Sentences to ponder

by on December 5, 2012 at 11:06 pm in Economics, Political Science | Permalink

Is it better to raise rates or cut loopholes?  Maybe conservatives should be preferring the boost in rates.  From Kevin Drum:

…which is simpler and easier, raising rates or closing loopholes? I’d say raising rates is easier, and if it’s done now it will make it harder to raise them again in the future. This means that if Democrats want to soak the rich again, they’ll have to do it via closing loopholes, which is a harder lift.

Second, there’s Coburn’s point. If you want to have any chance at all of broadening the base and lowering rates in the future, you can’t close loopholes now. You need to leave them there as bargaining chips. Tax reform will be more likely if rates are higher (making them easier to lower) and loopholes are all still intact (giving you plenty of stuff to close in return for lowering rates).

NAME REDACTED December 5, 2012 at 11:36 pm

This is all a meaningless distraction. In a large-economy, fiat-currency country the tax rate is not macroeconomically meaningful, government spending has meaning.

Taxes here are a way to make government services more painful to more people.

NAME REDACTED December 5, 2012 at 11:37 pm

Another way of thinking about it. Democracy is by definition an externality. This makes all taxes into Pigovian taxes.

MMT-Crank-Alert December 6, 2012 at 12:26 am

lol

DocMerlin December 6, 2012 at 12:31 am

Glad you enjoyed that.
Btw why did you name yourself, MMT-Crank-Alert?

gabe December 6, 2012 at 11:24 am

I agree. If the Sumner’s are correct about monetary policy then the governemtn should just print what they need, no harm will be done. It would be more efficient…..why tie it to debt issuance that we then force the masses to pay interest on? who does that benefit?

Carolyn December 14, 2012 at 12:45 am

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dan1111 December 6, 2012 at 1:19 am

I’m not so sure about this. I think one could make an opposite case, that goes something like this:

Raising rates is always hard, while closing loopholes is always much easier due to public perception. Thus, the only time the Democrats could successfully raise rates is when the budget is approaching a crisis situation (i.e. now). If the Republicans can manage to hold the changes to only closing loopholes now, the Democrats will never be able to raise rates later if the budget situation improves. If the deficit stays bad, maybe the Dems will be able raise rates, but they could have raised rates again anyway in the alternative scenario.

Lowering tax rates in the future will always be popular well beyond the point of it being wise from a budget perspective, so I don’t see the Republicans needing to save up bargaining chips for that.

Of course, this is all a political strategy argument. More important is the fact that simplifying the tax code is a Good Thing. I’m not sure I have enough faith in the Republicans’ commitment to principle/strategic ability to hope that they play the long game.

mulp December 6, 2012 at 12:32 pm

Until Republicans went insane by being totally and absolutely dogmatic in anointing Grover Norquist their god, raising tax rates was easy.

Republicans always raised rates to pay for what they wanted because Democrats would block it. And vise versa.

Why do Republicans see Norquist as a god? Well, that is an artifact of conservatives creating a myth of governance by markets – that government is just another commodity like a bushel of wheat. Tax are the price of government, so the idea was that lower the price would drive it into bankruptcy.

But couple that with the observation of colonial Americans – you can sell people bonds for a “good cause” as part of a ponzi scheme. That is how the American Revolution was funded. “Democrats and “Whigs” circa 1786 realized the Rhode Island wing-nuts needed to be quashed. A revolution within a revolution took place and in the end they crammed taxes down the throats of the wing-nuts. The Rhode Islanders were going to face extreme economic sanctions if they refused to be taxed. And Hamilton was able to get the taxes and authority to bailout the economy built on the Continental Congress ponzi scheme.

Rhode Island, by the way, seems to have never changed from 1790 – they refused to tax but simply ran a ponzi scheme until its collapse. Rhode Island refused to tax for what it wanted.

When you tax to pay for what you want, your wants become much more reasonable.

