This country definitely needs a tax reform, and as January 1 approaches and attempts to restore the economy are made, I think that two types of tax credit should definitely be eliminated. I’m talking, of course, of mortgage tax credit and child credit.
I find mortgage tax credit to be egregiously offensive. I don’t understand why people who undertook mortgage obligations they could never hope to meet and tanked our entire economy in the process should be rewarded while responsible people like me who are trying to live within our means and don’t buy until we have the money to pay for the purchase should be penalized for our responsibility. Mind you, I’m not saying there should be any tax credits for people who rent instead of taking out a mortgage. These should be private choices by private individuals and it makes me uncomfortable to see the government favoring one of such choices over the rest.
The child tax credit is also something I can’t support for the simple reason that I believe in government staying out of people’s reproductive choices. You cannot support abortion rights and accessible contraception and at the same time be in favor of child credit tax. Either the government should stay out of people’s reproductive choices or it should promote the choice it finds more acceptable. But you can’t have it both ways. Of course, if Roe vs Wade were repealed, God forbid, I would support sky-high child credits.
Please note that I’m not discussing how effective these measures will be economically. Whether they have a positive or negative effect on the economy is not that important to me. I’m not a Marxist which is why I do not believe that the economy forms the basis of everything. I believe that ideas come first and the economy catches up. During the recent presidential elections, we almost saw the “legitimate rape” crowd win. Had they won, they would have done everything in their power to invade our bodies and our private lives. Religious fanaticism has not abandoned its hope to come to power once again and to continue its fight for the control of the most intimate aspects of our existences. If we demand reproductive freedom while accepting pay-offs for our reproductive choices and personal decisions, we run the risk of losing this important fight.
Clarissa's Blog 
Since I see no reason to be agreeable today with how well we are seeing eye to eye 🙂 (note partial sarcasm)… two things to consider.
First, you realize your landlord that you rent from gets a “mortgage” interest deduction right? Since they operate your property as a “business investment” their entire mortgage payment is deductible…. so if we were to eliminate the mortgage deduction we would actually be rewarding the wealthy and punishing those who choose to own a home. If we remove the “deduction” for your landlord.. your rent goes up. I think it may be sensible to limit the home mortgage deduction to say the first $500,000 of a mortgage etc. (no reason to subsidize massive, lavish homes)..
Also, on the child tax credit, we as a nation need children for our economic future. From a purely financial standpoint children are the single worst investment a couple could ever make. Now thankfully we aren’t all robotic borgs so children can offer a multitude of benefits. $1,0000 per year per child is expensive, but still well below what it costs to raise a child. On the child tax credit I’m less sure if we should keep it, but from the standpoint of promoting future economic productivity it may make some sense.
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“punishing those who choose to own a home”
– Taking out a mortgage does not equal owning anything. Except owning a debt, of course.
“Since they operate your property as a “business investment” their entire mortgage payment is deductible”
– What mortgage payment? What makes you think that my rental company doesn;t actually own the place?
“Also, on the child tax credit, we as a nation need children for our economic future.”
– Immigration reform is the answer.
“On the child tax credit I’m less sure if we should keep it, but from the standpoint of promoting future economic productivity it may make some sense.”
– I can’t wait for the happy day when people would actually read my posts before responding. Didn’t I say very very very very clearly that I’m absolutely not interested in how this measure will affect economic productivity?
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Love the idea that people have kids just so we can continue to make money. Whip those brats into the field now! And by “love” I mean “hate.” Children are not a retirement plan for adults, they are their own people who deserve their own life.
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I agree with Matt (for once — check it out!).
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Consider the cost of the essentials of life (food, shelter, clothing, medicine, etc) that someone at the poverty line would pay over the course of a year. Call this amount X.
Now, consider the amount of all consumption/sin/value-added/indirect taxes someone at the poverty line would pay over the course of a year. Call that amount Y.
Those two amounts allow me to come up with two possible proposals for tax reform.
The first proposal is the same as the negative income tax I have mentioned here before. Tax all income (whatever the source) the same rate, making sure to eliminate all deductions (and eliminating certain payroll taxes as well). People therefore pay a certain amount as a tax. On top of this, give everyone amount X as a guaranteed minimum income. For some people, they will get more from the government than they pay in taxes, while others pay more in tax than they get back.
This system has the following advantages:
* All taxes distort the market, but since this one taxes all income the same way (without deductions) it distorts it less. Therefore, if you favour the free market, you should favour this system.
*It makes the tax planning industry unnecessary, allowing money spent there to be freed up for more productive purposes.
*Since it gives a guaranteed minimum income, it makes it easier to weather the loss of a job. Your employer screwing you? Now it’s easier for you to back up your threat to quit and work somewhere else.
*Food stamps, welfare, and unemployment assistance can be subsumed under the guaranteed minimum income, allowing those government departments to be eliminated. This results in a smaller, more efficient government with fewer administrative costs.
