December 03, 2012

On the Head of a Pin

We're going over a cliff.


One way or the other. With a deal or without a deal. It's not going to end well.

The Democrats and the Republicans are currently arguing over if they should raise revenue for the federal government by raising tax rates or cutting deductions. The Republicans are adamantly opposed to to raising the tax rates. The Democrats are opposed to cutting deductions. Both sides are motivated by the fact that  they think their method helps them and hurts the other side politically.

But in reality… it just doesn't matter.

If my federal income tax bill goes up by $200 or $1,000 or any number in between, it doesn't matter if it went up because they raised the rate or reduced a deduction. 

Which makes Obama's remarks that the GOP plan could impact the mortgage interest deduction particularly obnoxious. If you cut that deduction and keep the tax rates the same, my tax bill still goes up. The real negative impact is to the banks because mortgage interest becomes less attractive as a deduction. Go take a look at where the big banks put the bulk of their campaign donations and you will see why Democrats want to protect that write-off

The White House and Congressional Republicans will continue to debate how many tax dollars they can fit on the head of a pin. Eventually, just before time runs out, they will reach a deal in which everyone's tax rate will go up a bit and everyone's deductions will be reduced a bit. And on April 15 the federal government will have taken more of the money I earned, to largely hand over to people who did not earn it.

Before you ask, no I do not make more than $250,000. But that doesn't matter. My tax bill is going up, and so is yours.

As for cutting spending? Forget about it. It's not really part of the show.

Posted by: Stephen Macklin at 06:22 PM | No Comments | Add Comment


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