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Monday, November 12, 2012

Post-Election Tax Reform Ideas from the Right

[I]f we cap itemized deductions at $50,000 and keep tax rates as they are today, we would raise $749 billion in tax revenue over ten years.  Moreover, according to the TPC's distribution table, 96.2% of the extra revenue would come from the top quintile, with 79.9% from the top one percent.

[L]et’s hope the Speaker and the rest of the Republican negotiators are smart enough to propose revenue increases that will hurt liberals the most. Start by taxing the ever-loving crap out of Hollywood. I’ve suggested this before, and the esteemed Instapundit, Glenn Reynolds, was on the same wavelength last August when he suggested bringing back the 20% excise tax on motion picture gross revenue from the 1950s. ... Reynolds had other suggestions for revenue proposals – many of them involving the elimination of deductions, which seems to be the spirit in Washington at the moment – that would hurt blue state political machines and liberal institutions the most.  Capping the mortgage interest deduction at $250,000, for example, would hurt those rich blue enclaves with high property values – 8 of the 10 richest counties in America voted for Barack Obama in 2012.  Taxing trust funds and hoards of foundation money would hurt the Left, as outside of Hollywood, rich liberals are more likely to be sitting on piles of inherited assets, while conservative millionaires tend to be actively generating and re-investing income.  Ending the federal tax deductions for state and local taxes – an idea prominently advocated by Newt Gingrich during the Republican primary – would end the practice of federal taxpayers subsidizing the government greed of those big-spending blue states.  It’s actually a form of inter-state redistribution as it stands, so let’s do away with it.

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Comments

I have elderly clients with $80,000 annual income and $80,000 annual long-term care medical expenses. So let's cap their itemized deductions at $50,000 and increase their taxes from zero to several thousand dollars. Good way to generate state revenue also, since many of them follow federal limits.

Posted by: Bob | Nov 12, 2012 2:41:53 PM

I think the Right needs a vacation at this point.

Posted by: michael livingston | Nov 13, 2012 5:11:47 AM

Bob,

By all means, let us all sink into economic ruin because any change, anywhere in our rotted-through, politically auctioned-off tax system will hurt *somebody* (maybe even .000001%) *somewhere*.

That sounds like a sane policy.

To be elderly and institutionalized ($80k in LTC expenses - that sounds like *2* in care) and still somehow have $80,000 in annual income, suggests an asset base of over $2.5 million (3% of $2.5 million = $75k/yr).

End-stage institutionalized with $2.5 million+ ?

Spend it down.

The nation isn't going to be held hostage so that millionaires can die millionaries.

Or that significant wealth can be passed on (unearned) to heirs.

Posted by: cas127 | Nov 13, 2012 3:01:30 PM

I wonder if the study Prof. Mankiw cites thought about the supply response for deductions. A taxpayer can easily avoid the limit on donation deductions simply by not donating. The burden of that deduction isn't on the rich donor; it's on whoever benefits from the charity.

People would also buy less expensive houses, and move away from states with high state taxes or work less if they stayed. Eliminating the state income tax deduction for high earners is really to raise the marginal income tax rate for them.

Posted by: Eric Rasmusen | Nov 13, 2012 3:13:42 PM