Loopholes and Inequality

 

shutterstock_222504601“And let’s close the loopholes that lead to inequality by allowing the top one percent to avoid paying taxes on their accumulated wealth…”  President Barack Obama, State of the Union Address, January 20, 2015

That statement just about sums up Barack Obama’s entire political philosophy. Wealthy capitalists hire accountants and lawyers lobby the government to create ways for them to legally cheat the government out of tax proceeds — proceeds rightly given to other citizens — which is, of course, unfair in that it creates inequality. The conceit simple: money (capitalism) is rigged; even the government is cheated, and by association, so are you.

The fallacy, of course, is that the achievers (capitalists) fund the vast majority of taxes and much of government funding is just plain borrowed (deficits and the debt). The beneficiaries of this fictional claim on the capitalist purse pay little in the way of income taxes and pay withholding taxes, the whole of which are insufficient to cover current program disbursements. The so-called loopholes are not created in a vacuum. They are voted into law by the legislature and either signed into law by the president or allowed to become law by omission.

But the telling phrase mentioned above is the claim on “accumulated wealth.” This is a first; an admission that Obama and his ilk have more than just periodic income on their minds. They want your wealth.

There are those who will say that this isn’t true, can’t possibly be true. They will say that their wealth is protected by the Takings Clause, that the government has a right to tax only income. There are explicit constitutional protections, etc.

(Remember, the president himself thought that immigration “amnesty” was not something that could be unilaterally granted by the Executive Branch, but tell that to the five million plus illegal aliens now eligible for work permits.)

What would keep the IRS from broadening its definition of taxable income? Or from tightening the rules surrounding 401Ks, tax advantaged insurance products, HSA’s or other tax advantaged accounts? Why not tighten up the cap gains rules? Who says income is unearned? And why is interest on municipal bonds tax free?

Those sound like loopholes to me.

There are 27 comments.

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  1. DocJay Inactive
    DocJay
    @DocJay

    He is a scary horrible man.

    • #1
  2. Nanda Panjandrum Member
    Nanda Panjandrum
    @

    It makes one nostalgic for the one Democrat POTUS who actually said: “Life isn’t fair.”

    • #2
  3. user_891102 Member
    user_891102
    @DannyAlexander

    Word is that 529 plans for college savings are in the cross-hairs as well.

    The truly rich have scant need of 529’s, but the truly middle-class have a need that is more than scant.

    But hey, as the classic observation from “Animal House” underlines, “You [CoC]ed up — you trusted us!”

    • #3
  4. user_891102 Member
    user_891102
    @DannyAlexander

    #2 Nanda

    I think it’s safe to say that Obama *knows* that “Life isn’t fair” — it’s just that his entire life is about concealment.

    • #4
  5. Carey J. Inactive
    Carey J.
    @CareyJ

    A government official is someone with a deep, abiding, fear that someone, somewhere has some money left after paying their taxes.

    • #5
  6. Belt Member
    Belt
    @Belt

    I posted a response on Facebook yesterday related to this: For Obama and the Left, a ‘loophole’ is anything that lets you keep more of the government’s money than they want to let you have.  And it’s all the government’s money.

    • #6
  7. user_138562 Moderator
    user_138562
    @RandyWeivoda

    Belt:I posted a response on Facebook yesterday related to this: For Obama and the Left, a ‘loophole’ is anything that lets you keep more of the government’s money than they want to let you have. And it’s all the government’s money.

    That’s right.  The government owns the printing presses that made the money in the first place, so they really are the rightful owners of it.  When the government allows you to keep some of your earnings, they’re doing you a big favor that you don’t deserve.

    Wanting to keep the money you’ve earned: Greed.

    Wanting money that someone else has earned: Compassion, Fairness, Equality.

    • #7
  8. Full Size Tabby Member
    Full Size Tabby
    @FullSizeTabby

    Belt:I posted a response on Facebook yesterday related to this: For Obama and the Left, a ‘loophole’ is anything that lets you keep more of the government’s money than they want to let you have. And it’s all the government’s money.

    I don’t know, as their rhetoric also suggests that a “loophole” is anything that lets someone they don’t like keep their money, while something that lets people they like keep their money is a “targeted investment.” On second thought, I guess that’s still dependent on their belief that “it’s all the government’s money.”

