We can have a separate debate about income tax vs “fair tax,” or what rates should be, or how big the government sector should be. But, so long as the national government gets more than 70% of its revenue from the income tax, my position has always been that people with equal incomes should pay equal taxes. All the deductions and exemptions make that impossible.

Economists of all persuasions refer to the preferences as “tax expenditures.” The taxpayer who chooses to take on a million dollar mortgage with deductible interest of, say $50,000 ends up with a tax reduction of about $15,000 that another taxpayer who chooses to rent or to buy without taking on a mortgage doesn’t get. It’s no different than if the government mailed a housing subsidy check to the taxpayer with the mortgage — hence the term, “tax expenditure.”

In the case of the mortgage deduction, we actually encourage people to take on debt; which, of course, was a big factor in why the Great Recession started and why it continues while individuals and companies de-leverage rather than spend. Canada doesn’t have a mortgage deduction. Yet, they have a higher rate of home ownership than the U.S. Plus, they didn’t have a housing and debt crisis.

Almost exactly one year ago, it was reported that 75% of the tax benefit from the mortgage interest deduction goes to homeowners in just three markets: NY, SF and LA. Essentially, tax payers in all other locations are subsidizing homes in those three places. Most people think the deduction is a wonderful thing, even though most homeowners, including those with mortgages, benefit very little from it.

As for the “fair tax,” its advocates say it would need to be about 23% to be revenue neutral. That’s extremely misleading. It’s really 30% of the amount paid for good or service being purchased, because they include the tax amount in the denominator.

Under the “fair tax” as proposed, you wouldn’t pay that 30% when buying a previously owned home but would if you purchased a newly built home. I’m sure people will really go for the idea of paying a $150 thousand tax on a $500 thousand new home. And if you excluded homes from the “fair tax,” then the tax rate would have to be even higher than 30%.

“We need to get rid of all the itemized deductions, exemptions, refundable tax credits etc. that result in people with identical gross incomes paying significantly different taxes. The biggest welfare program in the country is the mortgage interest subsidy.”

We need to stop spending. We need to stop throwing money down a rat hole.

Your statement reveals a common thread in liberal thought. You labeled the mortgage deduction as a welfare program; this idea that the money people are allowed to keep is a cost to the government implies
that the Government owns all wealth and that its yearly expenditures are fixed and cannot be reduced.
Somehow somewhere the progressives have defined that
not taking is spending?????

The real cost of government has nothing to do with how much revenue (taxes that are taken from the people) the government has. The war, real welfare, food
stamps, research, education, pensions, payroll,
infrastructure etc……, these are costs.

The obvious problem is government over spending and waste. The progressive income tax and the mammoth tax code that has taken form over the last 100 years make the problem of inefficient government worse. When you
tax (punish) production and achievement you will
always have those that will fight to keep what they have earned and in the end you will get less
production and more evasion. Our current income tax
law is bad and needs to be reformed. A tax based on
income invariably makes liars out of most men. A Fair
Tax based on consumption will be more acceptable to the human heart and be in line with our intrinsic American values.

“Bad laws, make socially advantageous acts illegal and therefore lead to an undermining of morality in general. “

Milton Friedman

We need to get rid of all the itemized deductions, exemptions, refundable tax credits etc. that result in people with identical gross incomes paying significantly different taxes. The biggest welfare program in the country is the mortgage interest subsidy.

Everybody should pay something, even if it’s just 3% of gross income at the low income level. That wouldn’t change the fact that high income people pay a very high share of taxes, because most of the income growth during the past 30-40 years has been at the higher income levels.

http://www.thedailybeast.com/newsweek/2012/08/19/niall-ferguson-on-why-barack-obama-needs-to-go.html

I don’t endorse Stark’s recent record in Congress or on the campaign trail. I just reject the notion that Swalwell is a good choice to replace him.

Congressional salary is $174k, not $200k. Deficit is $1.3 Trillion, not $2 Trillion.

“Whether or not it’s legal in the technical sense.” You make it sound like an oversight or loophole. Anybody who is age 70 or older who has paid into SS is eligible for full SS benefits while still working, whether they make their living as a member of Congress, or as a truck driver. Maybe Stark shouldn’t take his Congressional salary. He’s rich and doesn’t need that money either, right?

Whatever imagined good things may come of Stark’s defeat, cutting “the flow of federal dollars to the Stark family” won’t be one of them. He’ll still be eligible for the SS benefits. But he will no longer pay into the system. So, the net flow of SS dollars will actually increase. Plus, he’ll start collecting a full pension. Plus, we will be paying full salary and benefits to his replacement. As a financial proposition, we are better off keeping Stark in office until he goes to that great Congress in the Sky, presided over by the Speaker of the Universe, Sam Rayburn!

Pete Stark, a fully employeed multi-millionaire, age 80, gets thousands and thousands of dollars for his 10 year old and up kids. Oh and did we forget, their mother is fully employed.

Neither pass the stink-test.

Warren Buffet and most wealthy seniors are not members of the United States Congress.

One would hope (probably in vain) that they would set a higher standard.