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For three straight years, 95 percent of Republicans in Congress voted for the Paul Ryan budget and its overhaul of the tax code to just two rates of 10 and 25 percent. But while Ryan refused to identify a single tax break he would end in order to make those lower rates possible, on Wednesday House Ways and Means Committee Chairman Dave Camp (R-MI) did. As it turns out, two of the tax expenditures Camp is targeting—ending the state and local tax deduction and reducing the mortgage interest deduction—will disproportionately hit blue state residents.

As Bloomberg News reported, "A tax plan from House Ways and Means Committee Chairman Dave Camp would further limit the mortgage- interest break and end the deduction for state and local taxes, according to a nonpartisan congressional summary."

The mortgage proposal would reduce the amount of mortgage debt eligible for the interest deduction to $500,000 from $1 million, according to the document. The state and local tax break, which particularly benefits residents of high-tax states such as New York and New Jersey, would be eliminated.
To put it another way, Camp's proposal like other Republican efforts targets the more affluent, higher cost and more highly taxed states where Democrats generally hold sway.

As the nation approached the so-called "fiscal cliff" in November 2012, the Wall Street Journal explained the dynamic behind what conservatives like to call the "blue state tax break."

Limiting personal income-tax deductions and other federal tax breaks, an idea gaining momentum as part of a fix for America's budget crisis, would hit some parts of the country harder than others, with a series of high-income blue states leading the way...

After California, the highest average itemized deductions--all over $28,000--were claimed by taxpayers in New York, the District of Columbia, Connecticut, New Jersey, Maryland and Massachusetts. All have high state, local and property taxes, which may be deducted from income on federal returns, although other tax provisions already limit some deductions.

As the WSJ's interactive table shows, of the 10 states with the highest percentage of taxpayers itemizing deductions, 9 voted for Barack Obama for president.

More analysis below the fold.

Only one of the bottom 10 (Florida) supported the Obama. The same is true for the percentage of households claiming the mortgage interest deduction. When it comes to the average dollar value of their home mortgage deductions, state and local income tax deductions and overall itemized deductions, blue states dominate. Only in the dollar value of their charitable deductions do red states top the table. (It is worth noting that charitable giving also reverts to form if contributions to churches and other religious institutions are not included.)

With their greater wealth, higher state and local taxes and steeper housing costs, blue state residents stand to lose more than their red state brethren by most base-broadening proposals. But that will also be true if President Obama gets his way with the expiring upper-income Bush tax cuts.

The conservative Daily Caller crowed about this point back in 2011. Tucker Carlson's rag responded to a call by some Democrats for a millionaires' surtax by rightly noting it "would hit Democratic states hardest."

For example, the 5.6 percent tax on million-dollar earners will hit 0.7 percent of taxpayers in New York, 1.2 percent of taxpayers in Connecticut and 0.4 percent of taxpayers in Colorado, according to an Oct. 6 report by the left-of-center group Citizens for Tax Justice (CTJ).

On average, 2.9 percent of taxpayers in the 18 states that elect two Democratic senators would be forced to pay the millionaire's surtax if it becomes law.

In contrast, only 1.7 percent of people in the 15 states that send two Republicans to the Senate would pay the surtax.

Analyses by the Tax Foundation in August found much the same thing. Looking at the potential expiration of the Bush tax cuts for all Americans (and not just the wealthy), the New York Post warned its readers that "New York, Blue States get hit with biggest hikes if Bush tax cuts expire."  As CNBC summed it up, "the most-hit states are generally considered Democratic strongholds, while the least-hit are mostly Republican"

If Camp's plan became law, the dynamic of "red state socialism" by which federal tax dollars generally flow from wealthier Democratic states to less well-off Republican ones would only become more pronounced. Red state spending on education, unemployment insurance and (more than ever) health care has been and will continue to be underwritten by blue state taxpayers. (For more background, see "In Defense of Red State Socialism.") As Jonathan Cohn described it in the New Republic ("Blue States are from Scandinavia, Red States are from Guatemala"):

In blue America, state government costs more--and it spends more to ensure that everybody can pay for basic necessities such as food, housing, and health care. It invests more heavily in the long-term welfare of its population, with better-funded public schools, subsidized day care, and support for people with disabilities...

In the red states, government is cheaper, which means the people who live there pay lower taxes. But they also get a lot less in return. The unemployment checks run out more quickly and the schools generally aren't as good. Assistance with health care, child care, and housing is skimpier, if it exists at all. The result of this divergence is that one half of the country looks more and more like Scandinavia, while the other increasingly resembles a social Darwinist's paradise.