    • #8
  9. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    Wait, what?

    Not paying taxes on one’s accumulated wealth isn’t a loophole.

    A loophole would be a rule that allows one to avoid paying taxes on one’s income.

    You want to start taxing capital, that’s fair enough (I suppose), but don’t go calling it a “loophole”!

    • #9
  10. Western Chauvinist Member
    Western Chauvinist
    @WesternChauvinist

    This is what I said on another thread:

    Leviathan has momentum now. The IRS has tried and, in some cases succeeded, to ruin citizens for theirpoliticalopposition. DoJ regularly administers “justice” differently based on skin color. HHS has the power to mandate what insurance companies sell in their plans. Which person or group has the guts and ability to take on a government that can capriciously take your money, deny your medical needs and throw you in jail?

    I dunno. I think Obama might be justified in his smugness. I fear we’ve elected a Republican Congress just to negotiate the terms of our surrender.

    Is there anything we can do to stop Leviathan in motion? Sure, people will be outraged if the IRS seizes our 401(k)s and offers an annuity instead. So what? Who’s going to stop them? The people have spoken and the 1% (10%, 20%) are clearly a minority. We need a more equitable distribution of capital — right? Right??!

    • #10
  11. PHCheese Inactive
    PHCheese
    @PHCheese

    The rich will leave, it has already started.

    • #11
  12. Western Chauvinist Member
    Western Chauvinist
    @WesternChauvinist

    PHCheese:The rich will leave, it has already started.

    Can’t get away from death or taxes. Uncle Sam will find you.

    • #12
  13. user_138562 Moderator
    user_138562
    @RandyWeivoda

    anonymous:

    Doug Kimball: What would keep the IRS from broadening its definition of taxable income?

    The clearest case is the estate (death) tax. In this case, people who have paid all of their federal, state, local, sales, etc., etc. taxes and have managed to put away some money to pass on to their progeny are sheared at a marginal rate of 40% on this already taxed income for everything above US$ 1 million. This may seem a large sum, but in an age where suburban houses in major metropolitan areas for going for half a million, is not so unusual.

    If someone believes that the estate tax is moral I would suggest to them that we eliminate the million dollar floor before the tax kicks in.  Everybody needs to pay their “fair share”.  Your parents died and left you a $10,000 car?  Better send Uncle Sam his check for $4000, he doesn’t like to be kept waiting.  Many states have an estate tax, too.

    • #13
  14. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    Western Chauvinist: The people have spoken and the 1% (10%, 20%) are clearly a minority.

    Always remember, in order to be a member of the global one per cent, one need only earn about US$33,000 per year.

    When the Left says they want to bring down the “one per cent”, they really mean America itself.

    • #14
  15. Joker Member
    Joker
    @Joker

    Deductions are almost all expenditures made in the pursuit of earning a profit. Calling a deduction a loophole is generally denying the reality that people are trying to make money. There are a few exceptions, but I don’t want to get into the weeds.

    Loopholes are generally tax credits. Practically all credits are allowed in furtherance of some social objective. So if you want to promote, say wind power, you allow a credit for spending on something that is not otherwise profitable or at least risky. There are tax credits for low income housing, historical building renovation, research and development expenditures and all manner of alternate energy production.

    You can argue that businesses should only spend on projects that can reasonably expect to turn a profit, but credits have been put there deliberately (and I mean through congressional deliberation) to fulfill or encourage spending on some desirable social or economic good. Governments are basically exchanging their own expenditure for expenditures made in the private sector.

    Generally speaking, poor and middle class folks do not have the means to erect wind farms or rehabilitate historical sites, or hire engineers and scientists to experiment to develop useful technologies or innovation. So the associated credits almost always accrue to the benefit of the moderately wealthy. It’s understood and intentional.

    So when you want to close a loophole you have to say that a credit does not serve its intended purpose or is too expensive given its result. Those are completely legitimate discussions. But we’ve gotten to the place where the beneficiary of the credit is the target, not the basis for the credit.

    When there are no adults in charge, this is the stupid foodfight you get.

