The Obamacare repeal plan of the Republicans withered on the vine.
Will tax reform suffer the same fate?
The answer depends on whether or not Congress is willing to take on Sacred Cows of the Tax Code.
Republican plans for a big tax overhaul hinge on how far the White House and Congress are willing to go in eliminating or reining in popular tax breaks, sometimes known in Washington as the sacred cows of the tax code.
Eliminating breaks would allow the government to simplify the tax code and broaden the base of income against which taxes are levied, making room for lower individual and corporate tax rates.
The dilemma—which Republicans are colliding with right now—is that many of the biggest tax breaks, especially for individuals, are popular and hard to dislodge. Among the most entrenched are the benefits for employer-sponsored health insurance, state and local taxes, home mortgage interest and charitable donations.
Those big tax breaks are where the money is. In 2018, households will save about $110 billion by deducting state and local tax payments and about $59 billion by deducting charitable donations, according to the Joint Committee on Taxation. The GOP would need to curtail breaks like those to get rates down as far as they want. Employer-sponsored health insurance, likely to be left alone, will lower federal revenue by about $236 billion in 2018, according to the Tax Policy Center.
The plan is still being written, and at this point, it’s nearly impossible for a household to know how it would fare. But what’s clear is that, for the first time since 1986, some of the largest, most important tax breaks are on the table for change.
Is Your Sacred Cow at Risk?
History suggests that entitlements, once granted are difficult, if not impossible to take back.
Mike “Mish” Shedlock
Last I heard, the Soviet Union of my youth has a flat tax while we ‘capitalists’ are still saddled with social engineering AKA ‘deductions’ courtesy of the political whores who know what’s best for us.
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I’m not sure ‘how’, but this has Vladimir’s fingerprints all over it!!11!
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Russia also paid off its share of debt from their Soviet days. This was less tban a year ago. CNN is still the fake news king.
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Soviet flat tax,,,,gulag time optional.
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I predict the GOP tax plan will fail and the stock market will take a serious hit.
News articles touting the GOP tax plan keep saying it “doubles” the standard deduction.
That is a LIE. $12000/$24000 is NOT double the standard deduction.
How many other lying devils are hiding in the details? This is why it is destined to fail.
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$12,000 is approximately the current standard deduction for married couples filing jointly. On what planet is $24,000 NOT double $12,000?
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The GOP proposed $12,000 single/$24,000 married standard deduction is NOT double the current 2017 standard deduction of $6350 single/$12,700 married. And it will be much less than double the projected 2018 standard deduction which increases with inflation under current law.
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rediculous
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Obviously your posts here are intended to disrupt factual discussion. In other words, you are a troll.
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I predict GOP tax cuts for the rich will go down in flames, followed by the stock market.
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Yes, for the worse (no Twitter)
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– Deductions for mortgage interest payments are benefitting the LENDER only. The benefits for the lender are being for by the borrower in two ways.
1) higher (monthly) payments to reduce the principal.
2) higher federal taxes for everyone (including the borrower.
Getting rid of this kind of deduction has an additional benefit. It will lead to lower house prices. Making housing more affordable.
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Sacred cows have their supporters who don’t want their cheese taken from them.
They will scream children will starve, grandma will be kicked to the street and blacks will be in chains…
Failing schools will demand even more money, bankrupt banks demand bailouts, public unions scream they “were promised”…etc.
Politician’s power and money come from their support.
How else do democrats stay in power in cities they have bankrupted and run into the ground?
Nothing will change.
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Every tax is premised on a scheme. Interest deductions were allowed for years and then in one of their “reforms” they eliminated it for most expenses except home mortgage. State Taxes have been allowed to spiral under the assumption that they were at least deductible.
Taxes are not just a revenue stream for government but intended as a social and economic transformation tool. They are deliberate manipulations and ultimately corruptions. They cannot be simply line item eliminated without substantial damage done. Remove home interest deduction and SEE what happens to home valuations. Remove property tax deductions for income tax and see what THAT does to valuations. Personally I pay $28k/yr in property taxes alone, which is a substantial consideration in home purchase costs, especially if you are offseting income to pay for it.
Taxation is deliberately opaque so as to make true costs and accountability impossible.
