From here, I especially enjoyed this part of it:
“The Republican proposal would … prohibit millionaires from receiving unemployment benefits or food stamps.”
No word on whether they’ll be prohibited from sleeping under bridges as well.
You laugh, but I’ve seen estimates of ‘millionaires’ receiving billions in benefits per year (over 20 billion, IIRC, in 2009), so we aren’t talking chump change, assuming the estimates are right.
-XT
Well, even if you eliminated all of that, it would still cover less than a tenth of the $225 billion cost of the proposed payroll tax cut.
Did you read the linked article? The benefits the GOP is talking about cost 20 million a year. Its just a gimmick, it won’t make any meaningful contribution to the money that needs to be raised. The GOP plan is to cut the federal workforce by 10% via a hiring freeze.
I assume ‘benefits’ in the sense your talking about are Medicare and SS, not food stamps or the other things Jack Batty refers to. I’d believe that oosts something like 20 billion, but then, the millionaires paid into it, I don’t think taking it away is particularly fair, or politically do-able.
Well, you could do it over ten years. But agree its a bad idea anyways, if for no other reason then I suspect rich people would rather just pay the tax, since it’d be much more expensive for them to buy insurance on the open market, as Medicare costs the gov’t less per person then private plans cost.
Plus, loosing Medicare, getting a private plan, then getting back on Medicare after ten years would be kind of a PITA for all involved.
But over 10 years…
Senator Tom Coburn has published an interesting paper (pdf) which puts the total at about $30 billion. He also says, in most unRepublican language:
He has also written an opinion piece for CNN called End Welfare for the Wealthy. However, these are just his personal proposals, not the official Republican Party stance.
Reasking the question: is the current payroll tax cut on the part the employee pays, the employer pays or both?
Couldn’t you also argue that extending the Bush tax cuts for the rich but expiring the payroll tax cut is unfair?
Employee.
Note that most of that isn’t really benefits paid to millionaires. Its tax-breaks given to millionaires (bigger then the benefits paid by a factor of 25 to one). And most of that isn’t just tax breaks given to millionaires, its specifically the mortgage tax deduction, deduction for rental properties and (weirdly) gambling losses right-offs. And the largest of those by a factor of three is the Rental Deduction. Coburn doesn’t discuss this deduction at all.
By his numbers, he should come out for mean testing those three tax deductions, which I certainly would support. But he spends most of that document talking about programs that pay a couple of tens of millions over several years to millionaires, and where the effort and expense of means testing would probably be larger then the money saved by simply giving it to everyone regardless of income level.
And he kind of misses the point of a lot of the smaller programs. The EPA, for example, doesn’t give grants to property owners to perserve their wetlands in order to help the property owners, they do it to preserve the wetlands. Means testing that kind of program doesn’t make any sense.
Agreed, Simplicio. One of the best, easiest, and, in my opinion, fairest things we could do to raise a bit of revenue is cap the mortage interest and rental property deductions.
You can keep the incentive for home ownership for lower-middle and middle-income homeowners without providing large tax breaks for giant homes for high-earners (or, worse, second homes - isn’t it only the third that doesn’t get the break?).
It might be a good idea, and fairness is a matter of opinion, but doing this would lose California’s electoral votes along with Connecticut and other high-value real estate areas. And a collapse in housing prices is what triggered the recent recession - putting further downward pressure might not be a politically expedient idea.
Again, I am not speaking against the merits of the idea, just its saleability. I doubt it would be very easy to bring off.
What my dad did was to take out a mortgage on his primary home and use the money to pay off his lake cottage. Now he collects the tax deduction for interest on the mortgage on his primary home.
Rich people don’t stay rich if they can’t come up with ideas to reduce their taxes.
Regards,
Shodan
And I was told it was all about hard work. Go figure.
I disagree. I think the average voter wouldn’t be against the idea of a cap on the interest deduction once your initial mortgage is over perhaps $1-2 million, nor do I think such a cap would measurably affect the recession–if you were talking about a cap that started hitting the $500k upper-middle-class homes, perhaps, but even then the recession was caused by a bubble collapse, not a mild downward pressure on home prices.
Saleability to the electorate, or saleability to the wealthy campaign donations set?