Reagan wanted tax cuts without paying for them. But Democrats kept coming back and forcing him to pay for them, and he then decided to tax hike. Bush, on the other hand had the Grover Norquist worshiping Congress which cut taxes and resisted every pressure to pay for it, but instead to take the country back to 1777 when it was simple to fund everything by simply printing money.

The fact that Obama from the very beginning call Grover Norquist a false god drove conservatives nuts. He started out in 2006 laying out wants and the taxes to pay for them in broad terms. My gawd, Obama was in the camp of the southerners who found common ground with the merchants who realized they needed to tax.

Obama was not dogmatic until it became absolutely clear Obama had to take the issue of the tax god to the voters.

Who has ever won an election in the past half century based on hiking taxes, other than Obama and Moonbeam Brown?

Both laid out their case for the costs of wants. And won.

Republicans are still in the free lunch mode that is the only way to worship their god Grover Norquist.

If Grover Norquist were a true god, his pledge would be “I will never vote to spend a single penny more on anything, not war on evil, not war on commies, not war on scary people, not war on drugs, not war on crime, not war on corporate landlessnes, …” but what possible point would their be for running for office after that pledge.

Clinton proved Democrats can not solve the problem unilaterally. Clinton unilaterally hiked taxes and then unilaterally checked spending hikes and got just to bare operating budget balance. Bush came in and declared the $5B in budget surplus to be over taxing and then did a helicopter drop of $200B to repay the previous years $5B surplus. Bush led to the Republicans to adopt the funding model of the Rhode Island driven Continental Congress totally destroying 8 years of pain by Bill Clinton in two years.

So, Obama must force Republicans to reject the false god Norquist and pay for what they want. They want big government war spending to create jobs in their districts. They are screaming in pain over the sequester limiting the increase in war spending growth to less than 1%, not even a cut, because it hurts the economy in their districts which depends on growth in war spending to pay for wage and profit increases. And they want no cuts to the medical industry which is bloated and grossly inefficient because Republicans include many of the heads of the medical bloat and waste in their ranks. Republicans must be forced to pay for what they want. No more free lunch ponzi schemes.

msgkings December 6, 2012 at 12:36 pm

Clinton did not ‘unilaterally check spending hikes’ but the rest of this post is remarkably reasonable and intelligible compared to your usual.

Rich Berger December 6, 2012 at 1:09 pm

As far as false gods go, the current resident of the WH has no equal. Ask Jamie Foxx.

Rahul December 6, 2012 at 1:30 am

I always thought a loophole was something that’s devious and sneaky but this sort of argument legitimizes a loophole as a regular policy tool. There’s something straightforward about a higher tax rate that a loophole lacks.

Is my ethical reasoning too naive?

Sean P. December 6, 2012 at 2:00 am

The new definition of loophole is “any tax deduction that the speaker doesn’t like” (or, if you’re just trying to come up with a big number to whine about, “any tax deduction”).

DocMerlin December 6, 2012 at 3:21 am

Bingo.

Rahul December 6, 2012 at 12:26 pm

A deduction is an advertised loophole?

Go Kings, Go! December 6, 2012 at 1:46 am

I dunno about politics, but deductions target behavior, while raising rates is a broader, more neutral approach and so I’d say raise the rates.

I prefer the fiscal cliff to either, though, it may actually dent deficits. Morally, raise rates on everyone so the majority enjoys what they wish to inflict on the minority.

Andrew' December 6, 2012 at 7:47 am

Please explain, honest question, how the conclusion isn’t the opposite of what you state.

If the problem with deductions is they target behavior, how is it better to not start eliminating them?

Go Kings Go December 6, 2012 at 11:21 am

Because I behave as follows: live in high tax state, $1.1 mortgage, highest marginal rate payer, give to charity. You’re right from a policy POV, but my name is not Policy.

msgkings December 6, 2012 at 11:40 am

And here we see the opposite ethical approach to Warren Buffett’s. All his haters bash on him when at least he’s advocating for policies against his personal interest but for what he feels is good for the country.

