ability. Might be one of the best ways to have the rich pay more taxes. And have the brackets get higher and higher % wise as the people get richer, with no deductions.
The bad news is that tax accounting is a HUGE employer. Not just the accountants but all the Government workers as well. lol Are businesses still allowed to deduct their operating costs? The cost of their inventory? Because if not then it's unworkable. And if so you're straight back onto the "well no, obviously some deductions make logical sense" that got us here. Tax law got the way it did for a reason. This is a classic example of someone isn't intimately familiar with the situation deciding that it could all very easily be simplified if we just stopped making it so unnecessarily complicated. Yeah business would be able to deduct their costs. So there would still be accountants just not on the personal side. There would still be the IRS as well just much smaller. I also get that this idea though simplistic would have tons of issues in practice. It would. Are there any specific individual deductions you can point to and say "this one obviously doesn't make sense" or is it more of a feeling that there are too many deductions being abused? I'll bite, why does it make sense for federal taxes to be deductible, but not the reverse (maybe state taxes ought to be deductible from the feds). There is a strange issue here with owing tax to distinct and separate sovereigns. In this light, the most sensible course does seem to be to simply tax the income as it is. edit: i guess we could just roll this into xDaunt's post. You've got it backwards, state taxes are deductible on the Federal side (after the standard deduction, in reality very few people actually get to deduct SALT now), Federal taxes aren't deductible. The situation you think ought to be is the situation that is. The situation you're asking me to justify to you wouldn't make any sense and isn't the actual situation. Think about how Federal taxes being deductible would work for a second. You'd have Xeno's tax rate. You make $100k, pay 20%, owe $20k. Deduct the $20k, your income is now $80k. Now you only owe $16k. Add back in the $4k, your income is now $84k, and so forth.
that's what I asked, perhaps not very clearly. philosophically, is there a reason we should prefer that you can deduct taxes paid to the state from federal taxes? if you make 100k, why not let the feds have the first stab. Stop at "now you only owe 16k." this time to a state, not to the federal government. Literally just swap the names of the entities.
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On February 26 2019 12:18 Introvert wrote:Show nested quote +On February 26 2019 12:09 KwarK wrote:On February 26 2019 11:59 Introvert wrote:On February 26 2019 11:55 KwarK wrote:On February 26 2019 11:51 JimmiC wrote:On February 26 2019 11:48 KwarK wrote:On February 26 2019 11:46 JimmiC wrote:
I'm down with that, zero deductions mean zero loop holes. It would be a far simpler and be a much less expensive system to administer. The people who currently can pay top tax accountants to pay basically 0 taxes would lose that ability. Might be one of the best ways to have the rich pay more taxes. And have the brackets get higher and higher % wise as the people get richer, with no deductions.
The bad news is that tax accounting is a HUGE employer. Not just the accountants but all the Government workers as well. lol Are businesses still allowed to deduct their operating costs? The cost of their inventory? Because if not then it's unworkable. And if so you're straight back onto the "well no, obviously some deductions make logical sense" that got us here. Tax law got the way it did for a reason. This is a classic example of someone isn't intimately familiar with the situation deciding that it could all very easily be simplified if we just stopped making it so unnecessarily complicated. Yeah business would be able to deduct their costs. So there would still be accountants just not on the personal side. There would still be the IRS as well just much smaller. I also get that this idea though simplistic would have tons of issues in practice. It would. Are there any specific individual deductions you can point to and say "this one obviously doesn't make sense" or is it more of a feeling that there are too many deductions being abused? I'll bite, why does it make sense for federal taxes to be deductible, but not the reverse (maybe state taxes ought to be deductible from the feds). There is a strange issue here with owing tax to distinct and separate sovereigns. In this light, the most sensible course does seem to be to simply tax the income as it is. edit: i guess we could just roll this into xDaunt's post. You've got it backwards, state taxes are deductible on the Federal side (after the standard deduction, in reality very few people actually get to deduct SALT now), Federal taxes aren't deductible. The situation you think ought to be is the situation that is. The situation you're asking me to justify to you wouldn't make any sense and isn't the actual situation. Think about how Federal taxes being deductible would work for a second. You'd have Xeno's tax rate. You make $100k, pay 20%, owe $20k. Deduct the $20k, your income is now $80k. Now you only owe $16k. Add back in the $4k, your income is now $84k, and so forth. that's what I asked, perhaps not very clearly. philosophically, is there a reason we should prefer that you can deduct taxes paid to the state from federal taxes? if you make 100k, why not let the feds have the first stab. Stop at "now you only owe 16k." this time to a state, not to the federal government. Literally just swap the names of the entities.
