Taxing

Posting has been light lately, I know. I’ve been busy at work, occupied with other projects and baseball has started.

So, today is April 16. The Day-After-Tax-Day. I didn’t protest with the teabaggers. (Is that a horribly unfortunate name, or what? Nothing speaks to your lack of experience as a protester than picking up a moniker that happens to be a homonym for a particular form of hinky sex.) Protesting isn’t really my thing. Standing around with a placard and urging passing cars to honk doesn’t seem to me to be the most effectual of political resistance. (Oh no… I blog. Infrequently. Congress is fairly trembling, I’m sure.)

I sympathize with the protesters. Taxes are high, and despite the chorus of sycophants echoing Obama’s empty rhetoric about tax cuts, they’re going up for everyone. Tax cuts without corresponding spending cuts are tax increases. Spending is paid for with taxes; we don’t have any magical fun money–and just printing more regular money isn’t too smart either.

The problem with tax protests is that they sort of miss the mark. I’d rather see spending protests. Spending drives taxation. So long as the government can borrow, it will always spend more than it earns. That debt must be paid for and taxes will be levied. So let’s protest stupid government spending. Let’s protest the massive unfunded liability that is Social Security. Let’s protest the absurdity of the stimulus bills and the budget that stands as a monument to irrational exuberance. If you thought irrational exuberance on Wall street was bad, wait until you see the concussive effects of an exuberant Congress.

Or not. Protesting in April probably won’t make much difference to November elections (especially since the big mid-term election cycle is next November). Organized political activity, however, can make a difference. If these protests are the first wave of an organizing effort to mobilize disaffected voters and harness them for direct political action, then that would be all to the good.

But how organized can they be if they call themselves teabaggeers?

Advertisements

No words…

Sometimes, I just can’t summon the words–or to be more accurate, I can’t summon the words I’m willing to use on a blog read by my family.

New plan may tax U.S. drivers for every mile traveled, says Transportation Secretary Roy LaHood

“The traditional gas tax is not enough to shore up infrastructure.”

The administration just passed a $1.7 trillion dollar spending frenzy billed as “infrastructure” spending.

Tax credits for hybrid vehicles, increases in the gas tax, tax for miles driven, deductions for sales tax paid on new cars, increased fuel economy regulations, subsidies for rail, bailouts for the auto-makers, taxes on miles driven … …

It’s not that they don’t know what they’re doing, it’s that they don’t really care. The purpose is to funnel money to connected business and enterprises. That’s the only purpose.

Different Rigging

I was thinking about the inanity of our tax code in the context of the housing crisis, and in particular I was gnashing my teeth at all the people who got zero-down home mortgages and then got to deduct the interest on those loans. I came to two conclusions.

The first was that I’m angry that I’m not one of those people.

The second is that the incentive is (as I mentioned yesterday) clearly perverse. It’s an incentive to extend debt and minimize initial equity.

So here’s my proposal:

Since in most cases, the amount paid in mortgage interest, over the life of the loan (assuming no default) often exceeds the original purchase value of the home, my proposal is simple.

Do away with the mortgage interest deduction and replace it with a deduction for the purchase price of the home, amortized over the life of the mortgage. You deduct what you pay in principal not interest. Any down payment is amortized along with initial purchase price. Any capital gain realized from sale of said home is not deductible.

That’s an incentive to save and an incentive to build wealth and equity, not an incentive to increase debt.

Tell your friends and tell your relatives. Let’s get the campaigns on board.

Taxes and the economy

I took a stab at our taxes the other day. For reasons not worth going into, doing our taxes is a little complicated. That’s in addition to the normal, everyday, absurd complexity of the US tax code mind you. Nothing illegal, just a lot of numbers to crunch.

Now, I know that doing taxes is never an enjoyable experience, but I found this year’s effort particularly infuriating. That sounds weak. I’m infuriated by a lot of things, customer service agents, the tone deaf idiots on American Idol, excessive elementary school testing…. But taxes anger me in ways that other otherwise ridiculous things don’t.

It’s not the cold, detached anger that I feel when I see an economic fallacy repeated as basic fact, and it’s not even the hot anger over a public policy that results in widespread poverty. It’s a different kind of anger. Doing my taxes generates the same kind of anger that I’d feel if I watched someone punch my mother.

I’m not roused to anger because the amount I have to pay is exorbitant and extortionist (it is), or because what I pay for is so absurd and pointless (that’s true too), but because I am so clearly targeted for excessive taxation. The government has decided that I, and others like me, should pay more than other people who make more than I do. In other words, the United States government has determined that my family must suffer a disproportionate burden of the collective load.

I’m not complaining here about “progressive” taxation (although that’s awful too), I’m complaining about outright discrimination. We don’t pay more because we’re rich, we pay more for two absurd reasons:

1) We’re married.
This is my first year doing taxes as a married man. It’s truly disgusting. By my calculations, we’ll pay at least 10% more (in federal taxes alone) than we would if we were able to file separately. That’s just absurd. Why the status of my marriage should make an ounce of difference to the government is beyond me. The penalty shows up in a number of places (child tax credits, deductions, etc…) and the cumulative effect is huge. We don’t wallow in excess cash and the added 10% that we’ll need to fork over to the feds will cost us dearly. This is becoming a popular issue, but I think it bears repeating that Bill Clinton vetoed a bill that would have ended this disgrace.

2) We don’t own a house.
That’s right. We rent. We don’t own because we can’t afford to buy. The fact that we rent means that we don’t benefit from the interest deduction available to homeowners. If our rent were a mortgage, we’d pay 20% less tax. I don’t want to hear about property taxes–we pay those too, in the form of higher rents. We have less capital, less money, and less wealth and yet we pay more.

And I see politicians (Clinton, Obama, McCain) pandering to rank populist sentiments and calling for a federal bailout of the sub-prime crisis. A policy that would raise my taxes to subsidize people who own houses they can’t afford. (but still enjoy the tax breaks that come with home ownership, of course.) To add insult to injury, a bailout will mean an increased tax burden, which would make it harder and harder for us to save for the increased down payment and higher rates that a bailout would inevitably induce.

Now, I’m not envious. I don’t want anyone else’s taxes raised, I just want a system that’s fair. When I look at the numbers and realize that as a married renter I’m paying 30% more tax than I otherwise would, I get angry. I don’t want to be penalized for getting married and I don’t think the government should be in the business of making it more difficult for people to become home-owners. I’m not jealous, I’m just angry…. Very, very angry.

Can someone explain to me why a flat tax is unworkable?