Go Kings Go is explicating the other way to go. I’m more impressed with Warren. When GKG says “you’re right from a policy perspective” he’s saying “I know what’s good for the nation but I want it a different way for me”.

For the record my own situation closely resembles GKG’s. And I favor late 1990s taxation rates, as well as some major entitlement reform (mainly increasing ages).

Andrew' December 6, 2012 at 11:54 am

“he’s advocating for policies against his personal interest”

I kind of doubt it. But he’s also arguing for policies that are against the personal interest of others far more than against his own. I don’t hate Warren Buffett, I think he should win an economics Nobel prize. But it’s easy for him to argue essentially to tax everyone not doing his investment style and who isn’t tax sheltering their fortune. He pays very little in taxes because few other people can do what he does. And we aren’t here because the government has just done awesome with the money they’ve gotten. They spent the trust funds and wasted the rest. Frankly, I don’t understand why Buffett argues for what he does.

msgkings December 6, 2012 at 12:16 pm

You don’t understand because your world view is radically different than Buffett’s. That’s not a crime but you should try seeing things from others’ perspectives more often. Otherwise someone might call you a narcissist.
;-)

bluto December 6, 2012 at 12:18 pm

Buffett’s insurance and annuity businesses potentially generate huge deductions. If Buffett has ever made a non self serving statements, I’ve never heard it.

msgkings December 6, 2012 at 12:23 pm

Care to elaborate, bluto? What ‘huge deductions’ are you talking about?

Buffett does what every smart person should, maneuver his assets to minimize taxes and maximize his personal utility. But then he advocates that folks like him should pay more in tax, which he would still try to minimize, as he should.

Also he gives away almost all of his money to charity after he dies, which is more than most rich folks do.

I sense what this blog likes to call ‘mood affiliation’. The right just hates Buffett because he doesn’t act like a Koch brother. Too bad.

mulp December 6, 2012 at 12:42 pm

“Anyone” can do what Warren Buffett does.

Simple. Sacrifice consumption to invest for the long long term.

But “everyone” wants to get rich quick without any sacrifice. They believe they are entitled to buy Facebook at $25 and sell a week later at $125, and maybe hold for 1yr1dy and sell for $350. They believe liberals screwed them by not making pets.com worth $675 a share today, but they can’t quite figure out why – how do you sell the idea that liberals not believing in never never land made pets,com worthless. Obviously Clinton and Democrats destroyed $7 trillion in wealth by some sneaking trick popping the NASDAQ bubble – the NASDAQ should be at 50,000 today but for the liberals like Clinton, Obama, and Warren Buffett not believing.

msgkings December 6, 2012 at 12:46 pm

Aaaaaand mulp is back to sounding crazy again. Preach on, brother…

Go Kings, Go December 6, 2012 at 3:04 pm

MSGkings, you’ve got the ethics all wrong. I reduce my tax rates for moral reasons. I oppose what the Federal government does in my name: bomb brown people all over the world, imprison them at home for smoking weed, subsidize Fiskers and Tesla’s for the wealthy, underwrite two political parties and regulate against all others, plus ordinary nepotism, simony, militarized police, etc etc; most embarrassing of all, our Federal government hectors other governments to commit the same idiocy. Instead of giving that monstrosity money, I give it to morally superior entities- my local government, banks and charities- or invest in tax advantaged real estate, which provides housing for low income workers.

So Much For Subtlety December 6, 2012 at 2:32 am

I think the only question to ponder here is how dumb Kevin Drum thinks we are. It is better to raise rates now because it will be easier to lower them in the future?

There has never been a time when raising rates did not make it just as easy to raise them in the future. What is more, it is next to impossible to reduce them again. Especially once a new source of Entitlement has been found like health care. If they are raised now, they will be raised forever.

Bargaining? How is that even a sensible suggestion? If the Dems were open to bargaining, now is the time to do it. They are not. Those loopholes are a way for their favored clients to get out of the higher taxes they want. They want loopholes and higher rates. If you give it to them, they will say thank you and then give nothing back.