It's with good reason that Dana Milbank described red state America as a "Confederacy of Takers." The corollary is Democratic states represent a Union of Taxpayers.

Of course, none of Camp's proposals his will come to pass any time soon. Too afraid to anger any voters by closing any of the federal tax breaks and loopholes that cost Uncle Sam about $1.3 trillion a year, Senate Minority Leader Mitch McConnell (R-KY) has already declared tax reform dead on arrival for 2014. House Speaker John Boehner (R-OH) said, "You're getting a little bit ahead of yourself" when asked if Camp's plan is the GOP plan. Brushing off any idea of a vote this year by replying, "Ah, Jesus," Boehner simply explained:

"We're going to start the conversation today."
For Republicans, the discussion about punishing blue state taxpayers will be their favorite part of that conversation.

UPDATE: Writing at TPM, Sahil Kapur provides more background on Camp's "blue state payback." Camp himself has made no secret of his objective in targeting tax breaks that disproportionately benefit Democratic states.  As the New York Times explained:

Mr. Camp’s plan is open about this intention: “This deduction redistributes wealth to big-government, high-tax states from small-government, low-tax states.” In fact, those states do a much better job of helping their most vulnerable citizens, improving education and mobility in big cities, and benefiting the country as a whole.

Originally posted to Jon Perr on Wed Feb 26, 2014 at 11:08 AM PST.

Also republished by Daily Kos.

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Comment Preferences

  •  The goal is to create internal pressure (11+ / 0-)

    in those states to reduce, or eliminate, their income taxes.  Trickle down government destruction.

    "When dealing with terrorism, civil and human rights are not applicable." Egyptian military spokesman.

    by Paleo on Wed Feb 26, 2014 at 11:19:37 AM PST

  •  Call it red state bias... (1+ / 0-)
    Recommended by:

    As here in Georgia, we have a small income tax, but I don't see the problem with eliminating the state/local deduction.  It's essentially the federal government subsidizing the state and local governments.  And as a Georgian, I'm not sure why I should be paying for the state government activities of California or New York.  Don't get me wrong - I like the high services provided by those states.  I just think the inhabitants of those states should pay for them.

    Now, the elimination of the standard personal deduction, on the other hand... that's a doozy.  And will lead to a lot more people spending a lot more time and money so they can properly itemize their taxes at the end of the year.

    And as to the mortgage interest deduction - I've been a homeowner, and now I'm a renter.  As a renter, I don't really appreciate a big subsidy to the people who pay their rent to a bank, while I don't get a deduction because I pay my rent to an individual.  And a million dollar cap?  Why are we subsidizing the owners of million dollar houses?  That's crazy!  

    •  What About that State Sovereignty Issue (1+ / 0-)
      Recommended by:

      Red-state dwellers natter on incessantly about state sovereignty but never seem to want to follow their argument to its logical conclusion.  How any state chooses to tax its citizens is their decision and those states get to take a whack out of their citizens' income FIRST, so the Federal government gets to look only at the NET income of those states' citizens.  That's how state sovereignty works and that's reflected in the current taxation system.  If red-state dwellers don't like it, then stop talking about states' rights, the 10th Amendment, and all the rest.  Republican hypocricy never ceases to amaze me, since it always seems to reach higher plateaus in its quest for the crazy.

      "Love the Truth, defend the Truth, speak the Truth, and hear the Truth" - Jan Hus, d.1415 CE

      by PrahaPartizan on Wed Feb 26, 2014 at 05:45:16 PM PST

      [ Parent ]

      •  I have studied federalism (3+ / 0-)
        Recommended by:
        marykk, erichiro, DocGonzo

        And our constitution.  I have never seen your interpretation before - the supremacy clause pretty much says the opposite.  States have no first right to your dollar.  And the federal income tax does not tax net income - it taxes adjusted gross income.  The federal government has no obligation to reduce the tax burden of its citizens who pay more in state income tax - in essence, allowing those states to tax a higher amount than they would otherwise be capable as Uncle Sam picks up part of the tab.   Why should it?  

        •  A Creature of the States (0+ / 0-)

          Try understandigng that the Federal government is a creature of the states.  Realistically, we all understand that Federal tax policy will be whatever its government decides it will be.  

