Mortgage Deduction and the Child Tax Credit

[Banzai88]

Until we actually bill people for what the government is spending on them the people will not hold government accountable until its too late. I think that is a feature, not a bug.

I have long contended that if folks had to consciously stroke a check ever month for their local, state, and federal taxes like they do for anything else instead of "Automatic Withholdings" making it effectively invisible, there would have been an armed tax revolt long, long, long ago!

Me, I'd be happy to see some of that 56% that doesn't pay any taxes move out of government dependency and get their damn hands out of my wallet! But hey, I get it, it buys votes and damn the consequences!

 

[ThirstyBarbarian]

I think everyone should be forced to write an estimated tax check to the government every 3 months.

My young daughter had to start doing that as she is self employed. It was amazing on how fast that changed her political alignment.

Well, unless you are talking about also doing away with payroll withholding for W-2 employees, it would just be a hoop-jumping exercise for them, and they’d end up breaking up their annual tax bill or refund into 4 even chunks throughout the year. The reason for estimated taxes for self-employed people is that there is no withholding mechanism for self-employed people, so all the taxes you owe for the year would come due in one big payment, and unless you are really good at budgeting, you might not be able to pay it all. Most people pay most of their taxes through withholding. Quarterly estimated taxes take the place of withholding.

 

[Antares JS]

Realistically balancing the budget will involve tax increases, spending cuts, and riots in the streets.

No argument here.

Well, unless you are talking about also doing away with payroll withholding for W-2 employees, it would just be a hoop-jumping exercise for them, and they’d end up breaking up their annual tax bill or refund into 4 even chunks throughout the year. The reason for estimated taxes for self-employed people is that there is no withholding mechanism for self-employed people, so all the taxes you owe for the year would come due in one big payment, and unless you are really good at budgeting, you might not be able to pay it all. Most people pay most of their taxes through withholding. Quarterly estimated taxes take the place of withholding.

jderimig can correct me if I'm wrong, but I believe the point being made was that people react differently to a number on a W-2 with money you never saw, and having to actually write the check for that number themselves with money from their bank account.

 

[ThirstyBarbarian]

The budget was balanced as recently as the year 2000. No riots, and it wasn’t an onerous tax burden.

Most of the political argument during the 2000 election was what to do with the coming surplus now that the budget was balanced. Gore wanted to put the surplus in a “lock box”, whatever that meant, to shore up Social Security and Medicare and pay down the debt. Bush wanted to “return it to the people”. Bush won, and his “return it to the people” strategy unfortunately returned way to much to very wealthy people, and the surplus turned into even bigger deficits again.

 

[ThirstyBarbarian]

jderimig can correct me if I'm wrong, but I believe the point being made was that people react differently to a number on a W-2 with money you never saw, and having to actually write the check for that number themselves with money from their bank account.

Sure, but that means getting rid of withholding, not making everyone file quarterlies.

BTW, this has been tried before, and people don’t like it. Some of the various stimulus plans that have come along for different crises and recessions over the years have been to reduce or suspend part of employees‘ withholding taxes. The amount owed isn’t changed, just the withholding. So people get a boost in their paycheck, but a bigger tax bill at tax time. They don’t like it. They’d rather pay as you go.you see that in how they set up their withholding (W-9?) forms. Many people prefer to take fewer allowances so their withholding is higher than necessary, and they get a bigger refund. They voluntarily choose to loan the government a bit more out of each paycheck and get the extra back later as a refund.

 

[Banzai88]

. They voluntarily choose to loan the government a bit more out of each paycheck and get the extra back later as a refund.

...and wonder why they can't pay their monthlies....and then instead of getting out of debt, they throw away that 'refund' on the latest big screen TV, year after year!

 

[jderimig]

Yes, get rid of mandated withholding. Make it an option, some people will take it for the convenience of having Uncle Sam in your wallet 24/7/365. Let others chose to take the whole check and pay quarterly.

 

[Peartree]

The budget was balanced as recently as the year 2000. No riots, and it wasn’t an onerous tax burden.

You're *almost* right. We came very close to balancing the budget in 2000 and, in fact, we did balance the *external* budget which did *not* include the money we "borrowed" from ourselves by spending the money received as "investments" (cough, cough) toward retirement through Social Security. If we consider that borrowing, as borrowing, as we should, then even in our best year since 1970 (or earlier) we were still billions and billions behind.

Realistically balancing the budget will involve tax increases, spending cuts, and riots in the streets.

