Democrats really don't want anything to do with the Republican budget suggestions because they actually cut spending. Democrats don't want to cut spending. They want to spend more. And to do that, they not only need to "tax the rich", but they also need to get rid of some of the tax benefits of the middle class.
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According to this article - 4 Middle-Class Tax Deductions Washington is Targeting - here are some of the tax "loopholes" of the middle class that are on the table to be cut:
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1)
Mortgage Interest Deduction
I know if that one goes away, we'll be paying lots more in taxes. The article says that the average tax payer saved $12,200 from this deduction alone. We weren't that lucky, but it was a substantial amount. And we're not anywhere near "rich".
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2)
Charitable Deductions
Supposedly, Team Obama isn't looking to get rid of this all together, just to cap the deduction at 28% of adjusted gross income. For persons who give next to nothing, that may seem reasonable. But I know of one rich guy who lives on 10% of what he earns and gives 90% of his income to charities. I'm sure he'll still be a hefty giver if this changes, but he will most likely have to give less to charity since the government will be snatching up more. I'm also aware of "rich" individuals who give 30%, 40% and 50% of their income away. They also will probably have to adjust their giving because Uncle Sam wants more of their money. And, when charities receive less, the government will have to provide more of these services. More taxes will be needed and the problems will not be solved.
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3)
State Taxes
It really benefits people who live in states with high state income taxes - like New York and California - to be able to deduct their state taxes paid from their federal tax returns. Of course, in states with no state income taxes, it means nothing. Frankly, I'm surprised that this is being proposed, considering all the liberal Democrats in the states that benefit most.
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4)
Earned Income Tax Credit
Strange name for this one. It benefits people to the extent that they get more back in refunds than they paid in and in many cases, persons who paid zero income tax get "refunds".
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Of all of these, I would like to see #4 as the first to be cut. If every income earner actually paid something in taxes, perhaps they would be less likely to insist on more and more government programs.
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We talked about that one quite a bit in our TEA party gatherings. There are plenty of people overseas who have been waiting for years for the opportunity to become U.S. citizens (and who cannot because there are so many illegals here) who would jump at the chance to pay even $500 per year in taxes for the blessing of living here. Isn't it amazing that some think they should never have to pay a nickel in taxes? (And, no, I'm not talking about the "rich" or businesses that provide work for people. )
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Click above to read about these proposed changes.
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Some of them - perhaps most of them - have little chance of being changed.
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For some reason, there is a part of our government and of society that refuses to even try to understand how broke we really are. (And don't start on the "rich". I've shown in articles and videos that taking all the money from all billionaires and millionaires will not help our country. The only thing that will help is to cut the government in as much as half. Fat chance we have of that with persons in the White House who want more and more government and more and more control over our lives. And, fat chance of that as long as so many people have their hands out for "free" stuff and who love the idea of stealing from their neighbor to benefit themselves.)
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If only people would try to understand business and finance. If only.
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Comments: 22
I appreciate your situation. You trust too much to the politicians, what they give they can take away. Before they cut spending they will raise tax revenues, preferred by raising taxes (even on you, which will probably make it even tougher on you), then cut the deductions.
The only good thing about deduction is it keeps money out of the politicians hands.
My guiding princple when it comes to deduction is that they distort the market place, whether it is how much charities get, what people pay for a house, what state people will live in, or how much people get to spend. I would eliminate those along with the oil deductions, the 'green' energy deductions, and so on. Let people decide without any direction from the politicians what gives them the best value.
I am involed in a local nonprofit that is always seeking money from people and organization. We have a foundation for the orgaiznation that provides a special tax incentive for giving over what the normal charitable deductions. I would still rather see ours and all others keep for moneys on an equal footing with all other spending. I think it would make the nonprofits more effective in how they use their moneys and how they treat those who give. Too many times I heard the appeal about the tax advantage and not enough how effective they spend the money. Similarly I think too many people have been sold a bill of goods that their investments should be driven mor by tax avoidance than the actual finaincial success of the what they are investing in.
Stop or drastically cut spending, then eliminate ALL tax avoidance rules, and then see if there really is a reason to consider raising anyone's tax rates.
The recent financial crisis became that force by showing how debt both personal and governmental can cause a 'train wreck', and both have become personal.
The challenge is that so many in power right now are trying to be that external force that pushes people back into their old ways. So once in motion there needs to be that force that keeps them in the new direction.