          "Love the Truth, defend the Truth, speak the Truth, and hear the Truth" - Jan Hus, d.1415 CE

          by PrahaPartizan on Wed Feb 26, 2014 at 06:54:01 PM PST

          [ Parent ]

          •  It isn't (0+ / 0-)

            The Supreme Court has addressed this exact point.  The federal government was created by "We the People," not by the states.  The Constitution is the Supreme Law of the land - state laws that contradict federal law are preempted.  State laws that deal with explicit or implicit federal areas are without effect.  Dual sovereignty is a thing - and it's especially important when it comes to police power, or the federal government seizing the machinery of state government (which is why Medicaid expansion was struck down by the Supreme Court).  But don't let that mislead you - it only goes so far.  Federal laws can and do nullify state laws.  The last time any states seriously attempted to nullify federal laws, there was a civil war (and the nullifiers lost).

            •  Pesky Little Amendment Issue (0+ / 0-)

              All of which is true.  But there is that little issue that amendements to that samne Constitutino require agreement by a super majority of those same states and not the people of those states.  Perhaps we should amend the constitution to allow for a diirect vote on amendments too?

              "Love the Truth, defend the Truth, speak the Truth, and hear the Truth" - Jan Hus, d.1415 CE

              by PrahaPartizan on Thu Feb 27, 2014 at 08:51:25 AM PST

              [ Parent ]

    •  Isn't Georgia is a net taker state? (3+ / 0-)
      Recommended by:
      ChemBob, LollyBee, CT Treehugger

      (Checks some stats)

      Hmm... about a push. You neither win nor lose, so not sure what the complaint is here.

      •  GA 9% Return on its Tax Investment (1+ / 0-)
        Recommended by:
        CT Treehugger

        I don't know what qualifies as a "push" for you, but Georgia GA takes $1.09 back for every $1 it sends to the Feds. That's a 9% return on its tax investment. It sure sounds like a taker to me.

        "When the going gets weird, the weird turn pro." - HST

        by DocGonzo on Thu Feb 27, 2014 at 06:36:15 AM PST

        [ Parent ]

        •  I saw a 2005 stat was 1.01 (0+ / 0-)

          I figured it unlikely the needle had shifted drastically but I'd say your state indicates otherwise.

          And you stat just makes our friend above's lamentation about subsidizing other states all the more unsupportable.

          •  2005 Tax Foundation (2+ / 0-)
            Recommended by:
            cskendrick, CT Treehugger

            I think all these stats come from a study the Tax Foundation (an anti-tax org whose conclusions and agenda I disagree with, but whose stats seem sound) updated last in 2005, and I think published in 2007.

            This is a stat that should be updated now, as deep into Obama's post-Bush term as the old stats were in the midst of Bush's Republican Congress and before the Iraq and bailout bills came due.

            Very possibly the bailouts reversed the balance, with the biggest banks in Blue states (NY, CA). But just as possibly the widespread fake economies of Red states saw even more net bailouts, especially as Blue state banks were more likely to repay the bailouts - especially if including fines and not just taxes.

            Really that angle shows the divide is not so much among the states as among the classes. The net subsidy to Red states is a product of Federal expenditures primarily on military contractors and national labs combined with their low incomes resulting in low taxes (aggravated by their legislators running tax law for generations).

            In other words, it's the 1% vs the 99%, with the states just a correlation smokescreen. As usual.

            But indeed the state-based argument from rank and file Red staters and their reps is just another big lie that isn't even relevant. As usual.

            "When the going gets weird, the weird turn pro." - HST

            by DocGonzo on Thu Feb 27, 2014 at 07:21:34 AM PST

            [ Parent ]

        •  Addressed this point... (0+ / 0-)

          A little further down, but I'll expand on it some more.  That is a measure of federal spending.  And it's a useful measure, as far as it goes.  But I'm not talking about federal spending within a state, I'm talking about the federal subsidy of state governments.

          To use concrete examples, I'm not talking about tax dollars collected in New York going toward Fort Benning  in Georgia or a Medicaid/SNAP recipient in Alabama.  I'm talking about the reduced federal tax burden someone in New York gets by virtue of their state income tax bill - an implicit subsidy that all of us, including people in Georgia, pay for.  

          Functionally, New York can charge higher income taxes than its citizens would otherwise bear, because Uncle Sam does the fine people of New York a solid and lowers their federal income tax bill.  That's cool and all - but why should the rest of the country be on the hook for the services provided by New York's state government?  Generally speaking, you should get what you pay for.  This deduction allows people in high-income tax states to get more than what they pay for, at the expense of people getting generally worse service in their low-income tax states.  It's a reverse Robin Hood.

