Tuesday, December 18, 2012
THIS AND THAT
Here elaborations on “stuff” that appeared in earlier posts.
+ The “Last Word” of a recent BUZZ installment proposed a federal law.
Here is the idea, slightly adjusted -
Let us pass a federal law that says
(1) Tax legislation CANNOT be temporary. Except for declared natural disasters or an official declaration of war, any legislation that makes a change to the US Tax Code will automatically be permanent, unless revised or repealed by specific subsequent legislation.
(2) Except for declared natural disasters or an official declaration of war, any tax legislation passed after September 30th cannot take effect until January 1st of the next year.
Written into the legislation should be a requirement that a 2/3 majority of both houses of Congress would be needed to repeal or revise this law.
Temporary tax law is not good tax policy (except perhaps for dealing with declared natural disasters like KATRINA and SANDY). In the past the idiots in Congress have consistently extended the temporary tax breaks that become known as the “extenders”, often waiting until literally the very last minute, and as a result causing problems and delays with the IRS printing of forms and instructions and processing of returns, and confusing taxpayers.
The IRS had usually “gone to press” with tax forms, schedules and instructions for the year in October. Putting a September 30th deadline on making changes to the Tax Code in the current year will allow the IRS to return to this schedule. It will also make year-end tax planning much easier for individuals and businesses, as they will know what will be in effect for the year during the last quarter and have plenty of time to plan accordingly.
+ Below is a recent comment on my post WHY WE NEED TAX REFORM by new tax blogger David Fazio, EA -
“You hit the nail squarely on the head: the Cash for Clunkers program was a success because it kept the IRS out of the process. Taxpayers got their government discount (the equivalent of an IRS tax credit) at the point of sale. They didn't have to wait up to a year to reap the benefit.
We have become a nation of deduction junkies. Congress has tweaked the code so much that we start to feel that every dollar we spend should be deductible. We have special deductions/credits for teachers, adoption, child care, income earned outside the US, education, student loan interest and so on.
Does a teacher with out-of-pocket expenses deserve an above-the-line $250 deduction more than the school cafeteria worker who doesn't itemize and has $15 deducted out of her paycheck every week for her uniform? Does the college graduate deserve a special deduction for his student loan interest when a Hurricane Sandy victim can't deduct interest on the credit card he's incurring while he's rebuilding his home and waiting for the insurance check?
Now no one said he tax code was fair. But too many perks are being handed out via the 1040 that (as you pointed out) are completely unnecessary.”
Great minds do think alike!
I have always been confused by the $250 deduction for “educator expenses”. The tax savings is $60-$70 for most educators. Depending on where you live, this barely covers the cost of a dinner out. And why, as David asks, were educators singled out. Are they more valuable than policemen, firemen, nurses, EMTs, or even school cafeteria workers, all of whom have “out of pocket” employee expenses?
The recipient of a special tax break, whatever it is, depends on either how much the recipient’s lobby pays the idiots in Congress to vote for it, or which special-interest group the idiots in Congress want to buy the votes of.
David also talks about the student loan interest deduction, which is part of a group of tax benefits related to post-secondary education. But, as I have said time and again, this group should be replaced by direct “point of purchase” student financial aid.