Maybe not. Realistically, the terrifying thing that the only thing between us and a balanced budget is Thursday. Every Thursday the Treasury Department has an auction selling US debt in the form of bonds. All that has to happen, due to a default on the debt, international currencies and investing shifting to another currency (as it may be doing now with the advent of BRICS), or some other seen or unforeseen event that causes uncertainty or a lack of faith in investing in the future of the United States, is for no one to show up in Thursday. On the day that no one shows up to buy US treasuries, and that day may be coming, everything stops because the US of A almost immediately runs out of money. There won't be enough to fund the budget, to pay Social Security checks, or Medicaid, Medicare, military salaries, fund government contracts of all kinds, or *anything* until Congress passes a balanced budget that can be covered by our income.

That scenario is far more likely, in my opinion, than riots in the streets... and it frightens me a lot more.

 

[jderimig]

You're *almost* right. We came very close to balancing the budget in 2000 and, in fact, we did balance the *external* budget which did *not* include the money we "borrowed" from ourselves by spending the money received as "investments" (cough, cough) toward retirement through Social Security. If we consider that borrowing, as borrowing, as we should, then even in our best year since 1970 (or earlier) we were still billions and billions behind.


Maybe not. Realistically, the terrifying thing that the only thing between us and a balanced budget is Thursday. Every Thursday the Treasury Department has an auction selling US debt in the form of bonds. All that has to happen, due to a default on the debt, international currencies and investing shifting to another currency (as it may be doing now with the advent of BRICS), or some other seen or unforeseen event that causes uncertainty or a lack of faith in investing in the future of the United States, is for no one to show up in Thursday. On the day that no one shows up to buy US treasuries, and that day may be coming, everything stops because the US of A almost immediately runs out of money. There won't be enough to fund the budget, to pay Social Security checks, or Medicaid, Medicare, military salaries, fund government contracts of all kinds, or *anything* until Congress passes a balanced budget that can be covered by our income.

That scenario is far more likely, in my opinion, than riots in the streets... and it frightens me a lot more.

nah, we always have the Trillion Dollar Platinum coin ace in the hoe.

 

[jderimig]

On the day that no one shows up to buy US treasuries, and that day may be coming, everything stops because the US of A almost immediately runs out of money.

The Federal Reserve will always show up on Thursday.

And the "Debt Limit" violates the 14th Amendment, maybe.
“the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

The GOP probably doesn't want to be the first to set the precedent of ignoring Constitutional Amendments.

 

[Blast it Tom!]

It looks as though the US may default on the debt if Congress doesn't act before June. And they are out of session and in very deep disagreement. The consequences of a default are unknown, but could be very bad, maybe even costing citizens entitlements including mortgage deductions and child tax credit.

Do you think the Fed bears some responsibility, enough for addition to the 545?

No, that Frankenstein is a creation of the 545. Well, it may not have been 545 when the Fed was chartered... I'm afraid that in my view it's still on them.

 

[Dotini]

No, that Frankenstein is a creation of the 545. Well, it may not have been 545 when the Fed was chartered... I'm afraid that in my view it's still on them.

I've got the funny idea that economists from the University of Chicago had long ago told the 545 that this borrow and spend economics is all okay and not to worry. Or maybe that was also the lobbyist's work? The Congress may be corrupt, but it had to get it's economic theories from somewhere. I recall when a certain somewhat sleazy President took us off the gold standard. Now only good faith and credit holds up the dollar.

 

[boatgeek]

The problem I usually point out to those who scream about the need to raise taxes is that confiscating and liquidating the entire net worth of Elon Musk ($174B) would fund the US government ($6.27T spending for 2022) for about 10 days, and then Elon Musk would have nothing and couldn't be taxed until he built another business.

I'm not saying it's wrong to tax the rich a bit more, but I doubt it will be the fiscal panacea people think it will be.

Realistically, balancing the budget will have to involve both tax increases and spending cuts, but I suspect that there would have to be more of the latter.

You're *almost* right. We came very close to balancing the budget in 2000 and, in fact, we did balance the *external* budget which did *not* include the money we "borrowed" from ourselves by spending the money received as "investments" (cough, cough) toward retirement through Social Security. If we consider that borrowing, as borrowing, as we should, then even in our best year since 1970 (or earlier) we were still billions and billions behind.

I don't think that anyone being taken seriously* is asking for the entire wealth of billionaires to be taken away. That said, it's hard not to see a correlation between these graphs of the percentage of income paid in taxes by the top percent:


(Sorry for these not being on the same chart--it's remarkably hard to find the data on a single chart.)

And this one of the debt. Note that we didn't start kicking off serious debt until the early 80's when the tax rate for the upper 0.1% was cut.


