GOP tax plan punishes people who work, rewards passive income

boing
21

I went to a book launch for The Trouble With Billionaires - a book about, uh, the trouble with billionaires - and I actually asked this question of the authors. I said, “What do you say to people who say that if we raise taxes on the wealthy they’ll just move to other jurisdictions.” And his answer was, “I’d say good riddance.” I think it’s a very good answer.

Well, unless the infighting is so bad that someone says they are in support of it and votes against specifically to humiliate McConnell again. Who knows at this point.

One place they are really clever is in the whole, “Most Americans will be able to do their taxes on one sheet of paper!” thing. Of course if you have a job and earn a salary they’ll let you do one page - just multiply your income by x% and pay. The guys who are going to have a ton of breaks, loopholes and exemptions will need a lot of pages to obscure the fact that their real tax rate is much lower than the advertised one. But for average Americans they don’t need that ruse.

4 Likes
22

It caps property tax deductions at $10,000 and caps mortgage interest deductions to houses sold at $500,000 or less rather than $1 million. These disproportionately affect the wealthy and help reduce the government’s role in promoting house ownership as a good in and of itself. Please note I’m not using disproportionately as a subjective term, but purely in terms of the objective net effects of the legislation.

It increases the standard deduction, that’s a good thing.

Maybe a bit of what it doesn’t do: no reduction to the top income tax rates (Trump was pushing for this during the campaign), not affecting 401(k)s, not getting rid of the healthcare mandate.

And you can argue about the pass-through stuff and estate tax / genetic tax subsidies (boo), but I don’t have a huge complaint about the reduction in the corporate tax rate.

1 Like
23

I think that’s what (if anything) is going to kill the tax plan, or take a big chunk out of it: in some areas of the country, the average price of a house is so high that I’m not sure I’d call the owners/inhabitants “wealthy.” Is everyone in San Jose (for example) wealthy?

24

Those areas are predominantly urban areas that don’t go republican anyway, right?

I think those measures are actually specifically meant to punish democratic voters.

3 Likes
25

giphy

1 Like
26

I disagree, Republicans don’t just operate on a “Do Evil” philosophy, they do have to figure out how to perform revenue capture and they do want the CBO score to be palatable, and taxes on properties are a low-hanging fruit precisely because they’re fairly politically neutral and they hit up foreign investors who by and large have enjoyed a relatively light tax burden in the US.

Worst case scenario is foreign property investment drops and prices dip as a result, but we’re in a peak sellers’ market so might as well take a little crumb off the cake.

And just to be clear: there are many Republicans in Congress fighting against this provision because it hits their Republican constituents’ pocketbooks. Ironically this may be proof that it will succeed since it’s probably an area of compromise.

1 Like
27

The “well off”, or “above average” not the “wealthy”. See above about the difference between the top 10%, 1%, and 0.1%.

Move that number up to $15K or $20K and it changes. And, is that a $500K mortgage or a $500K house? Depending on which, move that number up to $750K, $1M or $1.5M and that changes too.

There’s huge parts of the country where the cost of living, home values, and property taxes impact the proposed levels way way below what we would call the “wealthy” or those living a lavish lifestyle. These numbers hit this group harder.

It’s probably true that most of these areas lean democratic and screwing them is just a bonus. See much of NJ, MA, and CA.

Removing the incentive for home ownership is another bonus to wealthier people, as it encourages renting instead which is good for landlords.

5 Likes
28

I’d say that every home within a 40 mile radius of downtown DC is over a 500k. As with most urban centers in the US.

Good luck trying to sell or buy in the future.

1 Like
29

I don’t think their actions on healthcare suggest that they seek palatable CBO scores. I don’t think they even care much about how much revenue they collect since they seem to be fine with just putting all the losses into the deficit. I don’t think they operate on a “do evil” philosophy. I think they operate on a “reward our donors and suppress democratic votes” philosophy.

5 Likes
30

Without necessarily addressing the specifics of the rest of your post, I’d like to call this statement into question:

It’s probably true that most of these areas lean democratic and screwing them is just a bonus. See much of NJ, MA, and CA.

This is just truthiness - what you meant to say it is it feels true. But there are also plenty of million dollar homes in Texas, Arizona, and Utah too. And of course many of the million dollar homes in California are owned by Rebublicans.

When people talk about “fake news” it’s from this vein of critical thinking right here. This is the sort of thing that only passes an emotional test, not a logical one.

1 Like
31

No need to think it anymore, they’re being pretty up-front about that fact:

4 Likes
32

I seriously don’t understand how that isn’t bribery.

