Something about health care

I admit it -- I have not read the legislature's draft bills for health care reform, nor do I intend to. So I'm relying on bloggers to keep me informed, which certainly doesn't make me an authority. But thanks to my lovely disclaimer, I get to go ahead and write my thoughts, lacking though they may be.

My favorite blog quote on the issue comes from Joe Kristan:

The government that brought us profitable and money-saving innovations like Fannie Mae, Freddie Mac, Amtrak and the Postal Service now is going to try its hand at health insurance.

The idea of government running the health care system scares the dickens out of me.

As with many issues of public policy, I have no problem with the ideal that everyone gets the health care they need.

It is the way in which we work toward that ideal and the sacrifices we make along the way that terrify me.

I've spent much of the past few years dealing with two very large government bureaucracies: the IRS and the military. So my confidence in a government health care system is, well, not there.

CNN Money writes about 5 freedoms you'd lose in health care reform:

1. Freedom to choose what's in your plan
2. Freedom to be rewarded for healthy living, or pay your real costs
3. Freedom to choose high-deductible coverage
4. Freedom to keep your existing plan
5. Freedom to choose your doctors

I don't much like the sound of this. But the President isn't calling to talk to me, so I'll have to settle for writing here.

Peter Pappas provides a great round-up of the discussion from key tax bloggers, and here are some posts to check out:

• Taxgirl: Congress Puts Brakes on Health Care Reform
• Taxgirl: Health Care Plan Leaves Huge Hole in the Budget
• Taxprof: House Marks Up Health Care Reform Bill
• Tax Foundation: Who Should Pay for Health Care Reform?
• The Tax Lawyer: Taxing the Rich Because You Can: The Beginning of Totalitarianism
• Kay Bell: Healthcare surtax not progressive enough

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Why regulation won't work

A few seemingly unrelated posts from tax bloggers got me thinking (which is always scary). The posts are...

• The Wandering Tax Pro, Robert Flach, discusses the Ethics CPE requirements for Enrolled Agents and CPAs. He writes: "I have been preparing tax returns for about 38 years, without incident. If I do not have ethics by now sitting through 2 hours ain’t going to make me ethical. If I am so inclined to be unethical in my practice listening to a speaker tell me what is wrong is not going to make me 'see the light'."


• TaxVox: the Tax Policy Center blog, by Jacob Goldin, discusses the proposed tax on junk food, posing the question: "Would a junk food tax really reduce obesity?"


• Tax Rascal discusses the California tax credit for purchasing a new home, which lenders will be authorized to advance to buyers towards a down payment.

The connection I see is one of the unfortunate but very real facts of life: We cannot change people's motivation for behavior.

We can regulate behavior, but not motivation. We can educate, discuss, persuade, encourage... but when all is said and done, people can only be changed by themselves.

Here's how this relates to the above blog posts...

• An ethics CPE requirement will not make a person ethical.
• A tax on junk food will not make a person change their lifestyle.
• A financial crisis will not stop people from buying things they can't afford.

I don't think bigger government and higher taxes are the answer, but I'm afraid I don't know what the answer is. Ideally, everyone could agree on some clear goals for American citizens, which might include acting ethically, being healthy, and living within our means. But it's impossible to get millions of people to sit around the table and figure it out, so until then we're stuck trying to regulate behavior.

It's not the solution, but I guess it beats complete chaos.

(As a quick post script, a great book about this subject is Leadership and Self-Deception.)

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Yikes: Ohio to subsidize Hollywood

Joe Kristan wrote today about a troubling development in Ohio, my current state of residence: "The insane desire of states to subsidize Hollywood has spread to Ohio, where lawmakers are poised to subsidize 25% of the cost of films shot there. That's precisely half as stupid as Iowa's 50% tax-credit subsidy."

Why, as Joe asks, are we using taxpayer dollars to subsidize the film industry?

I realize the film industry employs a lot of people who are not famous or rich, including crew members, costumers, set builders, etc. But doesn't virtually every industry employ people who are not famous or rich? Why should all these others be forced to support the film industry?

If the film folks are not making money under current conditions, they need to deal with it. Try something new, call it quits, whatever. But don't demand taxpayer dollars.

I'm not being hypocritical in arguing that industries should adapt to the realities of the market. I recently posted about the misconception so many people have about tax professionals: that we all oppose tax simplification because complexity means job security. (The Wandering Tax Pro, Robert Flach, recently posted about this as well.)

The President has promised to simplify the tax code, and he set up an advisory board. Under the "let's save any industry in trouble" philosophy, I need to go to my legislatures and demand a "tax professionals credit" if the President is successful in making the tax law simpler.

Any lobbyists out there who want to help save the tax professionals? If you're not too busy getting film credits for Hollywood, that is.

