One of the big items on the Republican to-do list is “tax reform.” Without resorting to hot takes or partisan talking points, what exactly does this mean? Are there aspects of the tax code that both parties agree could use some reform?
Speaking personally, I don’t see any major problems with the tax code. Of course, I’m one of those crazy liberals who think that, if anything, our taxes are too low (at least in comparison with other first-world countries). When I hear “tax reform” I have visions of flattening the tax rates (aka making taxes more regressive), which I am hugely against, but I’m open to other, more charitable interpretations.
(One item that could be eliminated in a perfect world is the mortgage tax credit, but it’s hugely popular and would be extremely difficult to remove without immense political fallout.)
Not many, but collectively, the total set of things that each party thinks could use some reform are probably things that could use some reform. Once upon a time, we might have seen a compromise solution that gives a little in one place to get a little in another, but I’m not very confident of that these days.
The only thing that comes to mind that both presidential candidates said they wanted to change is carried interest being treated as capital gains income.
Certainly, taxes could be made much simpler by removing lots of special cases, although that’s not very politically feasible since the small groups that receive benefits from those special cases are highly motivated to keep them around.
I’d say that no matter how many special cases are removed, no politician would ever dream of removing the tax break for mortgage interest. There would be riots.
That’s one of things that a lot of people can agree is a good idea but there are a ton of people in Brooks Brothers suits that make sure they will grease whatever wheels are needed to preserve the deductions their pet interest has gotten used to.
Tax reform is just another one of those buzzwords.
The vast majority of Americans can use the 1040 or even 1040ez form, and if you have some moderate investments, you may need to attach a separate schedule. That’s pretty simple, and should take someone with a high school education, a calculator, a pen, and all their necessary documents about 10-15 minutes.
Taxes get complicated because of businesses. While you as an individual only get to right off certain things that have been listed in the tax code for you, businesses get to write off everything that is the cost of doing business.
A few things have limits, some are not 100% deducted, and some need to be depreciated over a number of years, but essentially, you are only supposed to be paying taxes on your profit, not on your revenue.
Changes to that part of tax code happen frequently, and it’s a complicated mess that you really need to either be a CPA/tax lawyer to figure out, or you need to hire one. I did my own taxes my entire life, thought I would do my business taxes myself, but realized I saved quite a bit more than the cost of the CPA by using him. (As well as many hours of headache.)
Now, would I like simpler taxes? Not really. My taxes will always be very complicated, and I will be using a CPA as long as I run things, so I don’t care if tax code is 5 pages or 500,000.
But, in the end, the reason for the complex taxes is that there are many things you should get to deduct, but there are things kinda like those things that you shouldn’t, so everything needs to be spelled out so that businesses manage to get all the deductions on the cost of doing business, but are not getting deductions on things that are not expenses incurred in the normal course of business.
Though I am a home owner, I would agree with getting rid of the mortgage tax credit, but I would replace it with a limited housing credit, of up to around 10k a year. Renters already get punished enough for not owning, taxes shouldn’t be punishing them too.
“We condemn attempts by activist
judges at any level of government to seize the
power of the purse from the people’s elected representatives
by ordering higher taxes.”
What does this refer to? Where can judges singularly enact higher tax rates?
I can only guess that this is a sort of oblique criticism of the supreme court’s approval of calling Obamacare’s penalty a tax.
Well, not in so many words, but if you look at Trump’s proposed tax plan, it involves a much larger standard deduction ($30k/couple). While this wouldn’t technically do away with the mortgage interest deduction, it would mean that the vast majority of people wouldn’t get any value out of it, since their itemized deductions would be lower than the standard deduction.
Current 30-year mortgage rates are around 4%, so $30k is interest on a $750k loan for a couple. Of course, add in property taxes and various other deductible expenses, and some high income earners are still going to itemize deductions, but the effect won’t be nearly as large. And of course the AMT would kick in, which means that the effective variation of deductions would be much less.
This is actually a pretty great policy. Itemized deductions still exist, but most people don’t have to care as much about them and have a much simpler time doing their taxes. And unlike removing the mortgage interest deduction, no one all of a sudden finds themselves unable to pay their mortgage because their tax bill has gone up. And the market distortion caused by the deduction is reduced.
And you could even pair this increased standard deduction with some slightly increased rates on the higher brackets, keeping things revenue neutral and making the system more progressive (spoiler: Trump’s plan does not do this).
Anyway, it does show that there’s a path toward simplifying taxes, not literally by removing parts of the tax code (which a democracy like ours might literally be incapable of doing), but by making those parts irrelevant to the vast majority of filers.
Edit: It might be about this Supreme Court ruling relating to school desegregation. That was in 1990, and I can’t find anything about judges and taxes in the 1988 platform.
I suspect that any “tax reform” that the GOP and Trump move to enact will be strongly-opposed by the Dems and you’ll personally probably find it distasteful.
Thanks, I was trying to search for a phrase that spanned a line break. I’m afraid I’m no help at all though. I’m nominally a Republican, but I have no idea what that line is in refererence to.