7 Likes
33

Fair enough. There are plenty of million dollar homes in those states too. But, the average home price tends to be higher on the two coasts. There’s lots of homes everywhere that are expensive, but that’s not the same as the average market price for an area meaning most of the homes are more expensive in those areas. You can definitely find individual (and many of them) examples everywhere.

The property tax is the other one. In general (there will definitely be counter examples), but as a trend, the “blue” states tend to have higher property taxes.

When you combine the two, higher tax rate and higher home cost, you break through the lower limits faster. And that combination tends to be in “bluer” states. A trend, not an absolute.

For instance, in NH, with property taxes usually called “higher”, property values are so much lower that it’s not as big a factor in blowing through the lower values, a good counter example.

I can definitely understand that in TX, around urban areas, it could be similar. But, TX is HUGE, and on average, property will be cheaper than say NJ on average. Where in NJ, you’re probably always closer to an urban area or two than many spots in TX.

You are correct though, these are stereotypes. Not worth judging en entire tax plan on. But, they do help to understand that it’s not just the “wealthy” picking up the tab, but simply the “well off” while the “actually rich” are doing better anyway.

Targeting people in the $200K to $500K tax bracket is always a good way to find more revenue. They sound super rich and we confuse them with people making $2M or more, makes it easy to stick it to them. And, they don’t have the same lobby power as those making more.

4 Likes
34

Well, as I’ve said, a VAT seems to be the easiest progressive taxable solution out there. We need to start sticking it to the dollars themselves, not the people that have them. “To produce and sustain the economy that generated this dollar of value requires an additional 17 cents.”

35

Wow, isn’t it kind of sad when “good parts” of a tax plan aren’t things that help the average Joe but instead are a reduction in a couple of ways the rich get richer?

36

To @mmascari 's point, a dollar is basically not a dollar throughout the country. Land owners pass on their additional costs for prime land and taxes to their tenants, and businesses pass on their additional costs from taxes and their landlords to consumers. Eemployers have to then pay more to try to maintain a certain standard of living so there’s actually someone around to employ… and they pass that cost right on to their consumers again. In the net, 1) your dollar has less buying power than elsewhere, and 2) you are probably squeezing less buying power out of your employer than people elsewhere, even if you’re making numerically more dollars.

For example, using the BEA’s 2015 statistics on regional price parities, if you live somewhere in California, you have about 80% of the buying power of someone in Oklahoma.

It’s not necessarily “bluer” states that are depressed – it’s an interplay of employment opportunities, real estate costs, tax rates, and so on – but blue states do get hit pretty hard.

Personal opinion: the notion of a VAT is not based on any notion of fairness or economic theory; it’s simply convenient to the government. High taxes are distributed throughout the chain of materials and labor, basically disguising where your money is going. That makes it very politically convenient, because while prices are high, it’s hard for any angry voter to articulate why or who’s to blame. It coerces materials suppliers to collect the tax for the government, which is also convenient, because those vendors have no incentive to cheat on taxes for their customer, and it puts the accounting burden on them instead of on any government office.

VAT is a great way to steal money from your people on the cheap. But if that’s all you want to accomplish, we could instead look to tax methods in places like China, where they just make you pay taxes in advance on what you’re allowed to sell in the coming year. In any capitalist system, there’s already an index of a good’s total cost on society: it’s price. VAT accomplishes nothing of true economic value that cannot be accomplished by a simple sales tax.

If you want a solution to economic inequality, the answer is also simple: tax the rich more. If they were rich enough to surrender U.S. citizenship – for truly, the U.S. will get its citizens’ tax money, no matter where they’re living – then they were already rich enough to hide it, re-invest it, incorporate it, or find a loop-hole.

(I admit, that works only on a federal level: specific states still charge more, which incentivizes billionaires to move from, say, New Jersey to Florida, even if they still have to pay Uncle Sam all the same.)

2 Likes
37

I wonder if that’s where Douglas Adams got the Golgafringan “B” Ark from?

38

They let Tiffany be in the photo, huh?

39

Over 80% of Texas residents are urban.

It’s true, really. But they think rural, because being rough tough cowboys is part of their mythos.

1 Like
40

And over 94% of New Jersians (sp?) are urban.

Dispelling stereotypes about Texans is a worthwhile endeavour. Still, back on the point about property values, the original point made was that targeting people with more expensive homes targets blue states because they have higher house prices. Someone said, “That sounds true but…” without checking whether it is true. It turns out it is true. Perhaps not because of the quantity of land in the state, but I find it hard to believe republican lawmakers didn’t know what they were doing here.

6 Likes