Monday, March 16, 2009

Echo Chamber

Just as Obama has gone after charitable organizations and churches by reducing the amount that can be deducted on your taxes (only if you're in the top two income tax brackets of course) we have our own Socialist here in Minnesota- Bloomington Representative Ann Lenczewski proposing the same type of legislation. The DFL House Tax Committee Chair takes it step further and also wants further reduce deductions allowed for child care, dependent care and the big one- mortgage interest- for those at higher income levels. (Obama's going to be proposing the same things very soon- they all have the same playbook).

This is an excellent blog from the Wall Street Journal on what Obama is trying to accomplish- a European model where people see the state as the provider of charity- not the individual. I also completely agree with the blogger when he says he'd be happy to get rid of all deductions in return for a simpler, flatter tax. But since that ain't happening anytime soon, we'd like the full value of the limited deductions we qualify for- thank you very much- because we don't qualify for most of the "credits".

From the Star Trib today:

The top House Democrat on tax issues said Monday she wants to eliminate a host of tax breaks while cutting income taxes for those of modest means and giving businesses two long-sought tax changes.

The proposal would lower the tax rates for the two lowest income categories, while creating new simplified tax credits for mortgage interest, charitable contributions and family expenses.

Here's the legislation proposed today. I've read through it and have done some calculations, but will wait until there's some analysis out there to confirm my conclusions. Our tax code is purposely convoluted and complicated so that people can't easily figure out the impacts.

For married couples filing jointly, the top bracket (7.85%) will kick-in at $102,030 vs $131,970-- look for the MN DFL to follow up soon with a new tier and higher rate on top of this change. It was 9.6% that passed through the MN Senate in 2007- will they bill bold enough to propose the same?


Jim said...

I was going to say something about "if you're going to eliminate 'em, eliminate 'em for everyone" but you already made that point.

The tax code is terrible. Sure, it can be done with an EZ form if you like to pay more than you should, but that shouldn't be the way it works.

But think of all the "jobs" you create for accountants and tax advisers. Yes, but if these are only needed to satisfy the government bureaucracy, they are not really productive jobs. If the government mandated the people dig ditches while others fill the holes in the ground, we'd have high employment but low real, useful productivity.

Yes, you can save money by spending hours farting around with your taxes or paying someone to do it for you, but it's all just a drain on society (so they can suck money out of us to spend on other wasteful programs).

Various lobbyists work to get loopholes installed for their employers and you end up with tax code tailored to specific companies while the rest of us have to eat cost (with higher taxes, debt interest payments, and inflation to make up the difference).

I don't oppose encouraging business with low taxes, but if the tax code is so obscure and only applies to one or two companies, it's not really "fair" and it's more like government-sponsored corporate favoritism that stifles competition.

I wouldn't oppose a "fair tax" or "flat tax" or some kind of streamlining of the code, but it has to come with government spending cuts. If all the redesigned tax system does is keep the government spending the same amount of money (with a new way to use a national sales tax to get internet transactions or something), then it's not that helpful.

Ideally, you could cut the federal spending to such a point where individual income tax isn't necessary. Of course, then they couldn't use it as a glorified welfare wealth redistribution scheme to buy votes with EITC, etc.

People voted for "change" but they're just getting minor adjustments (and the adjustments are in the wrong direction) on top of a big steaming pile of the same old stuff.

If only there was some kind of old yellow document that described how to set up a federal government with limited powers, checks and balances, state's rights, etc...

Goose said...

Unreal, just unreal. Ann, step out of the bubble and into the real world!

Yeah, that's a great idea, let's try to not incent people to employ help for childcare (i.e. - create jobs), reduce their incentive to give to charities (i.e. - wealth redistribution), and take away the mortgage interest deduction (i.e. - housing market sales).

Ann, Obama won 53% to 47% nationally. This is not a mandate. 53 million people voted for McCain and don't agree with your liberal platform.

In Minnesota, Obama won 54% to 44% and by about 300,000 votes. But, about 200,000 extra of those came from Hennepin County, another 100,000 from Ramsey, and some 40,000 from St. Louis (the Range). These aren't representative of the entire state of MN, stop legislating that way! Have some self restraint for God's sake...

Pawlenty better veto this puppy.