Green Jello

The GOP presidential hopefuls are in the thick of taking up conservative causes like taxes, social security reform, abolition of the USDOE, and many others. In the realm of taxes I am having a change of heart.

Most GOP candidates are decrying the current tax system and its loopholes for poor working families and the percentage of Americans who actually have to pay any income taxes (non-Social Security/Medicare taxes). The solution, for most candidates, is a flat tax, a tiered flat tax, a consumption tax, or a hybrid of one or more options.

In the past I have expressed opposition to flat tax proposals in that they generally create a tax cut for wealthy taxpayers at the expense of poorer taxpayers. This is still the case, wealth taxpayers are in fact (when you take income phaseouts of certain deductions and credits) paying a flatish tax of 35% or more. Therefore (taking Herman Cain's catchy 9-9-9 proposal) the rich would enjoy a large tax break and Joe the Plumber would go from large tax-credit induced refunds to paying 900 dollars a year income taxes (est 40k income). This is still a factual issue with flat taxes.

However, I'm not sure that "staying the (current tax policy) course" is the right approach anymore. Just this last year, we had a Congress that raised our nation's borrowing level to an extremely high level. (I'm not sure. Was it 14 trillion dollars? That is somewhere around 14 to 7 million times more than most Americans make in a lifetime) President Obama's solution for the current unemployment problem was to request another 300 billion dollars in government spending. The final straw on tax policy (for me) was the president's comments before the debt ceiling was raised that, "he couldn't guarantee Social Security checks" without the extra debt. Now I'm no government budget expert, but when a business needs to keep borrowing just to stay afloat it doesn't take a Harvard education to realize financial catastrophe is nigh at hand.

Now, I disagree with the "lucky duck" theory that taxing the poor is the only way to get the poor off their collectively apathetic arses to demand that the Federal government change. The desire to induce anger is not the best guide for wise fiscal policy. I believe adopting a simplified tax system will do three things: 1.) provide stability for businesses to grow and individuals to invest, 2.) Provide capital to invest in American businesses, and 3.) decrease the "Tax Gap"and end some large drains on the Federal Treasury.

One of the biggest problems in the US economy is the lack of stability in the US tax code. Businesses are ever on edge about what tax laws will end or what new tax laws will be enacted. By enacting a flat or simplified tax system, businesses and individuals can make financial, and more importantly investment decisions, without taxes being such an uncertain variable in the decision making equation.

As mentioned earlier, the flat tax's tax savings for higher income taxpayers would leave tax dollars in taxpayer's pockets. The saved tax funds would in turn (theoretically) likely be used to invest in entrepreneurism, stocks and bonds, or just spent in the open market.

For years National Taxpayer Advocates have stated that the biggest problem in the tax code is the law's complexity. Most Americans want to keep square with the government and pay their fair share. However, the tax code's complexity not only makes it impossible for the average lay taxpayer to be confident that they are preparing their return properly, but it also leaves a perception that other taxpayers are getting away with not paying their share. Such a perception can lead some taxpayers to cheat on their taxes since it appears that many others are doing like wise. The flat tax would provide wage earner taxpayers with easy to understand tax system and change the perception of inequality to one of equity.

The flat tax would also be a means of ending the welfare provisions of the tax code -- the Earned Income Credit, and the Additional Child Tax Credits. These provisions of the code provide lower income taxpayers with children (income between 15 and 50K) with thousands of dollars in tax refund dollars above and beyond what these taxpayers actually paid in. It is estimated that the Earned income tax credit alone cost the Treasury more than 40 billion dollars a year before taking into account the IRS budgetary costs of pursuing fraudulent EIC claims. The refundable portion of these provisions should be done away with.

Whether or not a flat tax would pass is another story. Democrats will fight against such proposals simply for the fact that the flat tax will raise taxes on the poor. However a reasoned approach to this issue might make a flat tax viable by using new credits that encourage retirement savings might keep poorer taxpayers from feeling a pinch.

The ever scrappy son of Utah's richest man Jon M Huntsman Jr. says if he is elected even the rich will have a share in sacrificing in order to get our country back on track. As mentioned in my last post that doesn't include tax hikes -- he's saving that for the "working poor families and seniors". Why do I bother talking about him, he is going to be out soon?

Speaking in an interview with the PBS NewsHour, Huntsman said that potentially means-testing Medicare could be one example of a sacrifice the wealthy could make.

"As president, I wouldn't hesitate to call on a sacrifice from all of our people, even those at the very highest end of the income spectrum," said Huntsman, himself a multi-millionaire. "I'm not saying higher taxes, but there are contributions they can make too."

I wonder why he is doing so poorly in the polls? He wants to tax poor working families, and he is even willing to make the ever deprived rich sacrifice in ways other than tax hikes. What more do Republican's want?

The one thing Huntsman has right is Medicare and Social Security means testing. Social Security is a wreck, maybe one of the best solutions (or beginning to a solution) is to stop paying benefits to retirees who are wealthy enough without Social Security and Medicare. Just as it is wasteful paying the poor for being poor, it is foolish to pay welfare to those who don't need welfare (and lets get real, social security isn't a pension or retirement savings plan)

More on Social Security later.

Many of the GOP presidential wannabes are going at a new approach to raising income taxes -- tax everyone. Michelle Bachmann contends that, " we need to broaden the tax base so that everybody pays something, even if it is a dollar. Everyone should pay something, because we all benefit." Son of a billionaire, Jon M Huntsman Jr. went straight to the point, "the half of Americans no longer paying income taxes, mainly working poor families and seniors, should be brought onto the income tax rolls." The Slate article linked above contends that this is part of theory that originated in WSJ editorials that called the working poor and those that don't pay income taxes "lucky duckies" and that real change to the tax code will only come when the lucky duckies share the tax burden and are enraged enough to demand change.