The only FAIR tax is one that is transparent, that ANYONE can look at and determine what they are paying as well as everyone else. Point of purchase sales tax is the ONLY transparent system available, and it WILL NOT be adopted in lieu of all others simply because it does not afford the taxing agencies to manipulate it, hide it or defer it to “others”, and there is a massive economic cabal making massive amounts from existing mandatory tax systems that create eternal demand for their services.
Tax reform is as impossible as removing a fully metastacized cancer from an infected body as everything is connected to everything else….corruption throughout.
The only value in this discussion is the promotion of illusion, the effect we are all witnessing currently. Markets are UP based upon optimism only sustained by propaganda. The reduction of corporate taxes is the most relevant, but given there are such demands for economic justice…which has NOTHING to do with corporations, it will likely never happen. If politicians could, they would tax coporations 100% as they are not “the people” and their income is seen as immoral, a justifiable target. No one will question the fact that these immoral corporations supply us with our consumables and our jobs, and are arm in arm with out government…no never mind.
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The sacred cows could be taken away if the true net result was a lowering of the tax burden. But it won’t be. They will slightly lower the rates, but the taxes paid will be higher. A lose-lose for the people and country.
Theis Republican Congress has already demonstrated they are communist/statists, and want EXACTLY the same as the lestists in the Democrat party.
No real tax reform will happen. Only a show bill.
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I think the “State and Local Tax” tax break is under heavy pressure
It rewards high-tax states,which are disproportionately democrat. Removing this tax break would allow Trump to flip the bird to California, Illinois and other blue strongholds, in order to justify lower taxes on republican voters.
For Trump, this one should be considered as a free shot !
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You forget that there are about 15 Republican Congressmembers EACH from CA and IL. Lose a bunch of them and the Republicans lose the House.
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All of whom, if they had even the tiniest sliver of principles and dignity; would immediately recognize the benefit from painting their own confiscatory states’ tax policies in as harsh of a light as is possible. Instead of doing their darnedest to make the Dems running their states into the ground look as good as possible.
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The bottom line is their constituents’ taxes will increase. And they would vote for that? If they did, they will have to look for another job.
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Exactly – over 50 House Republicans from ‘blue’ states.
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You’d think so. Heck, even Democrats in “flyover” states, should be happy to support not sponsoring rich people in New York and Silicon Valley to the tune of hundreds of billions in tax breaks.
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Those blue states send far more money to the federal government than they get back despite the deductions of the high local taxes from their federal returns. Who is supporting who?
Also, your argument boils down to, “take the money from local government and give it to the federal government.” You aren’t lowering anyone’s taxes by doing this. You are just shifting where the money is going.
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Exactly, and the tax code already punishes states with higher costs of living. For example, the education tax credits, phased out between $160,000 and $180,000. These are huge tax credits. $175,000 in a very high income in the south or mid-west. In NY, NJ, Mass & California it is middle income, yet the phase-out range is not adjusted for cost of living in your state. The deduction of state, city & property taxes is the only item on the tax code that mitigates (a bit) the over taxation of blue states.
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“Who is supporting who?”
People who produce stuff are supporting people who live off Fed engineered “asset appreciation”, the attendant commissions from trading in said pumped up assets, and the windfall artificially pumped up asset prices bestows on those wanking about with laws and regulations aimed at “protecting” the property rights of holders of said assets.
Compared to the welfare redistribution scheme operated by the Fed, and by laws like zoning and comically extensive IP protections, no other wealth redistribution scheme even registers above the noise floor. And, by at least a 9 to 1 ratio, the redistribution is to a select few so called “blue states.” From everyone else.
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You’re just spouting nonsense . https://files.taxfoundation.org/20170123145044/FedAidtoStates-011.png
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I know. New York benefiting more from financial sector bailouts, QE and cheap rates pushing up asset prices than Oklahoma, is just nonsense……
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“You aren’t lowering anyone’s taxes by doing this. You are just shifting where the money is going.”
Assuming federal revenue neutrality, you are obviously opening up for lower taxes for those who do not end up paying higher taxes. Kind of hard to get the numbers to work out, otherwise…
In the long run, all the feds are doing by allowing deductions for high tax states, is enable these states to tax even higher. Instead of forcing them to bear the full brunt of the burden of their own dysfunctional policies. Like “helping” a junkie, by allowing him to deduct the cost of junk from his tax bill.
