The Way Forward: End Tax Expenditures

[g5000]

Since there has been a lot of talk lately about Obama won because he gave gifts to negroes, I am thinking this is the perfect opportunity to discuss the biggest government gift-giving of all: tax expenditures.

Tax expenditures are the government's way of spending money without appropriating it. They are called all sorts of other names. Loopholes, credits, boondoggles, deductions, etc.

Two people can earn the exact same pay, but one pays less taxes than the other because they bought a house or have kids.

The more wealthy you are, the bigger deduction you get for buying a bigger house. This means the mortgage interest rate deduction is a hugely regressive tax.

Last year in Congress, the bipartisan Joint Committee on Taxation determined that tax expenditures cost the government $1 trillion dollars a year.

That $1 trillion that some people are getting off the hook for has to come out of someone else's hide.

It's time to end this practice once and for all.

Tax expenditures are much easier to hide than, say, Obama's plan to raise the income tax margins for the top 2 percent.

A tax expenditure can be hidden by a bought off Congressman as a rider to just about any bill that is in the pipeline. The expenditure doesn't even have to do with anything that the bill it is riding on is about!

The right bitches about "gifts". The left bitches about "fair share". Eliminating tax expenditures kills both bitches with one stone.

If you earn $50,000 and your neighbor earns $50,000, you could both rest assured you are paying the same amount of taxes.

And for resource purposes, here are the figures for tax revenues, outlays, and the amount of surplus or deficit for each year:

Historical Federal Receipt and Outlay Summary

I have calculated the percentage of growth or reduction of federal revenues from the period one year after Clinton took office to the most current year.

1994: +9%
1995: +7.4%
1996: +7.4%
1997: +8.7%
1998: +9%
1999: +6.1%
2000: +10.8%
2001: -1.7%
2002: -7%
2003: -3.9%
2004: +5.5%
2005: +14.5%
2006: +11.8%
2007: +6.7%
2008: -1.8%
2009: -16.7%
2010: +2.7%
2011: +6.5%



There were two Bush tax cuts:
Economic Growth and Tax Relief Reconciliation Act of 2001 - Wikipedia, the free encyclopedia
Jobs and Growth Tax Relief Reconciliation Act of 2003 - Wikipedia, the free encyclopedia


I think attributing the amount of federal receipts solely to tax rates is a Single Cause Fallacy. There were clearly other, greater economic factors affecting the amount of money the government took in.

When considering tax revenues, it should also be noted that the financial services sector ("Wall Street") at the peak of the derivatives bubble accounted for nearly 40 percent of all corporate profits in the United States.

That single sector has since returned to one third of all US corporate profits.

You can see below how their fortunes track very closely to the growth, reduction, and regrowth in federal revenues:

.

 

[AmyNation]

Very interesting thread. However, since it doesn't call Obama the anti-Christ or bemoan the intelligence of the American people, I doubt most of the posters here care.

 

[OKTexas]

Yep, the government should get out of the business of social engineering through the tax code. Taxes should be determined only on income, not how you chose to spend it. A simple flat tax should be chanrged on every dollar earned with no exemptions, exclusions or deductions so every wage earner has skin in the game.

 

[g5000]

When adjusted for inflation, tax expenditures have literally doubled since Ronald Reagan was elected.

It is important to understand that for every dollar someone does not pay, somoene else has to pay that dollar, and that means higher tax margins.


If a Congresscritter cannot add any tax expenditures to the tax code, then the money contributed to re-elect Congresscritters so they will create expenditures for their friends will come to a screeching halt, without any need for campaign finance reform.

You reform a broken system by removing those avenues which are wide open to tempation and corruption.



.

 

[Soggy in NOLA]

Very interesting thread. However, since it doesn't call Obama the anti-Christ or bemoan the intelligence of the American people, I doubt most of the posters here care.

I lost interest when he went off into the "gifts to Negroes" nonsense.

Whatever.

 

[g5000]

H.R. 6169

Why have we not heard of this bill on this forum?

Too busy being hacks, I guess.

Notice it was sponsored by Republicans.

Congress finds that the following problems exist with the Internal Revenue Code of 1986 (in this section referred to as the ‘‘tax code’&#8217:
(1) The tax code is unfair, containing hundreds of provisions that only benefit certain special interests, resulting in a system of winners and losers.

(2) The tax code violates the fundamental principle of equal justice by subjecting families in similar circumstances to significantly different tax bills.

