Paul L. Caron
Dean




Monday, February 6, 2012

Buchanan: Is It Possible to Have a Productive Discussion About Taxes?

Neil H. Buchanan (George Washington), Is It Possible to Have a Productive Discussion About Taxes?:

I have done a lot of writing about taxes, and especially about distributive justice, over the years. One of the most frustrating aspects of the never-ending tax debates is the profound level of dishonesty among far too many commentators, who are willing to use any statistical trick or framing device to score cheap points. In that context, one might reasonably think: "If only there could be an honest debate among people of good faith, we could at least find the areas of genuine agreement and disagreement. Then, maybe we could find a decent compromise."

That very Obaman attitude has the most honorable roots, and one hopes that it will someday be possible to have such a discussion. (I am not, of course, holding my breath.) I am now, however, beginning to despair, suspecting that even that lofty discussion could lead nowhere. In the latter part of my new Verdict column, "The Buffett Rule Is an Imperfect Form of Tax Justice, but an Important Step in the Right Direction," I begin to confront the sources of that despair.

https://taxprof.typepad.com/taxprof_blog/2012/02/buchanan-is-it.html

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Comments

What a dumb idea to tax unrealized gains. Those investments are always at risk and can go down in value unexpectedly. 2008 is a good lesson learned. Would you also tax unrealized gains on the value of someone's home? Can you then take losses on unrealized losses? Can we all take a deduction this year for the loss in the value of our homes? Where is the common sense.

Posted by: Linda | Feb 7, 2012 4:50:47 AM

Despair long long overdue.

Numbers can tell the "truth" (facts), they can lie (fallacies), they can be used as a lie to undermine numbers demonstrating a truth. They are often used when convenient but ignored when they undermine the result.

But numbers are not the reason to despair, it is humans. Humans are the problems, not numbers. Numbers don't write articles. Numbers don't run for political office. People use numbers to promote their political, or other (religious, professional, etc.) agenda. Human's have agendas. If numbers did not exist, humans would find some other way to promote their "right" position.

Humans let Rome fall, not Roman numerals.

Posted by: tax guy | Feb 6, 2012 8:12:19 PM

One would think that in a column lamenting "the profound level of dishonesty among far too many commentators, who are willing to use any statistical trick or framing device to score cheap points," Buchanan would not stoop to include the accusation that, "one major party taking a position that I once thought was beyond the pale in U.S. politics: that rich people should pay less than everyone else." Gander, meet sauce.

Posted by: Patrick | Feb 6, 2012 2:08:43 PM

The article is unintentionally hilarious. On the one hand it's true that much of tax writing presents a one-sided view that ignores all counterarguments. On the other hand the author spends the rest of his article giving a textbook example of these failings.

Is it possible to have a productive discussion about taxes? Not with Neil Buchanan, apparently.

Posted by: No-no-no | Feb 6, 2012 1:43:31 PM

The Buffet rule is essentially a second Alternative Minimum Tax. Call it AMT2.

At its inception in 1982 the original AMT taxed capital gains at 20%, the same rate it applied to other income. Currently capital gains are excluded from the AMT1's regular income basket and they have a lower tax rate. The concept of AMT2 is a return to the roots of the AMT.

The problem is that applying high tax rates to realized capital gains is an expensive and unfair way to make the tax code appear more fair. The richest taxpayers have no difficulty avoiding selling appreciated assets. They don't need the money, so they don't have to liquidate assets. The capital gains tax will hit those who hold most of their net worth in a single asset and who need to raise cash.

What kind of tax hits taxpayers who need to raise cash but spares those who have so much cash that they never need to sell anything? Not a progressive tax, that's for sure.

In my opinion, AMT2 will make sense only after enacting mark-to-market taxation of large unrealized gains. This will eliminate the tax-free build-up that billionaires like Warren Buffett and Bill Gates have always used to shield their wealth from the IRS.

Unrealized appreciation is where the money is, not in taxing realized capital gains beyond the revenue maximizing rate. The Buffet Rule is a bad idea unless the Buffett Shelter of tax-free build-up is first removed.

Posted by: AMTbuff | Feb 6, 2012 11:01:58 AM