*Eliminating the deductions makes it harder to commit tax evasion.
* It’s a lot simpler; a whole hell of a lot simpler. If you can do arithmetic and percents, you can do your taxes.
It also has the same disadvantage as other systems of income taxation:
*It discourages saving and investment.
The alternative proposal is to abolish income/certain payroll taxes completely, and instead switch to a VAT on all items. At the same time, give everyone X+Y as a guaranteed minimum income.
This system has the following advantages:
* The same first four, mutatis mutandis as the NIT.
* If someone has a bunch of money sitting around, only return on it is taxed as income. If this is used to (say) buy a house, that transaction escapes taxation. However, under a VAT, it is taxed. A VAT therefore taxes savings, and understood this way is more progressive than an income tax.
*People’s spending varies less than their income, so people will have less variance in the tax they pay per year.
*It is the opinion of most economists that VATs encourage savings.
It also has the following disadvantages:
*It basically conscripts businesses into the role of tax collectors.
*Paying transactions in cash makes tax evasion easier than under the NIT.
Despite which of the two reform proposals you favour, we should still tax financial transactions (a Tobin tax to discourage speculation, resulting in less volatile markets), heavily tax carbon (to encourage energy conservation and fight global warming), sin taxes (to encourage healthy lifestyles) and political advertising (to reduce corporate and SuperPAC influence on politics).
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“A VAT therefore taxes savings, and understood this way is more progressive than an income tax.” should be :A VAT therefore taxes wealth, and understood this way is more progressive than an income tax.”
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Here’s a paper by Kotlikoff of the Fed in St. Louis discussing whether the US is going broke and offering solutions.
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An unsustainable population is required for the perpetuation of capitalism. It is one of capitalism’s contradictions.
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Musteryou… can you elaborate? How I read what you are saying is that capitalism can only work with growing population ? (that is how I took your unsustainable population comment… but I wanted to make sure).
I almost think we face the opposite problem. We almost have TOO many people to provide good, quality jobs for. Technology is and will continue to improve faster than the number of people moderates (or declines). One of the only reasons we need more and more people is to pay for govt. programs like medicare and social security..
And there may lay our saving grace. As our demographic bulge (the baby boomers) retires in the next 20 years our work force may shrink… creating more demand for workers, potentially driving up the cost of labor (and consequently decreasing wealthy capitalist business owners profit margins) and providing more opportunities for the lower-skilled in our economy. Capitalism at its finest perhaps? Certainly a rosy scenario, and one I hadn’t thought too much about, but actually one that could happen!!!
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Consumerism.
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Well I do agree with you at basis. I think that the government tax code encourages heterosexual normativity. Personally I find it particularly egregious that “married–filing jointly” allows most people to claim a significantly better tax return (especially since gay people aren’t even allowed to get married!) However, at this point eliminating the child and home ownership tax credit would hurt many of our most vulnerable citizens. Like Matt pointed out, eliminating the home ownership tax credit would almost certainly cause rents to go up. For instance, I know that my landlord doesn’t own his property outright. Eliminate his deduction and my rent goes up. And I’m not in a particularly vulnerable position. There are many people who can’t afford their rents to go up and/or who rely on the tax credits to stay afloat. I know you don’t want to talk practicality here but it’s hard for me to advocate for a tax code that will harm so many……. especially when there are loopholes that advantage the wealthy.
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If concern about economic consequences should be enough to empower the government to promote certain reproductive scenarios above others, it must follow that if, say, Roe vs Wade becomes economically burdensome, then it should be repealed, too. I can easily imagine an argument about the economic hardship inflicted by Roe being made.
As I said, we cannot have it both ways. Sometimes, one has to be prepared to sacrifice something for one’s convictions.
“However, at this point eliminating the child and home ownership tax credit would hurt many of our most vulnerable citizens.”
– I don’t see married hetero couples with children and mortgages as the most vulnerable in the least. These are the folks who are celebrated and pandered to everywhere and by everyone. I fail to understand how a single 50-year-old lesbian in a rental is less vulnerable than a married hetero couple with children and a mortgage. They are not the ones who get punished for being who they are every step of the way.
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“I don’t see married hetero couples with children and mortgages as the most vulnerable in the least. These are the folks who are celebrated and pandered to everywhere and by everyone. I fail to understand how a single 50-year-old lesbian in a rental is less vulnerable than a married hetero couple with children and a mortgage. They are not the ones who get punished for being who they are every step of the way.”
I agree with much of what you say. And like I said above, I am uncomfortable with the fact that our tax code creates a “heterosexual mandate”: get married, have kids, move to the suburbs etc etc. I would personally prefer to see tax credits that allow students to pay for college. I guess I’m more committed to the homeownership tax credit than the child tax credit. I’m just convinced that eliminating the home ownership tax credit will cause rents to go up (so the lesbian in the rental would get harmed.)
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