Patterico's Pontifications

11/6/2017

A Contrary View: Deductions for State and Local Taxes Are Good Policy

Filed under: General — Patterico @ 9:00 am



Supporters of the Republican “tax cut” plan — which actually raises taxes on many in the middle class, including me — argue that eliminating the deduction for state and local taxes is good policy. I am here to tell you that it is not. Not only is it bad policy, it is unseemly to the point of being almost immoral.

This may sound shocking. You’re so used to hearing the opposite, you may never have heard the argument. But think about what is happening when you disallow the deduction. You are allowing one sovereign to tax money that the taxpayer is already paying to another sovereign.

Imagine an extortionist on a highway who takes 10% of your stuff so you can pass. Now imagine that you run into a second extortionist who takes another 10% — but says he’s taking 10% of your original amount, because it’s not his fault the first extortionist was there. It’s adding insult to injury. If you eliminate the deduction, you are telling taxpayers: you see this money that you are already being charged in taxes by one government? We’re going to pretend you still have it, and take part of it from you as well.

Moreover, allowing one sovereign to tax money already being paid to another poses genuine issues relating to the power relationship between the two sovereigns. This insight is not mine; it came from a reader of mine, who explained it this way:

I have always been of the view that it is not ok for one sovereign to tax money being paid to another sovereign. The money you pay in federal taxes should not be included in the tax base used to calculate state taxes, and the money you pay in state taxes should not be included in the tax base used to calculate federal taxes. OTHERWISE, one sovereign or the other has the power to use the tax code to control the behavior of the other, and, in extremis, to destroy it.

It seems to me that if we’re going to have a system of divided sovereignty, that’s a fundamental requirement for it to work.

So *ideologically* I am opposed to doing away with the SALT deduction, for that reason.

In response, a lot of Republicans argue that states without income taxes are “subsidizing” states that do have an income tax.

I find the premise of this argument a little puzzling. States without income taxes are not funded by fairy dust. They are also funded by tax money. In a state like Texas without an income tax, more of the money that funds state government comes from other taxes, like property taxes and sales taxes. But those are deductible too. Real estate taxes are deductible. And sales taxes are deductible for people who don’t deduct income taxes:

If you file a Form 1040, and itemize deductions on Schedule A, you have the option of claiming either state and local income taxes or state and local sales taxes (you can’t claim both).

As a California resident, I never deduct sales taxes because the IRS gives me the choice between itemizing state income tax and state sales tax, and I do better itemizing the former. But someone living in Texas can deduct their property taxes (generally a higher rate than California property taxes) and their sales taxes. I could argue that this is unfair (and I do). I pay both sales tax and state income tax and can deduct only one. Texans pay sales tax and no state income tax, and get to deduct the only one of those two taxes that they pay. But note that I don’t respond to that by whining about how it’s unfair. I don’t say Texans or Floridians should not be able to deduct sales taxes. I want lower taxes for all.

The better argument has to do, not with the type of state and local taxes being paid, but the fact that some states just tax less. So then we get the argument that low-tax states are “subsidizing” Californians. Well. Let’s please keep in mind that some states pay more in federal taxes than they take in federal benefits. These are called “donor” states, and California is one of them. Indeed, many large states with major urban areas, like California, New York, and Illinois, are donor states. So enough with this whining about you’re subsidizing states with large urban areas such as my state of California. On the contrary: we are subsidizing you.

But let’s say you still believe that citizens of lower-tax states are being treated unfairly. There are different ways of achieving fairness. Not all of them involve hurting the other guy. To illustrate, let me tell a story. This is taken from the book Red Notice, by Bill Browder. It is a famous Russian story about the character of the Russian people:

One day, a poor villager happens upon a magic talking fish that is ready to grant him a single wish. Overjoyed, the villager weighs his options: “Maybe a castle? Or even better—a thousand bars of gold? Why not a ship to sail the world?” As the villager is about to make his decision, the fish interrupts him to say that there is one important caveat: whatever the villager gets, his neighbor will receive two of the same. Without skipping a beat, the villager says, “In that case, please poke one of my eyes out.”

This sentiment is not unique to Russia. The desire to see one’s neighbor screwed is universal. Just pretend that the neighbor in the story is a smug urban Democrat. All of a sudden you’re willing to poke out one of your own eyes to see two of his poked out, aren’t you?

And indeed, with a little tweaking, the current argument over SALT deductions fits this proverb. Having both houses of Congress and the Presidency is a little like having a magic talking fish. In theory, you should be able to get what you want. So let’s say what you really want is fairness — and you have had one of your eyes poked out, while your neighbor hasn’t had any. Should you ask the talking fish to poke out one of your neighbor’s eyes? Or is it rather the sensible thing to ask the talking fish to restore your own poked-out eyeball?

If you’re not into parables about eyes getting poked out, there’s always the Rush song “The Trees” which makes a similar point:

If you don’t know the song, the story is that the shorter trees are upset at the taller trees for taking too much light. They demand equal rights, and eventually get them — when all the trees are cut down entirely, achieving total equality for all! Yay!

I never thought I’d see Republicans looking to add thousands of dollars to the tax bill of middle-class Americans in the interest of “fairness.” But that’s apparently where we are. The desire of one man to cut another man down for the sake of “equality” is, it seems, not limited to socialists and Democrats. This ugly sentiment lies in the hearts of Republicans as well.

If you think it’s unfair for those of us who live in high-tax states to have that money deducted, while you are not able to deduct so much, agitate for lower taxation for yourself. As a conservative living in a high-tax state, I’ll be right there with you. But if you are agitating for a bill that is going to add several thousand dollars to my tax liability — as this bill would do — then you and I are in a political fight. And guess what? I think you’re going to lose this one.

Small-staters (and sometimes others) also like say to California conservatives like me: “Well, this is the incentive you need to get your state government to tax less.” Pardon me a moment while I laugh uproariously.

You think I have any control over what our insane California legislature and governor do? I can assure you that I have as much control over the California legislature as you have over what Congress does with ObamaCare repeal. None. If I say to you: “Gee, looks like you have a problem with ObamaCare. You should really speak to your legislator about that!” you will likely respond that you have done so until you are blue in the face and it gets you nowhere. Guess what? That’s how conservatives in California feel. We have no control and we are shouldering a huge state income tax burden against our wishes. Piling on even more taxes from the feds is not acceptable.

And if you respond to that by saying: “OK, so then move to Texas if you don’t like paying high state income tax!” I will say in response: “OK, so then move to California if you don’t like being unable to deduct lots of state income tax!” Arguments like that are annoying point-scoring achieving nothing, ignoring the fact that people live where they live for all kinds of different reasons, of which politics and tax policy is only one among many.

Don’t get me wrong. I agree with the arguments that we should be simplifying the tax code. For example, the home mortgage interest deduction, from which I benefit, distorts the home sales market. Unlike the deduction for SALT, the home mortgage interest deduction has no similarly compelling principle behind it, like avoidance of one sovereign taxing money that is already being paid to a second sovereign. The deduction should be eliminated.

But only in a way that does not raise my overall tax bill.

The TEA in “TEA Party” stands for “Taxed Enough Already” and that is how I feel. The federal government is drunk on spending. We have a $20 trillion deficit and that is a spending problem, not a revenue problem. So I deeply resent any suggestion that I should have to pay more. Rand Paul may be preoccupied with other issues today, but he was right when he said this:

What I will not accept is a tax hike on the middle and upper middle class, sacrificing their paychecks on the altar of “reform.”

Not one American outside of Washington, D.C., cares about bullet points on some tax wonk’s white paper, eagerly presented over lunch at a think tank. All they justifiably care about is “will I pay more or less under your plan than I do now?” The answer, for the sake of the GOP and our economy, must be LESS for everyone.

So go ahead and smooth out your distortions in the tax code. But do not cost my household thousands of dollars per year while you do it.

As it stands right now, this GOP plan is hitting the working upper middle class to give big tax breaks to the very wealthy. I’m FOR big tax breaks for the wealthy. But I will fight them if they try to pay for them by taking it out of my hide.

Between doing nothing and doing something that will cost me thousands, you’re damned right I am for nothing. And there are many, many more like me. If politicians pass this bill without fixing the parts that raise taxes on us, there will be hell to pay next November.

[Cross-posted at RedState and The Jury Talks Back.]

208 Responses to “A Contrary View: Deductions for State and Local Taxes Are Good Policy”

  1. I emphatically and enthusiastically disagree that each state, as a part of federalism, has a constitutional right of some sort to continue forever to enjoy a subsidy — a loophole — that Congress has granted in the past but is now considering abolishing. If your argument is correct, then there will be an inevitable ratcheting toward higher state and local taxes forever, and indeed, Congress is straightjacketed from ever changing policies away from deductions it has granted in the past. The distinction between tax rates and tax deductions may be less comforting to you as your deduction is being eliminated, but that doesn’t mean it’s a trivial distinction.

    You say you think national tax policy should be fair nationally. But then you claim a perpetual entitlement to the parts of it that have disproportionately benefited you in the past because you live in a high-tax blue state. Those two things cannot co-exist, and every time a system is made more fair by eliminating past unfairness, those who’ve previously benefited from, and become fondly accustomed to, the unfair benefits are going to squawk.

    Beldar (fa637a)

  2. Cutting taxes is for whimps. Republicans have to cut spending to make a real difference for the economy. But while we’re on the subject…….

    The best way to deal with the sovereign powers taxation problem is to specifically allocate each sovereign their own source of taxation. As argued by Johnny Cochrane, let the federal government use a VAT (value-added tax – a type of sales tax) estate taxes, and corporate income tax, but no individual income tax to fund its spending. Then let the states have the income tax on individuals, and property taxes, but no sales taxes.

    This way the states can compete against each other with their differing rates of taxation. Competition between these sovereigns is the best medicine. Besides, we’d also eliminate thousands of pages of the tax code if we eliminated federal income taxes. Then the whole problem of using the federal government tax code for class warfare vanishes.

    Absent this solution, I still think it makes sense to screw the Blue States with elimination of state income tax ad Property tax deductions. That would create a HUGE incentive for the Democrats in the Blue State Legislature to reduce taxes. Believe me, the world won’t stand still in the Blue States if this passes. It will have more of an impact than electing more Republicans.

    El Gipper (f1f816)

  3. Small-staters (and sometimes others) also like say to California conservatives like me: “Well, this is the incentive you need to get your state government to tax less.” Pardon me a moment while I laugh uproariously.

    You’re laughing because you see this task — getting your state government to behave with fiscal responsibility — seems, and probably is, practically impossible. But that doesn’t mean it’s okay as a matter of principle to give up on that effort, and it certainly doesn’t mean that the rest of the country, in sympathy with your political impotence as a California conservative, ought to continue giving you a preferential tax break.

    The principled argument is to vote as if your single vote counts, and to try to persuade others to your point of view so that eventually enough other voters join you to change things. That such is at least theoretically possible even in California can be demonstrated by past initiatives/referenda regarding state property taxes.

    You may, and surely do, feel as if your opportunity to vote on California lawmakers who determine California fiscal policy is trivial and meaningless given the overwhelming opposition. But however effective it is, you do have a voice in California policy that I, as a Texan, do not (and should not) have. And like the difference between deductions and rates, that also matters a great deal as a matter of principled justification, or lack thereof, for maintaining blue staters’ windfall.

    Beldar (fa637a)

  4. This common-sense reform will make it more difficult for Sacramento and Albany and Springfield to jack up taxes even more.

    Over the long term this will save the taxpayers of those states gobs of money.

    It’s the kind of meaningful far-reaching systemic reform we see maybe twice in a lifetime.

    God bless you President Trump.

    happyfeet (28a91b)

  5. A federal tax deduction for state and local taxes is good federal tax policy if, but only if, one wants to encourage higher state and local taxes. If one wants to keep the federal government altogether out of the subject of how high state and local authorities ought set their rates, and for which kinds of taxes (property, sales/consumption, income, etc.), then one needs for federal tax law to neither subsidize or penalize states based on their own decisions.

    You are so consistent in trying to keep the federal government from picking winners and losers. Why is it okay with you now, Patterico, for the federal government to continue picking high-tax (and blue) states to be winners, and low-tax (typically red) states to be losers? I genuinely don’t get this blindness on your part, and I expected you to say, “Yup, this is going to suck for me and other California conservatives who’ve been voting against all these high state and local taxes, but at least in the future we won’t have to also fight against those trying to justify those high taxes in part on grounds that they’re deductible at the federal level (and hence subsidizing us at the expense of low tax states).”

    Beldar (fa637a)

  6. After being incessantly bombarded with arguments to raise taxes by blue state politicians forever, this step in the GOP plan makes perfect sense and should be, for them, a triumph.

    Time for blue staters to put their money where their mouths are. The collateral damage is unfortunate, but necessary. The long term results will be worth it.

    David Longfellow (8cba7a)

  7. Lyrics by George Harrison:

    Let me tell you how it will be
    There’s one for you, ninteen for me
    ‘Cause I’m the taxman, yeah I’m the taxman

    Should five percent appear too small
    Be thankful I don’t take it all
    ‘Cause I’m the taxman, yeah I’m the taxman

    If you drive a car, I’ll tax the street
    If you try to sit, I’ll tax your seat
    If you get too cold, I’ll tax the heat
    If you take a walk, I’ll tax your feet

    ropelight (e67740)

  8. Indeed, many large states with major urban areas, like California, New York, and Illinois, are donor states.

    this is largely cause people can’t afford to live in these high-tax states in retirement, so they move away and their SS benefits no longer count as “federal benefits” received

    happyfeet (28a91b)

  9. @6

    Except, of course, that this isn’t a tax increase. It’s a tax cut for the extremely wealthy, partially paid for by tax increases on the middle class(blue states) and moderately wealthy (everywhere). The part not paid for goes to increase the deficit.

