9AM CDT Sunday and a deal may be near

I am surprised there are no taxes increases being discussed.... I can't believe the Republicans could pull that off - especially since one of Obama's central pledges in the 2008 election was increasing taxes on families making more than $250,000.

Of course, every year there are tax increases on most US taxpayers just due to inflation and yet the lawmakers seems to ignore that problem (or simply are enjoying the "flexibility" of increased spending potential).

The taxability of social security benefits comes to mind.  In 1983, social security benefits became taxable for single filers earning (a modified adjusted gross income) more than $25,000 ($32,000 for married filers).  In 1993, the taxability of higher income taxpayers increased even more.

Has this amount been indexed to inflation?

Nope.

So as wages, interest, dividends and of course, social security benefits, have increased just due to inflation every year, what do you expect would have happened?

That's right - the portion of social security that is "taxable" increases each year.  It will happen again certainly in the next couple of years (2012 or 2013) despite the "no new taxes" pledge of 240 Republicans.

Just checked the IRS Statistics of Income to give you an example.  In 1996, $53 billion of social security benefits were taxable.  In 2008, $151 billion (a 300% increase) was taxable.  That extra $100 billion in taxable income provides the US Treasury with an extra $20 billion a year or so.

The problem of ignoring certain threshold adjustments because of inflation for decades is a common problem with Washington.  The rental real estate loss limitation for taxpayers with income greater than $100,000 was set in 1986, the capital loss limit of $3000 was created in 1977.

So it looks like no tax increases on this debt deal...well... maybe a few tax increases...

A lesson about the US tax system

Oops.. and I violated this just yesterday in my post.

Rule: Don't use absolute dollar amounts when discussing issues.  Cite things as a percentage of something else.

For example, don't say "$2 trillion" - say 16 percent of Gross Domestic Product. 

Don't say (as Boehner said yesterday) - a trillion dollars in cuts over 10 years (that works out to $100 billion in cuts a year to a $3 trillion dollar US government budget..peanuts basically....)

Which sounds like more is being done: 1) a trillion dollars over 10 years!!  2) a 3% cut!!!

From yesterday's debate - they were the same, sadly.....

The popular press (and Obama) are great at doing this (heck, any politician or news organization does this ad nauseum).

For example, there are 300 million or so people in the US - and with that 140 million "taxpayers" (many tax returns have multiple people on it - mine has 4 - me, my wife and our two daughters.)

So Obama points out that "50 million Americans are without health insurance!"  He doesn't say that 17 percent of Americans are without health insurance, or even worse for him, 83 percent of Americans have health insurance.

No, he used absolute amounts which make it seems worse.

But on the other hand, he wants to raise taxes on only the top 5% of US taxpayers.  Doesn't seem like much.

But how about "I want to raise taxes on 7 million tax paying households!"  That sounds like more.

And when you consider that the 7 million households represent about 30 million Americans - how about "I want to raise taxes on 30 million Americans!"  Now that sounds a lot worse than 5%!

So - to be "tax literate" - remember to always base your discussion on government revenues and expenditures as a percentage of something else - not absolute dollar amounts.

Boehner's plan passed, shot down by Senate

Maybe Saturday will finally bring a compromise.

I love how the Republicans point out that tax hikes will hurt an already weakened economy.

Hey - you thinking spending cuts won't? Last time I checked - slashing government spending meant firing people to some extent...

Of course, the spending cuts are minimal - like $25 billion this year for the current House plan, $30 billion for the Senate plan - according to an article on politico.com today.

Heck - they are going to do another one year "patch" on the Alternative Minimum Tax in December this year for the tax year 2012 - that is going to cost them at least $70 billion.

Debt debate July 21, 2011

Seems like a good time to start blogging about taxes.... 11 days or so until the "supposed" countdown to US government bankruptcy...

Of course, I don't exactly believe that August 2, 2011 is the "drop dead" date - but we shall see.