Monday, July 14, 2014
EVALUATING THE "EXTENDERS"
Back in, I believe, 2006 the idiots in Congress first introduced a list of “temporary” tax benefits, which were set to expire on December 31, 2006. However, the idiots have seen fit to temporarily extend these benefits every year, or every other year. The temporary extension of these benefits is often done at literally the very last minute, at the end of the year, which at the very least causes processing delays for the Internal Revenue Service.
These “extenders” expired on December 31, 2013, and have not yet been extended for 2014. It is expected that the idiots in Congress will extend the benefits for at least another year – but not until after the November elections. So more problems and delays for the IRS, and taxpayers, for 2014 filings.
The idiots in Congress should either excrete or get off the pot. If they feel these deductions are appropriate they should be made permanent, as was eventually done with the dreaded Alternative Minimum Tax (AMT) patch. If not, let them expire for good. Passing temporary tax benefits is not good tax policy – but then when have the idiots in Congress ever been concerned with good tax policy?
Do these extenders really need to be extended? Let us take a look at the more popular “extenders” that affect the average 1040 filer.
EDUCATOR EXPENSES –
This $38 - $70 gift from Uncle Sam is a nice nod to teachers – but why do teachers deserve this more than police officers or firefighters or nurses or other public service employees?
DEDUCTION FOR TUITION AND FEES –
While the American Opportunity Credit generally provides the best tax benefit for college expenses, and is available to more taxpayers due to the higher income threshold, it is not available for graduate students. This deduction is available to graduate students, and undergraduate students who have already claimed the AOC for the maximum 4 tax years It is often “more better” than claiming the Lifetime Learning Credit, and is available to more taxpayers due to its higher income threshold. That being said, the Tax Code should not be used for distributing government benefits. All education tax benefits should be removed from the Tax Code. These benefits should be delivered through the existing programs for student financial aid of the Department of Education.
OPTION TO DEDUCT STATE AND LOCAL SALES TAX
This provides a tax deduction for residents of states that do not have a state income tax, and I have found that it often provides a better tax deduction for retired seniors. This is one of the two “extenders” that, in my opinion, deserves to be made permanent.
DEDUCTION FOR MORTGAGE INSURANCE PREMIUMS
I have absolutely no idea why this deduction was created – other than the aggressive lobbying of the mortgage insurance industry. It certainly does not deserve to be made permanent. Mortgage insurance is, for the most part, life insurance, and life insurance premiums are not a deductible expense, other than as an employee benefit provided by employers.
DIRECT TAX-FREE TRANSFER FROM AN IRA TO A CHARITY
It allows retired taxpayers over age 70½ who do not need to take a required minimum distribution (RMD) from their IRA for cash flow purposes, but are statutorily required to do so, to avoid increasing their Adjusted Gross Income by using the RMD to make a charitable contribution. By reducing AGI this tax benefit could also reduce the amount of Social Security or Railroad Retirement benefits that are taxed. This is the most “appropriate” tax benefit of the lot and if any of the extenders deserves to be made permanent this one does.
RESIDENTIAL ENERGY CREDIT
This credit has been greatly limited over its extended life – finally ending up as a “lifetime” $500 credit. Each individual category of purchase also has further limitations, and have very specific requirements that often makes it difficult to determine if a purchase qualifies for a credit. It really does not provide much encouragement for taxpayers to make energy-efficient purchases. This also does not belong in the Tax Code. Instead “cash-for-clunkers” like point of purchase rebates should be used to encourage energy-efficient purchases.
So what do you think?