Thursday, January 26, 2012
TAXES AND THE STATE OF THE UNION ADDRESS
While I have not yet read it through carefully (nor did I sit through it), there appears to be nothing new on taxes from BO in the State of the Union address. No mention that I have seen of the need to totally rewrite the mucking fess that is our current Tax Code. Just more of the same – continue to complicate the Tax Code with more targeted deductions and credits.
The “Buffet Rule” and the general concept of taxing the rich more because they can afford it was one of BO’s themes -
“Tax reform should follow the Buffett rule: If you make more than $1 million a year, you should not pay less than 30 percent in taxes. And my Republican friend Tom Coburn is right: Washington should stop subsidizing millionaires. In fact, if you're earning a million dollars a year, you shouldn't get special tax subsidies or deductions. On the other hand, if you make under $250,000 a year, like 98 percent of American families, your taxes shouldn't go up.”
"Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that do the same. It's time to apply the same rules from top to bottom. No bailouts, no handouts, and no copouts. An America built to last insists on responsibility from everybody."
"Do we want to keep these tax cuts for the wealthiest Americans? Or do we want to keep our investments in everything else, like education and medical research; a strong military and care for our veterans? Because if we're serious about paying down our debt, we can't do both."
Millionaires don’t get the Child Tax Credit, for example, or any of the tuition tax benefits. Many tax benefits are wiped out based on Adjusted Gross Income (AGI) or Modified Adjusted Gross Income MAGI) well below the $1 Million mark. Millionaires are taxed on 100% of net capital gains in successful years, but are limited to a deduction of $3,000 in net capital losses in unsuccessful years.
Millionaires with excessive dividend income pay a lower tax rate on corporate dividends, but only because, due to unfair double-taxation, this income has already been taxed by the federal government on the corporate level as high as 35%.
Does insisting on “responsibility from everybody” mean that almost half of Americans do not have to pay any federal income tax?
And BO calls for the extension of the payroll tax reduction
“Right now, our most immediate priority is stopping a tax hike on 160 million working Americans while the recovery is still fragile. People cannot afford losing $40 out of each paycheck this year. There are plenty of ways to get this done. So let's agree right here, right now: No side issues. No drama. Pass the payroll tax cut without delay.”
To be sure, extending this for only 2 months was totally ridiculous, and, as long as it is in place for part of 2012 it should be all or nothing. But we should also address whether or not this kind of political trick is good tax or financial policy in the first place.
To give BO credit, he does make one good suggestion that I noticed -
“Put Americans to work today building the infrastructure of tomorrow.”
And he talks about corporate tax reform – but that is not my interest at this point nor is that the focus of this blog.