    Davethulhu (fab944)

  10. There is no change to the tax code that will raise no one’s taxes, or lower no one’s. If the standard is “no one must be made worse off” then that is an argument for stasis.

    Frederick (64d4e1)

  11. Cutting taxes is for whimps. Republicans have to cut spending to make a real difference for the economy.

    Bingo. Spent Enough Already. Tax cuts/tax policy changes/whatever are just temporary rearrangements of the problem. Barring the most extreme tax changes where entire segments of the economy become untenable, markets eventually adjust to changes in tax policy. Sure, raise the taxes on say…tea. WTH, I don’t drink tea. But I do sell popcorn. People pay more for tea have less to spend on popcorn. Now my income has been, effectively, taxed. Yes, this is a simple exaggeration and to a significant degree silly. However in the aggregate this is effectively how taxes impact an economy if you never cut the SPENDING.

    CFarleigh (5b282a)

  12. There are some basic fundamental questions here. Do you agree that subsidies encourage behavior and increase the price of an item?

    Does giving “free” money to colleges increase the cost of college?

    Does giving homestead rebates increase the cost of your property?

    If the answer is yes, then doesn’t it stand to reason that doing the same in tax policy encourages states to increase their burden on the public?

    If we want to lower the cost of college, we need to remove all the subsidies and make people pay the true cost of education rather than disbursing it amongst all of society.

    If we want people to know the true cost of their home, we need to remove all the rebates given for buying an irrationally valued property.

    If we want people to know the true cost of government, we need to remove all the costs that are spread to those who aren’t getting “benefits” from that government.

    Hiding the true costs is how politicians have succeeded in burdening society well beyond our imagined limits. We are the frog boiling slowly.

    NJRob (7f4bec)

  13. TN: no state income tax.
    CA: say 10% state income tax.

    Current tax code.
    Hypothetical: Make a $100K as resident in TN vs make a $100K as a resident in CA.
    Hypo. Tax Bracket: 25%.
    TN: pays $100K*.25 = $25K
    CA: pays (100- .1*100)*.25 = $22.5K

    Now, why should a TN be penalized vis a vis CA?
    That is unfair.

    jb (a3c1bc)

  14. I will be very surprised if the proposed subsidy removal ever arrives at the President’s desk. The removal would be a well earned reward for the Democrat Party in New York, Illinois and California for having achieved single party control and strategic irrelevance but the gored oxen in question are going to be quite vociferous in their insistence that subsidy reduction really should begin at a considerable distance from their current location and preferably with those in unthinkably different circumstances who are better able to deal with a $50 cut on their monthly EBT stipend than a $900 per month movement towards the actual cost of single party control.

    Rick Ballard (a99308)

  15. What about making it a 50 state standard deduction for state and local taxes paid, whether they are income taxes, sales taxes, whatever? That would hurt people who pay the highest taxes but it would be fair across the states, and take away more revenue from the federal government.

    DRJ (15874d)

  16. pig-licking coward John McCain’s gonna tank it anyway

    happyfeet (28a91b)

  17. What about making it a 50 state standard deduction for state and local taxes paid, whether they are income taxes, sales taxes, whatever?

    A capital idea! And make that standard deduction zero for everybody. Or increase the standard deduction or rob Peter, pay Paul. Or rearrange deck chairs. If we don’t reduce spending, does any of it really matter?

    CFarleigh (5b282a)

  18. DRJ,

    What is going to be “fair” about the distribution of pain after the bankruptcy and bailout of the overly generous and woefully underfunded pension plans in the single party states? What was “fair” about those states using the Federal tax offset to underpin profligate spending in the first place?

    Rick Ballard (a99308)

  19. High-speed rail from Tulare to Merced is berry, berry good to lefty cronies, too!

    Colonel Haiku (2601c0)

  20. @Colonel Haiku:High-speed rail from Tulare to Merced is berry, berry good to lefty cronies, too!

    Apu: Is there a chance the track could bend?
    Lanley: Not on your life, my Hindu friend!
    Barney: What about us brain-dead slobs?
    Lanley: You’ll all be given cushy jobs!

    Frederick (64d4e1)

  21. Move to texas or cut taxes in california. We are not paying for illegals welfare.

    floriduh (9ad19e)

  22. http://www.tulare.ca.gov/

    I found the moniker down town Tulare, well, cute.

    Steve57 (0b1dac)

  23. You can’t promise a middle-class tax cut and make the tax code more progressive, drop “unfair” deductions, increase credits to lower-income filers and pass it under reconciliation without raisin taxes on someone. The beltway boneheads have learned nothing from the failed repeal and replace follies. This is another round of Ryan’s “A Better Way” plan revised by the Goldman guys to attract democrat votes. Don’t worry, it’ll die in the Senate.

    crazy (d99a88)

  24. The ‘Nightmare’ Night USS Houston Went Down

    I live in fear.

    Steve57 (0b1dac)

  25. I spent an unusually long time writing this post because I expected there to be a lot of pushback. I tried to anticipate the counterarguments and respond to them.

    If you are pushing back against my argument, please do me a favor. Read the post again, and look specifically to see if I mentioned the argument you are making (e.g. “Why should we have to subsidize California’s high taxes?!!!). See if I responded to your argument. If I did, please acknowledge my reply and grapple with that on its terms.

    If you can do that, it will make me feel like it was worth the time for me to try to anticipate and reply to these arguments. I’d prefer not to just repeat things I already said in the post.

    Patterico (d10d9f)

  26. First blush:

    OTHERWISE, one sovereign or the other has the power to use the tax code to control the behavior of the other, and, in extremis, to destroy it.

    This power is limited in the real world, as the taxpayer will be destroyed far sooner than either sovereign.

    Kevin M (752a26)

  27. There are different ways of achieving fairness. Not all of them involve hurting the other guy.

    Yes, they DO all involve hurting the “other guy” if the “other guy” benefits from the current “unfairness”.

    Frederick (64d4e1)

  28. This is just another political move to punish political opposition but I like it.

    AZ Bob (f60c80)

  29. One day, a poor villager happens upon a magic talking fish that is ready to grant him a single wish.

    When the magic talking fish is the government, the government can grant no wish that does not involve a confiscation from someone else. The peasant cannot wish for a new castle, or a thousand gold bars, without having those things taken from someone else. And if his neighbor gets double, that means everyone else is losing three times to pay for these wishes.

    And so the analogy fails.

    A complicated tax code cannot be changed without hurting someone who benefits from it. A demand that “fairness” involve harming no one is actually a demand that the current “unfairness” be perpetrated forever.

    Frederick (64d4e1)

  30. Its closing a loophole

    narciso (d1f714)

  31. What if I think your point is irrefutable? I’m not trying to suck up, but if you’re right you’re right.

    Steve57 (0b1dac)

  32. Beldar–

    You rail about some states subsidizing other states through SALT, but never own up to the fact that Texas is being subsidized by California just that way.

    A Texan can currently deduct ALL state taxes paid. A Californian can only deduct his sales tax (9 to 10%) OR his income tax (average around 7%). His property taxes are generally much lower that Texas.

    CA’s sales and income taxes are each about 40% of state and local revenue. While the overall burden in CA is higher than TX, i’ll bet that TX’s entire tax bite is greater than 60% of CA’s tax load.

    So, currently CA subsidizes TX as far as SALT is concerned. The proposed reform makes the subsidy larger as CA’s property tax is by far the smallest component of CA’s state and local tax bill.

    Kevin M (752a26)

  33. Yes, they DO all involve hurting the “other guy” if the “other guy” benefits from the current “unfairness”.

    You ignore the poking eyes out example. I specifically talked about easing burdens on other states. Do not ignore what I already argued, please.

    Patterico (d10d9f)

  34. When the magic talking fish is the government, the government can grant no wish that does not involve a confiscation from someone else. The peasant cannot wish for a new castle, or a thousand gold bars, without having those things taken from someone else. And if his neighbor gets double, that means everyone else is losing three times to pay for these wishes.

    Taxation is not spending. The argument that it does is usually rejected by Republicans but talk about this and all of a sudden a tax break is a “subsidy.” Such good Democrats you’d all make, using such language!

    Asking not to be robbed is not asking for a handout. It’s asking to keep what’s mine. This used to be basic stuff taken for granted by our side.

    Patterico (d10d9f)

  35. Kevin M,

    Thank you for noticing and amplifying an argument made in my post.

    Nobody in no-income-tax states will talk to me about the deductibility of property taxes and sales tax. Why is that?

    Patterico (d10d9f)

  36. @Patterico: The government currently uses the tax code to play favorites, to advantage things it likes and discourage things it doesn’t. Agreed? If we don’t agree, then let’s find our common ground.

    So mortgage deductions, people get a tax break for buying more house, but they don’t get one for buying more cigarettes or alcohol. Do you agree that the people getting the tax break are being given an advantage relative to the people who would spend the same money on cigarettes and alcohol?

    If you don’t agree, let’s find the common ground.

    Frederick (64d4e1)

  37. I agree that it does that, but not that it should.

    Generally I want government to stay out of the business of encouraging and discouraging things through taxation.

    Allowing deduction of state and local taxes should not be done for this reason, but there is a more fundamental issue discussed in the post, initially raised by aphrael, and largely ignored here in comments though it was my central point in the post.

    Patterico (d10d9f)

  38. TX per capita tax bill (2015): $4100
    CA per capita tax bill (2015): $5860

    If you take 60% of CA’s bill (excluding the smaller of income and sales tax), you get a little over $3500.

    So, currently the average Californian subsidizes the average Texan by $600/year.

    Kevin M (752a26)

  39. @Patterico:I agree that it does that, but not that it should.

    And that’s where I am too.

    So, the tax code that favors a mortgage is unfair relative to people who want to spend their money differently. Consequently, we cannot remove that unfairness without hurting the people who benefited from it.

    The same argument applies to earned income vs capital gains, to self-employment over W2s, to people with kids vs people without, etc, etc.

    There are a million unfairnesses in the code that people currently benefit from.

    Consequently, no move toward fairness will avoid adversely affecting anyone who benefits from the unfairness.

    Bear in mind that most people who benefit from the tax code now had no choice, or little, in setting it up that way.

    So if the argument is, removing an unfairness in the tax code is like wishing for your neighbor to lose two eyes, then the argument REALLY is “the current unfairness must remain for ever”. Yet by hypothesis, it was unfair to begin with.

    Frederick (64d4e1)

  40. Not only has Beldar ignored the argument about the deductability of state and local taxes, but he professes complete puzzlement at my treating SALT deductions different from other deductions — all while totally ignoring the very first point I made in the post, which answers his question.

    Again: why did I bother to address these arguments if people are going to act like I did not?

    Patterico (d10d9f)

  41. A federal tax deduction for state and local taxes is good federal tax policy if, but only if, one wants to encourage higher state and local taxes.

    Not so. It also encourages the state to be more self-sufficient in the services it provides. Removing the SALT deduction takes more money away from the state and gives it to the federal government. How is this a principled conservative position?

    Kevin M (752a26)

  42. Patterico:

    The problem is your expectations are lofty. You’ve overestimated us again.

    If you feel the urge to ask why just remember the phrase why ask why

    Ben burn (b3d5ab)

  43. If you follow the link to what “my commenter” said, you will see the quote from aphrael which forms the centerpiece of this post and the argument that is being most studiously ignored.

    That tells me it is a good argument.

    Patterico (d10d9f)

  44. Now, why should a TN be penalized vis a vis CA?
    That is unfair.

    Currently a TV resident can deduct ALL their state and local taxes. A Californian can only deduct about 60% of theirs. Why is THIS fair? And the reform makes it worse as property taxes are about 20% of the CA tax hit, which they form a far higher proportion of the tax bite in states that have no income tax.

    Kevin M (752a26)

  45. *TN not TV.

    Kevin M (752a26)

  46. The thing to consider in the argument is that the GOP Congress starts off with 48 NAYs in the Senate. It is hard to see how any tax reform will pass that is in ANY way going to hit the middle class. The House has more leeway, but it also is more responsive to constituents, being elected every two years.

    Kevin M (752a26)

  47. The Republicans are also coming out in favor of taxing the rich, while the Democrats are complaining about that, but I cant find the article right now. It was talking about some element of the bill.

    Sammy Finkelman (02a146)

  48. Why are the people from no-income-tax states not screaming to have property taxes be non-deductible?

    And surely they want to surrender their ability to deduct sales taxes, to have parity with California!

    Write your Congresscritter! Let your feelings be heard here!

    Patterico (d10d9f)

  49. The House is going to go Democrat in 2018. I will care, but the more of this nonsense occurs, the less I will care.

    Patterico (d10d9f)

  50. @Patterico:That tells me it is a good argument.

    I think the reason people aren’t addressing it is that they don’t find it relevant, not because they think it’s a knock-down argument which proves them wrong so they must bury it in silence. The Federal government has a different kind of sovereignty from the state governments. The state governments are definitely subordinated to the Federal government. Maybe that was not the original intention but it is the fact. And the Constitution was specifically amended to allow direct Federal income tax.

    I myself see SALT taxes as one of the many kinds of spending that is given tax advantages over other kinds, and so is one of the many ways government is playing favorites, among individuals relative to each other, with the tax codes. I get a tax break for what it costs me to live in a jurisdiction with a lot of government, but not for my whiskey habit.

    Your highwayman example, in my opinion, proves too much. The extortionist can extort whatever he likes for any reason he wants, and so if he wants to “tax” you fifty times on the same income he will. It’s extortion, it’s unfair by definition.

    Frederick (64d4e1)

  51. It’s the 47% argument again. The only taxes that “matter” are income taxes.

    Davethulhu (fab944)

  52. For example, the home mortgage interest deduction, from which I benefit, distorts the home sales market. Unlike the deduction for SALT, the home mortgage interest deduction has no similarly compelling principle behind it, like avoidance of one sovereign taxing money that is already being paid to a second sovereign. The deduction should be eliminated.