(3)(A) Many tax preferences, sometimes referred to as ‘‘tax expenditures’’, are similar to Government spending—instead of markets directing economic resources to their most efficient uses, the Government directs resources to other uses, creating a drag on economic growth and job creation.

(B) The exclusions, deductions, credits, and special rules that make up such tax expenditures amount to over $1 trillion per year, nearly matching the total amount of annual revenue that is generated from the income tax itself.

(C) In some cases, tax subsidies can literally take the form of spending through the tax code, redistributing taxes paid by some Americans to individuals and businesses who do not pay any income taxes at all.

(5) Since 2001, there have been nearly 4,500 changes made to the tax code, averaging more than one each day over the past decade.

Wide open corruption.


Not a peep on here about this great idea.

It is the purpose of this Act to provide for enactment of comprehensive tax reform in 2013 that—
(1) protects taxpayers by creating a fairer, simpler, flatter tax code for individuals and families by—
(A) lowering marginal tax rates and broadening the tax base;
(B) eliminating special interest loopholes;
(C) reducing complexity in the tax code, making tax compliance easier and less costly;
(D) repealing the Alternative Minimum Tax;
(E) maintaining modern levels of progressivity so as to not overburden any one group or further erode the tax base;

They do leave expenditures for married people and families with children, which just leaves the door open for the entire system to be corrupted again with future expenditures:

(G) reducing the tax burdens imposed on married couples and families;

But at least this is a start.

.

 

[g5000]

Very interesting thread. However, since it doesn't call Obama the anti-Christ or bemoan the intelligence of the American people, I doubt most of the posters here care.

I lost interest when he went off into the "gifts to Negroes" nonsense.

Whatever.

I think you lost interest because it was too much reading.

Romney did say Obama won because he gave gifts to black and Hispanics.


That claim is nonsense.

He won because the right does not know how to propound superior ideas and defend them.


.

 

[akelch]

I love the idea...but it does distract from the real issue...taxing productivity.
If we compromise today they can change it tomorrow.

We always talk about "steps in the right direction" but we stop short in saying what the end goal is.

I want all taxes that tax productivity, investment, and savings to be abolished. If we have to take "steps" to accomplish this, so be it, but the goal should be clear.

 

[The Rabbi]

Romney did say Obama won because he gave gifts to black and Hispanics.


That claim is nonsense.

He won because the right does not know how to propound superior ideas and defend them.


.

This is incorrect. Romney had superior ideas. He did a good job of explaining them. Obama promised free stuff and told people Romney was a meany because he wouldn't give them free stuff. So people voted Obama.
Stupid is as stupid does.
Anyway, a big YES to making the tax code fairer and more transparent. One thing you didnt mention is eliminating this crap would also be an effective tax cut in terms of the amount of time needed to prepare returns.

 

[Ernie S.]

When adjusted for inflation, tax expenditures have literally doubled since Ronald Reagan was elected.

It is important to understand that for every dollar someone does not pay, somoene else has to pay that dollar, and that means higher tax margins.


If a Congresscritter cannot add any tax expenditures to the tax code, then the money contributed to re-elect Congresscritters so they will create expenditures for their friends will come to a screeching halt, without any need for campaign finance reform.

You reform a broken system by removing those avenues which are wide open to tempation and corruption.



.

There's your problem right there. The way it should be, is that for every dollar someone doesn't pay, the government should spend one less dollar.

Tax "expenditures" are an attempt at social engineering. The mortgage interest deduction was put in place to encourage people to buy houses, thereby increasing their wealth and employing construction workers.

For some reason. Liberals attack mortgage interest deductions, but are pretty free with tax credits for buying the "right" car, windmills and solar panels.
I am against using the tax code as a social engineering tool, but then, I have no mortgage, no dependent children, no Volt in the driveway or solar panels on my roof.

What deductions, credits, loopholes do you want to eliminate, and which do you want to keep?

 

[akelch]

Romney did say Obama won because he gave gifts to black and Hispanics.


That claim is nonsense.

He won because the right does not know how to propound superior ideas and defend them.


.

This is incorrect. Romney had superior ideas. He did a good job of explaining them. Obama promised free stuff and told people Romney was a meany because he wouldn't give them free stuff. So people voted Obama.
Stupid is as stupid does.
Anyway, a big YES to making the tax code fairer and more transparent. One thing you didnt mention is eliminating this crap would also be an effective tax cut in terms of the amount of time needed to prepare returns.