I also can't help but notice this one, showing average taxation rates at various income levels. Note that tax burdens for the lower half of the income spectrum has increased over time as tax rates for the upper section have dramatically dropped.


I admit to being pretty far left. If I stated my taxation policy here, I'm pretty sure I'd be called out for being a socialist or communist. But it's also the preferred tax policy of that noted radical Dwight D. Eisenhower. It's worth noting that Ike presided over paying off a large amount of federal debt, a massive infrastructure program, and the largest expansion of the middle class the US has ever seen. I don't think those things are coincidental.

Maybe not. Realistically, the terrifying thing that the only thing between us and a balanced budget is Thursday. Every Thursday the Treasury Department has an auction selling US debt in the form of bonds. All that has to happen, due to a default on the debt, international currencies and investing shifting to another currency (as it may be doing now with the advent of BRICS), or some other seen or unforeseen event that causes uncertainty or a lack of faith in investing in the future of the United States, is for no one to show up in Thursday. On the day that no one shows up to buy US treasuries, and that day may be coming, everything stops because the US of A almost immediately runs out of money. There won't be enough to fund the budget, to pay Social Security checks, or Medicaid, Medicare, military salaries, fund government contracts of all kinds, or *anything* until Congress passes a balanced budget that can be covered by our income.

That scenario is far more likely, in my opinion, than riots in the streets... and it frightens me a lot more.

I find it fascinating that many of the same politicians who claim to want to nip China's power are also taking policy action that could result in the Yuan replacing the dollar as the de facto world reserve currency.

The Federal Reserve will always show up on Thursday.

And the "Debt Limit" violates the 14th Amendment, maybe.
“the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

That's a much more compelling argument than the trillion dollar coin. It's also worth pointing out that the whole idea of the debt ceiling was developed in WWI to make it easier for the federal government to borrow for war needs. Before then, Congress voted on every bond issue.

* Yes there are people who propose this. They might even introduce a bill. But let's talk about taking them seriously when one of those bills gets a committee hearing, let alone passage through a committee.

 

[Antares JS]

I don't think that anyone being taken seriously* is asking for the entire wealth of billionaires to be taken away.

I get that, the point I was making was that the spending of the US government dwarfs even the wealth of the richest men in the world, and I don't see raising taxes alone as likely to balance the budget. Sure, it's probably part of the solution, but I don't think it can be the sole solution.

 

[jderimig]

I don't see raising taxes alone as likely to balance the budget. Sure, it's probably part of the solution, but I don't think it can be the sole solution.

Balancing the budget will require the American people and whoever else is here to pay alot more for alot less. Sorry folks, that ain't happening, there isn't exactly the greatest generation here anymore.

The path forward is to continue to live in a fiscal fantasy land and party like its 1999 until it all collapses. We should instead have a 50% or even 90% income tax elimination on individuals. It won't change the trajectory we are on at all. We can probably make up a good part of the lost revenue on increased profits and taxes on all the additional stuff American's will buy on the windfall.

 

[boatgeek]

I get that, the point I was making was that the spending of the US government dwarfs even the wealth of the richest men in the world, and I don't see raising taxes alone as likely to balance the budget. Sure, it's probably part of the solution, but I don't think it can be the sole solution.

That's fair. You can't take one-time taxes to solve annual deficits. But looking at wages alone, there are ~330,000 people in the top 0.1% (as of 2020), and their average wage is $3.2M. If their tax rates went up 35% to match pre-1975 levels, you'd be looking at ~$370B in added revenue, or about a quarter of the federal deficit. And that's only looking at wages. You'd get noticeably more if you counted all income (stock market, etc.).

Me, I'd be happy to see some of that 56% that doesn't pay any taxes move out of government dependency and get their damn hands out of my wallet! But hey, I get it, it buys votes and damn the consequences!

That number is down to around 40% in 2022. For the remainder, 1/3 are solely on Social Security. So you want Grandma and Grandpa to get their hands out of your wallet? Another 30% of non-payers earn between $30K and $60K/year, more than full time minimum wage in many areas.

 

[ThirstyBarbarian]

I have long contended that if folks had to consciously stroke a check ever month for their local, state, and federal taxes like they do for anything else instead of "Automatic Withholdings" making it effectively invisible, there would have been an armed tax revolt long, long, long ago!

Me, I'd be happy to see some of that 56% that doesn't pay any taxes move out of government dependency and get their damn hands out of my wallet! But hey, I get it, it buys votes and damn the consequences!