    Well, you are getting your wish. It IS being eliminated. Bit by bit. This reform will be the second time the deduction was limited, both in amount and in scope. If you limit it enough, at some point eliminating it will not be catastrophic. Do it all at once and you turn good loans into bad ones.

    I would like to see sale of one’s long-held primary residence completely exempt from capital gains as it is NOT a passive investment and should not be taxed as one. In any event the $500K limit should be doubled to account for inflation over the last 20 years.

    Kevin M (752a26)

  53. Honestly, even a progressive tax code needs no deductions at all. Instead of playing with the base amount of income, the way deductions do, and then calculating the rate, just make the rate lower if you think people are paying too much for that bracket but don’t deduct anything.

    If we’re not going to tax wealth, it seems pretty easy:

    Add up every check anyone wrote you last year. That’s your “income”.
    Calculate the appropriate percentage for your income, and send that check to the Treasury.

    But a code like that would have too few opportunities for rent-seeking.

    Frederick (64d4e1)

  54. Dt,

    You do realize that income wealth, don’t you. Bill Gates has very little income.

    Kevin M (752a26)

  55. try this again

    You do realize that income does not equal wealth, don’t you. Bill Gates has very little income.

    (angle brackets no good ehre)

    Kevin M (752a26)

  56. @KevinM & Davethulhu: Bill Gates has very little income.

    Neither does Warren Buffet, and he deliberately has structured his life that way, as rich people do. So I found his complaint that his secretary is taxed at a higher rate to be deeply self-serving and dishonest. Wage slaves can’t restructure their compensation that way, and he knows it perfectly well. If he wanted to pay his “fair share” he’d advocate a wealth tax. He’s giving it all to the Gates Foundation to avoid that very thing.

    Frederick (64d4e1)

  57. Well, you are getting your wish.

    No, because as I said in the post, my wish is for it to be eliminated and tax rates lowered enough so the net effect is that my entire tax burden goes down.

    I never said my wish was to have these loopholes disappear without other tax reductions, such that my total burden goes up. I said the opposite of that. I am not getting my wish at all.

    Patterico (d10d9f)

  58. @Patterico:tax rates lowered enough so the net effect is that my entire tax burden goes down.

    Which will harm someone who benefits from the current rate structure.

    Frederick (64d4e1)

  59. And Kevin M, just as I have said about Social Security and OCare, these changes have to have a sufficient transition period so as to not harm people who have relied on the status quo and cannot easily readjust.

    Patterico (d10d9f)

  60. It’s all too complicated for me.

    Let’s just do California Medical Marijuana tax.

    25% Tax for manufacture and 25% more for consumer. We will grow ourselves out of that policy deficit and prove once and for all taxes don’t kill Bizness.

    Ben burn (b3d5ab)

  61. Here’s one for old time’s sake. Bathe in the lefty tears and despair… still flowing, and still very amusing! http://ace.mu.nu/archives/372387.php

    Colonel Haiku (6047c1)

  62. Why are the people from no-income-tax states not screaming to have property taxes be non-deductible?

    And surely they want to surrender their ability to deduct sales taxes, to have parity with California!

    Write your Congresscritter! Let your feelings be heard here!
    Patterico (d10d9f) — 11/6/2017 @ 1:23 pm

    we moved there.

    Steve57 (0b1dac)

  63. The people who should be harmed are those who depend on federal spending, because federal spending needs to be cut. There is zero need to harm anyone by giving them a higher tax bill.

    Patterico (d10d9f)

  64. @Patterico: There is zero need to harm anyone by giving them a higher tax bill.

    You cannot propose any adjustment that will not harm someone who benefits from the system as it is.

    Frederick (64d4e1)

  65. It’s instructive to learn from the past, while soaking in teh salty tears. And you can use teh rended garments for washcloths on your nether regions!!!

    Colonel Haiku (6047c1)

  66. Tell those people to talk their state govs.

    Steve57 (0b1dac)

  67. When the magic talking fish is the government, the government can grant no wish that does not involve a confiscation from someone else.

    Nothing is zero-sum, not even government. Spending can change, too. The level of government where things are spent can change as well, presumably making things more efficient. Since government is often an eye-poking negative-sum blunderer, less of that behavior helps everyone.

    Kevin M (752a26)

  68. I never said my wish was to have these loopholes disappear without other tax reductions, such that my total burden goes up. I said the opposite of that. I am not getting my wish at all.

    Point taken, but the deduction is being phased out.

    Kevin M (752a26)

  69. Yes.

    Steve57 (0b1dac)

  70. I fully agree that over-spending is the budget problem, not under-taxing. It’s one of the reasons I oppose the balanced-budget amendment, preferring a max spending amendment tied to the GDP.

    Kevin M (752a26)

  71. @Kevin M:I fully agree that over-spending is the budget problem, not under-taxing

    I’ll second that.

    Frederick (64d4e1)

  72. 62… beenburned and his stupefying blasts of intoxication… or are they intoxicating blasts of stupefaction?

    Colonel Haiku (6047c1)

  73. The House is going to go Democrat in 2018

    If it does, Trump will be impeached. The question then will be how many GOP Senators hate his guts enough to risk the retaliation.

    Kevin M (752a26)

  74. All good points in this article.

    I will see I have a problem with a plan that doesn’t just cut taxes. That’s what should happen. I care about deficits, it they should be fixed by cutting spending (yeah, I know, good luck with that). But the reality is that we are going off the fiscal cliff anyway. Better we do it with low taxes so we can protect our hard earned income from the inevitable inflationary policies that come when the debtberg hits the Titanic.

    That’s where Republicans are useless. Balance or make something budget neutral on tax reform which is supposed to help me. But blow up the deficit on Democrat priorities because, I don’t know, whatever. I’m simplifying but It feels that way. So any relief that comes makes me happy but it’s less than it should be. I could pick apart the many shortcomings but the biggest one is that there is not enough cut cut cut. Trump was right about the name of the bill for sure.

    On the whole state/federal thing … who goes first? If the federal taxes first, than the state should tax your income after federal tax is deducted. I know we are where we are right now, but it could go either way. The double taxation thing is a great point but it happens all over the place. Estate Tax is one big example. When you spend your money, it gets taxed again. Property tax is a tax on something you supposedly own. But pay over and over – a permanent sales tax. Some states have asset taxes on other things like cars – an asset tax on a financed depreciating asset. Whoa, not very good.

    We have way too many taxes on top of way too many regulations. We can’t go wrong by just hacking, slicing, cutting, chopping, and repealing all these barnacles on our freedom.

    And in the process a free and vigorous economy starts to reduce the need for all those social welfare programs that require so much taxes to begin with because everyone gets a good paying job.

    Anyway, enough said. Taxes and Death.

    PrincetonAl (04d5c8)

  75. They started with the “A Better Way” blueprint and then had to find the pay-fors to replace the border tax Brady wanted that nobody else did. Eliminating the SALT deduction was key to finding the “lost revenue.”

    I didn’t like the border tax/territorial tax equity proposal either but Ryan/Brady’s Better Way tax cut was built around it in order to meet the spending requirements needed to pass it under reconciliation. POTUS just wants to sign a “middle class” tax cut for everybody but the “rich” so the clever wonks come up with these harebrained ideas that pit one republican group against another. It’s not a recipe for success. Avoiding the ultimate policy battles with the democrats with party-line votes under reconciliation leads to bad policy and hard feelings.

    I agree eliminating SALT creates a new tax distortion that could be offset by eliminating the property tax deduction as well but then everybody will be mad.

    crazy (d99a88)

  76. Kernel Popcorn needs his Cap’n Crunch decoder ring again..when will you stop misplacing it?

    Ben burn (b3d5ab)

  77. Patrick, your arguments are well-made, as always, but like others, I don’t see the “highwayman” example as compelling.

    Taxes are one of many expenses; you pay something, and get something in return (admittedly, it is more indirect than, say, buying a loaf of bread, but the fact remains). You pay federal income tax, and in return receive (or are entitled to) various services, and you pay state taxes which provide for other, different services. For historical and practical reasons, both state and federal governments tax income. Paying x% of your income in state taxes does not change your income, any more than paying y% of your income to HBO or Verizon or California Edison or Costco does.

    The problem is that, over the years, rent-seeking has led to writing in various exceptions to the tax code, to make the government pretend that income directed at certain (favored) types of expenses was never earned in the first place. This, to me, is a fundamental mistake and should be abolished except maybe in a very few cases like charitable contributions to non-profit organizations (where the donor receives nothing in return). Otherwise, a tax on income should simply tax everyone’s (true) income, without caring about how the income is disposed of.

    I think you have a better point in arguing that the “tax reform” bill does not go far enough in this direction with property and sales tax deductions, and I am with you there.

    But, honestly, your core principle seems to be: whatever increases my tax liability is unacceptable. There are variations on this sentiment sprinkled liberally throughout your original post. Nothing wrong with that, but it implies that the fruits of a century of rent-seeking that have been written into the tax code can never be removed unless those who benefit from it are somehow compensated.

    Dave (445e97)

  78. @Dave:The problem is that, over the years, rent-seeking has led to writing in various exceptions to the tax code, to make the government pretend that income directed at certain (favored) types of expenses was never earned in the first place. This, to me, is a fundamental mistake and should be abolished except maybe in a very few cases like charitable contributions to non-profit organizations (where the donor receives nothing in return). Otherwise, a tax on income should simply tax everyone’s (true) income, without caring about how the income is disposed of.

    Dave and I pretty far apart politically I think, but I agree with this.

    Frederick (64d4e1)

  79. Hey, beenburned, get offa that cloud!

    Colonel Haiku (6047c1)

  80. ben burnin cherry diesel

    mg (60b0f7)

  81. Most people don’t pay income taxes and won’t be affected by the GOP plan, unless they have lots of kids. Reason magazine (not pro Trump) says it should slightly lower income tax for most people while slightly raising it on others. Of course they also note that tax cuts without cutting spending is meaningless. The biggest thing is lowering the corporate tax.

    Is California really a “donor state”? I found that term to be smug and self serving. It’s a state with the highest poverty rate when cost of living is factored in. It rakes in revenues from the 1% who make money on tech, info and stocks, which isn’t all tied to the state. If Google and most of silicon valley moved to Alaska it might be donor state in a few years.

    The Feds provide the state with defense, intelligence, border security, SS and other medical costs. We get water from Colorado. And they prop up companies making money in CA with sweetheart deals and subsidies. California would be bankrupt within 20 years of secession living on their own “California dollar”.

    This is true for all states. They all belong to America, consumers buy products from different states, and the revenues they generate go to the nation. 49 other states buy products from CA and watch movies made by Hollywood. They’re “donating” money given to them by Americans and foreign consumers?

    lee (0c7da6)

  82. California Gas Tax Rises 12 Cents To Pay For Road Repairs

    http://www.kpbs.org/news/2017/nov/01/california-gas-tax-rises-12-cents-pay-road-repairs/

    “I’m eastbound and down…” – Cledus “Snowman” Snow [Jerry Reed] ‘Smokey and the Bandit’ 1977

    DCSCA (797bc0)

  83. Let’s please keep in mind that some states pay more in federal taxes than they take in federal benefits.

    And how is this calculated? Usually people who push this include retirees who move to lower cost states and receive Social Security there. The presupposition is that the state essentially owns the taxpayer. Any FICA paid to the Federal government actually belongs to the state and any Social Security or other benefits the individual receives belongs to the state. I do not believe this to be the case. The State has no particular claim on taxes paid or benefits received by any resident of any state. The State has no say on where any person chooses to live. The only thing that matters are payments directly from or to the state.

    dlm (a4eb00)

  84. plus california has tons of fascist regulations what pose lots of costs on real americans

    happyfeet (28a91b)

  85. Afraid I don’t agree with your stance on deductions for state/local taxes, to the extent it’s rooted in double taxation, but maybe I can explain in a friendly way.
    It’s key to understand that a deduction doesn’t avoid the circumstance where “You are allowing one sovereign to tax money that the taxpayer is already paying to another sovereign.” The way to do that is with a credit, not a deduction.
    With a deduction, the first highway extortionist (a state) takes 10% of your $100. The next extortionist (the feds) also want $10 but reduces the amount to $9 after granting a deduction for what the first extortionist took (10%*($100-$10)). So despite the deduction, you still pay “double” tax on the same income. If there were a credit for the first $10, the second extortionist (the feds) would get 0, and your overall burden would be $10.
    Moving back to tax policy: If you want to avoid the same income being taxed twice, the feds have to grant a credit for state/local taxes. But that can’t happen because a credit would degrade the federal tax base and set up some wild distortions where low-tax states would bear disproportionate burdens. The deduction already does this but to a lesser extent.
    I don’t think there is anything inherently wrong (or unseemly or immoral) with double taxation from separate sovereigns, but the combined tax burden needs to be reasonable and fair. In my view, the better way is to have a large standard deduction while eliminating deductions for as many things as possible (state/local taxes, mortgage interest, etc.).

    BobbyD (4b65b7)

  86. 87. BobbyD (4b65b7) — 11/6/2017 @ 4:55 pm

    The way to do that is with a credit, not a deduction.

    That;s how the United States treats income taxes paid to foreign countries, and the state of New York treats sales taxes paid to Pennsylvania. (where the sales tax is lower)

    Why they don’t do a credit? First, both sovereigns don’t treat all income the same, but that ay be a small point.

    Second, probably because that way the federal government would collect less, and people in higher tax brackets would of course, pay less.

    Come to think of it, if the federal government gave a credit against income taxes paid to astate, state taxation of income would be painless. If the state allowed a credit against the federal income tax, they’d get nothing.

    In the case foreign countries, the jurisdictions are at least roughly at the same level and high. In the case of sales taxes if you didn’t do a credit, how could you handle it and avoid double taxation?