Then maybe you can clear this up for me. Romney said he would not raise taxes on the top earns...but then he said he would eliminate some deductions thus bring in more revenue. So how is this not a raise in taxes? Plus, the bottom 10% have the same deductions as the top 10%. But he was very vague on what the deductions would be and who would be effected the most.

The income tax needs to go or Politicians will continue to play this shell game with voters.

 

[Star]

H.R. 6169

Why have we not heard of this bill on this forum?

Too busy being hacks, I guess.

Notice it was sponsored by Republicans.

Congress finds that the following problems exist with the Internal Revenue Code of 1986 (in this section referred to as the ‘‘tax code’’):
(1) The tax code is unfair, containing hundreds of provisions that only benefit certain special interests, resulting in a system of winners and losers.

(2) The tax code violates the fundamental principle of equal justice by subjecting families in similar circumstances to significantly different tax bills.

(3)(A) Many tax preferences, sometimes referred to as ‘‘tax expenditures’’, are similar to Government spending—instead of markets directing economic resources to their most efficient uses, the Government directs resources to other uses, creating a drag on economic growth and job creation.

(B) The exclusions, deductions, credits, and special rules that make up such tax expenditures amount to over $1 trillion per year, nearly matching the total amount of annual revenue that is generated from the income tax itself.

(C) In some cases, tax subsidies can literally take the form of spending through the tax code, redistributing taxes paid by some Americans to individuals and businesses who do not pay any income taxes at all.

(5) Since 2001, there have been nearly 4,500 changes made to the tax code, averaging more than one each day over the past decade.

Wide open corruption.


Not a peep on here about this great idea.

It is the purpose of this Act to provide for enactment of comprehensive tax reform in 2013 that—
(1) protects taxpayers by creating a fairer, simpler, flatter tax code for individuals and families by—
(A) lowering marginal tax rates and broadening the tax base;
(B) eliminating special interest loopholes;
(C) reducing complexity in the tax code, making tax compliance easier and less costly;
(D) repealing the Alternative Minimum Tax;
(E) maintaining modern levels of progressivity so as to not overburden any one group or further erode the tax base;

They do leave expenditures for married people and families with children, which just leaves the door open for the entire system to be corrupted again with future expenditures:

(G) reducing the tax burdens imposed on married couples and families;

But at least this is a start.

.

.
.
The National Women's Law Center Opposes H.R. 6169

August 02, 2012

The National Women's Law Center sent a letter to members of the House of Representatives urging them to oppose H.R. 6169, a bill that would would provide for expedited consideration of tax reform legislation only on the condition that it includes additional massive tax cuts for high-income households and corporations.

<snip>

Download the full letter below.
Document(s):

The National Women's Law Center Opposes H.R. 6169



H.R. 6169 is real close to being the same as the Romney/Ryan tax increase for the middle class that was rejected by the American people November 6th.




New Analysis Shows Romney Tax Plan Would Raise Taxes On Middle Class Families By More Than $2,000


<snip>

To estimate how average household tax burdens among different income groups would change as a result of this shift, we assume that the available tax expenditures are curtailed “from the top down” in order to make the tax plan as progressive as possible…Even after eliminating all available tax expenditures for households earning more than $200,000, this group still faces a net tax break. Americans making over $1 million would see an increase in after-tax income of 4.1 percent (an $87,000 tax cut), those making between $500,000 and $1 million would see an increase of 3.2 percent (a $17,000 tax cut), and those making between $200,000 and $500,000 would see an increase of 0.8 percent (a $1,800 tax cut).
Because taxpayers above $200,000 as a group have received a net tax cut, revenue neutrality requires that taxpayers below $200,000—about 95 percent of the population—experience a tax increase.

​

Here’s how the plan would affect the average taxpayer in each income group. As the column labeled “revenue neutral” shows, all taxpayers making less than $200,000 would see their taxes go up by hundreds, if not thousands, of dollars. In particular, families with children would see their taxes go up by $2,041, on average:

Again, this analysis assumes that deductions are eliminated in a way that would make the tax code as progressive as possible, so its likely that, in practice, Romney’s plan would look even worse. To this point, Romney has refused to specify which deductions he would limit or eliminate.

On several occasions, Romney has denied that his tax plan would provide a big tax break to the wealthy. But as this analysis shows, even giving him all of the benefit of the doubt when it comes to eliminating deductions, the plan is still a massive tax break for the rich.
.