    •  Not to worry (0+ / 0-)

      As a Georgian, you are not subsidizing Californians or New Yorkers, it is the other way around.  California and New York are both large "net" contributors to the federal government, while Georgia and the entire rest of the south are net recipients of federal government.  It's certainly not your fault that it is set up this way but know that most of the blue states pay in to the fed more than the fed pays out and the reverse is true with all of the south and most of the red states.  

      •  You're speaking of total federal (0+ / 0-)

        Money flows between entities within a state and  federal  money spent within that state.  That's an important thing to measure.  But it's different than an individual taxpayer in one state helping to offset the cost of a state tax bill in a different state.

        So, just to clarify, two things going on here.  One measure looks at net receipts from all federal taxation, and then spending on say, military bases, Medicaid, etc.  A good measure!  But measuring federal spending.  The second is a lowered federal tax bill for high state-tax states that  subsidizes state governments .  And I don't see any reason for me to lower the state tax bill of someone living in New York or California.  Those states chose their tax burden - and I think they're making good choices! - but they should pay for it.  Not me.

    •  We Subsidize You, Not You Us (0+ / 0-)

      OK, we'll do it your way. Since Georgia gets $1.09 from the Feds for every $1 sent (9% return on investment), while New York gets back only $0.72 per $1 (28% loss), we'll stop subidizing Georgia and the rest of the taker states.

      Per capita Georgians get back $1.53 for every $1 sent. So that's going to suck for you, even though NY'ers will each retain only $0.01 more that we're each sending you people. But we need it more to pay for the better services we provide ourselves in our state.

      Happy mudtracking!

      "When the going gets weird, the weird turn pro." - HST

      by DocGonzo on Thu Feb 27, 2014 at 06:33:58 AM PST

      [ Parent ]

    •  Good point (0+ / 0-)

      Except California and New York are currently net federal exporters. THEY subsidize Georgia, and thats DESPITE getting a portion of their state income tax paid for by the feds. This would simply increase the number of federal dollars going out of those states and into red states like Georgia (which might have to raise their own income taxes if it weren't for the rich blue states paying for their services)

  •  Blue stater here (4+ / 0-)
    Recommended by:
    MPociask, erichiro, SinglePayer1, ericf

    I support removing the deductions for mortgage interest and state taxes.  I also support removing the carried interest tax break and other give aways to the rich & powerful.

    I don't know all the details of the Camp bill, but because it doesn't hit the poor (red) states as hard as the wealthier (blue) states is no reason for not doing the right thing.

    •  "The right thing" (2+ / 0-)
      Recommended by:
      marykk, Jake formerly of the LP


      What a convenience it will be to have the person who rules on what The Right Thing is, right here!

      I had foolishly thought that "the right thing" was to NOT treat income that got taxed to pay for state and local services, as subject to federal tax.

      •  Well I think it should be all or none (0+ / 0-)

        The current system does not deduct sales tax and many other taxes and fees that state and local governments issue.

        Can you explain why you think deducting local taxes is good policy?

        •  it's more complicated (1+ / 0-)
          Recommended by:

          On Schedule A we get the choice of deducting either state and local income tax OR state and local sales tax.  So if a person happens to buy a car one year, that makes for a good time to look into the sales tax deduction for many people.

          I'm not liberal. I'm actually just anti-evil, OK? - Elon James White

          by Satya1 on Thu Feb 27, 2014 at 06:04:37 AM PST

          [ Parent ]

    •  How to Phase The Changes In (1+ / 0-)
      Recommended by:

      First, the tax issues on state taxation always involve the questions involving the states' relation to the Federal government.  One could make a very good case that the Federal nature of our government should enable the states to tax their citizens as they see fit and allow the Federal government to tax only the net income remaining.  That's how the system constructed now works.  If red-state dwellers don't like the fact that state income taxes are deductible from Federal income tax calculation, I would encourage them to get their state legislatures to pass state income taxes in their states.

      As for mortagage interest deduction, Federal government policity adopted that as an incentive for promotion home ownership.  If we as a nation decide that home ownership no longer remains a worthy goal (and that debate maybe should be engaged), then eliminating the deduction would make sense.  How it gets implemented, however, then becomes a very real issue.

      Lots of people buy homes with 30-year fixed mortgages with the expectation of staying in the home for a long period.  They construct their financial lives around those calculations.  Eliminating the interest deduction willy-nilly suddenly tells those folks they were fools for listening to the Federal government tout the advantages of home ownership.  Therefore any change in the interest deduction needs to be phased in over a long (say 15 year period) with progressively less deduction eligible during that time.  Camp's proposal is simply confiscatory, benefitting certain classes (like bankers and the wealthy) and screwing the working class.  Of course, he's a Republican, so that's the same as breathing air.