    Sammy Finkelman (69aa73)

  87. Note that the home mortgage interest deduction benefits people more in the high price states. There is more of a government subsidy for someone with a mortgage on a $500,000 home than a $100,000 home. In other words, the government is helping our esteemed host more in the purchase of his home than it did for me.

    (Full disclosure: my home mortgage interest declined so much in 2015 that I’ve wound up using the standard deduction since then. Since I bought the farm cash, I will have no mortgage interest at all in 2018.)

    The accountant Dana (e48a51)

  88. Given federal supremacy, shouldn’t it be up to the states to allow deductibility of federal taxes, rather than the federal government to provide deductibility of state and local taxes?

    I have said it all along: the greatest violence ever foisted upon a free people was the Sixteenth Amendment! Prior to that, Congress could impose direct taxes only on a population basis; that would mean everybody paid the same amount, from Bill Gates to Patterico to the unemployed. Once the Sixteenth Amendment passed, the greatest mischief ever became available, to tax one citizen more than another.

    The unaccountable Dana (e48a51)

  89. BobbyD,

    You say:

    Afraid I don’t agree with your stance on deductions for state/local taxes, to the extent it’s rooted in double taxation, but maybe I can explain in a friendly way.

    It’s key to understand that a deduction doesn’t avoid the circumstance where “You are allowing one sovereign to tax money that the taxpayer is already paying to another sovereign.” The way to do that is with a credit, not a deduction.

    With a deduction, the first highway extortionist (a state) takes 10% of your $100. The next extortionist (the feds) also want $10 but reduces the amount to $9 after granting a deduction for what the first extortionist took (10%*($100-$10)). So despite the deduction, you still pay “double” tax on the same income. If there were a credit for the first $10, the second extortionist (the feds) would get 0, and your overall burden would be $10.

    I agree that one could argue that there is a problem with double taxation of the same income. But I don’t think that’s quite what I argued in the post. I argued that it is wrong, not to tax money that has already been subject to taxation by another sovereign, but money that has been paid or will be paid to another sovereign.

    So in your example, my big issue is actually the one set forth in my example: actually taking the $10 paid to the first extortionist and using that as part of the tax base for the other sovereign.

    I think I was careful at all times to say the issue was taxing the money actually being paid to the other sovereign.

    Patterico (115b1f)

  90. 54. Kevin M (752a26) — 11/6/2017 @ 1:29 pm

    I would like to see sale of one’s long-held primary residence completely exempt from capital gains as it is NOT a passive investment and should not be taxed as one. In any event the $500K limit should be doubled to account for inflation over the last 20 years.

    They’re proposing to make it harder to qualify.

    Instead of it being necessary to have both owned the house and lived there (which don’t both have to be the exact same time periods) for 2 out of the last five years, the bill proposes to change that to 5 of the last 8 years.

    I don’t know how the exclusion, but a reduced one, in case of a change in place of employment, changes in health or other unforseen circumstances is affected by the bill, but to learn about the ways things are now I see that Publication 17 directs you to Publication 523.

    And it’s $250,000 except it’s doubled to $500,000 for a married couple filing a joint reurn.

    Section 1035 or whatever it is that pertains to bartering real estate, already very time limited, are abolished for personal homes and limited to business property.

    Sammy Finkelman (69aa73)

  91. Paying x% of your income in state taxes does not change your income

    Well, sure it does, Dave. It changes my net income.

    Patterico (115b1f)

  92. I hasten to say: perhaps not as defined by tax authorities, depending on the rules.

    But in reality it does.

    Patterico (115b1f)

  93. Anyone taking the standard deduction will not be affected since they don’t itemize.

    I can’t know for sure, but I suspect many people do not deduct sales taxes. It’s too much of a bother.

    dlm (a4eb00)

  94. @Patterico: There is zero need to harm anyone by giving them a higher tax bill.

    You cannot propose any adjustment that will not harm someone who benefits from the system as it is.

    Frederick,

    What you say may be true. But it does not contradict what I said.

    Patterico (115b1f)

  95. I have already argued (I guess I should get used to the things I say here being ignored) that if anyone deserves to be harmed it is people who benefit from spending, not from tax breaks. That is because we need to control spending, not tax breaks.

    Patterico (115b1f)

  96. Well, sure it does, Dave. It changes my net income.

    My point was that you pay for a lot of things out of your income, and I don’t agree that there is anything fundamentally different from paying Sacramento for the services the state provides, and paying, say, your condo association or utility company for the services they provide.

    I understand, of course, that money paid for state taxes is not available for other purposes. But neither is money paid for anything else.

    Dave (445e97)

  97. Patterico,

    You are absolutely correct that it is unfair to allow unlimited deductions of property taxes, but restrict deductions of state income taxes. This tax bill will lead to the repeal of Proposition 13 in CA to rectify that imbalance. So I actually favor disallowing the deduction of any state taxes so that we don’t provide incentives to bias the method and sources of tax collection.

    However, your argument about the immoral and unjust state of taxing income that has already been paid out as taxes to another sovereign (state government) is weak. Why couldn’t I make the argument that states like CA let their taxpayers deduct the amount of federal taxes to determine the amount of income subject to taxation? That would be a better way to solve your 2 sovereigns problem.

    You assume that the federal government should make this accommodation, but frankly, I don’t see why the states shouldn’t be the ones to grapple with it.

    El Gipper (f1f816)

  98. You assume that the federal government should make this accommodation, but frankly, I don’t see why the states shouldn’t be the ones to grapple with it.

    They both should.

    Patterico (115b1f)

  99. A taxes you 10% on $100,000 to take $10,000. B taxes you 10% on $100,000 to take another $10,000. Would it be better if B instead taxed $90,000 at 11.11% instead of taxing $100,000 at 10%? Would that make everyone feel better? I don’t see that it matters.

    dlm (a4eb00)

  100. It would have taken me a lot less time just to toss out an opinion with no substantive arguments or links to back it up. And then I wouldn’t have to deal with the frustration of watching people ignore arguments I already made. (There is a LOT of this in the RedState comments; it’s actually a lot better here.) Perhaps it’s better not to make the arguments at all.

    Patterico (115b1f)

  101. Would it be better if B instead taxed $90,000 at 11.11% instead of taxing $100,000 at 10%? Would that make everyone feel better?

    No. As I oppose eliminating deductions without compensating cuts in the rate, I oppose rate increases. I just oppose all tax increases — at least for people who are actually paying into the system.

    Imposing taxes on people who have no stake in the system might be a different discussion.

    Patterico (115b1f)

  102. @ Kevin M, who wrote (#33):

    Beldar–

    You rail about some states subsidizing other states through SALT, but never own up to the fact that Texas is being subsidized by California just that way.

    A Texan can currently deduct ALL state taxes paid. A Californian can only deduct his sales tax (9 to 10%) OR his income tax (average around 7%). His property taxes are generally much lower that Texas.

    You put words in my mouth unfairly, sir. I am in favor of eliminating deductions for all state and local taxes. I’m therefore under no obligation to “own up” to anything. I’m certainly not going to engage in counterarguments that are, in your own admission, based on your “bet” rather than upon data.

    Re our host, who wrote (#42):

    Not only has Beldar ignored the argument about the deduct[i]bility of state and local taxes, but he professes complete puzzlement at my treating SALT deductions different from other deductions — all while totally ignoring the very first point I made in the post, which answers his question.

    See above re my position on whether any state and local taxes should be deductible.

    I’m not arguing that I should get to keep my deductions and you should lose yours. I’m arguing we should all lose the deductibility of all state and local taxes because otherwise, we are indeed very squarely and unambiguously putting the federal “government [in] the business of encouraging and discouraging things through taxation,” which you claim (in #38) to be against. Here, you are not against it. I believe you when you say that is indeed a priority for you, because it’s something you’ve very consistently argued in other but similar contexts for many years here, and I’ve agreed with you then. What I do not understand is why you think this time it’s okay, despite your general rule, for despite the title of this post, you haven’t expressed a single policy justification for maintaining this blue-state tax windfall other than your own pique at the prospect of losing it.

    That your pique is especially acute I do understand, because you weren’t supporting the state laws and policies that created those high state and local taxes. Nevertheless, you chose to move to a high-tax state with a state income tax and a blizzard of other taxes and fees, and you’ve chosen to remain there, despite your and other conservatives’ lack of success in addressing either high state spending or high state taxation. So if you and fellow blue-state conservatives are victims, it is not of me or anyone from red states who demand evenhandedness, but rather of your fellow blue-state voters in combination with your own desire to remain in California for other reasons.

    Re this:

    [I]f anyone deserves to be harmed it is people who benefit from spending, not from tax breaks. That is because we need to control spending, not tax breaks.

    We’re talking here about normalizing and simplifying federal taxation to prevent state-to-state disparities in federal taxation. It’s not retroactive (and indeed, I’d be sympathetic to reasonable phase-ins based on past reasonable reliance). And the intent isn’t to harm anyone based on their politics or their views on spending. We do need to control spending, but that’s a different set of Congressional committees and a different line of legislating.

    And I utterly reject — and am amazed to see you suggesting! — that we don’t need to control tax breaks. Tell me, are you in favor of keeping all the tax breaks we have, or just those that selectively benefit blue-state citizens? Because I’m generally in favor of abolishing tax breaks, especially at the federal level, as was the candidate both you & I supported in the GOP primaries, Ted Cruz.

    Beldar (fa637a)

  103. Anyone taking the standard deduction will not be affected since they don’t itemize.

    That’s how I do it (inherited home=mortgage paid off years ago). From what I can find out online I will pay a couple of hundred more dollars in income tax under this plan, and at best pay the same as before: the increase in the standard deduction will either balance out or be less than the increase due to changing the bottom bracket from ten to twelve percent.

    kishnevi (07cb64)

  104. Also: Was your “very first point” in this post the double-taxation (state & federal) argument that there’s somehow some inherent right somewhere (you didn’t say the Constitution, but that’s the only source I can think of which would somehow bind Congress) to avoid such double-taxation? Because I did address that: The Constitution says no such thing, nor is there any other such general principle of law or equity that would require Congress to defer to high-taxing states by making their state and local taxes deductible. See my first paragraph in #1 above.

    Beldar (fa637a)

  105. I live in a high tax state, NY. Frankly while I will miss the deduction, it’s a badly-managed state that’s been run by bad at math fiscal idiots forever. If you take that deduction away-maybe-they wake the hell up. Medicaid fraud is rampant, social service programs are given away for a song and they create new ones without a 2nd thought how to pay for any of it.

    The state tax deduction allows state like NY to not take a cold hard look at their costs. If that encouraged NY taxpayers to demand greater fiscal responsibility compared to other states that would be a good thing.

    Much more hopeful AMT would be eliminated. For most working people, that’s a very good deal. It’s made the Bush tax cuts a mirage for middle and working class people.

    Bugg (08921e)

  106. Regarding the “dual sovereigns” argument: At best, this is an argument that two sovereigns ought not both tax the same thing because doing so subjects it to double taxation.

    (Let’s set aside for the moment that we absolutely, positively do that every single day in our state and federal systems of taxing most income twice, first at the corporate level and then at the individual level. That has its own problems, but they’re for an argument on anther day.)

    If so, then the more forceful argument would be that California should abolish its personal income tax and rely instead on sales and property taxes so as to eliminate the conflict between the double-taxing joint sovereigns.

    But it doesn’t at all follow that because California insists on having a personal income tax despite the existence of the federal income tax, its residents therefore ought to get a special federal tax deduction that gives them a windfall compared to states without personal income taxes.

    Beldar (fa637a)

  107. Nobody in no-income-tax states will talk to me about the deductibility of property taxes and sales tax. Why is that?
    Patterico (d10d9f) — 11/6/2017 @ 12:52 pm

    I will have to pay a little more attention this year at tax time. I think my property tax on a house and 13 acres is about $700. We are among the highest sales tax states. Unless I buy a car I don’t know if it’s more trouble than it’s worth.

    All my taxes go to Texas

    That’s why I hang my hat in Tennessee

    Pinandpuller (7381a5)

  108. It’s instructive to learn from the past, while soaking in teh salty tears. And you can use teh rended garments for washcloths on your nether regions!!!
    Colonel Haiku (6047c1) — 11/6/2017 @ 1:43 pm

    A whoorse bath?

    Pinandpuller (7381a5)

  109. Tell those people to talk their state govs.
    Steve57 (0b1dac) — 11/6/2017 @ 1:45 pm

    Tennessee passed a Constitutional Amendment agin’ them revenoors.

    Pinandpuller (7381a5)

  110. This is true for all states. They all belong to America, consumers buy products from different states, and the revenues they generate go to the nation. 49 other states buy products from CA and watch movies made by Hollywood. They’re “donating” money given to them by Americans and foreign consumers?
    lee (0c7da6) — 11/6/2017 @ 3:02 pm

    Nobody ever complains about the rough trade deficit.

    Pinandpuller (7381a5)

  111. I agree with Beldar.

    And the “two sovereigns” thing just seems irrelevant to me. Income is used as the basis for state and federal taxes first because of the difficulty in charging people “a la carte” for their “share” of the public goods being provided, and second to create some approximate correlation between the amount assessed and the means to pay it.

    But the two sovereigns are charging you for completely different things, and I don’t see anything intrinsically unfair about both of them using the same reference quantity.

    Dave (445e97)

  112. Actually the problem is more fundamental, thanks to the new deal and decisions like this one:
    https://www.oyez.org/cases/1964/515 there effectiv

    narciso (d1f714)

  113. Was only one sovereign, the federal leviathans, and the states became useless appendages of same.

    narciso (d1f714)

  114. They’re proposing to make it harder to qualify.

    Sammy, since I posted that 2 days ago, I’d have to agree. Ansd this really isn’t such a mystery that I need it Sammysplained.