The Republicans probably are stupid. Stupid enough to accept higher rates now for promised cuts in the future which never happen. But they can’t be so dumb they would swallow this tripe?

Engineer December 6, 2012 at 4:38 am

Those loopholes are a way for their favored clients to get out of the higher taxes they want.

Indeed.

For Drum and other statists, fiscal responsibility is much less interesting than helping “your” interest groups and forcing absolute surrender on the Republicans.

maguro December 6, 2012 at 6:15 am

They won’t say thank you.

Luke Johnson December 6, 2012 at 10:03 am

@So Much For Subtlety: If they are raised now, they will be raised forever??? Next to impossible to reduce them again because ENTITLEMENTS? Hmm… Let me direct you to a little thing called “history” based in this other thing called “reality:”

http://www.ntu.org/tax-basics/history-of-federal-individual-1.html.

As you can see, the top marginal rate is currently quite low compared to its historical average, and there has been considerable fluctuation throughout the last century in both directions.

Also, bargaining. You clearly do not understand the current political dynamics on the hill. WHY should the Dems bargain for anything right now? They just won the election in every possible way: white house AND gains in both houses. And the public blames the Repubs for the gridlock. The Republicans are boned if they don’t concede on more revenue. They have no leverage. Next year is the year for compromise, when tax reform (broadening the base through loophole elimination and lowering the rates for everyone) and entitlement reform (increase in retirement age, increased payroll tax cap, chained CPI to calculate benefits) are enacted.

I’m not even gonna touch your explanation of loopholes. Please stop reading Breitbart and educate yourself on the issues if you wish to be taken seriously.

msgkings December 6, 2012 at 11:43 am

+100

Hardcore partisans on either side (right or left) are as boring as hell.

Andrew' December 6, 2012 at 12:00 pm

“And the public blames the Repubs for the gridlock.”

Not necessarily. An incumbent president won. Nothing was proven.

And if so, the public is wrong. All Obama has to do is say “okay, we won’t raise any taxes.” His fixation on doctors and married engineering managers is very transparent.

msgkings December 6, 2012 at 12:19 pm

Yes necessarily, all current polls (even from Rasmussen) show the public blames the Reps more for the gridlock.

And the public is often wrong, is this news to you?

Andrew' December 6, 2012 at 12:34 pm

Yes, that would be news to me because I think the public is ALWAYS wrong.

And one has to decide if you are talking about policy or politics. And since Lindsey Graham has come out (on taxes) then my first rule of policy and politics dictates I do the opposite.

msgkings December 6, 2012 at 12:38 pm

“…the public is ALWAYS wrong”

If you were serious, which I know you’re not, you’d be quite the anarchist…

So Much For Subtlety December 6, 2012 at 10:33 pm

Thank you Luke for that introduction to history based on reality. Let me introduce you to something else – debt. The fact is Federal spending has been a more or less perfect upward slope for the past century. Despite people like Reagan promising to reduce government spending, government spending is almost never reduced.

I am sure you have given me a link to a perfectly nice graph. Unfortunately it does not load. But that is beside the point. Because I suspect you are looking at nominal tax rates. Not effective ones. Still, I will agree that taxing the very rich has probably gone about as far as it can go. Further rate rises will not be useful or productive. The only way Obama is going to pay for his pork is by extending taxes down to the middle and probably to the fairly poor. Or even to the most poor if he introduces a VAT or the like.

The Democrats did noti gain in both Houses. They did in the Senate but they remained where they were in the House of Representatives. Why should they? I can’t think of a reason either, except that government has to work and they should do the responsible thing. They won’t of course. Yes, the media is spinning hard for the Dems and the Republicans will get the blame. That is no reason to go soft. The Republicans are probably boned whatever they do but there is no point conceding more revenue.

There is precisely no chance that there will be a reduction in rates for everyone next year. Unless spending is brought under control, the Feds are going to need massively larger sources of revenue. And that is before Obamacare starts in. I doubt Obama will even consider an increase in the retirement age. He is not a compromiser. But we will see.