Usually when someone gripes about another person sucking off the government teat, that person is sucking off the next teat over. It is a government of many teats, and everyone is sucking off at least one, and many greedy piggies are sucking off multiple teats, and it’s not mostly “the poors”. I’m not poor, and I got me a fistfull of teats! I bet you have your own big juicy teats too.

Here’s a few teats I have that you actually have to have money to suck from. It’s no use to poor people because they can’t afford to use these teats:

• Mortgage interest deduction teat — subsidized mortgage payments, but only if you can afford a mortgage.
• HSA teat — deposits are tax deductible, investment earnings grow tax free, withdrawals are tax free. The only triple tax advantaged teat in the tax code. That’s subsidized health care, but only if you can afford to make the deposits.
• IRA teat, Roth IRA teat, 401(k) teat — Tax deductible deposits (or tax free distributions for Roths), earnings grow tax free. This is one of the big ones. And since I’m self employed I can set up an Owner 401(k) and make “profit sharing contributions” with a contribution limit that is around $50k per year if I can afford it. So can my wife. That means if we can afford to do it, either through money we make as income or money we borrow, we can reduce our taxable income by over $100k per year, if it makes sense. Believe it or not, that can be used to reduce your income enough to qualify for things like other government teats, like a healthcare premium subsidy. So that’s a government subsidized retirement plan, but only if you can afford to make the contributions, and it’s also a rich-guy tax loophole that lets you access the teats meant for poor people! Mo’ teats, mo’ teats, mo’ teats! Unfortunately I have not been able to afford that teat for a few years now, but If I made more money, that would be my favorite teat, for sure.
• Pass-through business income deduction — This is an odd teat. It never existed, then in 2017, it appeared out of nowhere. This allows us to deduct 20% of our qualifying business income, just because we earn it in a “pass-through” business, meaning our businesses are wholly owned by us, and the business income passes straight through to us, the owners. I don’t know why this teat exists, but it was included in the 2017 tax bill. So I didn’t ask for that teat, but you put a teat in my mouth, imma suck it.

So those are some of the government teats I suck on, and I’m sure we all have similar teats we don’t even think about while we cast aspersions on others we see sucking on a different teat.

 

[Igotnothing]

I don't think that anyone being taken seriously* is asking for the entire wealth of billionaires to be taken away. That said, it's hard not to see a correlation between these graphs of the percentage of income paid in taxes by the top percent:
View attachment 578479
View attachment 578483
(Sorry for these not being on the same chart--it's remarkably hard to find the data on a single chart.)

And this one of the debt. Note that we didn't start kicking off serious debt until the early 80's when the tax rate for the upper 0.1% was cut.
View attachment 578481

I also can't help but notice this one, showing average taxation rates at various income levels. Note that tax burdens for the lower half of the income spectrum has increased over time as tax rates for the upper section have dramatically dropped.
View attachment 578484

I admit to being pretty far left. If I stated my taxation policy here, I'm pretty sure I'd be called out for being a socialist or communist. But it's also the preferred tax policy of that noted radical Dwight D. Eisenhower. It's worth noting that Ike presided over paying off a large amount of federal debt, a massive infrastructure program, and the largest expansion of the middle class the US has ever seen. I don't think those things are coincidental.


I find it fascinating that many of the same politicians who claim to want to nip China's power are also taking policy action that could result in the Yuan replacing the dollar as the de facto world reserve currency.

That's a much more compelling argument than the trillion dollar coin. It's also worth pointing out that the whole idea of the debt ceiling was developed in WWI to make it easier for the federal government to borrow for war needs. Before then, Congress voted on every bond issue.

* Yes there are people who propose this. They might even introduce a bill. But let's talk about taking them seriously when one of those bills gets a committee hearing, let alone passage through a committee.

Government profligacy aside, it made sense to tax the lower quintiles once they began to have incomes sufficient to be the larger portion of government revenues. Post WWII the middle class had income. Prior to that, the middle class had land, but not much money.

The problem is the profligacy. Votes won't buy themselves. It appears that voters are to blame.

 

[jderimig]

Usually when someone gripes about another person sucking off the government teat, that person is sucking off the next teat over. It is a government of many teats, and everyone is sucking off at least one, and many greedy piggies are sucking off multiple teats, and it’s not mostly “the poors”. I’m not poor, and I got me a fistfull of teats! I bet you have your own big juicy teats too.

In my opinion the government doesn't have teats. The government is the one sucking the teats from the value creators in the country. The cases you mention are examples of government sucking less from citizens teats.

 

[boatgeek]

In my opinion the government doesn't have teats. The government is the one sucking the teats from the value creators in the country. The cases you mention are examples of government sucking less from citizens teats.