    Kevin M (752a26)

  115. based on your “bet” rather than upon data.

    The “bet” is based on 40 years of paying taxes in this state. Not all data is online.

    But I do not believe I am putting words in your mouth as you suggest that folks in “high-tax states” are being subsidized by hard-working God-fearing Texans. Or at least that’s what comes across. When in fact only a portion of CA taxes are currently deductible while ALL of a Texans are.

    I did not “choose” to move here (and those that did should go home now). My people have been in California since their Irish asses finished building the Union Pacific. I’m 4th or 5th generation depending on which tree you follow.

    This used to such a nice place to live.

    I do think that all such taxes should either all be deductible or all be non-deductible. But if the latter, then the rate brackets should come down and the standard deduction should go up. What the GOP has proposed is a big cut in middle class deductions, a false increase in the standard deduction (the loss of personal exemptions zeros that out) and a niggardly cut in rates (28% to 25%). Choco rations and all that.

    However, if I was REALLY in control of tax policy I would have much of what the feds do devolved to the states (“federalism”) and the tax base shifted accordingly. It is absolutely nuts to give billions to the feds so the states can beg them to give it back if we follow their rules.

    So, in principle, I am not against high state taxes, but rather for lower federal taxes, and a lower combined cost all told.

    Kevin M (752a26)

  116. Also, out host is talking about the GOP plan, not some ideal one, where the results favor some states over others, particularly those whose mix of taxes falls most heavily on property. The suggestion that we lobby for lower taxes isn’t very useful as CA’s property tax isn’t very high.

    And again, consider how much a Texan would favor a plan that only allowed income taxes to be deducted.

    Kevin M (752a26)

  117. Also: Was your “very first point” in this post the double-taxation (state & federal) argument that there’s somehow some inherent right somewhere (you didn’t say the Constitution, but that’s the only source I can think of which would somehow bind Congress) to avoid such double-taxation? Because I did address that: The Constitution says no such thing, nor is there any other such general principle of law or equity that would require Congress to defer to high-taxing states by making their state and local taxes deductible. See my first paragraph in #1 above.

    Nope. I never said or suggested it was a constitutional issue. It’s a moral issue. It’s an abomination to tax money that I don’t keep but pay to the state banditos. It’s an abomination for both the federal and state government to tax money I am already paying to a different sovereign.

    Patterico (115b1f)

  118. That your pique is especially acute I do understand, because you weren’t supporting the state laws and policies that created those high state and local taxes. Nevertheless, you chose to move to a high-tax state with a state income tax and a blizzard of other taxes and fees, and you’ve chosen to remain there, despite your and other conservatives’ lack of success in addressing either high state spending or high state taxation. So if you and fellow blue-state conservatives are victims, it is not of me or anyone from red states who demand evenhandedness, but rather of your fellow blue-state voters in combination with your own desire to remain in California for other reasons.

    If you are a victim of not being able to deduct enough taxes, it is not of me, but rather of your federal government having allowed the deduction in combination with your own desire to remain in Texas where you can’t deduct state income taxes. Feel free to vote with your feet and come here. Otherwise don’t whine to me about unfairness.

    Is that “vote with your feet” argument satisfying when it is coming back at you? By the way, this bill will not pass with these middle-class-slamming provisions. So if the law remains as it is now, I now know not to feel sorry for you for not getting all the lovely deductions we get now and will still get when this thing goes down in flames. Because you can change the unfairness with the ever so easy expedient of uprooting your entire life and moving to my state. Why, it’s just that simple!

    So you agree that you should not be able to deduct your sales and property taxes, which form a higher percentage of your tax base than it does in California. Do I understand you correctly?

    Patterico (115b1f)

  119. Let’s set aside for the moment that we absolutely, positively do that every single day in our state and federal systems of taxing most income twice, first at the corporate level and then at the individual level.

    Let’s set that aside because I am not talking about double taxing the same dollar.

    I am talking about taxing the dollar, and then taxing the money that is used to pay that initial tax again.

    That is different. See my reply to BobbyD above.

    Patterico (115b1f)

  120. But the two sovereigns are charging you for completely different things, and I don’t see anything intrinsically unfair about both of them using the same reference quantity.

    it’s a quantity that includes money we don’t have because we are paying that money to the other sovereign. See the example in the post.

    Patterico (115b1f)

  121. And I utterly reject — and am amazed to see you suggesting! — that we don’t need to control tax breaks. Tell me, are you in favor of keeping all the tax breaks we have, or just those that selectively benefit blue-state citizens?

    As you know from reading all the words in my post, I am in favor of rejecting all special tax breaks except the one that aphrael explained is not a “break” because all it does is prevent one sovereign from taxing money that the other sovereign already took from me or intends to take. Other “breaks” should be eliminated as distortions and replaced with lower flat rates — low enough that my tax liability goes down and not up.

    I will never support a tax hike for the federal government as long as I live. I used to favor them to help with the debt. No more. Control that through spending cuts.

    Patterico (115b1f)

  122. I’m not arguing that I should get to keep my deductions and you should lose yours. I’m arguing we should all lose the deductibility of all state and local taxes because otherwise, we are indeed very squarely and unambiguously putting the federal “government [in] the business of encouraging and discouraging things through taxation,” which you claim (in #38) to be against. Here, you are not against it. I believe you when you say that is indeed a priority for you, because it’s something you’ve very consistently argued in other but similar contexts for many years here, and I’ve agreed with you then. What I do not understand is why you think this time it’s okay, despite your general rule, for despite the title of this post, you haven’t expressed a single policy justification for maintaining this blue-state tax windfall other than your own pique at the prospect of losing it.

    That’s just not so. You might disagree with it, but the very first point in this post is a policy justification. I quote aphrael. Take issue with me if you like, but please stop pretending I didn’t offer any reason, and professing such great shock that I would be for “very squarely and unambiguously putting the federal ‘government [in] the business of encouraging and discouraging things through taxation.'” This is not an argument about encouraging or discouraging actions or I would agree with you: these deductions may encourage more taxation at the local level. It is a matter of principle — not constitutional principle but moral principle — that it is outrageous for one sovereign to tax money that is already pledged to another.

    As for eliminating other tax breaks, again, for umpteenth time: get rid of them, but do not raise my tax burden by thousands to do it. As I already said in the post. Especially when you are giving big breaks to far wealthier people. As I also already said in the post.

    Patterico (115b1f)

  123. Tax the wealthy. Anyone making 2 million a year can afford paying 44%. Leave the middle class alone you ignorant Jane’s.

    mg (60b0f7)

  124. Some of the proposed tax law changes not mentioned yet:

    1. Getting rid of the deduction for preparing taxes (right now that, and other miscellaneous deductions, have to hit 2% of adjusted gross income (I think)in order to be deductible and it’s the portion over 2% that is deductible. (It’s that over 10% – used to be 7.5% that’s deductible for medical expenses – taxes and mortgage interest only have to beat the standard deduction (for it to make sense)

    2. Moving expenses no longer deductible.

    3. Adoption tax credit to go away.

    4. The extra exemption for elderly (over age 65) and blind is gone because personal exemptions are gone. There is also a tax credit for the elderly and disabled which has a very low income limit ($17,500 for a single individual, $20,000 for a married couple if one spouse qualifies and $25,000 if both do – the amount of Social Security received also has to be low $5,000 if one person qualifies and $7,500 if both do) and that too is to disappear.

    5. While carried interest remains, the value of taht loophole is small sincce pas throuh income will be 25% and capital gains income is 23.9%.

    In another bill – the CHIP bill, which is unlikely to pass the Senate in its current form the grace period for keeping an insurance policy purchased on an Obamacare exchange is to go down to 1 month from 3 months.

    But abolishing the Obamacare individual mandate may be in the tax bill, because according to the CBO, (but probably not in reality) according to the CBO, unless it changes its calculations, that saves the government lots and lots of money with fewer people getting Medicaid and a subsidized Obamacare policy.

    Sammy Finkelman (69aa73)

  125. Spending must be cut. With only 1 party in d.c. It will be up to the “Silent Majority” to continue winning elections before billions will be cut from the budget.
    F the baseline accounting system.

    mg (60b0f7)

  126. the whole tax cut thing’s a moot point thanks to spiteful torture-trash like for example sleazy war hero John McCain

    it would also *maybe* help if unprincipled kentuckyslut showboat Rand Paul just resigned especially now that he’s nonfunctional and can’t do his job

    but it probably wouldn’t help all that much

    the bottom line is the Republican senate can’t govern

    they are too trashy to govern

    they are too trashy

    happyfeet (28a91b)

  127. rejoice in this day!
    felonia von pantsuit
    Is not President!!!!!!!!!!!!!!!!!!!!

    Colonel Haiku (2601c0)

  128. Again, all this talk about tax cuts, as a few others have now noted as well, is a waste of time and effort. Every second, minute, hour, post, advert, radio rant, etc. etc. etc. by so-called conservatives in regard to tax plan this or tax plan that is a second, minute, hour, post, advert, radio rant, etc. etc. etc. that is not being used to address cutting SPENDING. All the brain power, the cycles, consumed by all the “smart” people, the lawyers, the accountants, the tax experts, the economists, is for naught. There exists not one tax plan conceivable that will do anything to cut taxes in the aggregate, nor even for the individual over the long run. Not a one that will actually put real money in people’s pockets. The spending continues, and continues to accelerate, despite anything done on the revenue side and that spending comes from the productive efforts of every man, woman, and even child in this country who produces even one dollar’s worth (whatever that may mean at a given instant in time) of economic value.

    Glad to see some folks are starting to catch on but it’s gonna take a whole lot more effort than this to get our “betters” off the tax cut mantra.

    CFarleigh (5b282a)

  129. The Republicans are not for cutting spending, which by the way, is easy to be for as long as it remains abstract. The Republicans are pro-growth. By the way, when you have economic growth, spending should go down.

    What they need to do is eliminate the trap of disability, workman’s compensation, Medicaid and the problem of discrimination against the long term unemployed (Obama proposed the latetr but he made it too complicated, and tried to avoid :”wasting” a tax credit.

    New businesses need tax cuts or tax exemptions to encourage them to form. People need to be encouraged to switch jobs and employers to give raises to retain people. Say the first $3,000 of income from any new employer or self employment exempt from FICA every year. .This will mostly hit people when they need money – January or after a period of unemployment.

    Sammy Finkelman (69aa73)

  130. Beldar,

    You are against federal subsidies for flood insurance, right? They encourage building in high-flood areas. Without it, the true cost of building in those areas would be reflected in the price of flood insurance (which I recently learned is almost always federally subsidized, by an out-of-control program that is itself far underwater). The subsidy encourages building in areas where disasters are likely to repeat and may contribute to needless property loss, injury, and death. But it’s very popular. If you’re against federal subsidies you should help agitate to remove this one.

    Patterico (e680cc)

  131. Tax the wealthy. Anyone making 2 million a year can afford paying 44%. Leave the middle class alone you ignorant Jane’s.

    Sums it up nicely.

    Ben burn (b3d5ab)

  132. I wish the federal government would get out of the flood insurance business. Let private insurance handle it. If people want to build in areas where the insurance is very expensive, or build without insurance, so be it.

    DRJ (0280d9)

  133. Sources said that General Flynn did indeed discuss this offense, which was admitted, with FBI agents. However, they reported that after a brief period, a senior official entered the room and confronted General Flynn with knowledge of his wider conspiracy in Russia’s interference in the election. An outline of a case for espionage, a capital crime, where the default penalty is death, was made to Flynn senior, involving both himself and his son Mike Flynn Jr. While sources were not specific, they reported that the conversation involved both men’s knowing propagation, and co-ordination, with the Kremlin, of Russian propaganda, using an Artificial Intelligence ‘data weapon’ precisely to target that propaganda on social media. This technology and the way it was employed is also said to feature in an espionage investigation that is ongoing against Bob Mercer, sources say.

    https://patribotics.blog/2017/11/05/exclusive-sources-general-flynn-wept-as-he-asked-fbi-to-spare-mike-flynn-jr/

    Ben burn (b3d5ab)

  134. But I don’t live on the coast. I do live in an area that has oil and gas, and I wish the federal government would also stop subsidizing fossil fuels and all other energy, including renewables. It distorts the market and corrupts the system by letting politicians, not markets, pick winners and losers.

    DRJ (0280d9)

  135. My ideal water temperature for drowning the kittens is an even 100 degrees Fahrenheit. The kind of thinking demonstrated in this discussion is the kind of thinking that gave us a “choice” between Trump and Hillary. Nobody got a clue from

    Imagine an extortionist on a highway who takes 10% of your stuff so you can pass. Now imagine that you run into a second extortionist who takes another 10% — but says he’s taking 10% of your original amount, because it’s not his fault the first extortionist was there.

    You will speak to an extortionist about reasonableness, fairness and equity? What was your real purpose in this post, Patterico? To test the relative degree of statism in your commenters, or just our intelligence?

    nk (dbc370)

  136. 137… Gives a whole new meaning to “kitteh slayer”…

    — Kip Winger

    Colonel Haiku (6047c1)

  137. That was amusing Ben, you know mensch is a Russian sleeper right.

    narciso (d1f714)

  138. As Marcy says Page has many meanings for the word meet or met like the meaning of is is, is what?


    In terse and sometimes heated exchanges with members of the committee, Page admitted that he had met with Russian officials and discussed the U.S. presidential election “in general terms.” He also met with the head of investor relations at Rosneft, a top Russian oil company. Page said the sanctions the U.S. has imposed on Russia may have come up in their discussion but “not directly.”

    https://www.nbcnews.com/news/us-news/carter-page-coordinated-russia-trip-top-trump-campaign-officials-n818206

    Ben burn (b3d5ab)

  139. Ah, she’s a mensch

    Ben burn (b3d5ab)

  140. Is the Grand Marshall of the United States Supreme Court preparing a sealed indictment, do you suppose, narciso? LOL

    nk (dbc370)

  141. Patterico is making a process argument about taxes. But the tax process changes when it does not deliver the desired outcome, and people change their behavior which results in yet more changes.