The tax code has become a system of bribery towards the working poor. Certain tax provisions end up providing poor people thousands of taxpayer dollars that they didn't contribute. In 2004 it is estimated that the Federal Government paid out more than 36 billion dollars in Earned Income Tax Credit to over 21 million US households. The EIC coupled with the additional child tax credit, provides working poor families with a great deal of Treasury dollars just for being poor. This needs to change. While it is important to provide help to the needy, we don't need the government to be handing out cash to every single household that makes less than six figures whether the asked for it or not.

Having railed against the negative tax provisions of the tax code, it would be folly to require the working poor to shoulder a proportionate load of the income tax burden. First, most lower middle class families struggle to make ends meet without requiring them to set an additional 10-20% aside for income taxes. Adding these people to the tax roles may produce an enraged working poor, but it would also burden the IRS in pursuing tax bills that are more than likely noncollectable. Second, taxing the poor will create more poverty. I went through this ad nauseum when former Utah governor Huntsman started pushing a fair or flat tax. Ten to twenty percent of 100k is a lot less painful than ten to twenty percent of 40k.

The best move our nation can make in regards to taxes and the working poor is the repeal of income based refundable tax credits. This will end the multi-billion dollar drain on the Treasury without increasing the cost of living on lower middle-class families. Beyond that I foresee flat taxes as producing tax cuts that benefit the rich at the expense of the poor. The GOP candidates may argue that forcing the rich to pay all the taxes is class warfare, but taxing people who in some cases make 1/100th of the wealthy peers at the same rate is just plain tyrannical.

I have been wanting to come and write for some time, but caring for two autistic kids can keep you busy from sun up to sun down. I've missed you blogosphere.

Rep Menlove of Garland wants Medicaid recipients to perform community service as a form of payment for the benefit of having Medicaid.

So, what's the message ???????????????????????????????

The Utah State Tax Commission is proposing a Residency Test for income tax purposes. This test would have three levels:

I applaud the state's efforts. This has been an issue where the Utah State Tax Commission has repeatedly overstepped its bounds. They have pursued residency in cases as minuscule as the taxpayer having toys (atv's, snowmobiles, etc) licensed in Utah. Clear and reasonable guidance is long overdue.

One problem I see with this rule, and the problems may depend on the final language of the bill that passes the legislature, is the rule establishing residency if the taxpayer of spouse is enrolled in a Utah university or college. For example, if the final law says any of the three establish residency, than someone from Mesquite NV could become an unwitting resident (or recipient of a Utah state tax examination) by virtue of attending the nearest institute of higher education -- Dixie State College.

I think it would be wiser for the residency test to end at the enrollement of the taxpayer and the spouse's children in Utah K-12 schools. That way commuters to Utah institutes of higher education don't need to fear being improperly assessed Utah taxes.

Regardless, this proposed legislation is good step forward in saving taxpayers money in needless litigation and protecting taxpayers from overreaching Utah State Tax Commission auditors.

he managed to give a generous 1.4% of the haul to charity. Bravo Gov'na'

There a few who discussed the allegations of shady financial deals against the Governor made by Mayor Corroon. In a show of unrivaled civil political dialogue, master of GOP ethics and quid pro quo payolas, Dave Hansen (you remember, the guy who kept taking 5,000 dollar a month payments from Senator Hatch after he was also hired as Utah GOP chairman) said this: Fred Lampropoulos, who's company is a party to one of the questionable arrangements that the state made after Governor Herbert received a donation, said:

Corroon's campaign manager retorted: Dave Hansen is a buffoon, and one of the least qualified people to opine on campaign ethics. While working for Hatch, he willingly participated in a employment tax scam by falsely classifying himself as a subcontractor rather than an employee of the Hatch Senate Committee. After he was elected as Utah Republican Party Chairman he continued to take 5,000 dollar a month payments from Hatch for over a year. Quid pro quo should be his middle name.

Fred Lampropoulos' revelation about his donation to Corroon raises reasonable questions. He gave to both candidates, and he also had business dealings with both governments, when is this improper? In the case of Governor, timing has been an issue. Alton Coal made a donation and got a meeting with the Governor in the same day, soon after the company's strip mining permit was approved in an expedited manner. Another issue is the manner that contracts are awarded. In the case of the Provo Corridor project, the contract appears to have been won by Provo River by a slim margin. Coupled with the massive payola to the losing bidder, the state certainly looks guilty of impropriety regarding the Provo Corridor bid process.

I guess the big question, other than did the governor really act in an improper manner, is what is an acceptable campaign finance policy? The governor's policy of giving private meetings to 50,000 dollar+ donors, a policy the governor has continued despite the recent allegations from his challenger, has led outsiders to question whether or not those donations are crossing over the line to bribery especially when those donors end up receiving large state contracts or concessions after making their payouts.

I think Corroon's suggestion to limit campaign contributions to a cap, would be a logical step to avoid the appearance of impropriety at the state level of government.

Since the Kern Gardner argument failed, I thought I would mention a point of impropriety from the Corroon camp.

Herbert's brilliant campaign manager who says Herbert is as "honest as the day is long" (a rather subjective description -- I find that the day is often short. So, in Herbert's case I guess it works regardless) was quoted as follows: Unfortunately for Olsen, the Corroon campaign has already done just that: How sad. Herbert's manager Olsen almost had something that he could roast Corroon on, but Corroon took the initiative to own the story before it made the press or (God forbid) he ended up looking like an idiot learning about the email in front of the press at a news conference.