      "Love the Truth, defend the Truth, speak the Truth, and hear the Truth" - Jan Hus, d.1415 CE

      by PrahaPartizan on Wed Feb 26, 2014 at 05:58:00 PM PST

      [ Parent ]

      •  Mortgage Deduction Moratorium (2+ / 0-)
        Recommended by:
        PrahaPartizan, wmspringer
        Therefore any change in the interest deduction needs to be phased in over a long (say 15 year period) with progressively less deduction eligible during that time.  

        Yes, to avoid undermining any effect of any Federal subsidy of any longterm investment, that would be seen as unreliable like mortgages were shown to be.

        But to really make sense at all the deduction cannot be eliminated on any existing mortgage. As you said, borrowers decided on their mortgage based on the subsidy, usually the maximum we could afford to borrow. Without the subsidy many of us will own a mortgage we can no longer afford, and default. That's just grossly unfair and undermining, it would probably trigger a mortgage meltdown rippling through even more dozens of $TRILLIONS of debt derivatives than we faced in 2008-2010. With even less resources or stomach for facing it this time.

        "When the going gets weird, the weird turn pro." - HST

        by DocGonzo on Thu Feb 27, 2014 at 06:23:51 AM PST

        [ Parent ]

    •  Mortgage Payer There? (0+ / 0-)

      You're a Blue stater. But are you a mortgage payer, who's offering to give up your own deduction?

      Or are you just offering to give up your neighbors' deductions?

      "When the going gets weird, the weird turn pro." - HST

      by DocGonzo on Thu Feb 27, 2014 at 06:19:24 AM PST

      [ Parent ]

  •  It isn't obvious to me why (2+ / 0-)
    Recommended by:
    MPociask, marykk

    the mortgage interest deduction tends to be bigger in blue states.  I could guess - higher standard of living, higher incomes means higher property values?  Percent of residents owning homes is higher?  But it would only be a guess.

  •  Or, we could cancel coastal flood insurance (6+ / 0-)

    and farm subsidies on crops heavily concentration in red states.

    Oh, and deep-six oil corp tax gimmes too.

  •  Oh, I'm sure that's just a coincidence! n/t (4+ / 0-)

    Marx was an optimist.

    by psnyder on Wed Feb 26, 2014 at 06:37:56 PM PST

    •  All of those tax deduction correlate to wealth (1+ / 0-)
      Recommended by:

      so it makes perfect sense that almost all of them are wealthy blue states.

      Maryland, New Jersey, and Connecticut are the three richest continental states (I would argue that Alaska and Hawaii are special cases) and they are on all three lists.

      •  If correlated to wealth. (0+ / 0-)

        Won't a higher tax on those like 250k+ bracket also hit blue the hardest?

        Not that I'm opposed to higher tax on those with obscene amount of income (I'm not saying 250k is obscene, I'm thinking of something like annual millionaire level of obscene).

  •  Constitutional? (0+ / 0-)

    Forgive my laziness, I'm not going to try to look it up.  But I have the vaguest memory from Constitutional Law that the tax deduction (all taxes are deductible, including sales) is a constitutional issue.  

    Perhaps I hallucinated the whole thing, if this proposal can be floated and some smart person isn't saying, "wait wait, not so fast there"?

  •  Did I stumble into Red State by accident (2+ / 0-)
    Recommended by:
    Frameshift, Whatithink

    The way pele are complaining about paying their fair share is laughable. Sounds like a bunch of 1%rs.

    You best believe it does

    by HangsLeft on Wed Feb 26, 2014 at 06:43:56 PM PST

    •  While I don't doubt that a straight tax increase (1+ / 0-)
      Recommended by:

      on the highest level of earners would also impact blue states more, the current issue, from my position, is that the way its structure, the additional taxes impact mainly the middle-class and not so much on the upper class.

      So essentially, middle-class people in blue-states get screwed.

  •  The changes would affect individuals (2+ / 0-)
    Recommended by:
    marykk, MPociask

    Maybe they would disproportionately hit blue state Republicans, not necessarily blue state Democrats.

    Income tax deductions disproportionately help higher income tax payers. Tax credits are a more fair way to provide tax expenditures.

  •  Blue States pay more in taxes than they receive... (6+ / 0-)

    in benefits! By far, Blue states pay way more in taxes to the federal government than they receive in return. On the other hand, Red states receive more federal dollars than they pay into the federal government.