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The H & R Block lobby will surelt take care of this problem.
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They’re politically doomed if they don’t, and the economy is doomed if they do. They’ll probably do something half-assed, hoping to survive the midterms.
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Why is state, city & property taxes a ‘special interest ‘but a ‘standard deduction is not?
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Because one is equally available to all, and the other only to some.
Better than taking state,local,city tax deductions away from those who enjoy them; just let everyone, regardless of where they live, take the deduction for the highest taxed locale in the nation…..
Then make the standard deduction a million bucks, and be done with it.
But here I go being sensible again……..
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If you want a tax-code that is equal, get rid of all deductions and exemptions and tax every dime of income by one rate (15 to 20%.) A true flat tax. What you advocate is the opposite. It just increases the number of free loaders who pay nothing and makes productive people pay more.
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As far as income taxes are concerned, everyone should be a freeloader and pay nothing. The entire institution of income taxes is nothing but an inefficient, economically destructive excuse to spy on, rob and harass people, for the benefit of the government, the wealthy and the connected. Just like every.single.one of the other progressive era usurpations cooked up and imposed on a pacified bunch of gullibles around the same time.
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Yeah, that makes a lot of sense . . .
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Too much so for the properly well indoctrinated, it appears…
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There should be no deductions period. If taxes are legal, just, and necessary it should be simple and straight forward. All rates should be the same. At 10% a person making $15,000 would pay $1,500 a year, a person making 1 million would pay $100,000. The idea being that you could most likely lower the rate if everyone paid and there were no deductions. The same rate would apply regardless of type of income. Secondary argument is that if the byte was too hard just maybe people would do something about it but, I doubt it.
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Simple is better.
1. Corporations are legal persons. Tax them like everybody else.
2. Have a minimum-earnings, no-tax bracket. $50k, say.
3. Tax ALL earnings above that at 15%.
4. Absolutely NO deductions for anything. Nothing, nada, zilch, zippo.
You want to buy a house? Calculate the finances and pay the interest, or rent instead.
You earned money investing? Pay the same tax rate.
The more money you make, the more you will pay. Not a higher rate. Simply more, because you had the privilege of making more.
Results:
1. We slim down the IRS. After all, they are only needed for audits of corporations.
2. We have a simple one-page tax return which simply shows how much you earned, and how much you tax was deducted, direct from your payslip. One very simple calculation determines if the values are correct.
3. We eliminate all tax-deduction shenanigans by overpaid lawyers and accountants, working so that the uber rich end up paying less than most, percentage-wise.
4. We all go to work, knowing exactly how much we pay for the privilege of working in this nice country.
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While certainly an improvement, you are still stuck having to spy on every eleven year old who sells a lemonade, to make sure she really only sold $50K worth as she reported, and not $50K plus an additional glass for 50 cents…..
“Income taxes”, like all activity taxes, are nothing but a carte blanche license for Leviathan to build a Stasi grade spy apparatus with which to subjugate people.
Instead, tax property. That’s what government is supposedly there to protect. If you want the protection, you kind of have no choice but to tell the taxman what you claim to own. Otherwise, get some sandbags and a gun. Cheap, simple, efficient. No spying, no Stasi, no massive bureaucracy required.
And if you own nothing, the government obviously isn’t providing you much of a service “protecting” it. So you pay them nothing. For nothing. Again, as it should be. Like all progressive era rackets, income taxes were never any more than a sleight of hand to make people who own nothing but their own labor, pay for the cost of government protecting the idle rich and connected.
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I would be fine with the corporate piece as long as the dividends are not taxed. That would eliminate the issue of income being stored on corporate books for an individual to save them the tax hit. Probably see a lot more dividends being issued if such were the case. I just don’t think congress can get away from acquiescing to corporate interests. (“It’s just this one deduction. That’s all we need. Here is $100k for your next campaign.”
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Partisan politics, in making every issue contentious, is undermining our ability to govern. Until “campaign finance reform” is addressed and implemented we will continue to have our representatives be unable to vote their conscience and enact prudent legislation because they are beholden to special interests.