    • #15
  16. Quietpi Member
    Quietpi
    @Quietpi

    Forget not that in the early days of this administration the proposal was made (I think it was a Bidenism) to, well, nationalize all IRA’s, and the former  holders be granted a government pension in their stead.

    Also, I remember, not quite as clearly, in that I don’t remember the source, that more recently there was discussion in Washington regarding actually taxing wealth – the “wealth” itself.  In other words, you will be paying for the privilege to keep that which is yours.  This concept didn’t hang around as long as the IRA one, but it, too, is not new.

    • #16
  17. user_138562 Moderator
    user_138562
    @RandyWeivoda

    Quietpi:Forget not that in the early days of this administration the proposal was made (I think it was a Bidenism) to, well, nationalize all IRA’s, and the former holders be granted a government pension in their stead.

    Also, I remember, not quite as clearly, in that I don’t remember the source, that more recently there was discussion in Washington regarding actually taxing wealth – the “wealth” itself. In other words, you will be paying for the privilege to keep that which is yours. This concept didn’t hang around as long as the IRA one, but it, too, is not new.

    Donald Trump suggested we have a one-shot 14.25% wealth tax back in 1999.  That’s when he was thinking of running for president as a Reform party candidate.  I had forgotten that he once backed the Reform Party, since he’s usually been a Democrat up until Barack Obama became their candidate in 2008.

    • #17
  18. CuriousKevmo Member
    CuriousKevmo
    @CuriousKevmo

    Randy Weivoda: Everybody needs to pay their “fair share”

    Whenever I’m fed this argument I ask “what would you consider to be a fair share”.  I rarely get an answer.  One fellow — a big sports fan — said anything over $50,000 indexed for inflation should be “given back”.

    • #18
  19. CuriousKevmo Member
    CuriousKevmo
    @CuriousKevmo

    Quietpi:Forget not that in the early days of this administration the proposal was made (I think it was a Bidenism) to, well, nationalize all IRA’s, and the former holders be granted a government pension in their stead.

    Also, I remember, not quite as clearly, in that I don’t remember the source, that more recently there was discussion in Washington regarding actually taxing wealth – the “wealth” itself. In other words, you will be paying for the privilege to keep that which is yours. This concept didn’t hang around as long as the IRA one, but it, too, is not new.

    And isn’t this how these things tend to go.  Someone broaches the subject, outrage ensues.  But now its out there, a few latch on, pretty soon it becomes a topic “worthy of consideration” as a means of solving some perceived slight.

    • #19
  20. user_966256 Member
    user_966256
    @BobThompson

    Would the wealth distribution  or income inequality picture look different, in any significant way, if every tax change the President proposes were enacted? Would any other macroeconomic factor, such as employment of GDP, be really affected?

    To my way of thinking, it seems as if, with all the action centered on our fiat currency system, these steps are merely arcs in a circle that goes round and round. The dollars are printed, the financial institutions jump at the low  or no interest rate funds available, the large corporations use their large cash reserves to buy back their stock to increase per share earnings and run up the stock market or just use that cash to buy the competition while borrowing from the financial institutions at low prime rates for operating funds. Then, these parties who now have accumulated all this ‘wealth’ use it to insure control of who is going to be able to compete for elected offices across the nation. Tax increases on these people doesn’t really change anything qualitatively, or even quantitatively, but merely shifts the flow slightly, since they already pay most of the taxes anyway. That’s the one tenth of one per cent or even less maybe.

    Then, the other 99.9%, which includes a massive majority of both political party voters, just muddles through this mess trying to figure out why they are unable to influence anything in the economic or electoral spheres.

    So I see this as why there is such an effort by the establishment of both parties to stop any momentum generated by those favoring reduced government size and power such as the Tea Party.

    Sometimes I just ramble!

    • #20
  21. user_1008534 Member
    user_1008534
    @Ekosj

    I think it is what psychologists call a ‘coping mechanism’. If it were true that the successful really DID build that, really earned what they have by the sweat of their own brow, really are reaping only what they have sown…then it is hard to support confiscatory taxes. You basically have to admit that your logic – the logic of progressive taxation – is the same logic used by a mugger: “I want money and have none. You have money. I will take yours by force. ”

    That’s tough to swallow. Very tough on the psyche to admit you are not a great and powerful public servant but really just a grandiose mugger.

