Monday, February 04, 2013

Deductions are Insane

Yes, I will take advantage of as many deductions as I can (easily) manage.  No, that is not hypocritical. 

Our tax code is artificially complex and inordinately stupid.  Deductions are very, very unfair for multiple reasons, but the biggest are that wealthy people get more breaks, and they encourage bad behavior (e.g. bigger houses with little down).

The regressive side probably bothers me most.  Someone with $27k in income (MAGI minus standard deduction) only gets $0.15 back for every extra dollar of deductions.  Someone with $102k in income gets $0.28 back for each extra dollar.  On top of that, higher income individuals can afford more house and more children (and pay more in state/local taxes), which means the size of their deductions are often much larger.

If we want people with kids to get something from the government, we should do that: pay everyone $2500/year/kid.  That way income doesn't matter, and we now have a big spending program that Republicans can go after.  Same with housing.  If we want people to buy a house, rather than rent (for whatever reason) we should just have the government send every homeowner a $4k check each year and lose the mortgage, PMI, and real estate tax credits.

I'm actually kind of surprised that the state/local income tax thing doesn't come under more fire from red state (Republican) politicians.  Basically if you live in a low tax state you are subsidizing people in CA and NJ.  Why is that remotely fair?  (Yes, I know, red states tend to get far more back in federal outlays than they put in, unlike high tax blue states, but this still seems like an easy break for them to target, especially since the entire GOP tax ideology is illogical.)

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