Here's a comment on high-end health plans ("Cadillac health plans"), taxes, and the economy generally. It's pretty interesting.
Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
Tuesday, September 29, 2009
Absolute Writer's Block Found Something
Here's a comment on high-end health plans ("Cadillac health plans"), taxes, and the economy generally. It's pretty interesting.
Friday, September 11, 2009
Obameter #40: Fixing The Alternative Minimum Tax
(WTC: Remember and Rebuild.)
In 1984, Secretary of the Treasury Donald Regan asked President Ronald Reagan what General Electric, Boeing, General Dynamics, and more than 50 other big companies had in common. Reagan replied that he didn't know. Regan told him that they pay no taxes at all, and provided proof. Both men agreed this was wrong. In the 1984 State of the Union address, Reagan announced his intention "to simplify the entire tax code so all taxpayers, big and small, are treated fairly."
In 1986, the Reagan Administration along with allied Democrats from the Legislature passed the Tax Reform Act of 1986, which lowered tax rates while closing numerous tax loopholes and simplifying the tax rules. It also set an Alternative Minimum Tax, insuring that rich companies and individuals could not escape paying a certain level of taxes no matter how creative their use of tax shelters and tax write-offs.
However, unlike the standard tax brackets, the requirements of the alternative minimum tax were not bound to inflation. As the value of the dollar shrinks over time, more and more of the middle class began to fall under the definition of "rich" used by the alternative minimum tax. Legislatures have frequently passed AMT "patches" to exempt the middle class from the tax for a year or so, but a permanent fix was considered too expensive to the annual budget.
During the 2008 campaign, Obama and McCain both promised to make the 2007 patch permanent and index the AMT to inflation, thus preventing it from gradually covering individuals with lower and lower income levels. The permanent fix was added by the Senate to the The American Recovery and Reinvestment Act of 2009 (the Stimulus Bill) in negotiations with Senate Republicans whose votes were needed to pass the overall bill. Three Republican Senators, Susan Collins of Maine, Olympia Snowe of Maine, and Arlen Specter of Pennsylvania, were convinced by these negotiations and the ARRA passed. They are the only Republicans in the House or the Senate to vote for the ARRA package.
For Obama, that means promise kept. For Republicans, it's a depressing sign of how little influence we have in government today; even with 92% of Republicans in the Senate and 99.4% in the House opposing the ARRA, it still passed. I don't know what else was involved in those Senate negotiations, but I hope one universally supported issue point was not the purchase price of three Republican Senators' support for such a ridiculously huge chuck of government spending as the ARRA ($787 billion).
I do support the AMT changes as promised and delivered, so thumbs up for Obama on that point. The massive stimulus bill of which it was an influential part has earned my disgust and opposition. Since it is far too complex and inclusive to ever be covered as an Obama promise separately, I'm going to take this time to rant in address of the ARRA itself directly.
There are parts of ARRA I like and parts I don't like. Virtually anyone would be able to say the same thing. It has hundreds of individual programs all passed together as one incredible, huge, diverse behemoth measuring three quarters of a trillion dollars. It's five times the cost of the Bush Administration's stimulus bill of 2008, and twice the size of all the Homeland Security Appropriations Acts of that administration combined (at the time, Democrats in the House condemned the Homeland Security Act for changing too much with one monolithic bill), and it's larger than the entire US Federal Budget of 1982. It contains more than 140 separate programs that could not be addressed individually, but only confirmed or rejected as a massive whole. It's complexity ensures that everyone who voted for it voted for at least one program they do not approve of, and everyone who voted against it voted against at least one program they support. It's an intentional evasion of consideration of these programs individually on their own merits, and as such is a circumvention of critical analysis. It is wrong to circumvent critical thinking. The bill is a monument to compromised principles and deferential concession. It was passed almost exactly along party lines, also making it a monument to legislation by brute-force partisanship. Regardless of the value of the individual programs, passing them as a monolithic whole was bad governance and deserves condemnation.
In 1984, Secretary of the Treasury Donald Regan asked President Ronald Reagan what General Electric, Boeing, General Dynamics, and more than 50 other big companies had in common. Reagan replied that he didn't know. Regan told him that they pay no taxes at all, and provided proof. Both men agreed this was wrong. In the 1984 State of the Union address, Reagan announced his intention "to simplify the entire tax code so all taxpayers, big and small, are treated fairly."
