Tax hike before "fiscal cliff" deal

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    President Barack Obama said on Wednesday that Republicans would have to agree to raise taxes on the wealthy as the first step in a budget deal that would prevent a dysfunctional Washington from pushing the economy into recession.

    "What I'm not going to do is to extend further a tax cut for folks who don't need it," Obama said, shortly before meeting with a dozen corporate executives who are pushing for a quick resolution.

    Republicans firmly oppose raising tax rates, but they have suggested raising more revenue by limiting some tax breaks.

    http://news.yahoo.com/obama-says-tax...001600045.html
    JacobJason and aknottedyarn like this.
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  3. 26 Comments so far...

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    I think eliminating deductions sounds like a more sure way to raise revenue. Consider a rich guy who currently pays almost no taxes because of numerous deductions and credits. His tax rate could be doubled and the net revenue to the government would remain the same. Or consider the poster child for taxes, Warren Buffet. His income is from investments and subject to the capital gains tax. Raising individual tax rates has little effect on him. He will still be paying about 14% after deductions.

    IMO, the President is stuck on the issue of the Bush Tax cut for the rich and wants to reverse that for political points. If he'd back up and look at what he wants to achieve, more revenue from the rich, there are other ways to do that.
    Spidey's mom likes this.
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    I think that most of us are not opposed to looking at other methods to increase revenue. We certainly are not unwilling to consider eliminating deductions as part of that process. What we don't want to do is to eliminate deductions that also have the affect of increasing the tax burden further on the middle income brackets...we use many of the same deductions on a smaller scale.
    Elvish likes this.
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    Listening to Michael Medved correct screeching liberals today on the revenue/spending issue. He indicated that the revenues today are close to what they were in the good Bush years, because business is improving somewhat. So if revenues are improving, the cliff has to be the result of out of control spending.......which this government is just not going to do.

    He also mentioned the wisdom of Romney's suggestion of limiting income tax deductions, which would not matter one whit to most of us, but would make a big difference to the Paris Hilton types. We are able to take advantage of deductions, but it that limit were $50K , we'd be just fine and able to continue taking all the ones we currently do. That would also satisfy those who complain about uber-wealthy people who game the system and pay nothing by using deductions.
    CrufflerJJ likes this.
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    Quote from tntrn
    Listening to Michael Medved correct screeching liberals today on the revenue/spending issue. He indicated that the revenues today are close to what they were in the good Bush years, because business is improving somewhat. So if revenues are improving, the cliff has to be the result of out of control spending.......which this government is just not going to do.

    He also mentioned the wisdom of Romney's suggestion of limiting income tax deductions, which would not matter one whit to most of us, but would make a big difference to the Paris Hilton types. We are able to take advantage of deductions, but it that limit were $50K , we'd be just fine and able to continue taking all the ones we currently do. That would also satisfy those who complain about uber-wealthy people who game the system and pay nothing by using deductions.
    And so, hopefully the GOP leadership will offer up some reasonable plans rather than simply say no to increased tax rates for the wealthiest. If I am not mistaken, the POTUS indicated that he would be happy to entertain reasonable new ideas to deal with the deficit, especially if they were balanced.
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    Quote from tntrn
    Listening to Michael Medved correct screeching liberals today on the revenue/spending issue. He indicated that the revenues today are close to what they were in the good Bush years, because business is improving somewhat. So if revenues are improving, the cliff has to be the result of out of control spending.......which this government is just not going to do.

    He also mentioned the wisdom of Romney's suggestion of limiting income tax deductions, which would not matter one whit to most of us, but would make a big difference to the Paris Hilton types. We are able to take advantage of deductions, but it that limit were $50K , we'd be just fine and able to continue taking all the ones we currently do. That would also satisfy those who complain about uber-wealthy people who game the system and pay nothing by using deductions.
    I think everyone agrees you can't address the problem with increased revenue alone, which is why Obama is proposing a 3:1 mix of cuts and revenue increases (for every dollar of increased revenue, we'll cut spending three dollars).

    Limiting deductions could certainly help, although I'd disagree that Romney added anything meaningful to this idea. Romney's suggestion that we limit deductions has been mutually agreed upon for some time, it's the question of which deductions that has been at issue. Romney promised to cut taxes by $5 trillion and to then fill that budgetary hole back in by closing loopholes and deductions. The problem is that he then said he would not limit the top 15 deductions, and even if every single one of the remaining deductions and loopholes were done away with, they would only account for $2 trillion, leaving us $3 trillion in the hole. This does show promise though, as long as we acknowledge that math still exists.
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    I'll grant that I've not listened closely to much of what the candidates have said so I don't know everything that Romney had said. However, I do see how they could raise quite a bit of revenue by not eliminating deductions but instead limiting the total amount of deductions from your taxes. If the limit is $50,000 then someone like Mr. Romney could have a therapy horse, mortgage deduction, and charitable donations but anything above the total $50,000 deduction limit would not decrease his taxes. Most middle class tax payers would not be affected by such a limit and I bet it could raise quite a bit of money for the government.

    Even better would be a flat tax with no deductions or the FairTax which taxes consumption rather than income and would decrease taxes for the poor and middle class.
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    I've never gotten the supposed advantage of FairTax over a regular Flat tax azhiker, maybe you can enlighten me. One concern of mine is that it's potentially regressive. Lower and middle class earners spend nearly all of every paycheck on food, bills, gas, etc, while the top 1% spends a smaller portion on these everyday purchases, meaning a larger portion of a low and middle class earner's income will be taxed. Since it's not marginal, part of the FairTax is to send everyone a check each month (instead of saying your first $1000 per month of tax free), this seems like it has the potential for fraud and waste. It would seem if I was rich I should just make sure I spend as much as possible outside of the US, while low and middle class earners don't necessarily have the option to take their vacation in the Caribbean to avoid the tax, their vacation choices may be limited to a road trip east or a road trip west, both would be taxed far more than the Rich person's trip to St. Marten.
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    Good questions and I'll try to address them.

    First, because of the prebate, the FairTax is progressive. Everyone would receive a prebate which would cover the taxes for purchases up to the poverty level. However, only new items are taxed so if people choose to purchase used items they could avoid some of the tax and actually end up with a negative tax rate. In theory, nobody would ever quite achieve the 23% tax rate since everyone would get the prebate. However, the rich would get very close to 23% with their purchases.

    Under any system, the low and middle classes end up spending most of what they earn. Under the current system they start off with only a part of their earnings because of FICA, federal, and state tax withholding. Under the FairTax they would get every penny they've earned plus the prebate. Then their decisions would determine what they pay in FairTax.

    Things I like under the FairTax include:
    If you have a small garden you don't pay taxes on that food. Purchasing and repairing used cars, appliances, and clothing is rewarded which helps save our landfills. The rich are much more likely to feel the need to purchase a new car or new home.

    Now under your scenario of a rich person buying things offshore. Their ticket to fly would be purchased here and taxed. They may buy a few clothes but a large purchase like a car would have to be shipped back and that would cost $$.

    There could be some fraud but the government would have to be complicit. To receive a check you'd need to have a SSN which is issued by the government. Yes, it could happen. However, there is a ton of fraud in our current system with unreported income and criminal income. Drug dealers currently pay no taxes but under the FairTax every new gold chain or Escalade would be taxed. It's worth taking a look at their website. Here's a link to the FAQ page for the FairTax. What is the FairTax | What is a Consumption Tax | Answers on Tax Reform - Americans For Fair Taxation
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    azhiker96 likes this.


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