[Rhodes22-list] Taxes - Timely Article

[3drecon at comcast.net]

I have deliberately stayed out of all the political discussions lately, but I am compelled to comment.  If this has been addressed, then I apologize (I refuse to read all the previous tax e-mails).  The Flat Tax, Fair Tax, National Sales Tax, or any other tax that will replace the current system can work and can work well under a number of circumstances however; the one event that must occur is the repeal of the 13th Amendment authorizing the Income Tax.  No matter what Congress passes, a future Congress could otherwise reinstate the income tax on top of any other tax solution (and they will).

Philip


-------------- Original message -------------- 
From: "Brad Haslett" <flybrad at gmail.com> 

> Here's an article from today's WaPo that dovetails neatly with our recent 
> discussion. Care to make a bet about the home interest deduction? No one 
> in the Congress has the guts to take on that sacred cow! 
> 
> Brad 
> 
> ----------- 
> 
> *The $800 Billion Tax Loophole 
> * 
> 
> By Maya MacGuineas 
> Special to washingtonpost.com's Think Tank Town 
> Thursday, January 18, 2007; 12:00 AM 
> 
> Democrats are in a bind when it comes to their domestic economic agenda. 
> They have promised a number of new and costly initiatives such as fixing the 
> Alternative Minimum Tax, providing middle-class tax relief, and increasing 
> spending on homeland security and education. But they have also made a 
> commitment to fiscal responsibility. So how can they deliver on their 
> promises without opening themselves up to the old "tax and spend" label? 
> Reforming tax entitlements -- a large, mostly under-the-radar part of the 
> federal budget -- might just give them a way out of their predicament. 
> 
> As a result of the 1986 bipartisan tax reforms, the tax base was broadened 
> and the tax code was greatly simplified. But these reforms have been 
> gradually undone as Congress has created scores of new tax breaks and 
> loopholes. Want to preserve historic buildings, encourage alternative energy 
> sources, help working families, or give certain industries a boost without 
> appearing to increase spending? Voil? -- a new targeted tax break is born. 
> 
> Most tax expenditures are really spending programs designed to look like tax 
> cuts. Picture them as vouchers for healthcare, mortgage payments, daycare, 
> transportation -- name the tax break. Dressing these programs up as tax cuts 
> makes them a much easier sell for politicians who fear the "big spender" 
> label. But call them what you will, they drain the money from the Treasury 
> and extend the scope of government. All told, this portion of the budget 
> represents $800 billion in lost government revenues annually. 
> 
> Not only do these tax breaks mask the true size of the government, they are 
> a terrible way to make policy. They regularly pay people and businesses to 
> do what they would do anyway, making them both poorly targeted and 
> unnecessarily expensive. They are also extremely regressive. A particular 
> tax exemption might be worth 35 cents on the dollar to a wealthy individual 
> and only 10 cents to someone on the other end of the income scale who faces 
> a lower tax rate. It would be hard to justify a housing policy that does 
> more to subsidize the rich than the poor, yet that is exactly what the $80 
> billion a year home mortgage interest deduction does. 
> 
> Moreover, tax expenditures do not get nearly the level of scrutiny they 
> should. (If they did, would we really have a government program that 
> subsidizes millionaires who buy vacation homes?) New government programs 
> should only be created following vigorous debate over whether a proposed 
> policy is important enough to warrant government intervention, and if it is, 
> whether it will be effective. Discussions about new tax programs however, 
> tend to focus almost exclusively on the cost. Billions of dollars of 
> targeted tax cuts have been passed in the past few years with little or no 
> discussion about the worthiness of their goals. And unlike spending 
> programs, which are subject to congressional review, tax expenditure 
> programs are pretty much on automatic pilot. 
> 
> Reforming this area of the budget would not only be a critical step in 
> improving the tax code (and probably the closest thing we will see to 
> fundamental tax reform in the next two years) it could also generate tens -- 
> if not hundreds -- of billions of dollars in savings. 
> 
> The first step should be capping a number of existing tax breaks. Capping 
> two of the largest breaks -- the home mortgage interest deduction and the 
> exclusion for employer-provided healthcare, would easily provide over $50 
> billion a year in savings. Both of these changes would reduce the large 
> subsidies that go to the highest earners while freeing up resources. Getting 
> rid of a host of other tax breaks that subsidize certain businesses or 
> industries could easily generate another $25 billion. A thorough review of 
> the over 150 existing tax expenditures to determine which ones have outlived 
> their usefulness would yield still more in savings. As Democrats search for 
> ways to offset the costs of their new agenda, reducing the $800 billion tax 
> loophole would be an excellent place to start. 
> 
> *Maya MacGuineas is the Director of the Fiscal Policy Program at the New 
> America Foundation.* 
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