It is because the government doesn't want to be seen as taxing peoples money twice. No one wants to pay property tax and then have to pay taxes on the income we used to pay property tax. As Kwark stated, it can create weird incentives. And on top of that, there is this under pinning that the government(collectively) only gets to tax you once.
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United States41991 Posts
On February 26 2019 12:18 Introvert wrote:Show nested quote +On February 26 2019 12:09 KwarK wrote:On February 26 2019 11:59 Introvert wrote:On February 26 2019 11:55 KwarK wrote:On February 26 2019 11:51 JimmiC wrote:On February 26 2019 11:48 KwarK wrote:On February 26 2019 11:46 JimmiC wrote:
I'm down with that, zero deductions mean zero loop holes. It would be a far simpler and be a much less expensive system to administer. The people who currently can pay top tax accountants to pay basically 0 taxes would lose that ability. Might be one of the best ways to have the rich pay more taxes. And have the brackets get higher and higher % wise as the people get richer, with no deductions.
The bad news is that tax accounting is a HUGE employer. Not just the accountants but all the Government workers as well. lol Are businesses still allowed to deduct their operating costs? The cost of their inventory? Because if not then it's unworkable. And if so you're straight back onto the "well no, obviously some deductions make logical sense" that got us here. Tax law got the way it did for a reason. This is a classic example of someone isn't intimately familiar with the situation deciding that it could all very easily be simplified if we just stopped making it so unnecessarily complicated. Yeah business would be able to deduct their costs. So there would still be accountants just not on the personal side. There would still be the IRS as well just much smaller. I also get that this idea though simplistic would have tons of issues in practice. It would. Are there any specific individual deductions you can point to and say "this one obviously doesn't make sense" or is it more of a feeling that there are too many deductions being abused? I'll bite, why does it make sense for federal taxes to be deductible, but not the reverse (maybe state taxes ought to be deductible from the feds). There is a strange issue here with owing tax to distinct and separate sovereigns. In this light, the most sensible course does seem to be to simply tax the income as it is. edit: i guess we could just roll this into xDaunt's post. You've got it backwards, state taxes are deductible on the Federal side (after the standard deduction, in reality very few people actually get to deduct SALT now), Federal taxes aren't deductible. The situation you think ought to be is the situation that is. The situation you're asking me to justify to you wouldn't make any sense and isn't the actual situation. Think about how Federal taxes being deductible would work for a second. You'd have Xeno's tax rate. You make $100k, pay 20%, owe $20k. Deduct the $20k, your income is now $80k. Now you only owe $16k. Add back in the $4k, your income is now $84k, and so forth. that's what I asked, perhaps not very clearly. philosophically, is there a reason we should prefer that you can deduct taxes paid to the state from federal taxes? if you make 100k, why not let the feds have the first stab. Stop at "now you only owe 16k." this time to a state, not to the federal government. Literally just swap the names of the entities.
Not especially I suppose. It just wouldn't integrate easily into the existing system. We already have it set up that the Feds give you a break on income you don't have because you used it in a socially beneficial way. But sure, having states give a break for Fed taxes would also avoid the double taxation issue.
It's definitely not a subsidy though. No more than the government is subsidizing people who have no disposable income because they spent it all on chemo by saying "you've got no money so we're not going to tax you on the no money that you have".
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On February 26 2019 10:25 Wegandi wrote:Show nested quote +On February 26 2019 10:17 NewSunshine wrote:
My return was smaller this year than last, and I don't make much. I dunno if the tax cut passes the smell test.
You know, assuming you woke up today and didn't notice what was written into the alleged "tax cut" in the first place. You do know your "tax return" has zero to do with your tax rate, right? Also, while I certainly don't like taxes, there is some primordial satisfaction with the people in progressive states that have high tax rates which have been subsidized with SALT deductions no longer able to. You get to see the economic reality of what you vote for in your state. Can't say I'm crying a river there.
I don't expect you to cry a river for anybody. And you don't know where I live. But thanks for the unsolicited knowledge bomb anyway. I'm sure all the other voters who got taxed more this year who don't know as much as Kwark about the tax code would like one too.