It has nothing to do with Breitbart and everything to do with those nice little things, history and reality.

I realize December 6, 2012 at 3:59 pm

You are being incredibly partisan and stupid, but did you hear that these “raising rates” are really just ending some TAX CUTS we enacted some 11 years ago?

You blithering idiot.

So Much For Subtlety December 7, 2012 at 2:42 am

Interesting. Tell me, did government spending go down 11 years ago? Or did the deficit in fact explode? Thus causing taxes to be raised further down the road? It is not really a tax cut if you simply borrow huge amounts of money and spend it like a drunken sailor. It is simply playing with people’s perceptions.

Torben December 6, 2012 at 2:59 am

And this is why I hate politics.

john personna December 6, 2012 at 8:54 am

Indeed, and I’ll use this point to hang my comment that incrementalism often beats revolution – because revolutions often never come.

mgunn December 6, 2012 at 5:11 am

Is the idea that non-distortionary loopholes are equivalent to lower rates? Have deductions such that you effectively deduct some constant rate Z from your taxable income?
I = income D = deduction R = tax rate Z = some rate Let deduction D = Z * I
T = R * (I – D) (i.e. Tax = Rate * taxable income)
= R * (I – Z * I)
= (R – Z) * I which is equivalent to paying tax rate (R-Z)

Obviously doing this would be a silly obfuscation that would only fool people who don’t understand basic algebra… The naive get to claim we have high tax rates T. Economists know T is a sham and real tax rate is T – Z.

mgunn December 6, 2012 at 5:21 am

That didn’t show up properly…
Let I = Income; D = deduction; R = fake tax rate; Z = some rate; Let D = (Z/R) * I so that you can deduct constant rate Z from income. T = R * (I – D) = R * (I – Z * I / R) = R * I – Z* I = (R – Z) * I. This fairly obvious and shouldn’t fool anyone, but the idea is that deducting a constant rate from income is equivalent to lower tax rates. Would politicians fall for this? Is pursuing something similar a plausible strategy to keep marginal rates low?

mgunn December 6, 2012 at 5:33 am

Create a new “fairness” deduction. If you have existing deductions D1, you get a new deduction D2 = Z*I – D1. Then taxable income = I – D1 – (Z*I – D1) = (1-Z)*I. Use a new deduction to lower rates and eliminate the incentive effects of existing deductions.

Dismalist December 6, 2012 at 7:20 am

Translating the two paragraphs into English: It’s politically easier to remove large economic distortions and inefficiencies than small ones. Therefore, we must make them bigger to make them smaller.

Nonsensical.

DocMerlin December 6, 2012 at 4:36 pm

+1

Andrew' December 6, 2012 at 7:46 am

Okay, but in their bumbling and stumbling way Republicans are trying to improve the tax code. I’ll take ham-fisted effort over cynical maneuvering every time.

Andrew' December 6, 2012 at 8:04 am

‘not reforming the tax code now leaves more for us to reform later!’

What am I missing here?

Andrew' December 6, 2012 at 8:09 am

Btw, you have to add to your model that this isn’t about balancing the budget. That is the Democrats job to worry about their golden calf. The Republicans should be interested in that the money is being destroyed. So they should not be concerned one iota about the “simplest way” (easy for you to say if you are not a doctor or an engineer married to an engineer) to raise money for the government.

Andrew' December 6, 2012 at 8:17 am

(unless what you are really talking about is ‘negotiations’ between GOP versus their base. This is what the Democrats are trying to wedge in.)

Rahul December 6, 2012 at 2:05 pm

Your post reminds me of my trip to the Hamilton Mausoleum.

TheAJ December 6, 2012 at 10:08 am

They are? Which of their proposals and what in them improve the tax code?

Andrew' December 6, 2012 at 10:33 am

Let Obama tell you: “Obama: GOP Tax Proposals Would Put Nonprofits At Risk”

Eliminating deductions. “Improve” is a value judgment.

