Redstate

Thanks for your comments. I absolutely agree that the Republican Party needs to regain the mantle of reform; not only will this help us retake the majority, but more importantly, it is also the right thing to do.

That said, this is the largest individual tax hike in American history. As I said in the post, this tax hike is a job killer that threatens the well-being of American families. There is a need to reform the current tax code - but the Rangel tax hike plan is certainly not the way to do it.

the Bush tax cuts expire. The plan that Rangel puts forward itself is more revenue neutral than anything and regardless of his plan, those cuts are set to expire in 2011. It just seems this line of biggest increase in history is a tad bit disingenuous.

Isn't a tax increase until the tax cuts expire. And why exactly are the cuts expiring? Because Rangel has that as part of the plan.

Revenue neutral is not the same as "not a tax hike."

Example - if I plan to "lose" revenue by, say, decreasing corporate tax rates to the tune of $100 million (for simplicity - real numbers would be larger). And then offset that by increasing all personal income tax rates by 2 percentage points - isn't that a tax hike? It sure would seem that way to the guy filling out his 1040. Any benefit from decreased corporate taxation would likely not offset the higher tax bill he pays.

Revenue neutrality is usually a way to make something that will screw the average person sound like it's not going to harm him. It punishes some people at the expense of others. Not so neutral when you get the short stick.

its not a net tax increase. And besides, we had what 4-6 years to fix all these issues and instead decided to spend like sailors on shore leave. In order to eliminate the AMT permanently, we will have to either raise taxes elsewhere or accept much higher interest rates as our deficit shoots up even more.

maybe you missed it but the deficit has been shrinking, not going up.

And the AMT if properly indexed would not cause some horrendous fiscal crisis. Just repeal it. And, that effort was stalled by Senate Democrats, who wouldn't allow a flat repeal and forced us to pass piecemeal fixes every year.

Rep. Cantor did not say ALL tax increases are off the table. But even people who talk about a flat tax would tell you, in exchange for a broader tax base (through reduced deductions) you get a LOWER tax rate on the new base.

What Rangel is doing is not only raising the tax base by taking away some basic deductions (I would note that several flat tax plans keep mortgage deductions and charitable giving deductions even where other deductions are eliminated) but he is then INCREASING the rate you pay on the higher tax base.

This could be devastating for many homeowners. First you see the income that you're being taxed on go up - and in some cases that mortgage deduction is a considerable sum. This could bump you into the new tax bracket, where you pay a whopping new tax. Congressman Cantor: are there any numbers on what that kind of "reform" could cost people? How many new homeowners bought real estate in reliance (in part) on the deduction and would be forced to sell homes because their new tax burden is unsustainable? Oh, and BTW, Adjusted Gross Income also would eliminate your standard deduction. That's also below the line. So you pay higher tax rates on a higher income base - how is that "reform"?

In fact, Charlie Rangel is not "reforming" anything. Unless I'm wrong, this new surtax is not applied to everyone, the old Code remains in effect for most people.

Republicans are pushing reform that actually does something. Rangel is not "simplifying" the Code. He is tweaking it to improve its wealth redistribution characteristics. From homeowners to renters, from rich to poor. Reform should involve simplification, and should be balanced not by raising tax rates on some and lowering them on others, but through a restructuring of the Code itself. The Flat Tax seeks to eliminate most deductions (I believe there would remain a standardized deduction like today) in exchange for lower tax rates on what's left. The Fair Tax replaces the entire current income-based system. Rangel doesn't do either - he simply changes the rules for "the rich."

Republicans need not defend the current Code to fight this monstrosity. But if it comes down to it, the current Code is far superior to the scam Rangel is trying to push.

but it does also cut taxes by about as much as it raises taxes

Based on what, exactly? What are the huge cuts that are going to offset the expiration of the tax cuts and this new surcharge? AMT isn't going to do it.

Saying that any revenue raiser is off the table as part of tax reform means you can never have tax reform.

That's not what I got from the post.

All fundamental tax reform plans eliminate most or all deductions and credits. Attacking Rangel for reducing deductions is basically saying that you want to defend the current montrosity of a tax code that we now have.

This isn't "fundamental tax reform." It's a big tax hike being disguised as something smaller than it is by using AGI rather than taxable income. I suppose that attempt to mislead the public deserves praise?

They are locking us in as the defenders of the current tax code, the defenders of special deductions and credits, and the opponents or simpler, flatter tax systems.

I guess since I don't see anything simpler or flatter about a 4% income surcharge based on AGI. If they were going for simple, they would charge it on taxable income. If they were going for flatter, they wouldn't pile it on the 150k+ earners.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

If the corporate rate is 25% or 30% and the top individual rate is much higher than that, why wouldn't I have a corporation earn, hold, and invest my income, withdrawing only what I need to pay my expenses when I need to pay them?
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

I assume that corporation would be DOING something with that money while waiting to pay it out to you in dividends. Creating economic activity usually leads to creating more jobs which makes us all better off.

Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
Proud member of the V.R.W.C.

I assume that corporation would be DOING something with that money while waiting to pay it out to you in dividends.

Sure... it would be doing the same kind of stuff people are doing with the money now, except they'd be paying less tax on it. So it really makes no difference on that score. If our goal is to increase economic activity, we shouldn't be jacking up the top marginal rate at the same time.

Taxes on corporations is the problem with the income tax. I'd be all for repealing the corporate income tax altogether, but we'd have to do it on personal income at the same time if we didn't want to lose a bunch of revenue to people who are able to move their personal income into corporations to save on taxes.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

have already done so. It's really a limited set of people who can do this, mostly professional people like doctors and lawyers or small buisiness owners (who I wouldn't mind helping in this fashion).

If you are an employee of a company, you'll have to pay income taxes. If you're not, you've already got ways to avoid taxes.

I assume you want to elimiate all income and corporate taxes and move to a national sales tax or VAT system of some sort?

Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
Proud member of the V.R.W.C.

I'd guess that the people able to move their income into a corp have already done so.

There's no tax incentive to do so now, at least not at the Federal level. There are some very powerful disincentives to not do so, in fact, thanks to double taxation. But once you start cutting the corporate rate and hiking the individual rate, it will start to become a great way to shelter income. The greater the difference between the rates, the better the deal it becomes and the more people who will take advantage of it.

It's really a limited set of people who can do this, mostly professional people like doctors and lawyers or small buisiness owners (who I wouldn't mind helping in this fashion).

Coincidentally, this is the same group of people that are being hurt by the income tax hike. Many of those guys have their businesses organized as sole proprietorships, partnerships, or subchapter S corps. Those guys will get nailed by the tax hike on every dime of their business income as they earn it.

I assume you want to elimiate all income and corporate taxes and move to a national sales tax or VAT system of some sort?

I'd favor a sales tax because it is simpler and more transparent, but yea, I can't stand the income tax and I'd be open to replacing it with something else.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

The short version is NO. I just want to keep the rate cuts on corporate income.

Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
Proud member of the V.R.W.C.

This is the biggest flaw in the Rangel plan: a 14% spread between the top corporate and individual rates. (And yes, I think a top rate of 44% is in and of itself a huge flaw too, regardless of the corporate rate.) The corporation becomes a tax shelter as tax is deferred by keeping the income in the corporation. In addition, C corporations (which tend to be big businesses) get a competitive advantage over partnerships and S corporations (which tend to be small businesses), because the latter are taxed under the individual rate structure.

Incidentally, I love the surtax on adjusted gross income idea and I've been touting it for a long time. The difference is, instead of slapping it on top of the existing top rate, I'd convert the top couple of rates into an AGI surtax, which would allow you to bring the top rate DOWN because you'd be taxing a broader base, thus limiting the benefit from itemized deductions. Bill Bradley proposed this as early as 1982, but he CUT the top rate with the additional revenue he brought in by applying it to AGI instead of taxable income.

For example, assuming revenue neutrality, I'd rather have a tax of 15% plus a "surtax" of 10% of AGI above $100,000 instead of two rates on taxable income of 15% and 27% (with the 27% rate kicking in at $100,000). The former structure would give you an effective top rate of 25%, but on a broader base than the 27% rate in the latter structure.

This bill will create one kind of activity - it will be a boon for tax and corporate lawyers, who will get all kinds of new business from people trying to shelter their income in corporate entities and other shelters.

The money used to pay them (and by the way, I'm one of those lawyers), could be going to actually produce something valuable to society. You aren't going to generate jobs by increasing tax rates on the people with the money to do it.

which is one feature that Rangel threw in. I assume he hoped to get support for the whole thing from the business community by throwing them a bone.

Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
Proud member of the V.R.W.C.

...corporation's earnings when you pay them out to yourself. A business doesn't "consume" anything. It either invests in new growth or it pays its returns out to its shareholders, so it shouldn't pay income tax at all. The correct rate for business taxes is not our current 35%, the proposed 30.5%, or the EU's 25%.

It should be zero.

needs to be cut. Let's use that to propose our OWN tax reform plans. I'm even willing to give Charlie the credit if we can get a tux cut out of congress without the onerous offsetting increases he's proposing.

I know the Dems like to "pay" for tax cuts using a static economy as the guide, but we don't have to replace all the tax cuts with rate increases elsewhere. The economic growth from cutting the corporate rates should replace a fair amount of the "lost" revenue and the rest should be "paid for" with spending cuts.

Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
Proud member of the V.R.W.C.

though as you say, we're the choir that he's preaching to. But sometimes the choir needs to hear the message too.

It's nice to know what OUR GUYS are doing and what their thoughts are on any given subject. More importantly, it gives us a chance to give a little feedback as well.

Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
Proud member of the V.R.W.C.

The RSC has proposed an elimination of the AMT completely, and the institution of an election system that would allow taxpayers to opt to keep filing under the current Code, or to effectively use a flat tax system.

You can see the text of the bill - it's H.R. 3818.

Thanks reldim. I was aware of that, as are many other people here I'm sure. But go out on the street in your neighborhood and talk to 20 people. I guarantee you that you'll find that none of them are aware of the RSC proposal. Same with the alternative to SCHIP. My point was this information needs to be disseminated beyond the our little rightwing talk radio/blog community.

The naive forgive and forget.
The foolish forget but do not forgive.
The wise forgive but do not forget.

The RSC held a press conference - think is got picked up by the NY Times? Think the AP ran a wire story on it?

How do you get the word out when the people who are supposed to help inform the public (newspapers, radio, TV), actively seek to diminish your message in favor of the other side? The simple fact is that people who are key in the debate are not people who read blogs, listen to Rush and Hannity, or read Human Events and National Review. They read their local paper, watch the evening news, and even when the read or hear about a proposal like this, they get it with negative spin.

How do we counter that? How do we get the message out? Where are the people on the Right that will stop complaining and start funneling money into some 527 that will buy ads, will work to educate the voters? I don't have the answer - and so I don't sit and whine about how bad we are at "communicating." If you've got some ideas, I'm sure that the folks in the leadership would love to hear them.

Your first two paragraphs expanded upon a point I have made many times. Then you ask the same questions I do. I have donated money. I write letters in my local paper. And no, I am not whining. I really believe that many in Washington fail to realize how little exposure they have compared to the left. Part of the problem is that while we control the largest bully pulpit, the Presidency, he is unable or unwilling to formulate any fiscally responsible/small government message, and frankly unable to communicate anything. OK, maybe I'm whining now...

I guess what I'm saying is that we, the right, at all levels, from our politicians down to us need to be more aggressive and creative in disseminating our message.

The naive forgive and forget.
The foolish forget but do not forgive.
The wise forgive but do not forget.

Do you even know the origin of the AMT?

AMT was instituted to target 22 - yes that was 22 people who weren't paying "enough" taxes back in the '60s. Those 22 were making more than $150,000 ages ago.

This is not a "good start" unless the "good start" begins and ends at the elimination of the AMT. If you read the Congressman's post, you'd see why this is not just a "4 point hike" on "the rich" (btw, $150,000 is not rich in some places). My parents are doing okay, but not so great that they can take a hit. Since the $150,000 threshhold is figured BEFORE most common deductions, my parents would lose several thousand dollars in deductions - possibly more - and THEN pay 4 points more on the new number. In effect this could increase someone's tax bill by 6 or 7 points.

I need to look at the intricacies of the bill, and do a little math, but perhaps I can come up with a mathematical example of a couple of families and how they do under the Rangel "reform."

Could someone fix my code error - this shouldn't be all bold. Should be an out bold code between "22" and "people" in the second sentence.

Have the Directors ever considered giving people the ability to edit their own comments?

n/t

I'm pretty sure it was 155 taxpayers they intended to target. Still, your point is correct. The AMT was not supposed to be used for what it is today.

you can trust writing tax policy".No truer statement has ever been posted.

You're confusing their profit (what they "make") with their gross sales.

Those farmers likely have gross sales well into the six figure range. Their actual profit on what they raise is much smaller. If you don't allow for deduction of costs, and if the farm isn't set up as a corporation, this proposal would tax small farmers out of existance.

Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
Proud member of the V.R.W.C.

I think that you are confused.

Line 12 of the 1040 is "Business income (or loss)" which is the business gross profit adjusted for expenses. It is the income, not the gross profit, that determines the proprietor's AGI. So, these theoretical small farmers would be paying taxes on their net profit, not their gross.

the "no deductions" comment meant just that. NO deductions. Again it depends on how you define income and which deductions are disallowed in Rangel's bill. If it allows deductions of expenses from revenue and taxes only business profit then you are correct.

Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
Proud member of the V.R.W.C.

Just no "below-the-line" deductions such as mortgage interest, state and local taxes, and charitable contributions -- things that are used to pursue social policy objectives. "Above-the-line" deductions, including ordinary business expenses, are still deducted in computing adjusted gross income, which is what the surtax applied to.

I come from a family of 4 who lived in the NYC suburbs. My parents make over the magic $150,000 number. And I can tell you that, while they had both my brother and I as dependents even that amount was far from "rich" - It was comfortable, but there certainly wasn't an extra several thousand dollars to send to Charlie Rangel.

And as for "neutrality" - that onlyu exists in the static economic model that the CBO insists on using. If anybdoy bothered with dynamic forecasing this plan would probably be looked at as a net loser.

So they will be nailed by this 4% agi surcharge.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman

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