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On February 26 2019 12:23 KwarK wrote:Show nested quote +On February 26 2019 12:18 Introvert wrote:On February 26 2019 12:09 KwarK wrote:On February 26 2019 11:59 Introvert wrote:On February 26 2019 11:55 KwarK wrote:On February 26 2019 11:51 JimmiC wrote:On February 26 2019 11:48 KwarK wrote:On February 26 2019 11:46 JimmiC wrote:
I'm down with that, zero deductions mean zero loop holes. It would be a far simpler and be a much less expensive system to administer. The people who currently can pay top tax accountants to pay basically 0 taxes would lose that ability. Might be one of the best ways to have the rich pay more taxes. And have the brackets get higher and higher % wise as the people get richer, with no deductions.
The bad news is that tax accounting is a HUGE employer. Not just the accountants but all the Government workers as well. lol Are businesses still allowed to deduct their operating costs? The cost of their inventory? Because if not then it's unworkable. And if so you're straight back onto the "well no, obviously some deductions make logical sense" that got us here. Tax law got the way it did for a reason. This is a classic example of someone isn't intimately familiar with the situation deciding that it could all very easily be simplified if we just stopped making it so unnecessarily complicated. Yeah business would be able to deduct their costs. So there would still be accountants just not on the personal side. There would still be the IRS as well just much smaller. I also get that this idea though simplistic would have tons of issues in practice. It would. Are there any specific individual deductions you can point to and say "this one obviously doesn't make sense" or is it more of a feeling that there are too many deductions being abused? I'll bite, why does it make sense for federal taxes to be deductible, but not the reverse (maybe state taxes ought to be deductible from the feds). There is a strange issue here with owing tax to distinct and separate sovereigns. In this light, the most sensible course does seem to be to simply tax the income as it is. edit: i guess we could just roll this into xDaunt's post. You've got it backwards, state taxes are deductible on the Federal side (after the standard deduction, in reality very few people actually get to deduct SALT now), Federal taxes aren't deductible. The situation you think ought to be is the situation that is. The situation you're asking me to justify to you wouldn't make any sense and isn't the actual situation. Think about how Federal taxes being deductible would work for a second. You'd have Xeno's tax rate. You make $100k, pay 20%, owe $20k. Deduct the $20k, your income is now $80k. Now you only owe $16k. Add back in the $4k, your income is now $84k, and so forth. that's what I asked, perhaps not very clearly. philosophically, is there a reason we should prefer that you can deduct taxes paid to the state from federal taxes? if you make 100k, why not let the feds have the first stab. Stop at "now you only owe 16k." this time to a state, not to the federal government. Literally just swap the names of the entities. Not especially I suppose. It just wouldn't integrate easily into the existing system. We already have it set up that the Feds give you a break on income you don't have because you used it in a socially beneficial way. But sure, having states give a break for Fed taxes would also avoid the double taxation issue. It's definitely not a subsidy though. No more than the government is subsidizing people who have no disposable income because they spent it all on chemo by saying "you've got no money so we're not going to tax you on the no money that you have".
ok, I was curious if yours was mainly a utility argument.
I would never call it a subsidy because I don't believe that money the people keep "belongs" to the state. but that's a matter of language,moreso. well, and philosophy, I guess.
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On February 26 2019 12:23 Plansix wrote:Show nested quote +On February 26 2019 12:18 Introvert wrote:On February 26 2019 12:09 KwarK wrote:On February 26 2019 11:59 Introvert wrote:On February 26 2019 11:55 KwarK wrote:On February 26 2019 11:51 JimmiC wrote:On February 26 2019 11:48 KwarK wrote:On February 26 2019 11:46 JimmiC wrote:
I'm down with that, zero deductions mean zero loop holes. It would be a far simpler and be a much less expensive system to administer. The people who currently can pay top tax accountants to pay basically 0 taxes would lose that ability. Might be one of the best ways to have the rich pay more taxes. And have the brackets get higher and higher % wise as the people get richer, with no deductions.