In 1986, the Reagan Administration along with allied Democrats from the Legislature passed the Tax Reform Act of 1986, which lowered tax rates while closing numerous tax loopholes and simplifying the tax rules. It also set an Alternative Minimum Tax, insuring that rich companies and individuals could not escape paying a certain level of taxes no matter how creative their use of tax shelters and tax write-offs.
However, unlike the standard tax brackets, the requirements of the alternative minimum tax were not bound to inflation. As the value of the dollar shrinks over time, more and more of the middle class began to fall under the definition of "rich" used by the alternative minimum tax. Legislatures have frequently passed AMT "patches" to exempt the middle class from the tax for a year or so, but a permanent fix was considered too expensive to the annual budget.
During the 2008 campaign, Obama and McCain both promised to make the 2007 patch permanent and index the AMT to inflation, thus preventing it from gradually covering individuals with lower and lower income levels. The permanent fix was added by the Senate to the The American Recovery and Reinvestment Act of 2009 (the Stimulus Bill) in negotiations with Senate Republicans whose votes were needed to pass the overall bill. Three Republican Senators, Susan Collins of Maine, Olympia Snowe of Maine, and Arlen Specter of Pennsylvania, were convinced by these negotiations and the ARRA passed. They are the only Republicans in the House or the Senate to vote for the ARRA package.
$3,600b 2009 Federal Budget
Previously discussed wasteful spending
Previously discussed worthwhile spending
$70b Alternative Minimum Tax reform
American Reinvestment and Recovery Act of 2009
I do support the AMT changes as promised and delivered, so thumbs up for Obama on that point. The massive stimulus bill of which it was an influential part has earned my disgust and opposition. Since it is far too complex and inclusive to ever be covered as an Obama promise separately, I'm going to take this time to rant in address of the ARRA itself directly.
There are parts of ARRA I like and parts I don't like. Virtually anyone would be able to say the same thing. It has hundreds of individual programs all passed together as one incredible, huge, diverse behemoth measuring three quarters of a trillion dollars. It's five times the cost of the Bush Administration's stimulus bill of 2008, and twice the size of all the Homeland Security Appropriations Acts of that administration combined (at the time, Democrats in the House condemned the Homeland Security Act for changing too much with one monolithic bill), and it's larger than the entire US Federal Budget of 1982. It contains more than 140 separate programs that could not be addressed individually, but only confirmed or rejected as a massive whole. It's complexity ensures that everyone who voted for it voted for at least one program they do not approve of, and everyone who voted against it voted against at least one program they support. It's an intentional evasion of consideration of these programs individually on their own merits, and as such is a circumvention of critical analysis. It is wrong to circumvent critical thinking. The bill is a monument to compromised principles and deferential concession. It was passed almost exactly along party lines, also making it a monument to legislation by brute-force partisanship. Regardless of the value of the individual programs, passing them as a monolithic whole was bad governance and deserves condemnation.
Monday, August 31, 2009
Obameter #24: Income Taxes for Poor Seniors
This was posted a day late. Sorry.
Obama promised to "eliminate all income taxation of seniors making less than $50,000 per year." But since his election... nothing. It wasn't part of Obama's budget proposal. It wasn't part of the stimulus bill. It wasn't part of his tax-day speech that was specifically about his tax policies and ideas. It's not anywhere. Promise broken.
Little question, though: why only seniors? Why should a young adult be paying more taxes than a senior if their incomes are the same? Seniors already have Social Security, so they should be less poor than the young person of the same income. This change would only deepen that inequality.
The Tax Policy Center [W] has similar questions, declaring that the policy conflicted with "fair, simple and efficient" tax policy. It seems to me that the fairest, simplest, most efficient tax policy would be a universal tax rate without credits, options, or exceptions. Why is no one proposing that? Actually, someone did, but it never took hold and was criticized as being too easy on the rich. <sarcasm>Remember: all men are created equal, but the more money they make the less they deserve equality.</sarcasm>
(I have no special love for the FairTax plan. I'd also be fine with a universal income tax rate, or a income tax rate that increases as a function of income, or even the current tax bracket system so long as there are not 10,000 credits, exceptions, loopholes, incentives, and other complications.)