    The highwayman is there get the money he wants for the effort he is willing to put in. If he lets you deduct your SALT then he’s just going to get the rest from you some other way, which might be even less fair.

    Frederick (64d4e1)

  142. Those directional mikes ate unreliable, what the (cognate) are these people telling Richard Engels.
    Page is an oil man, rosneft is an oil company more like texaco on steroids. Yes one gets into a heated argument taking with stupid people like schiff, who don’t what they ate talking about.

    narciso (d1f714)

  143. Emptywheel..

    “IT DEPENDS ON THE DEFINITION OF MEET
    That said, the most interesting bits involve the things Page tried to hide or obfuscate, such as his claim he never met Trump even after having been in a lot of meetings with him.

    Mr. Rooney: Did you ever meet Mr. Trump?

    Mr. Page: I have never met him in my life. I’ve been in a lot of meetings with him, and I’ve learned a lot from him, but never actually met him face-to-face.

    He does the same with Arkadiy Dvorkovich, Russia’s Deputy Prime Minister, when Adam Schiff tries to point out that meeting him in July 2016 would amount to meeting a senior official.

    Mr. Schiff: And you don’t consider him to be a high-up official or someone in an official capacity?

    Mr. Page: I — nothing I — it was — again, I did not meet with him. I greeted him briefly as he was walking off the stage after his speech.

    Page even compares these two instances of not-meetings later in his testimony.

    [I]t goes back to the point I mentioned with listening to speeches, listening to particularly Arkadiy Dvorkovich’s speech, right. Again, great insights just like I learned great insights — even though I’ve met — I’ve never met Donald J. Trump in my life, I’ve learned a lot from him.

    Ultimately, even Trey Gowdy finds this obfuscation around the word “meet” to be too much.

    Mr. Gowdy: All right. I’ve written down four different words. I didn’t think I’d ever be going through this with anyone, but we’ve got to, I guess. You seem to draw a distinction between a meeting, a greeting, a conversation, and you hearing a speech.”

    Ben burn (b3d5ab)

  144. Ultimately, we’re where we were back in 1000 BC:

    Samuel told all the words of the Lord to the people who were asking him for a king. He said, “This is what the king who will reign over you will claim as his rights: He will take your sons and make them serve with his chariots and horses, and they will run in front of his chariots. Some he will assign to be commanders of thousands and commanders of fifties, and others to plow his ground and reap his harvest, and still others to make weapons of war and equipment for his chariots. He will take your daughters to be perfumers and cooks and bakers. He will take the best of your fields and vineyards and olive groves and give them to his attendants. He will take a tenth of your grain and of your vintage and give it to his officials and attendants. Your male and female servants and the best of your cattle[c] and donkeys he will take for his own use. He will take a tenth of your flocks, and you yourselves will become his slaves. When that day comes, you will cry out for relief from the king you have chosen, but the Lord will not answer you in that day.”

    Frederick (64d4e1)

  145. No Frederick..Israel was THEOCRACY but the people wanted a human king and Samuel was spinning the cautionary tale.

    Ben burn (b3d5ab)

  146. THEOCRACY is the threat now

    Ben burn (b3d5ab)

  147. The Republicans are not for cutting spending, which by the way, is easy to be for as long as it remains abstract.
    Agreed.
    The Republicans are pro-growth.
    Really, who isn’t? Even a majority of the masses of commies think their policies will result in superior output. Even their leaders are mostly indifferent. Who wouldn’t want growth, so long as you get to confiscate as much as possible.
    By the way, when you have economic growth, spending should go down.
    Yeah…key word “should”. Never seems to, however. If it actually did, some aspects of Keynsianism might be viable. But it’s all theory as it never happens. Wonder why….

    What they need to do is eliminate the trap of disability, workman’s compensation, Medicaid and the problem of discrimination against the long term unemployed (Obama proposed the latetr but he made it too complicated, and tried to avoid :”wasting” a tax credit.
    People are “trapped” in disability mostly because they choose to be. Why can a man with a “bad back” not be able to work at all, yet there are blind computer programmers? As for long term unemployed, while there may be such to a minor degree, the greater problem is the reason many are long term unemployed is that they are either not willing to take a lesser job/lesser pay after a layoff, or they have a drug/crime/attitude problem. Women frequently leave the work force to care for children for a dozen years or so and manage to get back in.

    New businesses need tax cuts or tax exemptions to encourage them to form.
    Need? Or want? Aside from the tax exemption, if we call it that, where in most cases startup/expansion costs that need to be spread over several years, don’t see why they are needed.

    People need to be encouraged to switch jobs and employers to give raises to retain people.
    Why must this be done via tax policy? Does it really have a viable effect?

    Say the first $3,000 of income from any new employer or self employment exempt from FICA every year. .This will mostly hit people when they need money – January or after a period of unemployment.

    CFarleigh (5b282a)

  148. Give all the taxation, how many times is the same income potentially taxed, albeit at different times?

    They hit you coming and going, over, under, sideways, down… backwards, forwards, square and round*

    * hat tip Keith Relf

    Colonel Haiku (6047c1)

  149. Given, not give

    Colonel Haiku (6047c1)

  150. Bahh! hit send too soon…per the last part:

    Say the first $3,000 of income from any new employer or self employment exempt from FICA every year. .This will mostly hit people when they need money – January or after a period of unemployment.

    Maybe. Actually kinda like this idea for probably other reasons than you state. Would be interesting to see people jump when February hits and they see how much their friend FICA is taking from them every other month of the year. Hell, might be better to do it for regular withholdings rather than FICA as FICA could be politicked such that “well, you’re really getting all that back when you retire/get disabled”.

    CFarleigh (5b282a)

  151. All the talk about cutting spending is well and good, but what, of any fiscal significance, do you propose to cut?

    Non-military discretionary spending is $600B. The total outlays are $3.8T. So the part of the budget that can be reduced without cutting the military or entitlements is only 15% of the total.

    Zeroing out non-defense discretionary spending completely would ALMOST balance the budget. That includes the entire federal criminal justice system, the border patrol, the FDA, air-traffic controllers, national parks, the forest service, etc.

    Further, Trump cultists have invented a completely false narrative that the GOP congress has increased spending recklessly in recent years. The opposite is true, as I’ll show.

    Spending sky-rocketed in 2009 with the fiscal crisis and democrat control of congress and White House, and then stayed almost flat in current dollar terms since then (thanks to the GOP congress shutting down Obama’s attempts to raise spending further). With inflation and the (slow but not zero) growth of the economy since then, federal spending in constant dollars has fallen, and spending as a fraction of GDP is now slightly below average, in recent historical terms (last 50 years).

    In 2009, outlays ($3.52T) were 24.4% of GDP ($14.4T). In 2016, outlays ($3.85T) were 20.9% of GDP ($18.4T). In constant (FY2009) dollars, spending has actually decreased slightly over that period. Since the economy has also grown in real terms (faster than inflation), spending as a percentage of GDP has fallen very significantly.

    For comparison, during 1981-88, the average of outlays was 21.8% of GDP. The lowest it has been in the last 50 years is 17.9% of GDP in 2000 and 2001. We are presently closer to the minimum of the last 50 years than we are to the 2009 maximum of 24.4%.

    So what accounts for the 3% difference from that minimum in 2000? The Fed statistics break things down by superfunction: National Defense, Human Resources, Physical Resources, Net Interest, and “Other Functions” (foreign aid, science, space, agriculture, justice and general government).

    In 2000, National Defense spending was 2.9% of GDP; in 2016 3.2%. Military spending is slightly higher, but only accounts for 10% of the overall difference.

    In 2000, Human Resource spending was 11.0% of GDP; in 2016 15.3%. So we have found what is responsible for the huge difference. We’ll come back to it.

    The other categories:

    Physical resources: 0.8% vs. 0.7% : smaller in 2016, and negligible overall
    Net interest: 2.2% vs. 1.3% : smaller in 2016
    Other functions: 1.1% vs. 0.9% : 20% smaller, in relative terms, but negligible in absolute terms
    Offsetting receipts: -0.4% vs. -0.5% : negligible difference

    So the additional 3% of GDP spending in 2016 (compared to 2000) is more than accounted for by the Human Resources category.

    The very general Human Resources “superfunction” is comprised of more identifiable “functions”. Here is the comparison (% of GDP) for 2000 vs 2016:

    Education, Training, Employment and Social Services: 0.52% vs. 0.60% (+0.08%)
    Health: 1.52% vs. 2.78% (+1.26%)
    Medicare: 1.94% vs. 3.23% (+1.29%)
    Income Security: 2.50% vs. 2.79% (+0.29%)
    Social Security: 4.03% vs. 4.98% (+0.95%)
    Veterans: 0.46% vs. 0.95% (+0.49%)

    (“Income Security” includes food stamps, unemployment and welfare, but the largest single item in that function is “Federal Employee Retirement and Disability”)

    Remember, we are comparing the lowest level of federal spending relative to GDP in the last 50 years (FY2000) with the most recent year (FY2016). Overall, the government spent 3.0% of GDP more in 2016 than in 2000.

    National Defense: 0.30% of GDP MORE in 2016
    Social Security, Medicare, Health, and Veterans Benefits: 3.98% of GDP MORE in 2016
    Everything else: 1.28% of GDP LESS in 2016

    In other other words, the difference between last year and lowest level of federal spending in the last 50 years (2000) is basically ALL entitlements. The rest of the government, apart from the military, is spending a considerably SMALLER fraction of GDP today than they were during the leanest budget of the last 50 years.

    All data is from documents on this White House webpage:

    https://www.whitehouse.gov/omb/budget/Historicals

    So to return to the original question, where do you propose to make significant (say, > 1% of GDP) cuts? Remember that ALL non-defense discretionary spending is barely 3% of GDP.

    Dave (445e97)

  152. we can cut the corrupt incompetent US military down quite a bit (joke military)

    but using 2009 as the baseline seems silly cause that was the Bush/Obama obscene spending orgy year

    happyfeet (28a91b)

  153. Dave (445e97) — 11/7/2017 @ 8:19 am
    I would first put in a hiring freeze on all fed employees except military. Then propose a 1% across the board spending cut each year for twenty years. Then I would prolly be assassinated.

    felipe (b5e0f4)

  154. I think a lot of people have not figured out how badly they will get slammed by this. If it passes, and I don’t think it will, people will figure out next April. In time for the midterm elections!

    I had an interchange with Brit Hume on Twitter last night. He seemed to have no idea what this will do to the professional middle class in large states.

    Patterico (e680cc)

  155. All the talk about cutting spending is well and good, but what, of any fiscal significance, do you propose to cut?

    Non-military discretionary spending is $600B. The total outlays are $3.8T. So the part of the budget that can be reduced without cutting the military or entitlements is only 15% of the total.

    Typical statist response. There is tremendous fat to be cut in DoD, HSA, etc. etc. etc. And NASA was the absolute worst. Having worked such programs and worked the private sector, I would say a good back-of-the-envelope estimate is they cost three times what similar size programs (when you can find such) cost in the private sector. The contractors and the government agencies are way too cozy with each other. I’m sure the same is true, probably much worse, in the HHS domain given that at least DoD/HSA/etc. contract workers have some engineering discipline and sense of self-respect aspects to them.

    CFarleigh (5b282a)

  156. @Dave:Remember that ALL non-defense discretionary spending is barely 3% of GDP.

    100% of spending is discretionary, because Congress decides what is “discretionary” and what isn’t, so your reasoning is based on a false premise.

    Frederick (64d4e1)

  157. All the talk about cutting spending is well and good, but what, of any fiscal significance, do you propose to cut?

    1. Take the 1976 budget.
    2. Adjust for inflation.
    3. Have lunch. I am going low carb these days, so baby spinach and a chicken sausage works nicely.

    Patterico (e680cc)

  158. @Dave: I notice too that all your figures are % of GDP, but that’s just assuming that government spending must increase as the economy does, which is even more egregious because government spending is part of GDP.

    Another reason why your argument that “there’s no fat to cut” is fallacious.

    Frederick (64d4e1)

  159. @Patterico:1. Take the 1976 budget.
    2. Adjust for inflation.

    I have done this:

    1976: $372 billion in total outlays times CPI adjustment of 4.44 = $1.65 trillion.
    1980: $591 billion in total outlays times CPI adjustment of 3.17 = $1.87 trillion.

    Less than half what it is today. 2016 was $3.9 trillion.

    Frederick (64d4e1)

  160. felipe… taking one for teh team!

    Colonel Haiku (6047c1)

  161. All the talk about cutting spending is well and good, but what, of any fiscal significance, do you propose to cut?

    The entire Department of Agriculture. Inspections can be outsourced.
    The entire Department of Energy. A few things it does the military can absorb.
    The entire Department of Commerce, spinning off the USPTO and some statistics folks.
    The entire Department of Labor, spinning off some statistics folks.
    The entire Department of Education, firing every last one.
    The entire Department of Housing and Urban Development. States should feel free to pick up the slack.

    The Consumer Financial Protection Bureau should also go, being an illegally funded agency.

    Kevin M (752a26)

  162. Eliminating all those departments must be racist, xenophobic and fascist I’m guessing.

    harkin (b4548f)

  163. Probably also misgendering.

    Kevin M (752a26)

  164. Do you need to drown kittens in water or can you use the blood of patriots and/or tyrants?

    Pinandpuller (34d920)

  165. I am Neegan.

    Pinandpuller (34d920)

  166. The other thing I would do is restore the Congressional Veto on regulations. Preferably by overruling Chadha, but restoring it somehow. Many of these agencies had the Veto built into their enabling legislation and when the Court stripped it out, the power shifted abruptly to the Executive.