The bad news is that tax accounting is a HUGE employer. Not just the accountants but all the Government workers as well. lol Are businesses still allowed to deduct their operating costs? The cost of their inventory? Because if not then it's unworkable. And if so you're straight back onto the "well no, obviously some deductions make logical sense" that got us here. Tax law got the way it did for a reason. This is a classic example of someone isn't intimately familiar with the situation deciding that it could all very easily be simplified if we just stopped making it so unnecessarily complicated. Yeah business would be able to deduct their costs. So there would still be accountants just not on the personal side. There would still be the IRS as well just much smaller. I also get that this idea though simplistic would have tons of issues in practice. It would. Are there any specific individual deductions you can point to and say "this one obviously doesn't make sense" or is it more of a feeling that there are too many deductions being abused? I'll bite, why does it make sense for federal taxes to be deductible, but not the reverse (maybe state taxes ought to be deductible from the feds). There is a strange issue here with owing tax to distinct and separate sovereigns. In this light, the most sensible course does seem to be to simply tax the income as it is. edit: i guess we could just roll this into xDaunt's post. You've got it backwards, state taxes are deductible on the Federal side (after the standard deduction, in reality very few people actually get to deduct SALT now), Federal taxes aren't deductible. The situation you think ought to be is the situation that is. The situation you're asking me to justify to you wouldn't make any sense and isn't the actual situation. Think about how Federal taxes being deductible would work for a second. You'd have Xeno's tax rate. You make $100k, pay 20%, owe $20k. Deduct the $20k, your income is now $80k. Now you only owe $16k. Add back in the $4k, your income is now $84k, and so forth. that's what I asked, perhaps not very clearly. philosophically, is there a reason we should prefer that you can deduct taxes paid to the state from federal taxes? if you make 100k, why not let the feds have the first stab. Stop at "now you only owe 16k." this time to a state, not to the federal government. Literally just swap the names of the entities. It is because the government doesn't want to be seen as taxing peoples money twice. No one wants to pay property tax and then have to pay taxes on the income we used to pay property tax. As Kwark stated, it can create weird incentives. And on top of that, there is this under pinning that the government(collectively) only gets to tax you once.
The government already does tax us multiple times. The weird incentives are already created as a direct function of the tax code and its deduction scheme. Kwark has it backwards.
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United States41991 Posts
On February 26 2019 12:25 Introvert wrote:Show nested quote +On February 26 2019 12:23 KwarK wrote:On February 26 2019 12:18 Introvert wrote:On February 26 2019 12:09 KwarK wrote:On February 26 2019 11:59 Introvert wrote:On February 26 2019 11:55 KwarK wrote:On February 26 2019 11:51 JimmiC wrote:On February 26 2019 11:48 KwarK wrote:On February 26 2019 11:46 JimmiC wrote:
I'm down with that, zero deductions mean zero loop holes. It would be a far simpler and be a much less expensive system to administer. The people who currently can pay top tax accountants to pay basically 0 taxes would lose that ability. Might be one of the best ways to have the rich pay more taxes. And have the brackets get higher and higher % wise as the people get richer, with no deductions.
The bad news is that tax accounting is a HUGE employer. Not just the accountants but all the Government workers as well. lol Are businesses still allowed to deduct their operating costs? The cost of their inventory? Because if not then it's unworkable. And if so you're straight back onto the "well no, obviously some deductions make logical sense" that got us here. Tax law got the way it did for a reason. This is a classic example of someone isn't intimately familiar with the situation deciding that it could all very easily be simplified if we just stopped making it so unnecessarily complicated. Yeah business would be able to deduct their costs. So there would still be accountants just not on the personal side. There would still be the IRS as well just much smaller. I also get that this idea though simplistic would have tons of issues in practice. It would. Are there any specific individual deductions you can point to and say "this one obviously doesn't make sense" or is it more of a feeling that there are too many deductions being abused? I'll bite, why does it make sense for federal taxes to be deductible, but not the reverse (maybe state taxes ought to be deductible from the feds). There is a strange issue here with owing tax to distinct and separate sovereigns. In this light, the most sensible course does seem to be to simply tax the income as it is. edit: i guess we could just roll this into xDaunt's post. You've got it backwards, state taxes are deductible on the Federal side (after the standard deduction, in reality very few people actually get to deduct SALT now), Federal taxes aren't deductible. The situation you think ought to be is the situation that is. The situation you're asking me to justify to you wouldn't make any sense and isn't the actual situation. Think about how Federal taxes being deductible would work for a second. You'd have Xeno's tax rate. You make $100k, pay 20%, owe $20k. Deduct the $20k, your income is now $80k. Now you only owe $16k. Add back in the $4k, your income is now $84k, and so forth. that's what I asked, perhaps not very clearly. philosophically, is there a reason we should prefer that you can deduct taxes paid to the state from federal taxes? if you make 100k, why not let the feds have the first stab. Stop at "now you only owe 16k." this time to a state, not to the federal government. Literally just swap the names of the entities. Not especially I suppose. It just wouldn't integrate easily into the existing system. We already have it set up that the Feds give you a break on income you don't have because you used it in a socially beneficial way. But sure, having states give a break for Fed taxes would also avoid the double taxation issue. It's definitely not a subsidy though. No more than the government is subsidizing people who have no disposable income because they spent it all on chemo by saying "you've got no money so we're not going to tax you on the no money that you have". ok, I was curious if yours was mainly a utility argument. I would never call it a subsidy because I don't believe that money the people keep "belongs" to the state. but that's a matter of language, moreso.
