December 11, 2012
Tax Prof's Advice to President Obama: Take Us Over the Cliff
As the nation hurtles toward 2013's "fiscal cliff" — a combination of tax increases and spending cuts designed to tackle the nation's ballooning deficit — pundits from across the political spectrum are inciting full-scale panic.
They warn about the tax increases the fiscal cliff could bring while destroying a fragile economy and ravaging a citizenry facing difficult economic times. They call upon the president and congressional Republicans to do whatever is necessary to reach a compromise to avert this coming tax disaster.
My advice to President Barack Obama is different. He should let us go over the precipice.
I have no desire to cause a fiscal calamity, but I do believe that the current tax policy in Washington is so politicized and the rhetoric so detached from reality that no productive compromise can emerge. We need a fresh start before we can reach any meaningful consensus on future tax policy. The path to this fresh start lies just beyond the fiscal cliff.
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At least going over the cliff will broaden the tax base rather than simply put the burden completely on a small group. There is no excuse, other than politics, for so many people to pay no income taxes to fund government operations, despite having income.
Posted by: Woody | Dec 11, 2012 2:54:22 PM
The generosity of earned income credit comes of course from overgenerosity at the top. Congress looks at distribution tables when it gives out benefits, and when it wants to give a tax break to campaign financing high income taxpayers, the tables and sense of fairness means giving to the bottom. I hope you are offering to give back all the tax breaks at the top that lead to the earned income bracket.
Posted by: Calvin H Johnson | Dec 11, 2012 5:40:14 PM
As long as we don't care about short-term consequences, we might as well get an even fresher start by defaulting on all federal debt. That means balancing the budget immediately but without any spending on interest.
Everybody knows this is where the debt bubble will end, so why not go there now? The price is only going up the longer we wait.
Posted by: AMTbuff | Dec 11, 2012 6:16:57 PM
I propose that the FICA maximum be raised to $1 million. As Woody so often points out, FICA taxes aren't real taxes. Therefore there is no burden on anyone to make the change.
Posted by: jimharper | Dec 11, 2012 9:10:54 PM
We are going over the cliff .....there is not going to be an agreement...count on it.
Posted by: Sid | Dec 11, 2012 9:10:57 PM
Concur with Woody. In the 1970s I was a humble Schedule C filer, barely feeding myself as a carpenter, but I paid income tax (not just the self-employment FICA tax) every year. The exercise, however frustrating, at least gave me an excuse to tout my US citizenship with some pride. Heaven only knows what excuse the 47% invoke nowadays.
Posted by: Jake | Dec 11, 2012 9:32:38 PM
I guess everyone has the right to legally minimize their tax burden except the poor.
Posted by: G.E. Moore | Dec 12, 2012 10:12:19 AM
Jim, FICA taxes are real money that benefit the individuals paying in and are not to be confused with real income taxes to fund the government. Taxpayers should not be expected to pay in any more on Social Security than they can reasonably expect in return.
Posted by: Woody | Dec 12, 2012 12:31:06 PM
Calvin, I'm screwed. I'm neither at the top nor the bottom to get tax breaks.
Posted by: Woody | Dec 12, 2012 1:52:17 PM