  •  Of course (3+ / 0-)
    Recommended by:
    marykk, blue jersey mom, SCFrog
    Camp's House GOP tax plan hits blue staters hard
    I heard him interviewed on the radio tonight. Without hearing any of the words as he avoided direct answers to questions, I could tell from the weaselly tone of voice what he was saying.

    Great Questions of Western Philosophy: How much wood would a woodchuck chuck if a woodchuck could chuck wood?

    by Mnemosyne on Wed Feb 26, 2014 at 06:48:28 PM PST

  •  Lowering the mortgage deduction? (1+ / 0-)
    Recommended by:
    La Gitane

    Now that sounds like a winner, coming out of a recession & housing collapse!

    •  It lowers the deduction (0+ / 0-)

      On mortgages from one million dollars to half a million dollars.  In other words, the only people who would see any impact would be people who own $500,000+ homes (which is assuming no down payment).  I can't imagine that having a huge impact on the housing market - even in California, the gold standard of expensive real estate, Zillow says the median home price is $400,000.  

  •  I skimmed the index this afternoon (1+ / 0-)
    Recommended by:
    blue jersey mom

    It eliminates all kinds of deductions and credits.  The ones I remember were the adoption tax credit, which has helped a lot of kids get permanent homes and out of child welfare, and, if I was reading correctly, the health insurance deduction.  Surprise, surprise.

    If you think you're too small to be effective, you've never been in the dark with a mosquito.

    by marykk on Wed Feb 26, 2014 at 06:50:30 PM PST

  •  Hits blue states harder... Ok. (1+ / 0-)
    Recommended by:

    Hits people with enough income to itemize harder than those with not enough income. Yeah, that too.

    What would you propose to do differently?

    If I have any spit left after I've licked my own wounds, I'll be glad to consider licking yours. Peace.

    by nancyjones on Wed Feb 26, 2014 at 06:53:49 PM PST

    •  For a starter, I would tax investment income (9+ / 0-)

      at the same rates as earned income. It is simply ridiculous that Mitt Romney, who does not work for a living, pays a tax rate that is half the rate of mine (and I am just a mid-level college professor).

      •  Interestingly.... (0+ / 0-)

        The Camp plan does do that - at least as far as the carried interest loophole goes.

        If you're talking about treating capital gains as ordinary income subject to the same rates as everything else, I'm on board with that as well.

    •  Totally Different (1+ / 0-)
      Recommended by:

      I'd tax all sales on everything except necessities instead, and no other taxes. That way people would pay to support the government based on what material benefit they're getting from the government.

      Necessities: groceries, used clothes, public education, public transit, ACA mandated healthcare costs, the rent/mortgage on the 20% cheapest homes in any zipcode, the amount those homes pay in utilities - all exempt.

      Equities taxed at 0.1-1% (decided by actual government economists), until 50%+1 ownership is accumulated, when the full tax rate is paid on the entire accumulation.

      I'll take a tax that's based on something that makes sense, that is far harder to evade, far easier to collect, and encourages saving while protecting everyone's necessities.

      "When the going gets weird, the weird turn pro." - HST

      by DocGonzo on Thu Feb 27, 2014 at 06:41:15 AM PST

      [ Parent ]

      •  Fair Tax (0+ / 0-)

        Wouldn't work - the tax rate would be too high and people would thus set up black markets to avoid it.

        The Huckabee version of the Fair Tax was 22% but most  assessments I read was that was too low (among other thigns it didn't include state taxes in there - which would probably add another 5-15%).

        •  One Or the Other (0+ / 0-)

          For almost everyone they'd pay less in sales tax than they do in income/etc tax. Evading sales taxes is harder than income taxes because there are far fewer sellers than income earners, who are easier to shut down than income tax evaders. Meanwhile it's harder for a vendor to hide sales of goods and services than it is to hide labor. Businesses are already keeping these records, most have required auditing standards, and many have licenses that are overseen. Many also already have onsite inspections.

          So while there is already an incentive for a labor black market in income taxes, putting the burden on the seller makes it harder to evade those taxes.

          Also, I've never seen a "Fair Tax" proposal that properly protects everyone's expenses.

          Yes, the sales tax rate would have to be about 25%, to pay for the $3.5T Federal expenses, and state expenses, out of a $16T GDP. Though the equity tax could reduce the burden on everyone else by both adding revenue and reducing speculation and other excesses that cause government expenses. And other efficiencies by eliminating the IRS and the unpaid work done filing, etc.