In terms of avoiding double taxation you could implement it in either direction, as you say.
In terms of the overall intent and design of the US taxation system I think the SALT deduction makes perfect sense. The fact that it, along with the other deductions, have been gutted by the tax reform is a really bad thing. There are a lot of folks out there who will be very disappointed to learn that the government isn't giving them any credit for tithing anymore, for example.
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On February 26 2019 12:26 xDaunt wrote:Show nested quote +On February 26 2019 12:23 Plansix wrote:On February 26 2019 12:18 Introvert wrote:On February 26 2019 12:09 KwarK wrote:On February 26 2019 11:59 Introvert wrote:On February 26 2019 11:55 KwarK wrote:On February 26 2019 11:51 JimmiC wrote:On February 26 2019 11:48 KwarK wrote:On February 26 2019 11:46 JimmiC wrote:
I'm down with that, zero deductions mean zero loop holes. It would be a far simpler and be a much less expensive system to administer. The people who currently can pay top tax accountants to pay basically 0 taxes would lose that ability. Might be one of the best ways to have the rich pay more taxes. And have the brackets get higher and higher % wise as the people get richer, with no deductions.
The bad news is that tax accounting is a HUGE employer. Not just the accountants but all the Government workers as well. lol Are businesses still allowed to deduct their operating costs? The cost of their inventory? Because if not then it's unworkable. And if so you're straight back onto the "well no, obviously some deductions make logical sense" that got us here. Tax law got the way it did for a reason. This is a classic example of someone isn't intimately familiar with the situation deciding that it could all very easily be simplified if we just stopped making it so unnecessarily complicated. Yeah business would be able to deduct their costs. So there would still be accountants just not on the personal side. There would still be the IRS as well just much smaller. I also get that this idea though simplistic would have tons of issues in practice. It would. Are there any specific individual deductions you can point to and say "this one obviously doesn't make sense" or is it more of a feeling that there are too many deductions being abused? I'll bite, why does it make sense for federal taxes to be deductible, but not the reverse (maybe state taxes ought to be deductible from the feds). There is a strange issue here with owing tax to distinct and separate sovereigns. In this light, the most sensible course does seem to be to simply tax the income as it is. edit: i guess we could just roll this into xDaunt's post. You've got it backwards, state taxes are deductible on the Federal side (after the standard deduction, in reality very few people actually get to deduct SALT now), Federal taxes aren't deductible. The situation you think ought to be is the situation that is. The situation you're asking me to justify to you wouldn't make any sense and isn't the actual situation. Think about how Federal taxes being deductible would work for a second. You'd have Xeno's tax rate. You make $100k, pay 20%, owe $20k. Deduct the $20k, your income is now $80k. Now you only owe $16k. Add back in the $4k, your income is now $84k, and so forth. that's what I asked, perhaps not very clearly. philosophically, is there a reason we should prefer that you can deduct taxes paid to the state from federal taxes? if you make 100k, why not let the feds have the first stab. Stop at "now you only owe 16k." this time to a state, not to the federal government. Literally just swap the names of the entities. It is because the government doesn't want to be seen as taxing peoples money twice. No one wants to pay property tax and then have to pay taxes on the income we used to pay property tax. As Kwark stated, it can create weird incentives. And on top of that, there is this under pinning that the government(collectively) only gets to tax you once. The government already does tax us multiple times. The weird incentives are already created as a direct function of the tax code and its deduction scheme. Kwark has it backwards.
No shit. That doesn't mean we compound the weird incentives by increasing the taxes people have to pay after the are done paying their state taxes. I know who is backwards in this discussion.