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“Campaign Finance Reform” is just another way for the Political Class to erect barriers to entry and entrench themselves. Instead, we need election reform:
Federal Representative should be chosen by lot, analogous to jury service (and without lawyers trying to pick & choose who gets to serve). Only one 2 year term per lifetime. And this obviously gives a big impetus to improve the educational system.
Federal Senators chosen by State assemblies, per the original Constitution. Again, only one 6 year term per lifetime. No more Teddie Kennedys or Johnnie McCains.
Automatic death penalty by public hanging outside the Capitol for any corruption, with the body left hanging for Representatives & Senators to consider on their way to the chamber.
Any citizen can lobby Congress on his own behalf, but no-one can get paid for lobbying. Same death penalty provision as for corruption.
That kind of truly democratic body would represent the people and be better placed to make the tough decisions. But it will never happen — at least, not until the current entrenched Political Class meets its inevitable French Revolution-type end.
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It is not “tax reform”. It is tax cuts – for the rich. The poor actually get a tax hike. But even more severe is the service cuts for them and the middle class. And then there are massive corporate tax cuts… Same old same old supply-side nonsense that has devastated the country since the early 1980s.
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It does not hike taxes on the poor. The proposal (which doubles the standard deduction) would substantially increase them number of people who don’t even need to file. It IS a tax cut for the rich, but also for the poor and lower-middle income. It is the upper-middle income folks (professional people, self-employed who do well, but aren’t rich) who get squashed. But, don’t let facts get in the way of your ideological prejudices.
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There you go again !!
See my first post above.
$12,000 single / $24000 married is NOT “double” the standard deduction !!!!!!!!!
The standard deduction this year is $6350/$12700 [plus a different amount for head of household and an additional amount for over 65 and/or blind.]
Do the math… the GOP amounts are LESS than “double” any of the current standard deductions… and will be a lot LESS then the projected deductions amounts next year which will increase with inflation.
Do the math, single senior citizens over age 65 will LOSE money next year under the GOP tax cuts for the rich.
.
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For comparison here is the position in the UK:
employer-sponsored health insurance is taxed as a “benefit in kind”.
local taxes: that’s our “Council Tax”, a property tax. Tough luck: no tax break.
home mortgage interest: the tax break was eliminated in the nineties.
charitable donations: yep, you get the income tax back.
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Nothing will happen because everyone is gearing up for 2018 elections. The dems will run on “We blocked him on healthcare, we blocked him on wasting money on his cronies, and (after this goes down in flames) we blocked him on tax brakes for the rich!”
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so US corps pay the highest nominal tax rate in the world , 35 % right .
https://itep.org/the-35-percent-corporate-tax-myth/
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If you make the standard deduction large enough to be, you know, realistic – and make the standard deduction for dependents realistic as well, the other deductions don’t matter all that much.
Is there anyone that does their own taxes (a shrinking number, I know) that doesn’t get pissed at the ridiculously low standard deduction amount? Realistically it should be about 15K. And a dependent should be about 6K at least.
The #2 goal of simplified taxes would be stripping the IRS of so much of its undeserved power.
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You’re confused. Dependents don’t get you an extra standard deduction – they get an exemption (and, in some cases, a credit), which this tax plan proposes to eliminate.
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O/T The Spanish constitutional court suspends the Catalan parlament Monday by petition of the Catalan Socialist Party, which claimed that the session would be used to declare independence and so liquidate the constitutional rights of that party.
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Seriously, who cares? The biggest tax is the one no one acknowledges: fiat currency. As long as we have “money” that can be created out of nothing via fractional reserve lending, the “gift” of inflation will continue stealing from the poor and giving to the rich. As Mish says, those with the first access to money will benefit. Taxes are just a sideshow.
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What a giant load of &*%$
Anyone who thinks the federal bureaucracy can’t be cut in half (half the headcount, and less than half the aggregate total compensation) needs to have their head examined. That is the real “sacred cow” that the criminals in Congress are afraid to touch.
No private sector company could get away with having five people do the work of (barely) one. No private sector company could have those five lazy dolts sit around while 2-3 more “outside” consultants actually do the work.
What an insulting and giant load of $%^#… Washington can and must make cuts to THEIR lifestyle, and stop pretending that all sacrifices have to be made outside the beltway.