    So, you create a coping mechanism. Something that allows you to do this otherwise distasteful thing. That is, you convince yourself that the money you are taking from the successful by force is itself an ill gotten gain. That the successful DIDN’T build that … They stole it. They only have success because they cheated others out of it. You cast yourself as Robin Hood. (Side note … It is not for nothing that, in the UK, Her Majesty’s Revenue & Customs is located in Nottingham.)

    But the actual Robin Hood Story is NOT that Robin and his Merry Men took from the rich and gave to the poor. Rather, an oppressive Prince John impoverished his honest, hard working people with confiscatory taxes which Robin and his Merry Men RETURNED TO THE TAXPAYERS made poor by Prince John’s taxation. Robin isn’t Obama … He’s Reagan!!!

    • #21
  22. CuriousKevmo Member
    CuriousKevmo
    @CuriousKevmo

    Bob Thompson: Sometimes I just ramble!

    Heh.  The first step is admitting you have a problem Bob.

    • #22
  23. CuriousKevmo Member
    CuriousKevmo
    @CuriousKevmo

    Ekosj: So, you create a coping mechanism. Something that allows you to do this otherwise distasteful thing. That is, you convince yourself that the money you are taking from the successful by force is itself an ill gotten gain. That the successful DIDN’T build that … They stole it

    I think thats right Ekosj.  Along those lines, you have to think that the Obama’s and Warren’s of the world really resent the fact that it isn’t the smartest people (which they see as themselves) that are successful in our system but those that work hard, had a great idea or have the personality traits to be good at selling.  So as you say, they can convince themselves that they aren’t really stealing, they are simply making things just.  As though that can be achieved.

    • #23
  24. user_216080 Thatcher
    user_216080
    @DougKimball

    The point of all this is, of course, is that though the constitution may be the source of the federal government’s authority, money is its source of power and influence.  But the well is dry.  The promises have outpaced the means, printing and borrowing won’t last, so it’s time to simply take.   But first, you must demonize the targets (cheats not paying their fair share) and create expectations (free stuff: tax credits for the children, free community college for the children, free daycare for the children – notice a pattern?)  Vague terms like “fairness” and “economic justice” are tossed around to give a vapid argument fake metaphysical weight.  In the end, it’s about maintaining sugar daddy power, that is the ability to dole out money extorted from adversaries.

    It’s important to point out the best way to raise wages and encourage employee benefits: raise demand for labor in a strong economy.  High wages will encourage even reluctant workers to come back into the workforce.

    And if it’s the children we’re concerned about, what’s to come of this huge debt we’re leaving them?

    • #24
  25. CuriousKevmo Member
    CuriousKevmo
    @CuriousKevmo

    Doug Kimball: Vague terms like “fairness” and “economic justice” are tossed around to give a vapid argument fake metaphysical weight.

    Love this phrasing Doug.  Beautiful.

    • #25
  26. user_309277 Member
    user_309277
    @AdamKoslin

     The conceit simple: money (capitalism) is rigged; even the government is cheated, and by association, so are you.”

    Insofar as capitalism creates nexuses of power between government officials and wealthy business people who buy influence, demand that public policy be enacted for their benefit, and use the legal and regulatory systems to shield themselves from competition, yes, the system is rigged.  Insofar as the wealthy do not view themselves as members of the same society as the poor and do not concern themselves with their troubles, preferring a “let them eat cake!” attitude and a gated chateau, the poor are not wrong to despise the rich.

    I will not defend the 529 tax – I personally benefited immensely from my middle-class parent’s ability to save and contribute to my college education.  However, we should be clear-eyed about our priors.

    • #26
  27. Grendel Member
    Grendel
    @Grendel

    Quietpi: Also, I remember, not quite as clearly, in that I don’t remember the source, that more recently there was discussion in Washington regarding actually taxing wealth – the “wealth” itself.

    It was one of Thomas Piketty’s ideas, in last year’s kerfuffle about wealth concentration.  Obama apparently never read the Fisking that Piketty’s research and statistical methods got, in among other places, the WSJ and Commentary.

    • #27

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