Would You Eat the Deficit-Cutting Burrito at Mittpotle?

Do you smell that? No, not that. Fall brings a certain crisp stench, the blissful aroma of football, inextricably melded with the environmentally crushing scent of charcoal. That’s partially offset by the acrid stench of political campaigning and debating.

Last night Obama looked bad, but Mitt is still a stiff, aloof buffoon, albeit a tad less so than he was a week ago. Nice progress, Mittster. In the end, we’re all prisoners in the two-party system. If only Libertarians didn’t want to get high and shoot everyone…

So let’s talk about one little sliver of the campaign that gets everyone fired up: taxes.

Welcome to Mittpotle! I’m wearing jeans while shaking hands with a black man in a Mexican restaurant in a swing state. White House, here I come!

Let’s agree on one thing at the outset, because that will be the last time we agree today: nobody really understands taxes or the impact that raising or lowering them will have on tax revenue or the general welfare of our society. A lot of assumptions underlie the math thrown about by politicians, pundits, and journalists, and every bit of it will be proved to be wrong in the future. They’re all estimates.

Obama has oft loudly averred that billionaires should pay taxes at the same rate as plumbers, and if that represents class warfare, then he’s all for class warfare.

I’m no billionaire, but I’d gladly pay the same rate as the average plumber, because it’s much lower than mine.  The word “fair” often boots this discussion into the realm of angry name-calling, so I’ll just point out that we all pay the same rate with certain taxes, like sales tax and property tax, which is nice.

Remember, I’m in the middle here. The staunch righties and lefties all have good stats up to back up their arguments. Sez the right: “Hey, 10 percent of us pay 50 percent of all income tax in the U.S.” Sayeth the left: “The rich don’t pay their fair share; just look at Warren Buffet and Mitt Romney!!”

Our tax system is inherently unfair. No one pays tax on the first $17,000 in income, so millions of American pay no income tax (arguably, rightly so).

Back in the day, the income tax was only for rich people; only 1 percent of the population got hit by any income tax in the early 1900s (you had to earn a whopping $3,000 a year before you paid tax). Progressively taxing the rich over decades contributed to broader government programs that, while perhaps inefficient, built the infrastructure and relatively stable economic environment that fostered a burgeoning American middle class and the envy and admiration of the world. All good stuff.

But all these well-to-do middle class folk wanted disposable diapers and instant coffee and houses and such.

And the government thought it was a good idea to encourage ownership of said houses, thus its ongoing decision to uphold the deduction of mortgage expense. The mortgage deduction is a good example of how the best intentions can destroy tax revenue and hamper economic progress.

First, it shouldn’t be deductible. Interest deductions were originally allowed with business expense in mind to spur investment and job creation; there was no 30-year, government-backed mortgage (let alone government-sponsored entities or investment banks securitizing and reselling them).

Second, it encourages American to tie up capital and peace of mind in their overpriced homes. The homes are overpriced because the demand for them is artificially boosted by the mortgage interest deduction and the government’s willingness to subsidize the costs of making and securitizing mortgage loans. That said, any candidate willing to alienate the millions of Americans who can only afford their housing payments because of the mortgage interest deduction will have a tough time winning. Good luck with that one, Mittster.

I am one of the faceless millions of Americans awkwardly ensconced in the upper middle class. We’re the ones who get pinched by the rhetoric and the enfeebled compromises that aim to increase tax revenue (not to mention the dread Alternative Minimum Tax).

I think people hate us, but I’m not sure. We’re the ones who “suffer” from irrational housing prices (that we ironically cause) in much-desired locales. You shouldn’t feel sorry for us, but we’re the ones without a voice.

And rightly so. We don’t win elections for anyone.

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2 thoughts on “Would You Eat the Deficit-Cutting Burrito at Mittpotle?

  1. I’ll agree with this assessment and raise you. To your point, I don’t know exactly what this will do to the broader economy (nobody does) but I’m in favor of just eliminating all tax deductions across the board. All of em, even the popular ones. And to offset a fraction of this, I would favor dramatically reducing income taxes and flat out eliminating the corporate tax.

    If you want more of something, like jobs, you shouldn’t tax it. If you want less of something, like carbon emissions, you tax it. Simple to say, simple to support, impossible politically to do. But that’s my plan and I’m sticking to it.

    Some part of me is hopeful the Republicans will lose this election and see the political value in cutting a deal that trades some tax deductions (likely on companies that do things we don’t want them to do) for the lower Bush tax rates on the middle class. This FT piece suggests that may in fact happen. A boy can dream…

    http://www.ft.com/intl/cms/s/0/ab2c3d5e-1160-11e2-9c94-00144feabdc0.html#axzz28kFRzzwj

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