That seems like a relatively easy loophole to close. Frankly, I think it also seems to be somewhere between petty and unethical for him to do it, as well–the fact that the deduction attaches to the primary home’s mortgage is enough to tell you its intent, and IMO ethical people don’t juggle money to dodge the lowest tax rates in fifty years.
I hardly think that’s the case, unless he’s spending money like it’s going out of style. Among the rich folks I know, taxes are not an appreciable part of their worries as to whether they stay rich–investment conditions and interest rates are far, far greater factors.
Here I’m defining “rich” as “has enough money to draw an annual income in the highest tax bracket solely from investment/interest without touching principal.” I grew up in a coal town, I live in a university town, I know several of these people well enough to talk about money with them.
Probably true for the deduction in general (which is presumably why its still around despite more or less everyone agreeing its a bad idea), but the total number of millionaires, and thus millionaire houses, even in CA and CT, isn’t that great. I don’t think it would exert much of a downward pressure on houses, and if it did, it presumably would just be on those houses bought by people rich enough to loose the deduction.
I suspect this is how the deduction will eventually die despite resistance from the middle class. They’ll pass a bill only removing it for high income homes but not index it for inflation, so eventually it will be eliminated for all but low income house owners.
This point was raised many posts ago. I stand by my statement that the payroll tax cut requires $750,000 in tax per top-300,000 taxpayer per year of the tax cut. If you don’t like the distortion introduced by the differing time frames for the cut and the increase (and it is deliberately confusing) then compare the total numbers. The plan is to take $750,000 from each top-earning taxpayer and distribute it among all wage earners, over some time frame not to exceed ten years.
I disagree. Households use debt just like governments do. Some use it wisely and some use it unwisely. The only wrinkle is that the US’s debt is denominated in its own currency, which it has the power to debase if it so chooses. Of course, that’s just another form of (extremely regressive) taxation.
I took into account both the monthly payment and the total cost when buying a house. Didn’t you?
The “monthly payment” analogy is more apt than you might realize. Lots of people bought houses during the housing bubble based on “teaser” rates or ARMs on the gamble that by the time the rate went up, they’d already have sold the house to a greater fool. The US budget is predicated on perpetual borrowing, also at interest rates that could well go up substantially. When mortgage payments went up and people found they were unable to make the payments or unload their houses, they started receiving unpleasant phone calls from their mortgage holders. What’s the endgame for the US government?
You must not be rich, or you would recognize that it isn’t either/or.
You have hit the usual dilemma on schemes to soak the rich - if you put the deduction high enough, you don’t raise significant amounts (and lose the support of the limousine liberals in San Francisco and LA) because there just aren’t that many rich people. If you put it low enough to actually get some money, you hit the middle class.
Both, but the latter will argue on how it hurts the former.
Without affecting HELOCs? That will be an interesting piece of legislation to write.
You will have to pardon me if I giggle a bit at the naïveté of the idea that people should pay more taxes than they have to.
Regards,
Shodan
economics is not morality or stock traders would all be poor as Joe Dirt. We have a consumer economy and poor to middle class folks spend their money here and don’t hoard. We need people to have jobs and spend. Regardless yes it’s fair in any case, people that work hard and make less than 50k a year should make more than what theyre making right now.
I agree about the political viability of removing the deduction, but I do think that it could be phased in at the high end (perhaps even with a grandfather clause for existing mortgages) and then expanded once people realize it’s not all that big a deal. The charitable giving deduction is another one - most people don’t give to charities to avoid taxation.
I do quibble with this a bit. There is a difference between legality and ethics. Pretending a second home is your primary, for example, is unethical (it is, at its core, lying). Not declaring cash income is both illegal and unethical. Things like faking gambling losses (something that seemed pretty common back when I was playing poker) to offset any reported winnings is unethical.
I don’t like all of this temporary, let’s extend it for another year, nonsense. If it’s good, make it permanent. If it’s not, kill it now.
And if we have it, we need cuts to pay for it. Real cuts, not this fuzzy math “will reduce the deficit by a factor of pi over the course of the next 12.3 years, counting money we won’t spend in Iraq”. Real cuts that put us on a path to a sustainable level of spending and a balanced budget.
This applies to the Bush Tax Cuts and the Payroll Tax Cut. This uncertainty is killing the recovery.