Why Everyone Is Wrong About "Tax Reform"
So, What's Wrong With "Tax Reform"?
I'll start with this little hint: What we are seeing debated right now in the abortion we call Congress is not tax reform. It isn't even a significant tax reduction. Okay, so that was more than a hint. Take a gander at my piece about Boris and Ivan. When I posted it last week a Boris attitude was running rampant through social media and cable news. Commentators and the wider ignorant crowd were whining about how unfair it is that the rich get the several times more than everyone else.They should pay more still! When I read and hear people saying such things I often wonder if they are stupid and pathetic enough to actually believe it, or if they are hoping to join the chorus of the left, hoping that Daddy Government will kill Ivan's goat for them. At any rate, it seems to be working. Since last post congress has been debating who should get taxed to pay for the tax cuts. (Can you see the stupidity at work here?) It appears they will not only keep the top rate at 39.6%, there is serious talk of running it up to 48%+ to pay for the measly tax breaks the middle class is getting. There are so many things wrong with the ongoing debate it is hard to know where to start. The undiluted bullshit is flowing out of DC like a wall of stinking lava. The first, and most significant point is how blatantly disinterested the Republican are in a true, free-market fix to our tax code. I would lump Trump in with them but I have to allow for his monumental ignorance about all things political and economic. I have been so hard on him over the years it wouldn't be fair to pretend he understands what is actually being debated here. Clearly, the Four Morons simply stroked his ego, let him think he was the driver of the debate and told him this was going to be a historic tax cut. It's not going to be any such thing. If the GOP actually wanted to REFORM the tax code, they would have started from a position of real reform. This would have been to announce that taxes and spending were going to be slashed to the bone. Naturally, the Dems would have had fits. But they would have been forced to defend the ridiculous code we have now. Any conservative, even pretend conservatives like Paul Ryan could have easily won that debate. The result, even with compromises, would have been far more productive and far better for the economy than what we have now. That's because the GOP started, as they did with Obamacare repeal and Immigration, from a position that was already 90% a Dem/Socialist position. And as with Obamacare and Immigration the Dems couldn't have been happier with the laws being proposed by Ryan and McConnell. When you see the Democrat half of the Four Morons saying how horrible the GOP plans are, you are just hearing hot air. They know three things: There are a few honest conservatives on the Right who know this is all theater and will have a hard time supporting it. They also know there are at least two political whores, McCain and Collins, who will not support anything that isn't 99.9% liberal so they can claim to be "mavericks" working across the aisle. Finally they know the Ryan and McConnell are weak leaders who care more about simply being in their cushy positions as party leaders than actually accomplishing something. Result: the Dems know they will either keep everything as they want it or if they "lose" the debate, they keep 90% of what they want. In other words, the Dems can't lose and the GOP had already surrendered their principals before the first committee took up "tax reform".
Oh Yeah, about the "reform" thing.
I really hope if you are reading this you are not one of those pathetic rubes excited about the post card tax form. THAT is the first "reform" Paul Ryan has been touting. There is nothing new about that card. It is a 1040A printed in a smaller piece of thicker paper. You'll enter the same numbers in basically the same way. The only difference is there will be more people claiming "gifts" from the government in the form of "earned" income credit (EIC) and the "alternative minimum" tax (AMT) repeal. While these "gimmees" send more of our money to mostly people who don't pay income taxes to begin with, they represent more of the federal government taking money from you and me and pretending to help us by giving it back or giving it to someone else. Why take it to begin with? So the card is a hoax.
The state tax write-off.