Anyway, as previously discussed, I oppose tax credits because it is paying people to obey more government rules. In other words, because it requires the complexity of tracking behavior and creates a line across which there is inequality in taxation. There is a suggestion of authoritarian government in that criticism, but also of ineffectual government. This example of ending income taxes for seniors circumvents the authoritarian accusation (there is no way that this could become an incentive for people to choose to be old), but the accusation of ineffectiveness remains. Rather than aiding the poor generally, this merely divides people yet again.
It's possible Obama recognized the inequality he was proposing and silently recanted. It is also possible that he was persuaded by the Tax Policy Center's reasoning. Either of those would be good things. But it's also possible he simply broke a promise to do something he thought was right, either forgetting about it entirely or judging it to be a lesser priority. I'm not very inclined to give him the benefit of the doubt on this without some statement from the White House. Pretending he never said it is not an acceptable policy.
In all, he proposed a broken, hobbled tax cut, failed to deliver, and failed to explain why. That does not show good character nor good judgment. Thumbs down.
Obama promised to "eliminate all income taxation of seniors making less than $50,000 per year." But since his election... nothing. It wasn't part of Obama's budget proposal. It wasn't part of the stimulus bill. It wasn't part of his tax-day speech that was specifically about his tax policies and ideas. It's not anywhere. Promise broken.
Little question, though: why only seniors? Why should a young adult be paying more taxes than a senior if their incomes are the same? Seniors already have Social Security, so they should be less poor than the young person of the same income. This change would only deepen that inequality.
The Tax Policy Center [W] has similar questions, declaring that the policy conflicted with "fair, simple and efficient" tax policy. It seems to me that the fairest, simplest, most efficient tax policy would be a universal tax rate without credits, options, or exceptions. Why is no one proposing that? Actually, someone did, but it never took hold and was criticized as being too easy on the rich. <sarcasm>Remember: all men are created equal, but the more money they make the less they deserve equality.</sarcasm>
(I have no special love for the FairTax plan. I'd also be fine with a universal income tax rate, or a income tax rate that increases as a function of income, or even the current tax bracket system so long as there are not 10,000 credits, exceptions, loopholes, incentives, and other complications.)
Anyway, as previously discussed, I oppose tax credits because it is paying people to obey more government rules. In other words, because it requires the complexity of tracking behavior and creates a line across which there is inequality in taxation. There is a suggestion of authoritarian government in that criticism, but also of ineffectual government. This example of ending income taxes for seniors circumvents the authoritarian accusation (there is no way that this could become an incentive for people to choose to be old), but the accusation of ineffectiveness remains. Rather than aiding the poor generally, this merely divides people yet again.
It's possible Obama recognized the inequality he was proposing and silently recanted. It is also possible that he was persuaded by the Tax Policy Center's reasoning. Either of those would be good things. But it's also possible he simply broke a promise to do something he thought was right, either forgetting about it entirely or judging it to be a lesser priority. I'm not very inclined to give him the benefit of the doubt on this without some statement from the White House. Pretending he never said it is not an acceptable policy.
In all, he proposed a broken, hobbled tax cut, failed to deliver, and failed to explain why. That does not show good character nor good judgment. Thumbs down.
Wednesday, August 26, 2009
Obameter #3: Capital Gains Tax on Small Business
My last few posts have been slightly huge, so here's a tiny one for a change.
Everything you own is capital. If you buy something then sell it for a profit it's a capital gain, and the IRS taxes you for it. Obama promised to completely eliminate the capital gains tax for small and new businesses. Buried deep within the Stimulus Bill is some text that reduces the capital gains tax on small businesses. The tax used to apply to 50% of capital gains. Now it only applies to 25% of them. That means investors can invest more money into small businesses without losing as much of it to taxes.
It's not everything he promised, but it's a beautiful thing.
Everything you own is capital. If you buy something then sell it for a profit it's a capital gain, and the IRS taxes you for it. Obama promised to completely eliminate the capital gains tax for small and new businesses. Buried deep within the Stimulus Bill is some text that reduces the capital gains tax on small businesses. The tax used to apply to 50% of capital gains. Now it only applies to 25% of them. That means investors can invest more money into small businesses without losing as much of it to taxes.
It's not everything he promised, but it's a beautiful thing.
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