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United States41991 Posts
On February 26 2019 12:26 xDaunt wrote:Show nested quote +On February 26 2019 12:23 Plansix wrote:On February 26 2019 12:18 Introvert wrote:On February 26 2019 12:09 KwarK wrote:On February 26 2019 11:59 Introvert wrote:On February 26 2019 11:55 KwarK wrote:On February 26 2019 11:51 JimmiC wrote:On February 26 2019 11:48 KwarK wrote:On February 26 2019 11:46 JimmiC wrote:
I'm down with that, zero deductions mean zero loop holes. It would be a far simpler and be a much less expensive system to administer. The people who currently can pay top tax accountants to pay basically 0 taxes would lose that ability. Might be one of the best ways to have the rich pay more taxes. And have the brackets get higher and higher % wise as the people get richer, with no deductions.
The bad news is that tax accounting is a HUGE employer. Not just the accountants but all the Government workers as well. lol Are businesses still allowed to deduct their operating costs? The cost of their inventory? Because if not then it's unworkable. And if so you're straight back onto the "well no, obviously some deductions make logical sense" that got us here. Tax law got the way it did for a reason. This is a classic example of someone isn't intimately familiar with the situation deciding that it could all very easily be simplified if we just stopped making it so unnecessarily complicated. Yeah business would be able to deduct their costs. So there would still be accountants just not on the personal side. There would still be the IRS as well just much smaller. I also get that this idea though simplistic would have tons of issues in practice. It would. Are there any specific individual deductions you can point to and say "this one obviously doesn't make sense" or is it more of a feeling that there are too many deductions being abused? I'll bite, why does it make sense for federal taxes to be deductible, but not the reverse (maybe state taxes ought to be deductible from the feds). There is a strange issue here with owing tax to distinct and separate sovereigns. In this light, the most sensible course does seem to be to simply tax the income as it is. edit: i guess we could just roll this into xDaunt's post. You've got it backwards, state taxes are deductible on the Federal side (after the standard deduction, in reality very few people actually get to deduct SALT now), Federal taxes aren't deductible. The situation you think ought to be is the situation that is. The situation you're asking me to justify to you wouldn't make any sense and isn't the actual situation. Think about how Federal taxes being deductible would work for a second. You'd have Xeno's tax rate. You make $100k, pay 20%, owe $20k. Deduct the $20k, your income is now $80k. Now you only owe $16k. Add back in the $4k, your income is now $84k, and so forth. that's what I asked, perhaps not very clearly. philosophically, is there a reason we should prefer that you can deduct taxes paid to the state from federal taxes? if you make 100k, why not let the feds have the first stab. Stop at "now you only owe 16k." this time to a state, not to the federal government. Literally just swap the names of the entities. It is because the government doesn't want to be seen as taxing peoples money twice. No one wants to pay property tax and then have to pay taxes on the income we used to pay property tax. As Kwark stated, it can create weird incentives. And on top of that, there is this under pinning that the government(collectively) only gets to tax you once. The government already does tax us multiple times. The weird incentives are already created as a direct function of the tax code and its deduction scheme. Kwark has it backwards.
Here's a reminder of what happened the last time you tried to explain taxes to us.
On November 03 2017 03:23 xDaunt wrote:Show nested quote +On November 03 2017 03:20 KwarK wrote:On November 03 2017 03:16 xDaunt wrote:On November 03 2017 03:13 xDaunt wrote:On November 03 2017 02:52 KwarK wrote:On November 03 2017 02:48 xDaunt wrote:On November 03 2017 02:32 KwarK wrote:On November 03 2017 02:28 xDaunt wrote:
Biggest thing for the tax plan -- go buy your homes now before this thing passes, particularly if you're in a region with high property values. The value of itemizing has been halved by the doubling of the standard deduction. Let's say you're getting a 3% mortgage on a million dollar home. That's $30,000 of deductible interest. The standard deduction is $24,400, giving you a tax deduction of $5,600, worth $1,400 at the 25% bracket. Probably hold off on buying that million dollar home for the tax benefit. If you're buying a home where the mortgage is $500k or greater, you're probably going to have plenty of other deductions to throw in as well and a high enough income such that you'll want to lock in your home now to benefit from the full mortgage deduction for the long term. Care to name a few of the plenty of other deductions thrown in? State and local tax deduction is getting capped while medical is getting eliminated entirely. Here's a schedule A for you. https://www.irs.gov/pub/irs-pdf/f1040sa.pdfI think you'll have trouble finding $25k on there without medical, and with state and local taxes capped. The business deductions can be huge. The Lines 21-27 stuff. Those aren't the business deductions. You're thinking of the Schedule C. Completely different form. Here you go. https://www.irs.gov/pub/irs-pdf/f1040sc.pdfAlso read lines 25-27 of that and see if you can work out what they do. Yep, you're right.