Just for openers, lets see the members of Congress cut their obscene “support” staff — both headcount AND the pay for the remaining parasites. Then insist that EVERY department and agency make headcount cuts. Insist that these lazy useless dolts have productivity levels no less than 1/3rd the private sector (which means they can only have 3 people doing the work of one, instead of 8 people doing the work of one now).
The largest single segment of the economy cannot have such dismal productivity levels and expect the rest of the economy to grow fast enough to overcome the government’s sloth-like productivity.
Enough with the cr@p. If the WSJ can’t write something more coherent, they will end up in the same trash heap as the NYTimes. No one needs to read such poorly thought out drool.
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The ONLY fix which can be made by voters alone is to SIMPLY STOP REELECTING pols who don’t follow through on their campaign promises but who instead do the bidding of their real owners, those deep pocket special interests who fund their campaigns. The incumbent reelection rate is ridiculously high. Unfortunately, for the best results this also requires well informed voters skilled in the critical thought process and skeptical analysis, so don’t hold your breath for either avenue of reformation…
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FY2018 budget deficit already projected to be > $700 billion.
Whatever the Republicans cook up will be scored by the CBO (how it will effect deficit).
If they have to bend much (allowing deduction for local / state taxes) deficit could easily start approaching $1 trillion.
Amazing that no one seems to care about that enormous number …. in a time country supposedly “recovering”!
When, not if, the next recession hits – $2 trillion deficit? $2.5 trillion?
Debt is exploding … Yet, by all means, lets “normalize” rates …
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Why aren’t Republicans talking about killing off flood insurance, crop insurance, and the entire gasohol scam? Crazy as it sounds, it’s almost like some politicians actually favor certain forms of welfare if it gets them reelected.
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When I said earlier that there should be no deductions I should have added one more statement.
Do away with all tax free organizations. I believe they are called 501c or something adnn probably other categories. There should be no such thing as tax free. Would lighten the load at the IRS and bring in more taxes so we could reduce our taxes. Why are some people or organizations super special?
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How do you tax the profits on a non-profit charitable organization? Oh wait, Lois Lerner has an idea………
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Reform is when:
Carried Interest get’s ordinary income treatment.
Capital Gains & Dividends get the same treatment as a Cardiologist who studies for years to save lives. Carl Ichan & Mitch Romney do not create jobs. It’s a myth.
Corporate side: Dividends should get the same treatment as interest expense. Why should tax policy support leverage over equity?
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The bottom 50% of wage earners pay 2.7% of the taxes.
The top 10% pays 90% already
The average persons taxes are…insignificant
The top 3-10% are already saddled heavily,and screwed over the worst. Their kids get no finiancial aid, yet they cant afford to pay $50,000 per yr for college.
The top 1% -2% is the only ones that have any money to give, and can give enough to make difference.
There is no more money. Its just taking from one pocket instead of another. Take it from avg joe, it does no good, hes spending it anyway.
Take it from top 1-2%, they are saving it and amassing it.
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“The average persons taxes are…insignificant”
…
Nah. You are ignoring payroll taxes. And why is that relevant? Payroll taxes are lumped with other general revenue and used to pay current expenses. The myth is tht the trust funds for social security and medicare hold marketable securities. They hold IOUs if the form of NON MARKETABLE Government Account Series bonds.
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Spot on.
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I don’t see how real estate tax or state and local tax is a sacred cow. if its not deductible you are essentially being taxed on the same money twice and if the rates are high enough wind up owing taxes greater than one’s income
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As it is, revenues fall short of expenditures anyway. The Fed simply prints this difference, so what’s a few more trillion in tax “cuts” In a world where “Debt doesn’t matter?”
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Fundamentals don’t matter … till they do.
Debt level doesn’t matter … till it does.
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They will pass sometime. It will make the tax code more complicated, not less. The 1% (the Deep State) will win again.
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– A number of Republican states have high property taxes as well. Texas, Florida, …………. The taxpayers in those states won’t be happy either.
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There’s a lot to hate about the GOP tax plan.
Personal exemptions which are adjusted each year for inflation…
will be replaced by tax credits that benefit less people and are
NOT indexed to inflation.
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