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Old 11-11-2010, 10:44 AM   #61
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I can't wait for the mortgage interest deduction to be zapped so we can revisit the pay off the mortgage question here.
What they did in the UK (in the early 80's I think) was to set a maximum amount of mortgage interest that was deductible and not link it to inflation. Then in recent years it was a lot less political pain to remove that deduction altogether.
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Old 11-11-2010, 10:47 AM   #62
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I assume it was just an oversight that you didn't mention how the incoming Republicans are even more dogmatic with respect to tax increases; with many already saying that the proposed $2 spending cuts for every $1 of tax increases relies too heavily on revenue gains.

For what it's worth, the "liberal" NYT Op-Ed page came out with a surprisingly strong endorsement for the commission recommendations. Maybe there is hope for an adult response after all.
Even if the ratio of proposed spending cuts to tax increases were 3:1 or 4:1, the Republicans would scream bloody murder because the ratio is anything more than n:0. The Republicans, despite their seemingly inclusive "everything is on the table" approach, are simply intransigent, beyond stubborn, when it comes to any tax increase no matter how small it is compared to spending cuts.

And samclem, I don't oppose a one-time, moderate increase in the SS wage cap (I have heard proposals to raise it to ~$140k) if it also increases the cap on SS benefits associated with the same cap. I agree it would end up helping the balance sheet of SS for the reasons you listed - the progressivity of the benefit formula (i.e. Bend Points) - even if it is less than what would occur if the cap were not also raised on benefits.
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Old 11-11-2010, 10:48 AM   #63
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I assume it was just an oversight that you didn't mention how the incoming Republicans are even more dogmatic with respect to tax increases; with many already saying that the proposed $2 spending cuts for every $1 of tax increases relies too heavily on revenue gains.

For what it's worth, the "liberal" NYT Op-Ed page came out with a surprisingly strong endorsement for the commission recommendations. Maybe there is hope for an adult response after all.
Maybe. I'm sure the incoming Republicans are going to issue statements condemning the tax increases, but I was referring to the leadership in both parties. I can't find any quotes from Rep. Boehner (which may be telling in itself), Speaker Pelosi branded the "proposals" (they aren't) "Simply unacceptable."

When the NYT and the Washington Examiner issue a joint editorial praising a particular package and talking to ther readers like adults, we'll know we're making progress. And that the end times are near.
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Old 11-11-2010, 10:58 AM   #64
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As far as tax simplification, here's a link to the reforms proposed back in 2005 by a bi-partisan committee (I guees we can't get a NON-partisan committee, so BI-partisan is the next best thing?).

http://www.google.com/url?sa=t&sourc...TPxmOOD4SAGplw

I haven't read it in a while, I just had the Executive Summary saved, and haven't compared it to anything in this write up. But my recollection was that while I prefer a scrap it and start over approach, the proposals were pretty good. They were at least aware of some of the conflicting, counter-intuitive, over-lapping codes.

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Old 11-11-2010, 11:40 AM   #65
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Look on the bright side, at least we're not facing a deficit of 32% of GDP this year like the Ireland. I think the US is about 9%
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Old 11-11-2010, 02:13 PM   #66
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Indications of how the scrimmage lines will form up on these issues: Accomodation from members of the majority party in the Senate, digging in of heels by members of next term's minority party in the House. From "Democrats Pulled in Different Directions on Taxes, Deficit" in The Hill:


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Fissures within the Democratic Party that were kept at bay by the midterm elections have resurfaced this week thanks to emerging debates over taxes and deficits.

Liberal and centrist Democrats are staking out disparate positions on fiscal issues in light of a draft report issued Wednesday by the chairmen of President Obama's fiscal commission.
. . .

A key centrist, Senate Budget Committee Chairman Kent Conrad (D-N.D.), on Thursday championed the recommendations made by fiscal panel co-chairmen Erskine Bowles and Alan Simpson. Their report called for major tax reforms and spending cuts, in addition to entitlement changes that would result in reduced Social Security benefits for some people.

Liberals have roundly condemned the report. One of the strongest statements came from outgoing House Speaker Nancy Pelosi (D-Calif.), who called the recommendations "simply unacceptable."

But Conrad, a centrist in a position to shape the debate over the fiscal commission's final proposals in the Senate, challenged critics to come up with something better.

"Instead of shooting this down, propose an alternative; but one that does as good a job as this one does in getting us back on a sound fiscal course," he said on ABC's "Good Morning America."

. . . centrists are also in a pivotal position to help determine how lawmakers will proceed with the final recommendations of the fiscal commission, which are due Dec. 1. Democratic and Republican leaders have promised to hold an up-or-down vote on any deficit reduction proposals supported by 14 of the commission’s 18 members.
I don't know if the panel will vote on all their recommendations as a package, or if each recommendation will have to stand an individual vote. Likewise for any vote in the House and Senate--as a package or one at a time?
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Old 11-11-2010, 02:32 PM   #67
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Indications of how the scrimmage lines will form up on these issues: Accomodation from members of the majority party in the Senate, digging in of heels by members of next term's minority party in the House.
Then it's a good thing that next term's majority party in the House rode to victory just seven short days ago on a pledge to reduce the deficit . . . should be interesting.
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Old 11-11-2010, 03:03 PM   #68
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Why not get rid of all deductions

I agree with you that if there is an incentive to get a deduction people will fudge... or do what I do and double up (I pay two years of property tax in a single year to max my deductions)...