A lot of the perverse incentives re: deductions are actually exaggerated by the TCJA. I've said it a few times before but basically exemptions and the standard deduction were different things for a reason and by combining the two of them you're taking away the value of the tax breaks for charitable donations, healthcare costs, disaster relief, and so forth.
Exemptions = a 0% tax bracket indexed to inflation that varies with your family size. Designed to ensure that you're not being taxed on the money you're using for bread ($4,100 per family member)
Deductions = no tax paid on your socially beneficial expenses
Standard deduction = we're gonna assume that you had at least some healthcare costs, property taxes, charitable donations etc so rather than make you fuck around with keeping a dozen $10 receipts we'll just give you a flat amount and then if it was more than that you can tell us
The problem = the higher the standard deduction the lower the benefit of actually doing any of that stuff is because you get credit for it whether you did it or not. A married couple need to donate $24,000 to charity before they see any benefit over the couple who didn't give shit, and then they just get the tax break on the marginal amount over that.
Ideally the exemption should be higher and the standard deduction should be lowered to the point where it doesn't create an undue reporting burden on individuals to keep receipts for everything, maybe $1,000. They've done the opposite, scrapping the exemption and telling people they can make up for it with a higher standard deduction. That math only works out if you weren't planning on having any deductible expenses in the first place. If you were then you get fucked.
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On February 26 2019 12:32 KwarK wrote:Show nested quote +On February 26 2019 12:26 xDaunt wrote:On February 26 2019 12:23 Plansix wrote:On February 26 2019 12:18 Introvert wrote:On February 26 2019 12:09 KwarK wrote:On February 26 2019 11:59 Introvert wrote:On February 26 2019 11:55 KwarK wrote:On February 26 2019 11:51 JimmiC wrote:On February 26 2019 11:48 KwarK wrote:On February 26 2019 11:46 JimmiC wrote:
I'm down with that, zero deductions mean zero loop holes. It would be a far simpler and be a much less expensive system to administer. The people who currently can pay top tax accountants to pay basically 0 taxes would lose that ability. Might be one of the best ways to have the rich pay more taxes. And have the brackets get higher and higher % wise as the people get richer, with no deductions.
The bad news is that tax accounting is a HUGE employer. Not just the accountants but all the Government workers as well. lol Are businesses still allowed to deduct their operating costs? The cost of their inventory? Because if not then it's unworkable. And if so you're straight back onto the "well no, obviously some deductions make logical sense" that got us here. Tax law got the way it did for a reason. This is a classic example of someone isn't intimately familiar with the situation deciding that it could all very easily be simplified if we just stopped making it so unnecessarily complicated. Yeah business would be able to deduct their costs. So there would still be accountants just not on the personal side. There would still be the IRS as well just much smaller. I also get that this idea though simplistic would have tons of issues in practice. It would. Are there any specific individual deductions you can point to and say "this one obviously doesn't make sense" or is it more of a feeling that there are too many deductions being abused? I'll bite, why does it make sense for federal taxes to be deductible, but not the reverse (maybe state taxes ought to be deductible from the feds). There is a strange issue here with owing tax to distinct and separate sovereigns. In this light, the most sensible course does seem to be to simply tax the income as it is. edit: i guess we could just roll this into xDaunt's post. You've got it backwards, state taxes are deductible on the Federal side (after the standard deduction, in reality very few people actually get to deduct SALT now), Federal taxes aren't deductible. The situation you think ought to be is the situation that is. The situation you're asking me to justify to you wouldn't make any sense and isn't the actual situation. Think about how Federal taxes being deductible would work for a second. You'd have Xeno's tax rate. You make $100k, pay 20%, owe $20k. Deduct the $20k, your income is now $80k. Now you only owe $16k. Add back in the $4k, your income is now $84k, and so forth. that's what I asked, perhaps not very clearly. philosophically, is there a reason we should prefer that you can deduct taxes paid to the state from federal taxes? if you make 100k, why not let the feds have the first stab. Stop at "now you only owe 16k." this time to a state, not to the federal government. Literally just swap the names of the entities. It is because the government doesn't want to be seen as taxing peoples money twice. No one wants to pay property tax and then have to pay taxes on the income we used to pay property tax. As Kwark stated, it can create weird incentives. And on top of that, there is this under pinning that the government(collectively) only gets to tax you once. The government already does tax us multiple times. The weird incentives are already created as a direct function of the tax code and its deduction scheme. Kwark has it backwards. Here's a reminder of what happened the last time you tried to explain taxes to us. Show nested quote +On November 03 2017 03:23 xDaunt wrote:On November 03 2017 03:20 KwarK wrote:On November 03 2017 03:16 xDaunt wrote:On November 03 2017 03:13 xDaunt wrote:On November 03 2017 02:52 KwarK wrote:On November 03 2017 02:48 xDaunt wrote:On November 03 2017 02:32 KwarK wrote:On November 03 2017 02:28 xDaunt wrote:
