Nothing new + my manifesto

Congress is not getting anything done on tax legislation, despite the pressing need to come up with something for 2011. Most politicians want the Bush tax cuts to stay in place for everybody except the "wealthy," but even some Democrats are now saying that raising taxes for anybody, including the "wealthy," in the midst of a recession, would be bad for the economy. If Congress does nothing, everyone's taxes will rise because of the automatic expiration date of 12/31/10 written into the bush tax cut law.

Philosophically speaking, the President and many Democrats seem to believe that "rich" people are not playing "by the rules." Their evidence for this seems to be simply that some people have more money than others. This seems to be held as an offense against social justice.

The President has never specified exactly to what extent he believes wealth should be redistributed, but there seems to be little doubt that he believes this is an important goal. This is not something new and subversive in America, since the fact is that our entire income tax structure has some grounding in the idea that some people just have too much, and some of it should be taken away.

Is this the best approach to the goal "to promote the general welfare," set forth in the preamble to the Constitution? In my opinion, it is not.

1. The fact that some people have more money than others is just a natural fact that flows from the natural differences amongst individuals. The statement in the Declaration of Independence that "all men are created equal" is just a statement of what happened at the beginning, not a statement of how everything should turn out in the end. We should all start out the same at the starting line, and in America we have tried hard to create that condition. What happens after that is up to the individual.

2. The fact that some people have more money than others does not make those who have money automatically bad. Similarly, the fact that there have been some bad people who acquired wealth illegally does not mean that ALL people who acquire wealth are not playing "by the rules." Furthermore, there are plenty of laws that can be enforced against those who do obtain wealth illegally or actually unfairly.

3. Americans, statistically, give more money to charity than any other people in the world. They want to help. Many of the richest give huge sums.

4. The economy is not a zero sum-game. If some people get more, it DOES NOT FOLLOW that necessarily others get less. On the contrary, the EXACT OPPOSITE can happen. Because of the GROWTH factor, EVERYONE GETS MORE!!!!!!!! If a business grows, provides needed goods or services and creates jobs, everyone benefits. If "everyone" includes the owner of the business, well, that is the fulfillment of the American Dream for him.

5. To expect everyone to end up with the same amount or even remotely similar amounts is unnatural and artificial. It is a nice thought, but to try to force that outcome gums up the whole works.

6. To take money away from key people in the economy (those in positions to enhance economic growth) and from productive businesses is DESTRUCTIVE to the economy.

7. To take money away from people who make a lot because they are highly skilled and do work that is of major benefit to the society as a whole (e.g., doctors, engineers and such) is DESTRUCTIVE to the society at large.

8. Rich people are as imperfect as everyone else. They can be obnoxious or caught up in the trappings of their wealth. This is not nice, but it is not a crime. They should get religion or something, but taking money away from them is not the answer.

9. If we stop punishing productive people and businesses by taking resources away from them, the scariest thing about it would be how fast we will grow. (And of course sometimes we would go too fast and have a crash. Then we would start this debate all over again.)

10. There would be plenty of money to care for those unable to care for themselves. The flow of money to charity would be immense.

11. The government is NOT the best entity to help those who need help. It just creates jobs for politicians and bureaucrats.

More 1099's

Congress is considering legislation that would require landlords to issue 1099's beginning in 2011. The 1099 rules as they currently exist do not apply to landlords.

Pending legislation

The US Senate is close to passing a bill that contains a number of tax breaks for small businesses.
1. Self-employed people would be able to deduct medical insurance for themselves and their family on Schedule C for 2010.
2. Businesses could write off (instead of depreciating) up to $500,000 in machinery, equipment and similar fixed assets placed in service in 2010 and/or 2011.
3. The 50% depreciation bonus that was in effect for 2009 would be extended through 2010.
4. Expanded tax breaks on sale of small business stock.
5. And a few other provisions.

Estate tax stuck in Congress

There is still no guarantee that Congress won't reinstate the estate tax retroactive to January 1, 2010. As discussed in previous posts of this blog, the estate tax (AKA death tax) was completely phased out this year, due to a law passed in 2001. The House has passed a bill that re-instates it with a 45% tax rate on everything above $3.5 million. But it is stuck in the Senate. Most senators want a higher exemption level and a lower tax rate. (Maybe that's because most of them will have estates worth more than $3.5 million?) This matter has also been pushed back by a number of other things on the Senate's agenda. If nothing is done, the estate tax will revert back to its 2001 level: a top tax rate of 55% and an exemption of only $1 million. Probably the vast majority of Senators and Congressmen have potential estate worth more than $1 million (just guessing here), so the odds are good that something will be in place for 2011. At least that's the conventional wisdom.

Homebuyer credit extension passed

The House approved the extension mentioned in the previous post (June 22), and the President is expected to sign it in a few days. The deadline is extended to September 30.