But if NOTHING is deductible, then you don't have to worry about it either... or give a standard dedection and everybody has to use that amount no matter what...

I think Option 2 basically gets rid of all the misc. itemized deductions. There is certainly a class of deduction related to the production of income that you can't or shouldn't get rid. So for instance you can't tax rental income without allowing deductions for interest and repairs. Same thing is true if you have an ebay business which basically involves going to garage sales buying items fixing them up a reselling them on you have to allow the person to deduct the costs of buying and fixing the items.
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Old 11-11-2010, 03:08 PM   #69
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Indications of how the scrimmage lines will form up on these issues: Accomodation from members of the majority party in the Senate, digging in of heels by members of next term's minority party in the House. From "Democrats Pulled in Different Directions on Taxes, Deficit" in The Hill:


I don't know if the panel will vote on all their recommendations as a package, or if each recommendation will have to stand an individual vote. Likewise for any vote in the House and Senate--as a package or one at a time?
I thought it was as a package with an up or down at least in the senate, similar to the BRAC recommendations. Frankly it is the only way to do it, since other wise we will end up with lower tax rates, higher standard deduction, while maintain all of the deductions, and higher SS benefits for poor people, along with promises to make spending cuts in a future generation. Although, I imagine they will raise the full retirement age to 69 long after we are all dead.
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Old 11-11-2010, 03:19 PM   #70
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I think Option 2 basically gets rid of all the misc. itemized deductions. There is certainly a class of deduction related to the production of income that you can't or shouldn't get rid. So for instance you can't tax rental income without allowing deductions for interest and repairs. Same thing is true if you have an ebay business which basically involves going to garage sales buying items fixing them up a reselling them on you have to allow the person to deduct the costs of buying and fixing the items.

sure... I guess I should have said 'itemized deductions'.... and if they do say we should get rid of them I did not hear it... (I have not read the report)

The ones you mention are on sch C and relate to business deductions...
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Old 11-11-2010, 04:00 PM   #71
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What they did in the UK (in the early 80's I think) was to set a maximum amount of mortgage interest that was deductible and not link it to inflation. Then in recent years it was a lot less political pain to remove that deduction altogether.
In the US the maximum deductible mortgage is interest on principle of $1MM ($500k for singles). That doesn't go up with inflation. So if you can get a 5% interest rate then the maximum dedection per year is $50k ($25k for singles).

There is also the extra deduction of interest on $100k ($50k singles) second loans.
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Old 11-11-2010, 04:27 PM   #72
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....
Maybe you guessed I disagree? Yep, they're dead, so screw their intentions of what happens after death. Throw their body in the compost pile, they won't know they aren't in the family burial plot. Take their car, their clothing - they can't use 'em now. We wouldn't want the rest of the family to dispose of any of that per the deceased wishes. They're dead, screw 'em, too late to hire a team of lawyers now. Stupid dead people.

edit/add: And if it were the "American Way", our Founding Fathers would have put it in the Constitution. Heck, they didn't even put income tax in there, or even hint at one group taking care of another.

...

-ERD50
By "American Way"... I meant the prevailing practice.

It is ok to disagree... It is America.

I do not think the estate tax is intended to be something that "screws" people. Although, the recipients (of less) probably feel they were...

They can pry it out of your warm live hand or your cold dead one. Pick your choice.


I intend to spend mine! If I can help it... all they will find is an empty hand.
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Old 11-11-2010, 04:33 PM   #73
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In the US the maximum deductible mortgage is interest on principle of $1MM ($500k for singles). That doesn't go up with inflation. So if you can get a 5% interest rate then the maximum dedection per year is $50k ($25k for singles).

There is also the extra deduction of interest on $100k ($50k singles) second loans.
Thanks for the clarification. The only house I bought in the US was a 5 bed, 3,500 sq ft home for $110K (in 1992), so if I knew what the max was, I've obviously forgotten about it as it was way above what mattered at the time.

The last house we bought in the UK was in 1986 and it cost £45k. At the time the maximum principle that qualified for the interest deduction was £30k.