          "When the going gets weird, the weird turn pro." - HST

          by DocGonzo on Thu Feb 27, 2014 at 10:58:57 AM PST

          [ Parent ]

  •  One other thing it does, I'll wager (1+ / 0-)
    Recommended by:

    I'm willing to bet that whatever 'reforms' are in this tax bill, the net result will be to make the rich richer - and everyone else gets to pick up the tab. That's the way they roll.

    "No special skill, no standard attitude, no technology, and no organization - no matter how valuable - can safely replace thought itself."

    by xaxnar on Wed Feb 26, 2014 at 06:59:41 PM PST

  •  It's not great...Not even good... (1+ / 0-)
    Recommended by:

    But taxing carried interest as ordinary income is a pretty extraordinary give.  As for the mortgage deduction, it's probably one of the most regressive tax policies out there and i'd support abandoning it completely.  I'd support anything that at least reduces it.

    •  Smoke And Mirrors (0+ / 0-)

      The plan makes 40% of capital income exempt right off the bat. Applying a 35% rate to 60% of the income raises the existing 20% rate all the way to... 21%.

      On the Internet, nobody knows if you're a dog... but everybody knows if you're a jackass.

      by stevemb on Thu Feb 27, 2014 at 07:19:34 AM PST

      [ Parent ]

  •  Aside from the stupidity (0+ / 0-)

    Of removing the very deductions that middle class earners depend on the most, I cannot imagine how a two-bracket system would function - with a 15-point spread?!? What happens if you're $1 between 10% and 25%??

    What a cluster fuck...

    Money should be treated like any other controlled substance; if you can't use it responsibly then you don't get to use it.

    by La Gitane on Wed Feb 26, 2014 at 07:20:14 PM PST

  •  I'm surprised at the audacity of heavily (2+ / 0-)
    Recommended by:
    DocGonzo, stevemb

    subsidized redstate commenters thinking that us already overtaxed bluestaters should pay yet more.  And where does the money go?  A lot to defense - and how much defense spending is de facto welfare for otherwise unemployable undereducated redstaters?  (better that than superexpensive hardware that will never get used).  Even the location of military bases, which was once driven by occupying the old Confederacy, is now a cash cow for the red states.

    Armed! I feel like a savage! Barbarella

    by richardvjohnson on Thu Feb 27, 2014 at 01:35:59 AM PST

  •  "Republians want to tax your taxes". (3+ / 0-)
    Recommended by:
    DocGonzo, stevemb, sharman

    Let's see if the professional Democrats notice the gift that has just been laid at their feet.

    ----- GOP found drowned in Grover Norquist's bathtub.

    When it all goes wrong, hippies and engineers will save us. -- Reggie Watts

    by JimWilson on Thu Feb 27, 2014 at 02:25:05 AM PST

    •  "Republicans Attack State Soverignty" (1+ / 0-)
      Recommended by:

      The one-liner to use on your teanut gallery relative. If you get his attention, point out that under the Constitutional system as designed by George Washington and Jesus, the states have first call on levying taxes, and the feds only get a cut of what's left -- but now the overlords in Washington want to take their cut first.

      On the Internet, nobody knows if you're a dog... but everybody knows if you're a jackass.

      by stevemb on Thu Feb 27, 2014 at 07:14:41 AM PST

      [ Parent ]

  •  Move tax Conversation to Business (3+ / 0-)
    Recommended by:
    Satya1, DocGonzo, MPociask

    While we all discuss who should pay what, the large corporations are laughing all the way to the bank.  Never has business been more profitable or had / hoarded more money.  We listen to overplayed GOP soundbites about having the highest corporate tax rates of the OECD nations.  While that is true, it is also true and much more important to understand that that even though our corporate rate is 35%, we only take in 23%.  Small companies pay 35%, S & P 500 companies pay 12%.  1 in 4 S & P 500 companies pays zero in taxes.  Some like Facebook, not only pay nothing on their 1.1 billion in 2012 profit, but we wrote them a check for $429 million.  Add that to the $385 million they should have paid on their profits and were at $814 million dollars in welfare to a company who's CEO is one of the richest men in the world.   This check amounts to about $1.40 from every citizen of the US.  We discuss whether a working mom with two kids should get $150 or $130 per month in food stamps but we seem to have no problem paying millions and in fact billions to some of the wealthiest businesses and people in the US.  

  •  Mortgate Break Moratorium (2+ / 0-)
    Recommended by:
    MPociask, Satya1

    We have to decide whether subsidizing homeowner debt (and so subsidizing bankers) is a higher priority for spending that subsidy than other priorities, like education, transit, etc. Or other priorities like war all the goddamn time, which if eliminated would let us pay for everything else with ease.

