Is this a good idea?

December 5, 2004 10:41 PM

It's the stupid, economy.I'm no economist, but I'm reminded of the underpants gnomes business strategy when I read this. Obviously there is a political component (to the story) but what the $!@(# are the nuts and bolts? Why is pressuring economic engine states (California, New York) a good thing? (registration to the L.A. Times ... sry) Pretty much the same story here.
posted by Smedleyman (15 comments total)

...drastically cut, if not eliminate, taxes on savings and investment...

...scrapping the business tax deduction for employer-provided health insurance...

So, what, they're not even pretending that they're not evil now?
posted by Faint of Butt at 10:51 PM on December 5, 2004

Pretend they're not evil? Why should they? After all, they have a "mandate" this time!
posted by hattifattener at 11:54 PM on December 5, 2004

From the last link:

"There's no question this effort would punish blue states"

Said one prominent conservative. "Yes, we talked about this. The fact that it hits blue states is not something that's been missed among Republicans."

---

Culture war has progressed to economic war.
posted by stbalbach at 12:03 AM on December 6, 2004

A culture war IS an economic war.
posted by vevaphon at 1:19 AM on December 6, 2004

"more fair"

Because I own my home w/o a morgage, how is the 'morgage deduction' "fair" to me while not allowing me to deduct my state tax load?

It looks like the government WANTS everyone in hock up to their eyeballs. Gotta ask "why"?
posted by rough ashlar at 3:49 AM on December 6, 2004

I still remember being told by someone that the reason for the electoral college, as opposed to direct election of presidents, is that without the EC the Evil Big City People would be the only ones who mattered. According to this person that meant the candidates wouldn't bother campaigning in, or worrying about, any place other than big cities. Completely unlike the situation today, I mean, who can forget the huge investment in time both Kerry and Bush spent in Podunk Arkansas? Or, for that matter, the fact that they only campaigned in (and seemed to care about) the "Swing States". Here in Texas you wouldn't have even known there was an election going on.

But most importantly, according to the pro-EC person, was the fact that if it weren't for the EC the Evil Big City People would use their control of the government to totally screw the Good Small Town Folk.

Nice to know that now, thanks in no small part to the EC, the Good Small Town Folk, can screw the Evil Big City People with impunity. Democrats subsidize the red states to an obscene amount anyway, its pretty disgusting that the Bush government can't think of anything better to do than tax the Democrat states more. His economic policy is what got us into this mess in the first place, but now California and New York will wind up paying for Bush's economic incompetence. Typical.
posted by sotonohito at 5:02 AM on December 6, 2004

It looks like the government WANTS everyone in hock up to their eyeballs. Gotta ask "why"?

Because indentured labour is good for business.
posted by srboisvert at 5:48 AM on December 6, 2004

Ashlar has a good point--the Home Mortgage Interest deduction is horrible policy [1]. It increases development of new land, and is reverse means-tested. That is, you have to have enough money to afford a house, and then the HMID allows you do get a nicer house.

Perhaps some one could tuck in a poison pill amendment, demanding that the HMID be cut as well. It's a third rail of sorts.


[1] - only good thing I've heard said about mortgage deductions (from serious policy scholars) is that since Americans save so little capital, home equity is about all people have to retire on. Of course, this is horrible from a macro-econ perspective, since the whole point of savings is to increase capital for growth, not put it into a hole in the ground.
posted by allan at 5:51 AM on December 6, 2004

The HMID was a one-time giant transfer payment from taxpayers to homeowners, whether or not the latter had mortgages. A subsidy that was designed to make homes more affordable was rendered useless by market forces (supply and demand) creating rising property values.

Unintended Consequences 101.
posted by trharlan at 6:42 AM on December 6, 2004

What bothers me with tax cuts is that the money you save (and then some), ends up still being paid elsewhere for what the taxes used to pay for. For example, city services that used to be paid for with a few bucks of my taxes, now charge an extra fee for the same service, since there has been no tax increase in ages. I save 2% in tax increases and spend 10% more in extra service charges.
posted by jim-of-oz at 8:50 AM on December 6, 2004

Derail: ...what the $!@(# are the nuts and bolts...