I think getting rid of the interest deduction on $1MM homes will be very difficult, politically, at this time.
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Old 11-11-2010, 09:00 PM   #74
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This is why I object to those (mainly on the Left) who suggest eliminating the wage cap on FICA (SS only, not Medicare) taxes. It is a terrible idea. The same cap on wages subject to FICA also caps SS benefits which is something those on the Left never mention in their arguments. If you eliminate the cap on wages and also on benefits (not what those on the Left suggest) then it won't save the SS system as much, if anything, while giving Bill Gates an uncapped SS benefit check every month.
Eliminating the cap on wages and having unrestricted benefit checks would still result in a very large increase in SS tax revenues for a fairly small increase in total benefit check payouts. The payout schedule is highly progressive, so that high wage earners get very little "payback" for what they put in. And, the higher the "cap" is, the more it is a wealth transfer system for the poor--welfare. But, a softer welfare that isn't means tested--everybody gets something, and those who paid a lot get slightly more back.
or, like i suggested in another thread, remove the tax cap but add another knee at about the current cap level, which when computing the benefit only adds 5% (instead of the current 15%) of the income over that knee to the benefit computation.
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Old 11-11-2010, 09:28 PM   #75
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The reason I like the high standard deduction is really simplifies taxes for the vast majority or Americans and discourages the minor cheating. E.g. claiming that underwear you donated is worth $5/pair or fudging on your prescription cost etc.
Hey! How did you get access to my tax forms?
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Old 11-11-2010, 09:30 PM   #76
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sure... I guess I should have said 'itemized deductions'.... and if they do say we should get rid of them I did not hear it... (I have not read the report)

The ones you mention are on sch C and relate to business deductions...
Well TP read the report it is 50 powerpoint foils in big fonts,and takes maybe 20 minutes..

From page 26 one of the Tax plan options
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Repeal state & local tax deduction, cafeteria plans, and miscellaneous itemized deductions

Limit mortgage deduction to exclude 2ndresidences, home equity loans, and mortgages over $500,000

Limit charitable deduction with floor at 2% of AGI

Cap income tax exclusion for employer-provided healthcare at the amount of the actuarial value of FEHBP standard option
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Old 11-12-2010, 12:57 AM   #77
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Another calm, nonpartisan voice of moderation is heard . . . Paul Krugman weighs in.
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"Count me among those who always believed that President Obama made a big mistake when he created the National Commission on Fiscal Responsibility and Reform . . ."

" . . . But on Wednesday, when the co-chairmen released a PowerPoint outlining their proposal, it was even worse than the cynics expected.

. . . "Still, canít we say that for all its flaws, the Bowles-Simpson proposal is a serious effort to tackle the nationís long-run fiscal problem? No, we canít."


. . . "Can anything be salvaged from this wreck? I doubt it. The deficit commission should be told to fold its tents and go away."
He raises some points worth considering, but overall he's another shouting voice in the mob trying to move the line of scrimmage before the real playing begins. Krugman's emphatic "nyet" will probably cause a lot of Americans to look more favorably on the Commission's work.
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Old 11-12-2010, 03:35 AM   #78
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I was watching 3 way debate on the Newshour over the report; including AFL-CIO guy, Grover Norquist, and a woman who is the President of Committee For a Responsible Federal Budget . I guess it is telling that even the Newshour which generally has thoughtful discussion Norquist, and the AFL-CIO both ended up reading from their talking points. I am not even convinced that AFL guy had actually read the report yet.

AFL guy: don't cut Social Security eliminate the Bush tax cuts.
Norquist: Our problem isn't a revenue problem it is a spending problem.
Together: This plan is a non starter.

At one point Grover talks about how if we could increase growth by 1% it would generate an additional 2.5 trillion in revenue over 10 years. The AFL Guys said well astonishingly I actually completely agree with Grover, we need growth. Of course, I disagree with him how to get there.

This is precisely the problem IMO. On one side we have Tea Party types saying if we just cut spending and cut taxes everything will get better and on the other side, the Krugmans say if we just increase spending on infrastructure and give money to those in real need and pay for it by taxing rich people everything will get better. Everyone agrees on the goal higher growth, no one agrees on the approach, and so we end up with lower taxes, more spending and a huge deficit.

Just once, I'd like one of the extremist to acknowledge that actually they don't know crap. I know 1+1 = 2 and I'm 99.9999999999999999% sure that sun will rise tomorrow. But the impact of Keynesian economic stimulus on the US economy or which side of the Laffer curve we are on, or impact of cutting corporate taxes on job creation, all of the stuff is pretty much a scientific wild ass guess, best case.
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Old 11-12-2010, 05:41 AM   #79
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Another calm, nonpartisan voice of moderation is heard . . . Paul Krugman weighs in.

He raises some points worth considering, but overall he's another shouting voice in the mob trying to move the line of scrimmage before the real playing begins. Krugman's emphatic "nyet" will probably cause a lot of Americans to look more favorably on the Commission's work.

I agree with 99% of his observations and analysis of the situation.

Simpson should recieve a withering round of criticism and calling his plan what it is... screwing the middle class in favor of the extremely wealthy!
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Old 11-12-2010, 05:58 AM   #80
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I agree with 99% of his observations and analysis of the situation.

Simpson should recieve a withering round of criticism and calling his plan what it is... screwing the middle class in favor of the extremely wealthy!
Seriously how can you say that? Did you miss the part where the capital gain and dividend rates increase from 15% to between 27-35% and the large decrease in itemized largely impacts the wealthy. Obviously the devils in the details but I don't understand, how you know this?
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