Ideology Makes Tax Planning Impossible Right Now

Monday, 10 Dec 2012 07:56 AM

By Denis Kleinfeld

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Every newsletter, Internet tax blog, television and radio news show, as well as magazine and newspaper opinion page writers, all express their expert opinion of what is the right compromise for Congress and the president to reach over taxes.

It is obvious that few of them have ever had a tax code in their hands, much less ever filled out a tax return.

Even among the tax professionals, the point of their stories or advice columns seemingly is irrelevant in meaningfully guiding taxpayers in what the tax system will be in 2013 and how to cope with it.

This is not to suggest that tax planning be avoided in favor of waiting to see what Washington finally comes up with.

Planning for the worst is generally a good idea.

The intertwining of tax receipts, governmental spending and the debt ceiling have made for a poisonous mixture that the government has been brewing for decades.

Most taxpayers have merely gone along with their lives, either because it’s easier to believe politicians actually know more than they do or taking the time to figure out what is going on is just not worth it.

I agree that the issues surrounding the tax, spending and debt debate are not easy to understand without both considerable technical knowledge and practical experience.

But the current controversy should be amazingly clear for even the least-informed taxpayer.

In a nutshell, the debt ceiling once again needs to be raised if the government is going to keep paying out money in excess of tax receipts.

The president campaigned for re-election on the basis that the Republicans are going to have to agree to $80 billion a year in tax increases for 10 years. He promised that if he got that then he would agree to some reductions in the rate of the increase in spending.

After the election the House Speaker John Boehner, R-Ohio, agreed to the additional tax revenues by way of phasing out deductions. In return, Boehner wanted to know what the spending rate cuts are going to be.

The president has made it absolutely clear that it is not the $800 billion of additional tax revenue he really wants, but he demands that the tax rates on the top 2 percent of taxpayers goes up.

The president’s tax policy is crystal clear. It is an ideological personal victory he is demanding that has, quite literally, nothing to do with the welfare of the United States.

The constant drumbeat by the media revolves around a familiar theme. Fear, hype, fear, hype, fear, hype.

Once again there are calls for compromise and deal making.

But how is it possible to compromise and make a deal with a committed ideologue?

It isn’t.

Ideological belief is no way to run a tax system. At least it never has been before.

I have little doubt that the Speaker and House Republicans recognize that they have the power to put the tax system and economy on a rational path.

But then, political ideologies of various kinds have strong roots in Washington, and rational ideology does not.

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