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Sorry about the missed posts guys, I honestly had a crazy weekend. But here are a couple updates to hopefully make up for the missed articles...
In case any of you were skeptical about increasing taxes or removing tax breaks, here's a great article describing the flaws of such a system. The author even says that tax breaks "cost the federal government about $1.2 trillion in lost revenue last year. As it happens, the budget deficit was $1.3 trillion." I did not realize it was THAT big of an issue! Read the article, what are your thoughts?
Any other suggestions as to getting money back into consumer's pockets if they cut tax breaks?
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I know the biggest issue with tax breaks right now are the Bush tax cuts which are about to expire. Paul Ryan is proposing a budget for 2012 that would extend the Bush tax cuts while Democrats (for the most part) are arguing to let the cuts expire. Letting those tax cuts expire would significantly lower our debt levels, which in my opinion seems like a pretty viable option for a repayment method.
ReplyDeleteThis is a great article. Its nice and short which is probably the number one thing that keeps me reading, but also cuts to the point.
ReplyDeleteI thought the authors argument that taxes slow down growth because they take time to fill out was incredibly poor and quite a stretch, but I really enjoyed the graphs provided.
My response to each graph.
1. Health insurance is a huge expense and anything that provides a break to tax payers is welcomed in my book. I think this tax break should stay.
2. Regardless of who this tax break favors, I think it is unnecessary and individual homeowners should simply be aware that owning a home is expensive.
3.401k exclusion needs to stay. On the days I don't have class I intern for a financial advisor and have the opportunity to sit in on client meetings. You would not believe how many elderly people come who do not have enough savings to provide for the rest of their life. It is sad, shocking, disturbing, and quite uncomfortable to listen to.
Americans love to spend money, our debt is a clear example of this. In my opinion any tax incentives that encourage saving are welcomed and need to stay.
I agree with Chris here....the authors argument seems quite weak to me as well
ReplyDeleteI enjoyed reading Chris's post more than the article to be honest. I am not an avid reader on the proposed tax breaks and all but I believe that the government should encourage people to save more of their money with tax break incentives among other options. The U.S. has over $14 trillion in debt right now so we should be more concerned about saving and paying back our debts than anything else.
ReplyDeleteI also agree with Chris, the claim that taxes slow down growth requires a much better argument. I am hoping the health care reform will provide our citizens better avenues to cope with rising health care costs. Health care expenses are, however, something we can't skimp on and these tax breaks seem necessary with the current system. Although middle-class mortgage interest tax deductions are typically much lower, I found that classifying those deductions as meager was too strong a word. In today's financial times, any deduction seems significant and would probably increase consumer confidence. The major point I take away from this article is that we shouldn't necessarily take away the tax breaks but narrow down the loopholes that exist that allow for people to circumvent the system.
ReplyDeleteI agree with Chris, the tax break on mortgages seems unnecessary. This tax heavily favors the rich. If someone can afford multiple homes, they should have to pay full on those taxes.
ReplyDeleteBut, I do agree that exclusions #1 and #3 should be kept. Small business owners benefit greatly with exclusion #1. I think it is sad that some of the largest employers, corporations, in our country are not required to offer adequate health benefits.
And, any exclusion that will get people to save more is great in my mind.
For a frame of reference regarding interest on home mortgages:
ReplyDelete$150,000 home mortgage, 6% annual interest, 30 years: $175,000 total interest paid
$1,000,000 home mortgage, 6% annual interest, 30 years: $1.2 million total interest paid
As you can see, home mortgages is a pretty lucrative business.
I would argue that this tax break reduces the homeowner's incentive to invest in the equity of their home. By comparison, Canada doesn't have this tax break, and their average home equity (70%) is much higher than ours (45%). Nevertheless, I still think this is an important tax break for many families, much more so than the article depicts.