It’s not my fault they didn’t listen 10 years ago and now can’t afford to phase their $#!+ out.

Andrew' December 6, 2012 at 10:34 am

(Note how you won’t see Obama refer to ‘nonprofits’ as “tax expenditures”)

TheAJ December 6, 2012 at 11:55 am

These are not serious proposals. Look at some of the largest deductions – healthcare insurance, mortgage interest, and charitable contributions. These all have an impact on core Republican constituencies – the Upper Middle CLass ($100-250K) and churches.

Its not gonna happen. There’s a reason why righties have been so nondescript about which deductions they want to eliminate – its because they really don’t want to in the first place.

The only one, not surprisingly, that they probably would want to eliminate would be the state and local tax deduction, because it would be a way for righties to squeeze even more money out of blue states to pay for failures of governance in red states.

Andrew' December 6, 2012 at 12:03 pm

Then call their bluff.

TheAJ December 6, 2012 at 12:27 pm

Isn’t that the same as doing nothing and just raising rates?

Andrew' December 6, 2012 at 12:31 pm

That’s the political way.

The policy way economists nearly universally agree with is to reduce deductions.

So, if we are talking about who is better at politics I’ve already said it’s the Democrats.

Andrew' December 6, 2012 at 12:39 pm

“It requires one simple thing: That Democrats and Republicans vote on the parts of the “grand bargain” that they already agree with.”

http://www.theatlantic.com/business/archive/2012/12/how-to-solve-the-fiscal-cliff-in-1-easy-move/265958/

Risking a tax increase in an ongoing depression (and we are entering a new recession) just to be able to raise tax rates on those making $250k would be considered crazy in a non-insane world. The Democrats have a rhetorical advantage because they can blame this on “the rich” but since I see through this I don’t care.

msgkings December 6, 2012 at 12:44 pm

If you’re sure about the new recession about to start you should make a fortune shorting the market, because it hasn’t priced that in yet.

mulp December 6, 2012 at 12:58 pm

“Risking a tax increase in an ongoing depression (and we are entering a new recession) just to be able to raise tax rates on those making $250k would be considered crazy in a non-insane world.”

Are you quoting the press releases from 1993 or have the anti-tax groups written new ones.

After tax rates were jacked up in 1932 to as high as 90%, job creation began because taxpayers expected results and got them. You might try to argue the tax hikes extended the Depression and that the every increasing Democratic majorities were the voters being tricked by FDR to vote for him even as he was making them worse off, but you are simply fooling yourself.

Taxes have been hiked at the beginning and during recessions and that was followed by robust recoveries.

Tax cuts have been followed by stagnant recoveries. The many Bush tax cuts resulted in job growth at one third the rate of the 90s which were led off with tax rate hikes.

We see the Federal tax burden today 25% lower than in the 90s with the greatest burden on the lower 80% who have seen their incomes fall much faster than taxes while the upper 20% have seen incomes rise faster than taxes, and the top 1-10% have really seen the most benefit. But the economy has only gotten worse since 2001 even as more and more tax cuts have been signed into law.

And eliminating the medical benefit tax exemption would only lead to single payer because it would make everyone aware of the fact we pay twice as much as Canadians and have nothing to show for it.

Jason December 6, 2012 at 8:16 am

So basically don’t get what you want now so you can still negotiate for that same thing later. Makes sense!

Alan Gunn December 6, 2012 at 8:35 am

The supposed reason for raising rates is to “make the rich pay their fair share.” But, even putting aside the question of what share is “fair,” if the tax base is riddled with preferences, raising rates on high-income people doesn’t necessarily hit “the rich,” it hits people who have high taxable incomes. Only if you have a definition of “taxable income” that really means that richer people have higher incomes will raising the top rates achieve its goal. It won’t do a thing to people who are rich but who have low taxable incomes because they take advantage of various preferences. Just one example: the AMT falls especially hard on people who have many children. Is taxing those people more heavily really a sensible way to make the rich pay more?

