The 999 Plan

[Giant Communist Robot]

It seems most people will pay more under this plan. Unusual coming from a Republican. Correct me if I'm wrong. The way we do it now, those with money subsidize those without. It's the basic social and political structure of our country. So, even if Cain is elected I don't think we'll ever see 999.

[Giant Communist Robot]

BTW, Cain is no lightweight. Check out this biography.

[Shapley]

Unusual coming from a Republican. Correct me if I'm wrong.

Not really. Republicans have advocated flat taxes set at levels that will increase taxes (people will pay more), but will be more fair, and simpler. The primary push is to get rid of 'targeted tax breaks', but that push starts to falter when some peoples' tax breaks show up on the chopping block.

Even during the debate on the 'flat tax' back during the term of President Clinton, the idea of cutting the mortgage interest deduction always seemed to get lost, as if having a mortgage is some sort of patriotic duty, and getting a tax break on the interest is some sort of right.

[Giant Communist Robot]

You're right about that flat tax stuff. It is a Republican idea and it would raise taxes for most people. Many Republicans reject raising taxes, and some want tax cuts. Three flavors of tax policy in one party. I'll admit there are no clearly best ideas; all have advantages and disadvantages.

[Giant Communist Robot]

as if having a mortgage is some sort of patriotic duty, and getting a tax break on the interest is some sort of right.

I've said before our governments' function is defined by its' actions. In our case we should view this as another form of entitlement.

[jamiebk]

999 is clearly bad in so many ways. Tax consumer spending instead of income and you will gut retail sales. it also burdens states with collection and many states already have a sales tax. Bottom line, be prepared to pay a whole hell of a lot more in aggregate taxes if this lame idea gets traction.

[dai bread]

There are very few tax breaks here, and mortgage interest has never been one of them even when we had tax breaks for wives, children and life assurance premiums. All long gone.

[BigJon]

999 is clearly bad in so many ways. Tax consumer spending instead of income and you will gut retail sales. it also burdens states with collection and many states already have a sales tax. Bottom line, be prepared to pay a whole hell of a lot more in aggregate taxes if this lame idea gets traction.

Not necessarily. If the consumers have more money in their pockets due to the lower income tax rate, they may feel richer and spend more anyhow. Then again, we coudl become a nation of savers . . . <cough, cough>

[Haggis@wk]

my PRIMARY objection is that "999" could become "20-20-20," quickly. That's the same reason I object to VAT, too easy to raise, especially if the government (as in the UK) gives the authority to bureaucrats to avoid have their fingerprints on unpopular changes to the tax rate.

[Shapley]

That's why I think it will never gain favour among conservatives. Most have always favoured the income/consumption tax ideas as an either/or concept. They do not favour federal consumption tax unless we get rid of the 16th Amendment. We do not favour expanding the federal government's authority to tax us on both ends.

[jamiebk]

If the consumers have more money in their pockets due to the lower income tax rate, they may feel richer and spend more anyhow.

More money in their pockets??? Uh...not really. Under this plan in CA for instance, where we already have a 7-8% sales tax (and an income tax) consumers will see taxes on for instance, necessities like appliances etc. go from 7% to 16%+. That does not count the "other" "9's". Hardly any Americans are at that marginal rate.

[Giant Communist Robot]

That's why I think it will never gain favour among conservatives. Most have always favoured the income/consumption tax ideas as an either/or concept. They do not favour federal consumption tax unless we get rid of the 16th Amendment. We do not favour expanding the federal government's authority to tax us on both ends.

If I recall correctly, Nixon's advisers suggested a national sales tax and he scoffed at the idea, saying once the liberals got their hands on that there would be no end to tax increases.

[Giant Communist Robot]

If the consumers have more money in their pockets due to the lower income tax rate, they may feel richer and spend more anyhow.

More money in their pockets??? Uh...not really. Under this plan in CA for instance, where we already have a 7-8% sales tax (and an income tax) consumers will see taxes on for instance, necessities like appliances etc. go from 7% to 16%+. That does not count the "other" "9's". Hardly any Americans are at that marginal rate.

This underlines what I feel is one of the fundamental problems with economics--it's about peoples' behavior, their psychology. When people are being observed and they know it, they change their behavior. If a tax plan is implemented and people are told they will act one way, what are the chances they'll do something different?

[jamiebk]

Some people don't have a choice of behavior...they are the poor or under-employed who currently pay very little if any tax (and rightfully so). Under 999, they will pay just like everyone else. 9-36% of their income is a whole lot more significant to them.

[Giant Communist Robot]

Some people don't have a choice of behavior...they are the poor or under-employed who currently pay very little if any tax (and rightfully so). Under 999, they will pay just like everyone else. 9-36% of their income is a whole lot more significant to them.

Even if Cain's elected, Congress will never pass this plan.

[piqaboo]

[quote='shapley']as if having a mortgage is some sort of patriotic duty, and getting a tax break on the interest is some sort of right[/quote]

Not that its a right, but that many current mortgage holders calculated the payment they could carry based on that tax break being present.
Remove it from existing loans and we'll get default crisis round III. Not from foolish, greedy or folks who hoped to flip but had bad timing, but from careful people who had the rules changed on them mid-game.

One could remove the tax break from new purchases, or possibly even from new loans - the argument could go either way regarding refinancing of loans on existing purchases.

[Shapley]

Remove it from existing loans and we'll get default crisis round III. Not from foolish, greedy or folks who hoped to flip but had bad timing, but from careful people who had the rules changed on them mid-game.

If the overall tax rate, sans deductions, is lower than the rate with deductions, then the impact would be lessened. Even so, it is something into which tax law writers would have to look as they design it.

I suppose a 'grandfather clause' for extant loans, even if it expires in ten years or so, would be possible.

But there, again, we start putting wrinkles in our 'flat' tax. Methinks those wrinkles were what killed it the last time it surfaced, even after the Democrat's House Leader (I think they were the majority at the time), Mr. Gephardt, proclaimed that the flat-tax side had 'won the argument'...

[piqaboo]

Most mortgages are 30 years. Putting in a 10-year expiry clause doesnt sound thoughtful.
In effect that makes it a gov't imposed adjustable rate mortgage, imposed on people who paid the higher costs of having a fixed rate mortgage.

[Shapley]

Most mortgages are 30 years. Putting in a 10-year expiry clause doesnt sound thoughtful.
In effect that makes it a gov't imposed adjustable rate mortgage, imposed on people who paid the higher costs of having a fixed rate mortgage.

Perhaps, but we should not limit tax policy on such things. Nearly every business decision is made with 'guesstimates' of what tax rates will look like in the near- and long-term. Ten years should be a more-than-adequate amount of time to review and renogotiate the terms of a home loan.

The call for higher corporate taxes is no different, is it not? If one invests in a business based on an assumed tax rate, and the government raises the taxes, is that not equivalent? I know most people hate evil, corrupt corporations but we usually only give them a year or so notice before their tax rates are hiked.

[Haggis@wk]

The call for higher corporate taxes is no different

Who never pay taxes, we do