Bush's Tax Advisory Panel is a disaster in the making. Their stated purpose is to come up with a revenue neutral (the time period is not specified) plan to:
(a) simplify Federal tax laws to reduce the costs and administrative burdens of compliance with such laws; (b) share the burdens and benefits of the Federal tax structure in an appropriately progressive manner while recognizing the importance of homeownership and charity in American society; and (c) promote long-run economic growth and job creation, and better encourage work effort, saving, and investment, so as to strengthen the competitiveness of the United States in the global marketplace.
According to the NY Times, the Panel has concluded that a consumption tax (sales or VAT) is a bad idea. Apparently, if they exempted food, education, and medicine, they'd need a sales tax rate of about 87%. Instead, the panel is focusing on reforming the federal income tax. (While a proposal for a "flat tax" is still possible, apparently the panel is unlikely to come to much of a consensus on that.) The only thing they have agreed on so far is that their proposal (originally due out in July, now pushed back to November) will feature the following tax cut:
1. They will eliminate the Alternative Minimum Tax entirely. This will cost $1.2 Trillion over 10 years.
This sounds great, especially if you're at the upper end of the tax ladder. And more rungs are being eaten up by the AMT every year. According to Forbes, 2.3 million people paid the AMT for the 2003 tax year, 13 million are expected to do so for 2005, and 33 million by 2010. The big question, though, is how they are going to pay for it. That's where the "Oh My God..." moment comes in. The proposals under consideration are:
A. Lower the mortage deduction ceiling from $1 million down to about $300,000.
B. Reduce the mortage deduction from 35% of interest payments down to 25% or 15%.
C. Limit tax-free health insurance premiums to $11,000/year or below (as opposed to the current system where employers can deduct every penny, and employees are not taxed on the premiums.)
D. Limit the ability to deduct state and local income taxes from the Federal income tax.
Are they insane? It would be hard to think up a set of proposals that would hurt ordinary Americans more. Here's a better idea: abolish the AMT and pay for it by closing tax loopholes and creating a higher income tax bracket rate for the millionaires for whom the AMT was originally invented. There is an extensive, if somewhat biased discussion of the AMT at this House of Representatives website.
You know, I almost wish Bush would endorse these proposals. That might ensure the Democrats retake the White House in 2008.
7 comments:
I used to believe, as you still seem to do, that all the Democrats needed to win was for Bush to screw up badly enough. I no longer believe that. I don't know what people's votes are based on, but I don't think it's really anything rational. Maybe they'll vote out Republicans because gas is too expensive, or for some other nonsensical reason.
// posted by Bell Curve
I suppose we should be glad they aren't talking about a national sales tax (VAT). Europe relies heavily on those taxes and they are the worst things about European public policy next to the ag subsidies.
All sales taxes are inherently REgressive. What's more, in a post-industrial economy consumer confidence is a big part of economic growth and sales taxes depress consumption. So sales taxes hurt poor people and screw up the economy. Good for these folks for at least being smarter than the Europeans.
As for the AMT and income taxation. I would like to seem them increase income taxes and eliminate the capital gains taxes. No capital gains taxes is one of my favorite things about European public policy. They make up for the revenue losses with income taxes. The idea is you want to tax money that is being used to allow rich people live really outlandish life styles but you don't want to keep them from wheeling and deeling. Being able to quickly and cheaply move investments from one sector to another is very important in a trade exposed and globalized economy. We should adopt this aspect of the European tax structure.
// posted by Raised By Republicans
Expensive gas is a rational motive for a vote. So is "He talks to God" in the strict definition of rational. If you have a strong preference for candidates who claim to talk to God, Bush is your man.
// posted by Raised By Republicans
I agree with Bell Curve. I have already said in my comments before that when you talk to the average Bush Supporter, they know jack about the actual policies of the Administration. That came out during the elections. Remember that story (I think it was an NYT story or something) that polled Kerry supporters vs. Bush supporters? The results were shocking because it was evident that the Bush supporters knew nothing. Then again, what did I expect?. And since the pool of know nothings is 10 times greater than the pool of smart people, and the pool of people who THINK they know something is greater than the other two combined, I doubt a screw up will change people's minds.
Every idiot in America thinks he will one day be rich and be subject to such generosity. So while Americans distrust wealth, they all want a piece of it. And they vote against their own interests all the time.
And just a thought: if your goal is to support home ownership, why strike out at interest deductions? People claim this is an incentive for buying a home. Of course, they are the same idiots who fail to see that the deduction doesn't add up to much. And failing to make state and local taxes deductible is double taxation, as is taxing my gross income when at least 20% of it went to sales taxes already.
// posted by USWest
Yes, USWest, the attempt to limit mortgage interest deductions is antithetical to encouraging home ownership. I think the nice phrase about encouraging home ownership was yet another Bush Administration obfuscation. They just want to cut taxes for the rich.
Check out Bush's approval ratings on PollingReport.com
// posted by Raised By Republicans
According to Today's NY Times, (10/18/2005), President Bush's tax advisory commission is recommending two alternative plans, "both of which would limit or eliminate almost all existing tax deductions, including those for state and local income and property taxes."
According to the NY Times, "For the new mortgage interest credit, however, both plans would lower the mortgage limit to the maximum that the Federal Housing Administration will insure. That level changes each year and varies depending on housing costs in each county, with a current maximum loan limit of $312,895, in communities where housing is most expensive, and a national average of about $244,000."
Also, "The six tax brackets in the existing law would be replaced by four, with a low bracket of 15 percent and a top rate of 33 percent in one plan and 35 percent in the other. The top rate now is 35 percent."
Naturally, both plans lower capital gains and dividends taxes, as well as corporate taxes. Sigh.
Post a Comment