The tax reform camel

There's an old joke that says a camel is just a horse designed by a committee. With the Republicans looking to reform the tax code in 2017, expect a platypus instead of a horse.

(hat tip to Disciplehood for the pic)

Here is a summary from the Associated Press:

Congressional Republicans are planning a massive overhaul of the nation's tax system, a heavy political lift that could ultimately affect families at every income level and businesses of every size.

Their goal is to simplify a complicated tax code that rewards wealthy people with smart accountants, and corporations that can easily shift profits — and jobs — overseas. It won't be easy. The last time it was done was 30 years ago.

Senate Majority Leader Mitch McConnell, R-Ky., and Speaker Paul Ryan, R-Wis., have vowed to pass a tax package in 2017 that would not add to the budget deficit. The Washington term is "revenue neutral."

It means that for every tax cut there has to be a tax increase, creating winners and losers. Lawmakers would get some leeway if non-partisan congressional analysts project that a tax cut would increase economic growth, raising revenue without increasing taxes.

So what kind of changes are they considering to their theft from the American people? Here are a few of their ideas, followed by a 0-4 deck chair rating (based on "rearranging deck chairs on the Titanic", with 4 deck chairs being the most pointless):

1. ...lower the top individual income tax rate from 39.6 percent to 33 percent, and reduce the number of tax brackets from seven to three. The gist of the plan is to lower tax rates for just about everyone, and make up the lost revenue by scaling back exemptions, deductions and credits. This gets a 3 deck chair rating for being a step in the right direction, but still mostly cosmetic, mainly because:

The plan, however, retains some of the most popular tax breaks, including those for paying a mortgage, going to college, making charitable contributions and having children.

Until you eliminate ALL deductions and tax breaks, the income tax rate is pointless. And before you squeal about that being "unfair", the most fair system of all charges EVERYONE the exact same tax rate, period, no exceptions. If our government is going to steal our money, at least let it be the same percentage from everyone.

2.  The standard deduction would be increased, giving taxpayers less incentive to itemize their deductions. This gets the big 4 deck chair rating. Everyone should always process taxes as if they were itemizing, and then compare it to the standard deduction. This saves no time for smart filers.

Get rid of deductions entirely, then we will talk.

3. Small business owners would get a special top tax rate of 25 percent. 3 deck chairs. A step in the right direction. Let me know when we hit zero. Taxing businesses on top of individuals is just double-dipping by the government, since businesses only pass on their costs to consumers, thereby taxing us twice.

4. Investment income would be taxed like wages, but investors would only have to pay taxes on half of this income. 3 deck chairs. Consider this: You work and then try to invest your previously-taxed income to make it grow. When you invest wisely and make more money, they tax you again. So you used your money to help the economy, you get rewarded for it, and then you pay taxes on it again.

Personally, I hope there is a special place in Hell for the politicians who let this happen.

5. [Trump] promises a tax cut for every income level, with more low-income families paying no income tax at all. 2 deck chairs. Anything that gets us closer to zero is a positive, especially because:

The Tax Policy Center says Trump's plan would reduce revenues by a whopping $9.5 trillion over the first decade, with most of the tax benefits going to the wealthiest taxpayers.

The only way to reduce government is to starve the leviathan.

6. ...cap itemized deductions for married couples making more than $200,000 a year. 4 deck chairs. This is just wealth envy writ large.

7.  ...tax carried interest, which are fees charged by investment fund managers, as regular income instead of capital gains. 4 deck chairs. Yet more wealth envy in action.

I certainly can appreciate why anyone would want investment fund managers to be taxed for their investment income, but this is just another money grab that will raise investment costs and push them even farther away from the average person. Do you want to make investing so cost prohibitive that only the wealthy can afford it?

8. Both Trump and House Republicans want to lower the [corporate tax] rate, and pay for it by scaling back tax breaks. 3 deck chairs. Only a step in the right direction. By the way, if you think corporations will lose any tax breaks, think again. I am sure the lobbyists are already lining up with the bribe money (aka "campaign donations") for the politicians.

9. House Republicans want to scrap America's worldwide tax system and replace it with a tax that is based on where a firm's products are consumed, rather than where they are produced.

Under the system, American companies that produce and sell their products in the U.S. would pay the new 20 percent corporate tax rate on profits from these sales. However, if a company exports a product abroad, the profits from that sale would not be taxed by the U.S.

There's more: Foreign companies that import goods to the U.S. would have to pay the tax, increasing the cost of imports. 

This gets a 2 deck chair rating for eliminating part of the tax. This part is positive. 

However, there is a huge negative here, in that this creates a 20% tariff on imported goods. Don't expect our trading partners to be happy with this. You can call it a corporate tax until you are blue in the face, but other countries will still see it for a tariff, which is what it is.

As Will Rogers once said, "Be thankful we're not getting all the government we're paying for." I will be thankful when we aren't paying at all. Taxation is just a way for politicians to steal money from us.

By the way, to those of you who are progressive socialists, ask yourself: Do you really want Donald Trump to have access to all this money? Do you really love big government so much that you would hand it over to someone like Trump? 

To paraphrase the old Warren Buffett quote, "Always build a government so small that an idiot can run it. Because sooner or later, one will."