    But ending the deduction for people who already bought mortgages must not be allowed. Homeowners (like me) bought that mortgage factoring in the deduction. That longterm investment cannot be fundamentally changed so that the final home price (including financing) cost something like 15% more than we bargained for. We are also people whose home prices were raised through the roof by all the easy credit for a generation, then the collapse of that bad system, and the bailouts that propped up these unreasonable prices. Another blow to us is really out of line.

    If the deduction is a low enough priority for its elimination, the only reasonable way is to disallow it on only new mortgages going forward. Which would leave new borrowers to calculate the value of the deal without the subsidy. Which would also tend to reduce principal borrowed, as the net interest paid would be too high for some - or else theoretically pressure banks to reduce rates (and their profits) instead, which seem unlikely. So it would also help lower home prices, without the larger principals to buy them. Which would also hurt homeowners like me, who bought propped up prices and will sell into less propped up prices.

    But at least we'd know what we're getting.

    Again, cut the goddamn Pentagon $1.5 TRILLION budget instead. Since that's all borrowed money it costs about $2.25 TRILLION a year including interest. Cut it before we cut the homesteads the "defense" budget is supposed to protect.

    "When the going gets weird, the weird turn pro." - HST

    by DocGonzo on Thu Feb 27, 2014 at 06:18:14 AM PST

    •  I am with you on this... (1+ / 0-)
      Recommended by:

      Regarding not having an immediate elimination of the deduction.  I think you could grandfather in all existing mortgage, or just put out a 10 year time frame.  I think the average home ownership is only 7 years anyway, so that would allow many people to retain the deduction for their remaining time in the home.  Of course, by the same token, if many people are going to naturally phase out anyway, you could just say let time take its course and never apply the deduction elimination to existing mortgages.

      And I am with you as well on keeping an eye on the big picture - I see the home interest deduction elimination as important for equity reasons and to stop driving American wealth into homes, but if we're talking revenue/spending, there are much bigger fish to fry.

    •  Good comment (0+ / 0-)

      I would also add that I think now would be a very bad time to implement something that puts downward pressure on home prices.  The last time I looked there are still too many people with underwater mortgages.

      But in terms of tax reform, I think the big issues are about corporate tax reform.  As a percentage of revenue, that is down to historic lows, (although they've been low since the Reagan years.)  That the biggest of corporations get away with paying nothing, to me is ridiculous.

      I'm not liberal. I'm actually just anti-evil, OK? - Elon James White

      by Satya1 on Thu Feb 27, 2014 at 08:11:34 AM PST

      [ Parent ]

  •  Republicans Raise Your Taxes! (0+ / 0-)

    Democrats committed to the "reduce the debt at all costs" propaganda throughout the Great Recession. They internalized the "cut your taxes" mantra even as Republicans chased them out of offices as "tax and spend Democrats" anyway.

    If they don't hurl at Republicans this Camp tax plan to raise taxes on over a third of Americans, middle class homeowners who survived the Great Recession with homew ownership intact, as "Republicans raise your taxes in a recession", then Democrats must lose. There's no explanation other than that they're a sham, a sockpuppet for Republican rule.

    "When the going gets weird, the weird turn pro." - HST

    by DocGonzo on Thu Feb 27, 2014 at 06:27:43 AM PST

  •  We have been harping here about how... (1+ / 0-)
    Recommended by:

    These tax breaks disproportionately affect the wealthy at the expense of the poor.  Just because eliminating the tax breaks would affect more people in blue states, doesn't mean it shouldn't be done.  
    The mortgage interest deduction is a tax break for the wealthy.  Only the wealthy benefit from it.
    Do we know think that only taxes on wealthy people who live in red states should increase, or that taxes on wealthy republicans should increase more?  Well...actually that second one isn't such a bad idea.  

  •  I'd kill both (0+ / 0-)

    The reason blue states would be hit harder by eliminating these deductions is blue states have higher average incomes, and frankly, more rich people. These deductions help generally higher income people, so if the concern is targeting Democrats, that's really not much concern. I never have gotten the deductability of state taxes from federal taxes. It could easily work the other way around. The mortgage interest deduction is something other countries get by without and maintain similar home ownership rates. It always struck me as a subsidy to the upper and upper middle classes. I would phase it out to reduce the disruption, but it should die.

    The fact is if we're going to end tax expenditures that benefit higher incomes, we're going to affect people in blue states. As a blue state resident, I'm perfectly OK with that. Tax expenditures are basically hidden spending that benefits the affluent.

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