It is my secret doomed desire that people will someday refrain from ever using parens or brackets in punctuation-mash-obscenities, so I don't spend five seconds instincitively scanning for the matching opener or closer.
posted by cortex at 12:34 PM on December 6, 2004

While it'll cost me at first, eliminating the state and local tax deduction will have a happy end -- it will turn my eminently blue neighbors red. It'll be a happy day when New Jersey tax revolters cut our tax burden down to Texas size.
posted by MattD at 1:53 PM on December 6, 2004

It looks like the government WANTS everyone in hock up to their eyeballs. Gotta ask "why"?

why

[1] - only good thing I've heard said about mortgage deductions (from serious policy scholars) is that since Americans save so little capital, home equity is about all people have to retire on. Of course, this is horrible from a macro-econ perspective, since the whole point of savings is to increase capital for growth, not put it into a hole in the ground.

well said. when the only argument you have is that "it's the only way Americans will save," you know you're in trouble. yet i don't see that mortgage-interest deduction disappearing anytime soon.

Near the top of the list would be the elimination, or a scaling back, of the Alternative Minimum Tax, according to overhaul advocates.

the AMT is the real target, imo. they might as well just come out and say that investment income shouldn't be taxed. greedy bastards.
posted by mrgrimm at 2:18 PM on December 6, 2004

Interesting, I never saw the downside to the HMID .
posted by euphorb at 6:32 PM on December 6, 2004

Seems relevant to repost this:

The buried lede: To this end, we must also consider the separation of middle-class entitlements from underclass entitlements. When both the underclass and the middle-class are dependent on universal programs such as Social Security and Medicare, they're likely to vote (to some degree) as though they share common interests). Means-testing all government programs and offering private alternatives is the long-term solution to this problem.

Concepts such as the "Ownership Society" are designed with this in mind.

Every once in a while, a stupider member of the team accidentally speaks the truth.

(Actually, it reminds me of the lovely and funny Juli, from college, one of the first "real" Republicans I ever met. We argued about the supervision of the South under the Voting Rights Act, and I asked her if she felt that voting was a privilege rather than a right. She deadpanned, Actually, Dan, I believe only people who own property should vote. It was months before I figured out she was kidding.)
posted by dhartung at 11:06 PM PST on October 21

So, in case that tangential bit isn't entirely clear, this isn't just about benefiting the red states over the blue states, or benefiting the rich over the poor. It's about class warfare. In this case, it is absolutely no mistake that they are creating an overhaul of the tax code which, oh so incidentally, will eliminate a deduction for state and local taxes. They want to incentivize state and local governments to reduce taxes, by making people feel the bite. (And you know who'll feel it.)

Perhaps some one could tuck in a poison pill amendment, demanding that the HMID be cut as well. It's a third rail of sorts.

Watch for this, then -- jiggery-pokery that affects the standard deduction will affect whether one can use the HMID on Schedule A or not. The fewer people using it, the fewer people will be affected if it's axed. Or a sneaky-brilliant carrot-and-stick strategy, such as creating something similar to the §179 deduction from Schedule C (which undlerlies those notorious "Hummer deductions") -- you can deduct a certain amount of a home purchase right away but sacrifice the HMID in future. For people who take it, they get to pay no taxes at all the year they buy a home, but sacrifice itemization -- which includes state & local tax deductions -- for the life of the purchase. Mark my words, if they do this, it will be through a sucker punch.

Actually, wait a minute -- this is it. I almost missed it. The state & local deductions are taken off Schedule A, and then many who itemize may no longer do so, which does indeed reduce the numbers taking (direct) advantage of the HMID. See these IRS numbers {PDF}:

Interest paid was the largest itemized deduction of taxpayers over the period 1990-2001, with home mortgage interest being the largest percentage of interest paid. Taxes paid, the second largest deduction, had the largest positive percentage change and highest frequency of itemized deductions.... The deduction for taxes paid was the most frequently claimed itemized deduction and the second largest itemized deduction for individual taxpayers over the entire period of this study. This deduction (in constant dollars) increased at a faster rate than the deduction for interest paid.

This really will suddenly screw a lot of people.
posted by dhartung at 10:09 PM on December 6, 2004