OMG! It's the Fiscal Cliff!

[Lamplighter]

OK, I have not thought this through, so maybe someone else can improve on my question...

Elsewhere I posted about a few Republicans changing their attitude
towards Grover Norquist's pledge to never raise taxes.
Those Republicans, and a few others, are saying that they are not willing to raise the tax rates,
but instead want to "raise revenues" by closing loopholes and "capping the deductibles".
One of them said that capping deductions at (maybe) $30K - $40K
might be acceptable, but only if the Democrats would cut entitlements.

So, my question is this:
Why are Republicans pushing the idea of capping deductions ?

My distrustful mind wanders through ideas like these...
If tax rates are generally around 28% on upper levels of taxable income,
a cap at $35K seems as though it would be equivalent to such a deduction on (only) $125K.

Why is that OK with Republicans ?
Is it because it is applied to "earned income",
as opposed not to income from "interest", "capital gains", "return of capital", etc.
Or, are the wealthy looking to remove all foreign income from their taxes completely.

I like xoB's current signature: "Everything is interesting... look closer"

[glatt]

I'm not sure. Maybe the ones changing their positions are not pure evil? Maybe they know we need to put taxes back to where they were. Maybe they figure that by reducing deductions for the rich they can raise taxes without "raising taxes."

Obviously, the devil is in the details.

[Lamplighter]

Originally Posted by Lamplighter

OK, I have not thought this through, so maybe someone else can improve on my question...

Elsewhere I posted about a few Republicans changing their attitude
towards Grover Norquist's pledge to never raise taxes.
Those Republicans, and a few others, are saying that they are not willing to raise the tax rates,
but instead want to "raise revenues" by closing loopholes and "capping the deductibles".
One of them said that capping deductions at (maybe) $30K - $40K
might be acceptable, but only if the Democrats would cut entitlements.

So, my question is this:
Why are Republicans pushing the idea of capping deductions ?
<snip>
Why is that OK with Republicans ?
<snip>
I like xoB's current signature: "Everything is interesting... look closer"

Today the Republicans have made public their budget proposal...

L.A. Times
Lisa Mascaro and Michael A. Memoli
12/12/03
Republicans counter with their own 'fiscal cliff' plan

<snip>
Obama seeks $1.6 trillion in new revenue over a decade with a tax
increase on the wealthy and a broader overhaul of the tax code,
while Boehner's proposal would raise half that amount.

At the same time, Boehner proposed $1.4 trillion in spending cuts to
Medicare, Social Security and other programs favored by Democrats.
Obama has offered $400 billion in cuts.

Obama is also seeking new investments to stimulate the economy and
wants to continue long-term unemployment insurance and the temporary reduction
in the payroll tax. Republicans did not address them.
<snip>
Studies have shown that almost as much revenue, about $800 billion,
could be generated by the GOP plan to limit deductions as by
Obama's proposal to raise rates on the wealthiest 2% of Americans.

But that revenue might never be realized if next year's
tax code overhaul results in lower rates, as the GOP proposes.
Democrats appear unwilling to take that risk.
<snip>

So is this last bit the real answer to my questions ?

[SamIam]

Originally Posted by Lamplighter

So is this last bit the real answer to my questions ?

Who knows? It always goes back to the Tea Party faction. Why did all those people in Jonestown drink the kool-aide? Ask Grover Norquist.

@Glatt - Thank you for your clearly worded explanation!

@HM - My speakers have wonked out on me, so I can't listen to the video. Your Dad looks pretty cool though. Your folks aren't divorced by any chance?

[glatt]

I found a site with maps that reflect who would be hurt if various deductions would be eliminated.

Here's a map of mortgage interest rate deductions. It shows the percentage of tax returns that used this deduction in each state. It seems to correspond pretty closely to states that went to Obama. There are obviously some exceptions like Utah, but the South matches the election map pretty well.

[glatt]

Here's total itemized deductions by state.

Fascinating. No wonder the Republicans are pushing this.

[glatt]

And of course, here is the 2012 electoral map to refresh your memory.

[Happy Monkey]

Originally Posted by SamIam

@HM - My speakers have wonked out on me, so I can't listen to the video. Your Dad looks pretty cool though. Your folks aren't divorced by any chance?

Sorry, happily married.

[BigV]

Originally Posted by Happy Monkey

Sorry, happily married.

best bad news I've heard all day.

[Griff]

There is talk of taxing employer paid insurance plans as income. That'd be pretty brutal for the middle class, I'd think. Seems like a step toward National Health Care but taking the most painful route possible to get there.

[SamIam]

Originally Posted by Happy Monkey

Sorry, happily married.

Drat! Why does it always seem like the good ones are already taken?

Originally Posted by BigV

best bad news I've heard all day.

hmmm... Let's see - Washington or Washington?

Originally Posted by Griff

There is talk of taxing employer paid insurance plans as income. That'd be pretty brutal for the middle class, I'd think. Seems like a step toward National Health Care but taking the most painful route possible to get there.

That idea has been out on the table for a few years now. The Center on Budget and Policy Priorities called the employer tax exclusion “The largest single subsidy in the tax code” in a paper they put out in 2009.

The exclusion of employer-provided health insurance from taxable income is considered a “tax expenditure” or “tax subsidy” because it is an exception to the usual rule that all compensation is counted as taxable income. In fact, the employer tax exclusion is the largest single subsidy in the tax code. [1] According to the Joint Committee on Taxation, it reduced federal tax collections by $246 billion in 2007 — $145 billion in income taxes and $101 billion in payroll taxes.

~snip~ Although the tax exclusion provides a big boost to employer-sponsored health coverage, it is poorly targeted. It gives the greatest benefit to those with the highest incomes, although they are the group that least needs help paying for health insurance. The 24 per¬cent of tax units with incomes over $75,000 in 2004 received almost half of the benefits of the exclusion, while the 27 per¬cent of tax units with incomes under $20,000 received just 6 percent of the benefits.