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Obama targets multinational corporations

The President spoke today of his administration's plans to increase the amount of taxes paid by U.S.-based multinational corporations.

He began his remarks with this statement: "Let's begin with a simple premise: Nobody likes paying taxes, particularly in times of economic stress. But most Americans meet their responsibilities because they understand that it's an obligation of citizenship, necessary to pay the costs of our common defense and our mutual well-being."

Agreed!

Here are a few key statements he made:

• "For years, we've talked about shutting down overseas tax havens."
• "I'm asking Congress to pass some commonsense measures."
• "These and other reforms will save American taxpayers $210 billion over the next 10 years."
• "We're beginning to restore fairness and balance to our tax code."

So what is the plan?

The White House released a Fact Sheet on its plan, which provides detail on the following goals:

(1) Replacing Tax Advantages for Creating Jobs Overseas With Incentives to Create Them at Home

• Reforming Deferral Rules to Curb A Tax Advantage for Investing and Reinvesting Overseas
• Closing Foreign Tax Credit Loopholes
• Using Savings To Make Permanent The Tax Credit for Investing in Research and Experimentation at Home
  

(2) Getting Tough on Overseas Tax Havens

• Eliminating Loopholes for "Disappearing" Offshore Subsidiaries
• Cracking Down on the Abuse of Tax Havens by Individuals
• Devoting New Resources for IRS Enforcement to Help Close the International Tax Gap
  

What's next?

We'll see how this all plays out with Congress. Here are a few links for more on the story...

The Tax Lawyer's Blog: Obama Vows to Close Foreign Tax Loopholes
TaxGirl: Obama Set to Shake Up Corporate Tax "Loopholes" Today
CNN Money: Obama plans corporate tax crackdown
Bloomberg: Obama Seeks End of Corporate Tax Break

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Bias disclosure

Since this blog is about tax developments, it will include government news. I hope the reader (if there is a reader out there) will not find it terribly partisan. I don't think of myself as political, as I tend to only read news about the economy and tax policy. (Although I did hear about the swine flu. My bubble is not entirely impermeable.)

Of course, I've got opinions. And I'm usually too quick to share them. In the spirit of full disclosure, I figured I'd share my philosophy on taxes. And I hope that I'm not breaking any copyright laws by stealing the idea from Tax Attorney and CPA Peter Pappas.

• Everyone should pay their taxes. “Taxes are what we pay for civilized society.” (U.S. Supreme Court Justice Oliver Wendell Holmes). “Taxes, after all, are dues that we pay for the privileges of membership in an organized society.” (Franklin D. Roosevelt)


• No one should pay more than they are required. “The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted.” (US Supreme Court, Gregory v. Helvering, 55 S Ct. 266, 1/7/1935)


• Figuring out your taxes shouldn't be so hard. The average taxpayer should be able to figure out their taxes, since the average taxpayer has to pay them.


• Raising taxes won't fix all our problems. If we are to encourage innovation, industry, and entrepreneurship, we must let people keep most of their income.
  

So that's my philosophy in a nutshell.

Back to tracking tax developments...

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Band-aid solutions to tax complexity problem

On April 15, President Obama addressed the nation on the issue of tax simplification.

The Wall Street Journal article indicated one proposal under consideration would exempt up to 40% of Americans from having to file a tax return. After contacting the article's authors, I learned that the plan was written by Austan Goolsbee and adopted by the Obama campaign.

Titled "The Simple Return" plan, the proposal would not actually exempt up to 40% of Americans from filing a return. Rather, it would make it so the only action required by the average taxpayer would be "checking the numbers, signing the return, and then either sending a check or getting a refund."

A few of the key points in the plan:

• The proposal assumes the tax law remains as is, with the same mass of deductions, credits, exemptions, and so forth.
• The program would be voluntary. Anyone who preferred to fill out his own tax form, or to pay a tax preparer to do it, would just throw the Simple Return away and file his taxes the way he does now.
• The IRS would prepare a "Simple Return" with the data it receives from employers and banks (including froms W-2, 1099, and 1098), which the taxpayer could then just review and sign.
• California has already implemented a pilot program of the "Simple Return" plan, which it calls "Ready Return."

I have just read this over in the last couple of days, so I'm far from qualified to render an expert opinion. Still, I'll go ahead an render my inexpert one:

This seems to be a valiant effort to make the existing system more manageable for the average taxpayer. But it treats the symptoms rather than the disease. The real problem is the complicated, convoluted, mind-numbing tax law.

Rather than trying to lessen the headache of working within a broken system, let's try to fix the system itself.

Unfortunately, that's where my "wisdom" (or foolishness, depending on who you ask) runs out. I hope to read more about others' ideas for real tax reform over the summer. Stay tuned.

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