Thursday, September 25, 2008

Counting Eggs

Saying the complexity and loopholes of our current tax system have made it unfair and have created a huge and oppressive bureaucracy, Sam Rasoul has proposed replacing it with a graduated flat tax. Rasoul says his proposal would be revenue neutral, much simpler for taxpayers, reduce taxes for most households earning less than $50,000, close loopholes that have upper income taxpayers dodging their fair share. Check out the details of Rasoul's plan.
The concept of a flat tax is a often pushed by conservatives and libertarians. If you Google "flat tax" you'll find about 1.1 million hits, many from groups like the Heritage Foundation and Hoover Institution. A primer on the flat tax is on Wikipedia, but as on all online (and other) sources, read with a jaundiced eye. It is important to note that Rasoul's plan is actually a graduated flat tax which has some aspects of a flat tax while retaining several progressively higher tax rates as incomes increase. This compromise is probably more politically palatable than a pure flat tax.
While I'm not ready to endorse a flat tax, or even a graduated flat tax (simplification yes!), I applaud Rasoul for creative thinking and putting tough issues like this one on the table. That alone puts him head and shoulders above his opponent. This should be a topic in their upcoming debate and in future debates that we all hope the incumbent will agree to.

7 comments:

Anonymous said...

In good times a flat (progressive or otherwise) tax that eliminates the mortgage deduction would be political suicide. In a time of great economic peril stemming from falling housing prices, mortgage problems, etc. such a suggestion is particularly ill timed inasmuch as it would exacerbate the source of present problems. Goodlatte will absolutely clean Rasoul’s clock on this issue during any debate.

Belle Rose said...

So there is no good time to get rid of this popular middle class tax break? Goodlatte has done a lot of clucking about tax reform but has gotten nowhere. Don't give me the litter about Pelosi blocking... until this last term Bob had a majority in both houses and from 01-07 had his birds totally in control.

Rasoul has the courage to put something on the table for discussion. As popular as the mortgage deduction is, so is tax simplification. So is tax fairness. With the exemptions he suggests, most of middle America wouldn't need the mortgage deduction. All loopholes, err... deductions, have to be on the table.

Goodlatte might clean the chicken house, but he won't clean Rasoul's clock on this issue. Or any other.

Anonymous said...

Speaking of chicken houses, don't bet yours on such notions. The timing of Rasoul's suggestion in the midst of a housing crisis is not only red meat for Goodlatte in a debate, it would make for incredible district-wide mailout material: "Rasoul says he wants to end homeowner's mortgage deduction." Rasoul would be lucky to even hold his Democratic base.

Anonymous said...

One more thought...

Granted--tax simplification would likely be viewed as nice/desirable. I would wager however that the mortgage deduction is perceived as essential/critical by those who have mortgages and those who would like to. Simple is not always good...foreclosure is relatively simple, but it is not nice.

And, again these personal considerations don't even touch the grave national economic impact of eliminating the deduction in the midst of a housing crisis.

Belle Rose said...

OK, since this is such a popular middle class tax break (I get it and benefit from it), leave it in place. Even in a graduated flat tax, some deductions could be possible. But, when you do so, which deductions have priority? Guess it depends on which chicken's head it getting chopped off.

Back to the main point. Rasoul has put an interesting and provocative idea on the table that looks to the future. Goodlatte = tired old ideas.

truth-teller said...

Leaving the mortgage deduction in would mean, probably, that the rates would have to be higher, or the brackets dropped lower.

I think taxpayers are smart enough to do the cost-benefit analysis; the equivalence of the two approaches could easily be demonstrated, and the simpler system--the one Rasoul proposed--would be found superior.

Give people credit, anon.; most are not stupid.

Anonymous said...

T-T,

Sorry, but my prediction is that the public’s reaction to your candidate saying that he wants to end the mortgage deduction will be dead on arrival (the program with the announcement and his political aspirations on election day).

You also fail to address my other point: eliminating the deduction and thereby reducing the value of a house in the midst of a housing crisis (that already involves falling housing prices) would be insane.