The 1986 act lowered the top rates a lot, and it also made many rich people, especially doctors, angry, because it took away their shelters. I know of one very successful doctor who was furious because he was going to have to pay income taxes for the first time in years. (I also met a real-estate guy who was happy because the act meant that you had to make deals that made economic sense to succeed. That made his work more fun than in the pre-86 days when any real-estate project, no matter how stupid, could be sold.)

Luke Johnson December 6, 2012 at 10:16 am

There’s a lot more to it than just the short-term “fiscal cliff” stuff. The problems you raise will most likely be dealt with next year during tax reform. The “rich” derive the vast majority of their income from capital gains, which as we saw with Mitt Romney resulted in a roughly 14% tax rate. (Cap gains and dividends are taxed at 15% under current law.) One of many proposals would be to raise the cap gains rate to, say, 20%, and tax dividends as ordinary income.

As far as the “fair share” thing goes, consider this: America has the flattest tax system in the world in terms of average rates. “Flat” is inherently regressive, which I’m sure you will understand considering you are reading a blog called “marginal” revolution. “Rich paying their fair share” simply means a progressive tax system which we do not currently have.

Nope. December 6, 2012 at 10:24 am
Andrew' December 6, 2012 at 12:09 pm

We aren’t really talking about “the rich” but those making $250k+. What about them?

““Flat” is inherently regressive” – from a non-supply-sider perspective.

Who knows what our tax system does? That is a good reason to simplify and smooth it. I call it the Y=MX+B Flat First Derivative Tax Plan.

Tarrou December 6, 2012 at 10:35 am

“Oh no Brer Fox, whatever you do, don’t throw me in that there briar patch!”

He expects us to believe that progressives, who do not blush to claim that the top 5% of earners paying 40% of all federal tax (while making 25% of the income) isn’t their “fair share”, who lionize the recent French rate hike to 90%, who look longingly back on our own 90% rate of the ’50s, will take 39% and be completely unable to justify any rate hikes in the future? Really Mr. Drum? Is there any other political advice you’d like to get off your chest? Maybe how Second Amendment nuts like me should support “reasonable” gun legislation, because then progressives would find it near impossible to try to restrict the right to bear arms?

Chris Doherty December 6, 2012 at 10:44 am

I like these thought experiments where we pretend Republicans are interested in governing.

Rich Berger December 6, 2012 at 10:49 am
TomHynes December 6, 2012 at 10:52 am

Tax rates are going up. Intrade says so, so all the discussion about it is just a Kabuki dance

http://www.intrade.com/v4/markets/

msgkings December 6, 2012 at 11:46 am

Yeah, just like when Intrade said Obamacare was going down in the Supreme Court. Intrade knows all.

RPLong December 6, 2012 at 11:53 am

This whole discussion highlights why the US tax code is complex to the point of self-destruction.

First of all, I totally agree with Rahul. “Loophole” used to be a term reserved for dishonest tax tricks, i.e. using convoluted rationalization for taking a tax credit that would not otherwise apply to you. Since when has the term “loophole” equated to “any particular deduction?” What is going on here?

Second of all, the whole purpose of many deductions is to promote voluntary compliance. The IRS says to you, “If you declare that off-shore account of yours, we promise to give you sufficient deductions that it won’t break you.” We can argue about whether or not the IRS or taxation in general are good things, but if we take them at their word, then closing loopholes is going to reduce both compliance and revenue, as those with sufficient resources will simply move their money into non-taxable locations.

Why are we wasting time on these pointless debates? The powers that be wish to raise our taxes, and they will damn well do so. The debate is a sideshow to promote “buy-in.” We should not consent to being played as suckers. There is not a whole lot we can do to prevent our taxes from going up – we are powerless in the face of Leviathan. But we should at least stop being so naive. They can raise our taxes, but we don’t ever have to LIKE IT. They can have my money, because I don’t want to be an outlaw, but they cannot have my ideological consent.

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