    Kevin M (752a26)

  167. eggs, greek yogurt, healthy nuts, cauliflower. low carb.

    mg (60b0f7)

  168. Wasn’t there a FICA tax holiday right about the time the W/Obama Temple veil rent? Something to do with The Stimulus.

    Pinandpuller (34d920)

  169. There’s a couple of AF personnel in NM or CO looking to get booted out.

    Pinandpuller (34d920)

  170. Our rather agitated host wrote:

    I think a lot of people have not figured out how badly they will get slammed by this. If it passes, and I don’t think it will, people will figure out next April. In time for the midterm elections!

    I had an interchange with Brit Hume on Twitter last night. He seemed to have no idea what this will do to the professional middle class in large states.

    You are aware, I am certain, that the ‘professional middle class’ gave the majority of their votes to Hillary Clinton.

    The increase in the standard deduction will cover far more people, but yes, you’ll get screwed. Using the figures given here, and assuming that you have a taxable income of $500,000, you’d pay $135,767.80 under the proposal, where, assuming the same income, but a $50,000 state and local tax deduction (10%), yielding a $450,000 taxable income, you’d pay $124,383.00 under the 2017 tax rates.

    However, if your taxable income is only $400,000, your tax would be $83,420 under the GOP proposal, but $94,017 on $360,000, assuming again a 10% state and local tax deduction.

    I have no idea how much money you and Mrs Patterico earn, and it’s none of my business. But this should give you some idea where the dividing line is.

    The Dana who ran the numbers (e48a51)

  171. Government is like a cereal company giving you more air and less cereal in a progressively larger more expensive box.

    Pinandpuller (34d920)

  172. However, I oppose the GOP tax bill not because of what it would do for me — and it would help me — but because it increases the deficit. I want to see taxes cut after spending is cut, and I want to see spending cut to the f(ornicating) bone.

    Were I Tsar and Emperor of All the Americas, I would eliminate welfare, eliminate it completely, and if you won’t work, you starve to death. That would solve our illegal immigration problem as well, because Americans who won’t work now will be forced to work, or die.

    Yes, I’m an [insert slant term for the rectum here], but sometimes you need an [insert slant term for the rectum here] to get things done right. That’s why Donald Trump is President!

    The deficit hawk Dana (e48a51)

  173. mg

    Agreed. These carbs are killing us (US). Fat, ketosis and health or carbs, diabetes and slow death by gangrene.

    Pinandpuller (34d920)

  174. @ Patterico, who wrote (#120):

    So you agree that you should not be able to deduct your sales and property taxes, which form a higher percentage of your tax base than it does in California. Do I understand you correctly?

    I’m not sure whether the factual premise you’ve inserted into the middle of your question is correct or not. One other commenter here asserted the same thing based on his “bet” based on having lived 40 years in one state; my own “bet,” without having done any research, is exactly the opposite, but I’m frankly not sufficiently interested to educate myself further. If you want me to accept that premise, I’d like to see a better source first.

    But regardless of whether that statement (“which form a higher percentage of your tax base than it does in California”) is true, I do indeed agree that no American should be able to deduct his or her sales and property taxes paid to the state from their federal taxable income, yes, and I’ve now written exactly that several times. I am in favor of a federal tax policy that is absolutely neutral regarding the types and levels of state and local taxation — which before this series of posts, I would have bet a large amount of money would have been your position, too, even if that worked to the interim disadvantage of your home-state citizens.

    Is your position on eliminating these deductions the same or different from the DNC’s?

    Although we disagree about the “two sovereigns” argument, I’d appreciate an acknowledgement that I did indeed address it, beginning with comment #1 above and continuing through several more thereafter. To you this seems “immoral.”

    If so, both constitutionally (under the Supremacy Clause), morally, and logically, it’s the responsibility of the junior sovereign, over whose leaders you and your fellow Californians have complete control, to eliminate what you see as a “moral” problem, and not the other way around. You and I can both vote in federal elections and therefore, in theory, the Congress’ decisions on tax policy have political legitimacy with regard to us both, and to every other American. However, Texas’ taxation decisions have no political legitimacy with regard to you, nor California’s decisions with regard to me, under that old “No taxation without representation” concept that sparked the original Tea Party. And if Texas miraculously were to amend its state constitution and its enact a state income tax, I would certainly consider that as a fact supporting the prospect of moving elsewhere, because the states are indeed individual laboratories of democracy and one does indeed ultimately vote among those laboratories with one’s feet.

    Finally, you asked:

    You are against federal subsidies for flood insurance, right?

    Yes, I am. I’d like to see it phased out, notwithstanding the fact that it benefits people who live in my city and its coastal environs, which are indeed flood-prone. I believe my principles are consistent.

    Beldar (fa637a)

  175. Wasn’t there a FICA tax holiday right about the time the W/Obama Temple veil rent? Something to do with The Stimulus.

    Not full. 2% for a couple years ending in 2013, but maybe also before that. Didn’t bother with the whole article, just looked to remind myself that there was something of one. Info here:

    https://taxfoundation.org/why-your-2013-paychecks-are-2-percent-less/

    I think a federal tax holiday for January would be far more informative given that most working people are in a more than 6.2% or whatever tax bracket. Of course withholdings for later months would have to go up by 1/12 or whatever. And as with everything, there would be reactions real or imagined, that the politicos would trumpet as a reason it couldn’t be done.

    CFarleigh (5b282a)

  176. 1. Take the 1976 budget.
    2. Adjust for inflation.
    3. Have lunch. I am going low carb these days, so baby spinach and a chicken sausage works nicely.

    I was hoping for a serious discussion, but regardless, in 1976, outlays were 20.8% of GDP. Last year, as I noted, they were 20.9%. Enjoy your lunch.

    The main difference between FY1976 and FY2016 is that military spending was higher, and Social Security/Medicare spending was lower. In 1976, Education and Welfare spending, on the other hand, were funded at approximately twice the level (relative to GDP) that they are today. “Other functions” was also eating up about 0.5% of GDP more back then.

    Another reason why your argument that “there’s no fat to cut” is fallacious.

    I didn’t say that. I said any plausible cuts will not involve fiscally significant sums unless they go beyond non-defense discretionary spending. The numbers are what they are.

    I notice too that all your figures are % of GDP, but that’s just assuming that government spending must increase as the economy does,

    It’s not “assuming” anything, it’s an empirical fact.

    In the last 60 years, GDP has grown by a factor of 40. During that same period, government outlays as a percentage of GDP have remained in a very narrow band of 20+/-3%. And absent major wars or revolutions, the rest of the world’s economies show the same behavior (this page has data, and graphs, for nearly the whole world).

    If one did not use GDP as a baseline, but simply corrected for inflation, I don’t think the result would be very popular.

    You’d be talking about a 42% cut in the defense budget, a 70% cut in Social Security and a 90% cut in Medicare, compared to last year.

    Seems like a tough sell, but if you promise to abolish the Federal Reserve and go back onto the gold standard, you might pick up Ron Paul’s base of support…

    Dave (445e97)

  177. I am against bicoastalism.

    Steve57 (0b1dac)

  178. What is the real rate of inflation, what does food, shelter fuel cost now as opposed to 1978?

    narciso (d1f714)

  179. I consider this part of the tax to be punitive, probably unintentionally.
    Continuing to re-elect clowns like Brown and leaving him with a majority in Assembly and Senate has consequences and ignorance is no excuse.
    Blue Coastal elites include a very large middle snob class that thinks they believe all the right things and everyone else is dumb and needs to be led or ruled. When I say ruled, I mean swamped with rules.

    For myself, I am willing to pay a little more to get a seat watching my neighbors get all self righteous now that their ox gets gored. Raise gas tax .60 cents “crickets” because its an evil climate killing brew.
    Its worth it to see the outrage at the removal of the insulation that covers the consequences of blue state rule.

    The changes noted will affect me significantly. I flip houses while I live in them… fix it up inside, move in and then fix the outside over two years… everything here sells for $1M and I try to carry as big of a mortgage as I can in order to have enough working capital. Some years I make a lot of money and pay over 50% in State and Federal taxes. Plus property taxes, sales taxes, additional fees and taxes on everything from diesel fuel to the electric bill and Trump is going to cost me thousands more as he weans crying babies off the federal teat.
    If this forces an economic climate change in CA it will have been well worth it and I’ll make it all back and more because people with more money and less rules = more business at a market based profit rather than at a government regulated and burdened profit.

    Of course the blue elites might continue to elect to over tax themselves and everyone else and eventually behaving like self immolating monks.

    steveg (e8c34d)

  180. I was nit wrong they also hired paladino’s firm
    https://www.newyorker.com/news/news-desk/harvey-weinsteins-army-of-spies

    narciso (d1f714)

  181. What is the real rate of inflation, what does food, shelter fuel cost now as opposed to 1978?

    I used the deflator in the OMB documents I linked to.

    According to that,

    $0.2888 (1976) = $1.0000 (2009) = $1.1066 (2016)

    Or equivalently:

    $1.00 (1976) = $3.83 (2016)

    Dave (445e97)

  182. @Dave: Why should government spending remains a constant % of GDP?

    So you can disguise your assumption that spending must always grow as a conclusion that it must always be cut.

    You give the game away here:

    In 1976, Education and Welfare spending, on the other hand, were funded at approximately twice the level (relative to GDP) that they are today.

    Why is “twice the level relative to GDP” instead of “per pupil” your metric?

    So you can avoid dealing with the fact that per-pupil spending is three times as high, in real dollars.

    Until you can approach this honestly, why should anyone listen?

    Frederick (64d4e1)

  183. that it must always be cut. should read that it must never be cut.

    Frederick (64d4e1)

  184. @Dave: I categorically reject any argument you make based on % of GDP.

    You can pick absolute dollars or per capita dollars to make your points if you like, but % of GDP is to me an intent to deceive.

    Here is one reason: government spending is itself included in GDP, it is not independent of it. So doubling the level of government spending, keep the rest of the GDP constant, results in less-than-doubling of the government % of GDP.

    For example, in 2016 Federal outlays were $3.9 trillion out of $18.6 trillion, 21% of GDP. Suppose that were to double, keeping the rest fixed, then you would have $7.8 trillion out of $22.5 trillion, which would be only 35% of GDP.

    In other words, we see you palming the cards, please stop. Absolute real dollars will work just fine to make any point you wish to make, or real dollars per capita.

    Frederick (64d4e1)

  185. @Dave: Why should government spending remains a constant % of GDP?

    I never said it should. I said it did. Because it does.

    Why is “twice the level relative to GDP” instead of “per pupil” your metric?

    Because it *is* twice the level relative to GDP.

    In 1976, the federal government spent 1.06% of GDP on education. In 2016 the federal government spent 0.60% of GDP on education.

    Since the 1976 and 2016 budgets, overall, spent almost exactly the same fraction of GDP, I might just as well have said:

    In 1976, 5.1% of federal outlays were spent on education, compared to 2.8% in 2016.

    I’m sorry if either of these undeniably true statements causes you distress.

    Patrick’s flippant suggestion to adopt the 1976 budget implied that it was somehow preferable to the present budget. But I doubt he really wants to (almost) double the fraction of the federal budget spent on education.

    So you can avoid dealing with the fact that per-pupil spending is three times as high, in real dollars.

    So?

    Anyone with a clue how education works in the US knows that the Federal government isn’t the major source of funding for elementary and secondary education. Last year, the feds spent about $750 per pupil, but that is not the right way to look at it.

    One of the main purposes of federal elementary and secondary school funding is to support special needs programs that local schools might not be able to afford on their own. They also support teacher training and recruitment programs that aren’t based on “per pupil”.

    I attended a public school in 1976. Compared to today, the technology and facilities we had then might as well have been from the stone age. That’s precisely why things scale with GDP, because GDP growth reflects productivity and a higher general standard of living, and that in turn means you have fancier stuff that does things better, or does things that used to be impossible.

    It’s the same in the military. In 1976, every rifleman didn’t have body armor, night vision goggles and a handheld computer hooked up to GPS and sending video to and from his commander back at HQ in real-time. Stuff gets better. It costs more, but since the country is richer, we have more resources to pay for it.

    It’s the same with health care. It’s the same with everything.

    Regardless of whether you think spending “should” scale with GDP, in practice it does, at least closely enough to provide useful comparisons.

    I tried to make this clear by pointing out what would happen to the military if we simply adjusted the 1976 budget (which was 5% of GDP at the time, compared to 3.2% now) for inflation – we’d have a lot fewer soldiers, planes and ships, and the men and women who defend us would have to do without many cutting edge (expensive) technologies that allow them to dominate our enemies and come home safely.

    Dave (445e97)

  186. So we are talking about 383% inflation since then
    ?

    narciso (02db6f)

  187. So we are talking about 383% inflation since then

    I guess that would be right. 383% is about 3.3%/year compounded continuously for 41 years. That’s not too far from the numbers I’d expect for inflation. Inflation has been low for quite a while, but it got up to around 20% in the late 70’s/early 80’s.

    I think the deflator takes yearly changes into account, so the 3.3%/year is just an approximate average.

    Dave (445e97)

  188. Prices today are 383% of 1976, which would be more accurately described as “283% inflation”.

    “100% inflation” means prices have doubled, 200% means they tripled, etc.

    Dave (445e97)

  189. @Dave: Stuff gets better. It costs more

    This is totally false for the examples you are using. A handheld computer in 1976 would have cost far more in real dollars and had a fraction of the capabilities of one today.

    I said it did. Because it does.

    The whole point of the critique, that the government DOES SPEND TOO MUCH MONEY, is because it HAS been.

    You’re just reasoning in a circle; oh spending scaled with GDP then and it does not so what’s the problem.

    And you’re doubling down on the dishonesty.

