Comments on: Will We Get an Income Tax Holiday?

By: Miranda

Miranda — Fri, 12 Dec 2008 12:35:13 +0000

I suppose a holiday on capital gains could stimulate increased investment — especially if short term capital gains were exempted. But I’m not sure how helpful such a thing would be to most members of the middle class whose investment earnings are mostly in tax-deferred retirement accounts.

You are right, though, that most people are in hoarding mode after the spending spree that is the holiday season.

By: Frugal Dad

Frugal Dad — Fri, 12 Dec 2008 11:29:07 +0000

Personally, I would rather see a moratorium on capital gains taxes than one on income tax. You’re right; the increase in take-home pay would likely be saved or put towards debt reduction, particularly in January and February when people tend to spend less coming out of the holiday shopping season.

By: miranda

miranda — Thu, 11 Dec 2008 01:32:58 +0000

That’s because a tax rebate, where we get to “keep more of our money”, is popular politics. Doesn’t make much fiscal sense, but it helps people feel better about things.

By: Miki

Miki — Thu, 11 Dec 2008 00:19:38 +0000

A tax rebate by any other name stinks the same and accomplishes nothing.

I’m not saying the Dems are better, but tax rebates seem to be the only idea Republicans have.

By: » Income Tax Holidays: Do We Really Want Them?

» Income Tax Holidays: Do We Really Want Them? — Wed, 10 Dec 2008 18:44:48 +0000

[...] is a bad idea and could cause far more trouble than it’s worth. There are so many reasons — Miranda at Yielding Wealth has already listed a few — but I have a few of my [...]

By: miranda

miranda — Wed, 10 Dec 2008 17:14:17 +0000

Thanks James and David for weighing in. I agree that it would be economic suicide for the government. This from CNN Money really woke me up to the costs SO FAR: http://money.cnn.com/news/specials/storysupplement/bailout_scorecard/.

Also, I really like David’s idea. I’ve been a fan of lower income tax and no deductions for quite some time. I like the idea of a progressive flat tax (flat tax, no deductions, for your tax bracket), with the highest bracket capped at 18% -20% and the lowest paying about 5%. And I’m considering how I feel about VAT as well.

By: David Neubert

David Neubert — Wed, 10 Dec 2008 16:26:42 +0000

I agree that this looks likes the checks. Most people just saved (paid of debt). It would take a permanent change to the tax code to get people to change their behavior. Lower the income tax and at the same time close ALL loopholes and ALL deductions for everyone.

By: James

James — Wed, 10 Dec 2008 15:29:50 +0000

There are several problems with this, like you mentioned. A tax holiday should be more costly than our bailout package. The bailout package was structured in a way that gave more of a bailout to lower income families, and less for higher income families. By giving everyone a tax break for an extended period of time would be economic suicide on the part of the government. It would also be very detrimental to our already terrible debt that our economy is stacking up (a great mention in the post). Thanks for the great post! Scary thoughts that some of our gov. representatives are coming up with, huh…

By: miranda

miranda — Wed, 10 Dec 2008 01:49:02 +0000

Nail on head: Government will take it another way. And with interest. I agree that throwing money at the problem hasn’t been working. But for some reason they think that if they throw enough money at the problems, they will disappear.

By: Jennifer

Jennifer — Wed, 10 Dec 2008 00:51:48 +0000

Hey Miranda,

Interesting…When I read the beginning I was thinking, didn’t they already try this with the stimulus checks? Then I saw your #4. I agree with you, I think it’s a bad idea.

All anyone is focused on right now in government is throwing money at people (in particular, big corporations) instead of making them live within their means.

It’s something I am even getting better at myself because of the state of the economy. So, I wouldn’t want the taxes withheld because that would only provide a false sense of having extra money. Extra money that I don’t have and that I am sure the government would just take from me another way :)

Thanks for the post.

Jennifer