Biggest thing for the tax plan -- go buy your homes now before this thing passes, particularly if you're in a region with high property values. The value of itemizing has been halved by the doubling of the standard deduction. Let's say you're getting a 3% mortgage on a million dollar home. That's $30,000 of deductible interest. The standard deduction is $24,400, giving you a tax deduction of $5,600, worth $1,400 at the 25% bracket. Probably hold off on buying that million dollar home for the tax benefit. If you're buying a home where the mortgage is $500k or greater, you're probably going to have plenty of other deductions to throw in as well and a high enough income such that you'll want to lock in your home now to benefit from the full mortgage deduction for the long term. Care to name a few of the plenty of other deductions thrown in? State and local tax deduction is getting capped while medical is getting eliminated entirely. Here's a schedule A for you. https://www.irs.gov/pub/irs-pdf/f1040sa.pdfI think you'll have trouble finding $25k on there without medical, and with state and local taxes capped. The business deductions can be huge. The Lines 21-27 stuff. Those aren't the business deductions. You're thinking of the Schedule C. Completely different form. Here you go. https://www.irs.gov/pub/irs-pdf/f1040sc.pdfAlso read lines 25-27 of that and see if you can work out what they do. Yep, you're right.
Doesn't mean you're right this time. The effect of deductions on behavior really has nothing to do with the tax code. It's Econ 101, which I am more than comfortable with. Hell, by your own admission, the purpose of keeping the deductions in place is to incentivize people to keep donating to good causes. Regardless of whether that's good or not, it is still a distortion that incentivizes people to do things other than what they'd otherwise do if left alone. Similar distortions result from SALT deductions.
Let me just cut right to the heart of the matter for you. Leftist tax policy is designed to have higher tax rates that are offset by lots of deductions because leftists want to use the tax code as yet another tool to control people and manipulate their behavior. If that's what you want, fine, that's a legit policy argument. But own it for what it is rather than try to come up with some convoluted argument for why eliminating deductions actually distorts behavior.
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United States41991 Posts
It's not just good causes, it's people who have no income because they're spending it all recovering from a hurricane, people with healthcare costs, that kind of thing.
If your income on paper looks great but the reality is all that income was already earmarked for something then the government doesn't want the money you don't have anyway. It's not just an econ thing, it's a politics thing. The government doesn't want to put tax liens on all the houses in the hurricane Harvey disaster area after they spent all their income on hurricane shit instead of paying taxes. Nobody, except you, wants that.
You characterize these things as distortions to the market. I view them as common sense. If someone has no money because of cancer then I don't think we should be taxing the money they don't have, and I'm fully prepared to accept the moral risk that the preferential treatment of cancer patients might influence the decisions of individuals. I'm not worried that we may be incentivizing individuals to get hit by hurricanes or contract terminal illnesses, I value the common sense and compassion over that kind of social Darwinism.
I'm also slightly confused by the characterization of there being lots of deductions, have you actually looked at a Schedule A? There's healthcare, home interest, investment interest, charitable, and theft/disaster. Five deductions. Technically there are some other things on the Schedule A but stuff like the gambling loss deduction is just an offset to gambling income so you're just taxed on the net winnings (+$24k because fuck you gamblers). Those aren't true deductions, they're just on there because they had to be somewhere.
Also deductions don't really distort the actions of individuals much, they're not the same thing as tax credits (which you may have them confused with). A deduction doesn't pay you to do an action, it just doesn't tax you on the money you used to do the action. You're still out all that money in the first place. Nobody benefits by creating additional deductible expenses. That seems like a misunderstanding of the old "child tax credit = paying the poor to reproduce" shit that has someone migrated onto the Schedule A deductions, despite the two having no rational connection.
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also, that money being spent is already subject to a consumption (sales) tax, and/or an income tax on the guy you're paying.
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EPT