Most people actually think this is a good thing. While I am sure they love the idea of getting the money in their Federal refund, did you ever consider what little sense it makes? Let's say you live in Mississippi. Your government taxes you and everybody else. At the end of the year you get a deduction for what you paid Mississippi. In other words Daddy Government is subsidizing your citizenship in a state. Pretty good, right? But in MS, you don't pay very much in the way of state taxes. New Yorkers, on the other hand, pay a huge tax bill to the state. Their deduction is a lot bigger. So when businesses and people decide to live in New York, it is understood that to live in such a "great" state, you have to pay for the privilege. But wait, they are subsidized too. Hmmm. What would happen, I wonder, if the federal government dropped everyone's tax rates a bit and stopped subsidizing people living in congested, high tax, big, bureaucratic areas? Would a small to medium sized business person stay there with the traffic and the crime and the red tape, if someone else was not paying him public money to do so? Just chew on that one. But everyone is worried about the deduction (which the government never had any business creating) going away. The idea of the government subsidizing what state you live in deserves more attention. And I will revisit this subject in greater detail soon. And what of your mortgage interest deduction? Did you buy a home because you got a deduction? Don't lie. You're not a billionaire. You bought a house because you were ready to buy a house. Period. The "deduction" you get is smoke and mirrors. How about we knock a few more point of your tax bracket and stop wasting time and money factoring and paying inflated refunds. How about the child-care credit? That's going up! How about we knock more still off what you pay to begin with and not pretend to "give" you that money every year? Do you know what happens to prices when there is less money chasing them? That's right! Very good! They go down. It is the illusion of getting that money from Daddy Government that contributes to the high cost of child care. And if you don't qualify to pay income taxes, everyone else is paying for your child care and your "earned" income credit. You should thank people for that every day. If that line makes you smirk it is because you are an ingrate with an over-bloated sense of entitlement. Don't worry, you are not alone. This tax debate and the comments I see on social media indicate there a bunch of you out there.
Don't get me wrong.
Any reduction in taxes will have a positive effect on the economy right now. But the pathetic little we will come away with after this bit of worthless theater in Congress will not be anywhere near the boost we'd get from a real across-the-board cut. Everyone paying the same percentage of their income, closing all loop holes would be better.
But the tax cuts need to be paid for!!!!
No they don't. Not in the near term. But once the economy settles into the new norm, there will be no new boost from the tax rates. So, since we know that any new revenue from the volume of taxes being paid will be wasted by the spending pigs in the House and Senate, what is a voter to do? What is the 1 smart statesmen in 50 to do? Well, if you want to offset tax cuts directly, you don't raise other kinds of taxes. That kills the point of the exercise. You must cut spending. First there has to be a push for no new spending. No one is dying in this country because the government doesn't piss enough money away. Uncle Stinky can, as I point out in Street Politics, dump a lot of useless spending over night. Start with the entire Department of Education. It has never educated a single child in this country since its inception. In fact, like the "war on poverty", every dollar spent by the Dept of Ed has resulted in one less educated graduating class after another. It is a drag on REAL education. Dump it. Put the EPA under the Department of the Interior. Strip it of its entire mission other than referee of disputes between states over shared waterways. Every state now has an EPA of its own. We don't need a 51st EPA in DC. Slash it by 90%. Not a single molecule of carbon will be emitted because of that cut. Until now the only thing that stood between fossil fuels and success was bribe money on K Street. Now the states will be the final arbiter of who burns what fuel and who builds wind farms. And don't get me started on job training programs. They are most wasted tax dollars ever spent. Not one of the 47 job training programs run by the federal government has reported a single success. Most don't even pretend to have a matrix to justify the money they waste. That's just three examples of billions we can save to put the "pay for tax cuts" canard to rest. There are more in the book and many more to be had throughout the federal pig trough.
This should be your take-away. There is only one true, honest, permanent tax reform to be pursued. That would be a flat tax. To be most effective it should be a point-of-sale retail tax, but or now we just leave it as an income tax. No pretend loop holes. Arguing for more taxes to pay for tax cuts is the kind of sick shit Orwell tried in vain to warn us about. Reduce the size of the pig trough. My final conclusion is this: I am likely pissing up a rope (old Navy talk for wasting my time). My guess is the GOP will put out a plan even more Byzantine than our existing tax code which will do 1/10th of what a simple across-the-board cut will do. There will be great fanfare. The Donald will call it the greatest tax cut in history. And you will let them all get away with it. Don't be a political pansy! Read Street Politics: It Ain't Your Daddy's GOP Anymore! Grab your copy here. Let's demand good governance!
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