    You’re deliberately choosing a metric that you know for a fact understates actual changes in spending.

    Frederick (64d4e1)

  190. @narcsico: So we are talking about 383% inflation since then
    ?

    Yeah. That’s pretty straightforward. Even a small inflation rate per year adds up, because it’s a compounding problem.

    400% over 40 years is an average of 3.5% per year. It didn’t actually happen that way, it happened at a high rate in the late 70s and it’s been much lower lately.

    There’s been 17% inflation since January 2009. That averages to about 2% per year.

    Frederick (64d4e1)

  191. This is totally false for the examples you are using. A handheld computer in 1976 would have cost far more in real dollars and had a fraction of the capabilities of one today.

    It cost so much, and had so little capability, that nobody used them in 1976. People simply did without the abilities that we now take for granted, and their “handheld computer budget” was zero.

    The whole point of the critique, that the government DOES SPEND TOO MUCH MONEY, is because it HAS been.

    You’re a loon if you think US government spending will ever shrink dramatically from its modern historical range (in percent GDP terms).

    I’ve pointed out, multiple times now, how the math works. If you ZERO OUT non-defense discretionary spending completely, it only gets us back to the level of 2000 (17.9% of GDP). And it is moronic to treat zeroing out non-defense discretionary spending as a realistic possibility. It shows you are completely out of touch with political and economic reality.

    Of course bad or ineffective programs should be terminated. Truly repealing Obamacare (and not replacing it with something equally costly) would certainly reduce spending (by a fraction of 1% of GDP), and be a good thing.

    If you want to do more than nibble around the edges, you are talking about cutting Social Security, Medicare and/or the defense budget. I showed you where the real money is spent in my previous post.

    You’re just reasoning in a circle; oh spending scaled with GDP then and it does now so what’s the problem.

    You seem to have reading comprehension issues.

    What I wrote was that over the last eight years, spending did NOT increase with GDP, and furthermore I said that this was a GOOD thing, because (as a consequence) spending as a percentage of GDP decreased significantly (from 24.4% in 2009 to 20.9% in 2016) meaning a smaller proportion of the nation’s wealth is being redistributed by the government.

    And you’re doubling down on the dishonesty.

    There’s not a shred of dishonesty in anything I’ve written on this subject. Go to hell.

    You’re deliberately choosing a metric that you know for a fact understates actual changes in spending.

    Again, you demonstrate your incomprehension. I showed that outlays as a fraction of GDP declined despite NO significant change in spending.

    Explain to me how it is understating changes in spending, when no change in spending leads to a significant change in the metric.

    On second thought, don’t bother. Spending as a percentage of GDP is the metric used by the OMB, banks, the Wall Street Journal, and anyone else with a modicum of sense, because it is a simple and robust way of analyzing trends in government spending over time.

    You’ve called me a liar for posting, verbatim, official government statistics from the White House website, with clear and unambiguous explanations of what they are.

    If ratios are too hard for you to understand, it’s not my problem.

    Dave (445e97)

  192. @Dave:Explain to me how it is understating changes in spending, when no change in spending leads to a significant change in the metric.

    Because “government spending as % of GDP” puts government spending in the numerator AND the denominator. So you can conceal how large increases and decreases actually are. We see you palming the card. It is exactly like when people defined “poverty” by income percentile and then say there’s been no progress on poverty–because by definition, there cannot be.

    You are defining away the government’s spending problem. No one here will accept that definition if you spell it out.

    For example, suppose my wife wishes to scold me about my whiskey habit, pointing out that I’ve gone from $100 a month to $500 a month in the course of ten years, adjusted to real dollars.

    But, I rebut, our income has grown five-fold as well, so the share of the household budget I spend on whiskey has been held constant, consequently there is nothing to complain about.

    This is exactly the argument you are making.

    If ratios are too hard for you to understand, it’s not my problem.

    I understand the ratio perfectly. You are using it to deceive.

    You’ve called me a liar

    Not at all. I’ve said you’ve been deceptive, and since you persist in it when called on it then I called you dishonest. I never said you lied, or that you are liar. Consult a dictionary if English words confuse you.

    Frederick (b0c51b)

  193. Dave puts the “con” in “conservative”.

    Colonel Haiku (2601c0)

  194. Because “government spending as % of GDP” puts government spending in the numerator AND the denominator. So you can conceal how large increases and decreases actually are. We see you palming the card.

    LOL.

    Your argument is equivalent to claiming that Batting Average is not a valid statistic to measure hitting performance, since the hits are included in both the numerator and denominator. Stop the presses! The entire statistical record of baseball’s history has been a fraud!

    Regardless, for the third time:

    REAL GOVERNMENT SPENDING WAS UNCHANGED BETWEEN 2009 and 2016.

    If X is government outlays, and Y is the rest of GDP, explain to me how government spending can change the quantity

    X/(X+Y)

    WHEN X IS CONSTANT.

    Since you seem unable to follow abstract quantitative reasoning, let’s use the real numbers.

    In 2009, X/(X+Y) = 0.244, meaning that X/Y = 0.323.

    In 2016, X/(X+Y) = 0.209, meaning that X/Y = 0.264.

    The difference in X/(X+Y) = 0.244 – 0.209 = 3.5%; this is what I quoted

    The difference in X/Y = 0.323 – 0.264 = 5.9%; this is what you insist I should have quoted

    So by your preferred metric, the decrease in spending relative to GDP that I pointed out in my original post IS EVEN BIGGER.

    Go ahead and credit the GOP congress with a 5.9% reduction in spending relative to (non-governmental) GDP if you prefer.

    Dave (445e97)

  195. Moment please. Please to tell this humble one when Confucius say government spending should be a percentage of GDP. Or when Buddha say that prosperous countries with big GDP should spend big money on big government.

    nk (dbc370)

  196. @Dave:Your argument is equivalent to claiming that Batting Average is not a valid statistic to measure hitting performance

    No, I’m saying that the metric is inappropriate for measuring changes in level over time.

    A batter’s average does not measure how many hits he gets in a season, and if that is more than last season.

    WHEN X IS CONSTANT.

    X is NOT constant, if X is Federal outlays. It is increasing over time, as measured in real dollars. You have chosen a metric which you are fully aware conceals this.

    So by your preferred metric

    You are not using my preferred metric. I named them earlier: absolute constant dollars, or constant dollars per capita.

    No one is buying what you’re selling, because you’ve chosen to conceal the actual numbers that indicate “increase in spending”.

    Frederick (b0c51b)

  197. Dave, if you can’t make your point in constant dollars, or constant dollars per capita, you can’t make the point. We saw you palm the card.

    Frederick (b0c51b)

  198. True story, I had a 0.500 batting average in high school. Why did I not go pro, why did you never hear of me, Dave?

    I was at bat twice and got one hit. In the season. So no in my case batting average is not a very good indicator of my performance.

    Frederick (b0c51b)

  199. Moment please. Please to tell this humble one when Confucius say government spending should be a percentage of GDP. Or when Buddha say that prosperous countries with big GDP should spend big money on big government.

    I never said it should be. I said it is, as an empirical fact.

    Over the last 60 years, GDP has increased by 4000%. And during that time, federal spending as a proportion of GDP has only varied within a range of about +/-3%.

    The two quantities have a correlation coefficient > 99%. Only a fool would ignore such an overwhelming correlation.

    For reference, here is a graph that goes back to 1930, using the same data I quoted:

    https://fred.stlouisfed.org/series/FYONGDA188S

    The ratio often (but not always) tends to go up during recessions, and down during economic expansions.

    Dave (445e97)

  200. Also we still get the $500,000 home sale tax exclusion. So yeah, some of that gets eroded by the new taxes, but Southern CA is still one of those markets where you can get a $500,000 profit on your home.
    Most of flyover country never even gets more than a small taste of that

    steveg (e8c34d)

  201. #200
    Causation or correlation.
    Or past performance is no indicator of future results

    Humans are able to defy math and completely f up certain types of probabilities

    steveg (e8c34d)

  202. 170. Pinandpuller (34d920) — 11/7/2017 @ 9:35 am

    Wasn’t there a FICA tax holiday right about the time the W/Obama Temple veil rent? Something to do with The Stimulus.

    Not a tax holiday. They cut the rate by 2% but put the lost amount into the Social Security trust fund.

    Sammy Finkelman (69aa73)

  203. X is NOT constant, if X is Federal outlays. It is increasing over time, as measured in real dollars.

    I’m forced to conclude that you simply do not understand English.

    For the FOURTH time: I compared 2009 and 2016. Measured in real dollars federal outlays differed by a negligible amount in those years (and in fact were slightly LOWER in 2016, not higher as you keep dishonestly claiming):

    2009: $3517.7 Billion (in FY09 dollars)
    2016: $3481.5 Billion (in FY09 dollars)

    See that? The difference is $36 BILLION FY09 dollars. That is barely a 1% difference IN REAL DOLLARS (and 2016 is LOWER).

    The difference in GDP between those two years, on the other hand was $2.2 TRILLION 2009 dollars.

    So tell me, how much did the $36B SMALLER real spending in 2016 distort the $2.2T LARGER GDP in the denominator? Hmm?

    Now do you see how foolish you look?

    No one is buying what you’re selling, because you’ve chosen to conceal the actual numbers that indicate “increase in spending”.

    I concealed nothing; in fact I even quoted the totals in current dollars in my original post.

    For the FIFTH time: There was no increase in spending in real dollars.

    Please re-read the previous sentence until you understand it.

    Dave (445e97)

  204. You’re a prosecutor and I’m a transactional lawyer so our tax expertise may not be the be-all and end-all of tax discussions. But like you I live in a high tax state (NY) – and a punitive property tax county (Westchester). I would lose NY income tax deductions of about $20k, theoretically making my federal tax bill $6-7k more under the proposed plan. But I ran the numbers on the brackets and exemptions and my federal tax was reduced by $6-7k. It was a wash.
    I also can’t deduct my property taxes because I am in AMT territory – in one sense an opportunity to gripe about the intellectual dishonesty of the AMT but usually I remember that it is really more an opportunity to be grateful that my income is at that level.
    Some will win and some will lose because our tax structure is so complex that we alter our behavior based on taxes as well as the underlying sense of the business transaction (or perhaps better said, the taxes become part of the underlying business transaction’s equation).

    I am in favor of eliminating the state deduction. Too many people treat state taxation with a casual annoyance that I think they wouldn’t if they might not if they can’t deduct. My hope is that the elimination of the deduction would cause people to focus more on state taxes so that spendthrift governments like mine would feel more pressure from voters.

    As for double taxation, I understand your principle but it already exists in an incredible number of areas beyond the state income tax deduction – e.g., my property taxes discussed above,. Yes, it annoys me hugely. But my sales taxes are also paid with post-tax income, as are all of the governmental filing fees I have to do when I perform some act that requires a permit, as are most estate taxes that are assessed on post-tax income of the estate (I’d eliminate the estate tax but I WOULD impose taxes on the gains from the transfer of assets to the extent exceeding their basis, with some type of exception that delays the imposition of the tax for small businesses and farms and the like so that didn’t force a liquidation of the business or farm) Once on a business trip to Calcutta/Kolkata I laughed when the room service had a luxury tax that was on top of the previous room service meal and delivery taxes and actually stated in parentheses “tax on the tax” as an itemized amount – because it was at least honest.

    Taxing already-taxed income seems unfair to me as well but it’s a fact of life in so many areas that using it as the principle for SALT deduction doesn’t seem realistic. I’m way more interested in my total tax bill and whether the tax is assessed fairly and rationally. My sense is that you are too but we come out differently on how it should be done.

    Finally, if my total tax bill WAS higher, I’d be okay with it if the additional incremental amount was devoted solely to paying down the deficits of the applicable taxing authorities. Since that won’t happen I don’t want more taxes.

    PS – I am also in the process of voting with my feet. One of the few advantages of higher-taxed states is that 401s and various health care accounts and IRAs have a much more amped up tax benefit to those of us in high-tax jurisdictions and we tend to get paid more so it is easier to max them out. As I write this I am in a much lower-tax jurisdiction looking at it as a place to retire because it is simply too expensive to retire in the NYC area unless you literally have money to burn. As Glenn Reynolds at Instapundit observes, as the tax rate increases, the effective tax rate tends towards zero because people figure out how not to pay the tax at all.

    This is actually a lot more fun than the jousting discussions we have on Trump where those of us who were #NeverHillary, and thus voted for Trump, are add odds with your #NeverTrump rants, which I understand are the types of doggedness that make you a great prosecutor but with which I ultimately disagree.

    Lazlo Toth (720f77)

  205. @Dave:2009: $3517.7 Billion (in FY09 dollars)
    2016: $3481.5 Billion (in FY09 dollars)

    Is there a reason you start the clock in 2009? Yes, I believe there is, because in 2008 it was $2983 billion. So 2009 represents a very large increase over 2008. That it hasn’t changed much since then is not impressive to those who believe that 2008 was already way too high, you see.

    And historically Federal outlays have been increasing over time, in constant dollars. A pretty constant log-linear increase from 1980 to 2008 with a large jump in 2009, remaining roughly steady thereafter. Not every single year is higher than every last single year, of course.

    If the historical trend had continued on from 2008, we would only have reached the 2009 level at about 2018. And from 2009 – 2016 we would have added half as much to the national debt as we actually did, you see.

    Now I understand that you believe that there’s nothing wrong with that since it’s a roughly constant fraction of GDP, but as I said, I reject your premise that % of GDP remaining constant is an appropriate standard for whether the government is spending “too much”.

    There was no increase in spending in real dollars.

    Thank you for using constant value dollars to make your point. Please continue to do so.

    Frederick (64d4e1)

  206. If the two sovereigns theory holds water, then the states have no rights to tax income already taxed by the Federal government. You are looking at it from the wrong angle.

    Corky Boyd (fba78a)


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