Alien Space Bats wrote:First, the whole Republican position on tax cuts is a steaming pile of horseshit.
There aren't enough tax deductions in the code to compensate for a 20% across-the-board cut without hitting the big ones: Mortgage interest, State and local taxes, charitable contributions, medical expenses, and certain employee benefits (mostly health insurance and qualified pension contributions).
(Image)
Here's another view of the situation:
(Image)
The problem here is relatively simple: First, for those Americans not currently subject to Federal income tax (but subject to other taxes), reducing the marginal rate in return for slashing deductions can never be anything but a loss. If you have no taxable income at all, and the government eliminates enough of your deductions to expose you to taxation, any marginal rate will result in you paying more in taxes than you did before (because you now have taxable income, whereas before you did not). Consequently for Mitt Romney's hated 47%, his plan will necessarily mean a tax hike.
Second, for all of the talk of how the rich are exploiting the mortgage interest deduction and the deduction for charitable contributions, slashing or even getting rid of those deductions altogether won't cover the reduction in taxes due to a reduction in the marginal rate. If fact, because there's a multiplicative effect between the two (the marginal rate and the value of the tax deduction that shields income from that marginal rate), in many cases wiping out the deduction completely won't make up for the reduction in rates (and this is doubly true when you consider another Republican policy goal - eliminating the alternative minimum tax, which itself limits deductions under the current code). No,if you want to find $5 trillion worth of deductions to cut, you have to go after the ones that create opportunities for the intergenerational transfer of wealth by the working and middle classes.
The biggest are non-taxable employee benefits - especially contributions to pension plans, but also contributions to health care plans. These are an important components when it comes to efforts by the working and middle classes to help their kids do better than they did for a couple of reasons: First, pension contributions often supplement life insurance as a legacy when people die before exhausting such funds. Second, supporting your parents when they're too old to work is a legal requirement in all 50 States when and if your parents can't support themselves; thus, anything which reduces the burden children need to pay to support their parents allows those children to pass along more of their wealth to their children, thus increasing intergenerational social mobility.
Home ownership figures in here as well: For many families, their home will end up becoming one of the biggest assets they have. That asset is a tremendous lever for intergenerational social mobility: It can be remortgaged to help a child pay for college, it can be sold to augment an aging homeowner's retirement savings, and it (or the proceeds from its sale) can be passed along to the next generation as a legacy. Yes, the home mortgage deduction was one of the factors fueling the real estate bubble; but take it away, and both home ownership and intergenerational wealth accumulation drop sharply.
Finally, while the rich may benefit tremendously from charitable contributions, the poor and working classes also benefit from them. After all, who do charities largely serve? Why, the lowest income brackets - the very brackets that will be hit hardest by government cutbacks. If a policy of slashing deductions for charitable contributions at the same time as government expenditures on social causes are cut seems regressive to you, rest assured your not alone: To cut government spending "because charity should be handling that sort of thing" is one level of mean and stupid; but to cut tax deductions for charitable giving - and thus encourage less charity - at the same exact moment as government spending is slashed is yet another level of mean and stupid beyond that. It's doubling down on mean and stupid; indeed, it could almost be thought of as mean and stupid squared.
The counter-argument that this will stimulate investment is disingenuous to the point of being evil. There's nothing in the Romney-Ryan tax plan to encourage such increased investment here in America; indeed, the elimination of tax barriers that prevent American investors from bringing their foreign gains home tax-free (which is what the so-called "territorial" tax system proposed by Romney and Ryan will do) will actually encourage greater overseas investment by the American rich, since no tax barriers exist to making ones money overseas and then bringing it back to enjoy here at home. And with National Right-to-Work as the very least we can expect from the GOP should Romney and Ryan claim the White House, that pressure to move jobs offshore will collapse American wages in record time.
Declining American personal income and the end of the mortgage interest deduction will crash the real estate market for good - and take state and local government down along with it. Urban municipalities will buckle and break under the financial strain; streets will be left with police, lighting, or even maintenance, spurring crime and blight on a scale not seen since the 1960's. George Romney had to deal with riots in Detroit that were largely someone else's fault; Mitt will face riots on a national scale, and he will very much be the one to blame for that.
Of course, when Republicans speak of "loopholes", they are speaking of more than just deductions from income; they are also speaking of tax credits. The biggest credits are, as shown above, those issued for child care, or care of a dependent elderly or disabled person; those issued for college students paying for books and tuition; and those issued for working families with dependent children. Again, each of these credits contributions to social mobility, both intragenerational and intergenerational: These credits subsidize work by parents with children, contributions to our children's education, and our obligations towards elderly and disabled family members. By reducing the cost of the activities they subsidize, they enable earning, saving, and intergenerational support within families; eliminating them will further reduce the opportunity for each generation to boost the next up onto its shoulders in an effort to work towards a better future.
Past generations of Republicans understood this and supported these credits; this generation of Republicans rejects biological evolution as contrary to its faith while embracing the Darwinian notion that each of us is in mortal competition with our fellow citizens as fundamental to its faith, both on our own and on behalf of our children (the right having, in essence, adopted neo-Calvinism as its heresy of choice, thereby confusing the rich with the Elect and believing them and their children destined to build the New Jerusalem - on the bleeding backs of the poor). The new Republican rich understand that it's not enough to win the game today; they must ensure that their children have the wealth and power to lord over society for centuries to come. Their goal is the construction of a lasting plutocracy; to that end, social mobility is their bane.
Finally, eliminating the deduction for State and local taxes is an attack aimed at the "Blue" States, all of which have more government than their "Red" counterparts. Mind you, it's not like the current deduction "subsidizes" big local government in the "Blue" States at the expense of the "Red":
(Image)
No, the idea here is to further undermine government simply for the sake of undermining government - which advances the GOP's Social Darwinian agenda, since government essentially exists to protect the weak and self-restrained among us from the strong and ruthless among us; fancying itself, the latter, Republicans hope to eliminate government in order to feast on their neighbors.
I ran the math a few hours ago, I think the known cost of the estimated tax expenditures that only households making over $200,000 was around <$100b. Until Romney clarifies his shit, it's mathematically impossibru.
