makes sense to me. Its more rational than cut everything go for big tax cuts and hope.
On Fri, Oct 12, 2012 at 4:14 PM, Judah McAuley <[email protected]> wrote: > > The question on eliminating deductions versus changing the rate is a > really interesting one. In the short term, you could achieve a goal of > $X in tax revenue by doing either. The major differences come later, > however. > > Let's say you eliminate the major deductions like mortgage interest > and whatnot and reduce the tax rate from 35% to 28%. The economy > starts growing, things are fairly happy, yay for revenue to pay for > programs. Legislators start carving out deductions. Deductions are > politically pretty easy. You can identify a given group of > voters/businesses, target a cut that helps them, then go and explain > how you just helped them. That's how we got the deductions we have > now, it's a pattern you can guarantee will happen again. It doesn't > require big, screaming bills, just chipping away bit by bit, mostly > done quietly. > > Then the economy starts to sour again. Revenues decline while people > and states hit hard need more help. Congress could go after the > deductions that they've put back in the code but that is politically > difficult when times aren't good. And even if they did go in and kill > off all the deductions again, you're still only back up to the 28% > rate, not 35%. The only way to bring revenues around would be to then > go in pass a tax rate increase which is really toxic politically. > > So the big difference is that if you let the Bush tax cuts expire, you > go back to higher starting rates that you can then adjust with > deductions. If you remove deductions but lower the base rate, it > becomes much more difficult in the future to handle subsequent > financial trouble. > > Prudent would be to set the tax rates back to what they were during > the Clinton or Regan years (take your pick), then start reevaluating > deductions and paying down the debt during positive economic times. > Then when, invariably, we hit an economic down turn again, we'll have > lower debt levels to service, a greater ability to stimulate the > economy and room in the tax code for targeted deductions that help the > hardest hit during that time period. > > Of course, that would take actual leadership and a willingness to be > responsible during good times as well as tough times, so I doubt that > will actually happen. > > Judah > > On Fri, Oct 12, 2012 at 12:13 PM, Scott Stroz <[email protected]> wrote: >> Its hard for me to wrap my head around the fact that, according to >> what Rep. Ryan said last night (and I understand that I may have >> misunderstood, or even maybe, he misspoke) everyone will get a 20% >> across-the-board tax cut, but the difference will be made up by >> eliminating loopholes and deductions only 'for the wealthy'. Everyone >> gets cuts, but only the wealthy will make up the difference? How are >> wealthy people behind this plan if they are the ones stuck with the >> bill? In the end, how is that any different than letting the Bush-era >> tax cuts expire only for the wealthy? >> > > ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Order the Adobe Coldfusion Anthology now! http://www.amazon.com/Adobe-Coldfusion-Anthology/dp/1430272155/?tag=houseoffusion Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:356078 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/groups/cf-community/unsubscribe.cfm
