Government

Higher taxes – good for America?

Believe it or not, there is a measure of logic to most provisions of the IRC. To encourage or discourage something, to avoid double taxation, to save money in other areas, etc. Having said that, special interests also look to the tax code to meet their goals, including individuals. 

All this gets quite complicated as you well know and it frequently gets out of hand. That is caused by a disjointed, uncoordinated, bandaid approach to taxes with little regard to the consequences. Temporary changes become permanent, provisions designed to sunset don’t … or do. 

Enter the politicians with their promises to make things fair and provide us with lots of “free.” stuff. 

Bernie Sanders has the most radical, but not only, proposals which can only be described as higher taxes for all. You can find a summary HERE 

One thing Sanders would do is raise the Capital Gains tax, one of those taxes with some logic behind it.   
 

What do you think are the consequences of massive tax increases?

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4 replies »

  1. There is not a tax problem with the federal government, there is a spending problem. The federal government continues to spend 500+ billion more than it takes in, this cannot continue for much longer. Tax rates for everyone will have to go up in the near future, at so point there will be zero buyers for government debt, no matter what interest rates the bonds pay. The government will also need to cut spending, not increase it like the corrupt politicians promise each and every election cycle.
    As far as capital gains taxes, they should be zero, and raise the revenue from some other source, like a 2% vat on everything but food. By the time inflation and taxes eat away at long term investments, I sometimes wonder why anyone would risk it at all.

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  2. Logic? I guess it depends on what the word means: From the dictionary: “reasoning conducted or assessed according to strict principles of validity”, or perhaps “a system or set of principles underlying the arrangements of elements in a computer or electronic device so as to perform a specified task.”

    Tax code, logic? I think not.

    I remember my first job working with the tax code (beyond filing my individual tax returns). I mentioned to a tax attorney that the imputation of income for group term life insurance under IRC 72 and associated regulations made little sense, and seemed arbitrary, because, at that time, my employer made NO contribution. We used a group rate, where younger people paid more than the Table 1 rates, and older people paid less than the Table 1 rates. Because our group rate “straddled” Table 1, even though there was no company contribution (it was younger employees subsidizing older workers), the IRS regulations required imputation of income as though the company was providing the subsidy. The tax attorney reached behind him, grabbed one of several CCH binders (the old 3 wring loose leaf binders) he had on the shelf behind him, flung it across his office to land at the table where I was sitting and he (almost screamed at me) saying: “Stupid, show me even one provision in the code that is not arbitrary.”

    Nearly 40 years later, after having studied tax law (including public finance) in my undergraduate business program, in my MBA coursework (including public finance), in law school, and in my graduate/masters law program, and having day to day experience with the tax code for over 35 years, I have yet to encounter even one tax provision that incorporates “logic” – show me one provision based on a “strict principle of validity”.

    The only logic (and even then it is arbitrary) the only valid point of the tax code that I can see comes from how the entire system is deployed, what drives the process. It comes from an old Ronald Reagan quote: β€œGovernment does not tax to get the money it needs; government always finds a need for the money it gets.”

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    • Somebody had a reason to push every provision in the IRC which at that point to them was 100% logical even the imputed income. However, taken together and considering all the consequence of each provision uncoordinated with others, the whole thing becomes illogical.

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  3. What do I think about massive tax increases? I think after working for over 40 years that I have been doing it wrong. Before Internet stock trading, brokerage fees were too high to buy individual stocks so I relied on my 401K. Now I’ll be taxed at a much higher rate than I could have been. I saved for retirement and my reward is that I’ll get to pay thousands more for my healthcare if I retire early instead of getting reduce premiums from the Obamacare exchanges. It is true that currently I have a life style that I want but there is so many free government services ranging from free senior bus services to free income tax preparation that I am starting to wonder why I worked so hard. If Old Bernie gets his way, why work at all. He will only tax those who work hard and get ahead. I am starting to see the appeal with the young and under employed. Twenty years after Old Bernie gets elected, I would expect a Greece meltdown in the USA. Cutting taxes should result in cutting services and that would just raise the crime rates as the have not’s just steal what they want instead of working for what they need.

    It seems that the Democrats want to punish those who work by calling them rich and taxing them to death. Mean while, burger flippers want $15 hr because they think that their services are more valuable than a teacher or paramedic. My only hope is when they get their $15 hr, that they lose all their tax breaks and earned income credits and get the crap taxed out of them.

    I get the part that the government wants to discourage savings to encourage consumer spending to drive the economy. But if there are no savings then the government has to provide retirees with services else seniors will be dying in the street thus that is why social security was born. Could no one see that endless spiral into socialist programs that will requiring taxing, no just taking all of your hard earned money? Why work you have a safety net if you do not work. I say keep taxing and I want 18 years paid (26 years if they go to college) family leave for every child so that I can be there for them. It can be paid for by somebody else.

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