How do they fund roads and fire departments in your utopia? National defense?

 

[jderimig]

How do they fund roads and fire departments in your utopia? National defense?

The government of course by sucking at the teats of the private sector. If we are going to use a titillating metaphor get the milk producer correct.

 

[ThirstyBarbarian]

In my opinion the government doesn't have teats. The government is the one sucking the teats from the value creators in the country. The cases you mention are examples of government sucking less from citizens teats.

What I was describing is spending in the tax code. Those are subsidies for certain aspects of my financial well-being based on my personal financial decisions and actions—subsidies for my home mortgage, my healthcare, my retirement, my business income, etc.

In terms of how it affects the government’s budget, and a citizen’s personal budget, there is no difference between setting a tax rate for everyone, and then collecting less from certain people, or setting the same tax rate and then sending those same people a check. You are trying to frame it as collecting less, but in the end, it’s the same as sending a check.

 

[jderimig]

What I was describing is spending in the tax code. Those are subsidies for certain aspects of my financial well-being based on my personal financial decisions and actions—subsidies for my home mortgage, my healthcare, my retirement, my business income, etc.

In terms of how it affects the government’s budget, and a citizen’s personal budget, there is no difference between setting a tax rate for everyone, and then collecting less from certain people, or setting the same tax rate and then sending those same people a check. You are trying to frame it as collecting less, but in the end, it’s the same as sending a check.

Thirsty, I understand your point. I just dont agree with the term "spending in the tax code". The tax code doesn't spend. Not raising revenue is not spending. That term is a political rhetoric and it doesn't work. If you don't get a gig does your spouse consider that "spending"? "Dear stop spending so much, get a job"

 

[cwbullet]

Flat Tax please.

I am all for a flat tax or sales tax.

 

[Bravo52]

I don't think we'll ever have a "flat tax" as long as there is a two-party system in the USA. Why? Our current form of taxation is progressive so the more you make the more you pay. There are issues with it, sure, but buy and large, it works. We've all seen the graphs on who pays what so no need to rehash that. The bigger issue is a flat tax is regressive. Large social programs can't be efficiently supported by a regressive tax system. We will no longer be paying a "fair share", but X%. Doesn't matter if you make $10K a year or $10M. A National Sales tax is very similar but different in that if people don't buy, the economy tanks. No revenue for the government and what is there, could become very inconsistent. Not a simple solution.

If I had to pick one, I wouldn't. I'd instill a "hybrid" (see, I can be green) system that is a flat income tax and a miniscule national sales tax. A little of both. Even still, it would eventually get perverted so we might as well stick with what we have...which is what the folks in DC want anyway.

 

[jderimig]

Our tax system is fine, stop f'ing with it, it generates gobs of revenue and the economic system is in equilibrium with it. The problem is on the other side of the ledger, there is no forced coupling with revenues and expenses. States and local governments have figured out how to do it, its not splitting the atom. The problem is us, we want benefits but don't want to pay for them. Time to grow up.

 

[Dotini]

Is the subject of this thread entitlements, also known as unfunded liabilities? The fallout of "tomorrow" could be these will be among the first to go bye bye.

 

[cerving]

Once you get the kids out of the nearly paid-off house, your tax burden goes way up. Not to mention nearly 50% taxes for the net profit on the business (which I fortunately am not living off of). The older you get, the higher your taxes get... until you quit working and start drawing SS. Then they get to tax you 401K withdrawals/interest...

 

[jderimig]

Is the subject of this thread entitlements, also known as unfunded liabilities? The fallout of "tomorrow" could be these will be among the first to go bye bye.

SS and Medicare are not "totally" unfunded liabilities. They are required by statute to reduce benefits if the trust fund goes negative.

 

[les]

Flat Tax please.

I agree with a FLAT tax, not a Sales tax. And yes, I would suggest monkeying with the flat tax with one tweak.... Exclude the first X amount of income (say $30K) for the low income people. In many ways, the Standard Deduction does that.

The money I spend on an accountant is among the best money I spend each year

I have an issue with having to pay someone to do my taxes. It is like a tax to pay taxes. I found a program on line that charges nothing for Federal and $15 for State. I can pay more for a premium service to get additional support. But with that program I was able to cover a small business, W2, Pension/SSA payments.

The really stupid thing about the complexity is that the IRS already knows enough to calculate the taxes for ~80% of the population.

Agreed. The IRS can do it, and basically does do it to compare against your return to see if you missed anything. The issue is the Turbo Tax, Intuit, Jackson, HR Block etc lobbies have fought to block this