Quote:
Originally Posted by Timber Loftis
1. Increase the debt ceiling -- out to 2013, on a lock-step 3-stage system per annum.
2. Balance the budget.
3. Have an equal amount of spending cuts and revenue increases (i.e. new taxes)
Notes: At first I was thinking a 33/66 split on this one, but I really believe some of the pre-existing taxes that the rich have been able to lobby themselves out of should come back. First no-brainer is reinstate the pre-Bush tax rate for dollars made over 250/350,000 (a 2% increase). Second no-brainer is getting rid of loopholes for the rich in the tax code, such as the one I posted an article about that allows them to treat income as capital gains. I also think they should re-insert the 60's era "millionaire tax" (my term, there, but the tax kicked in at around $300K, which is roughly a millionaire or more in today's dollars). I'd suggest setting that at 40%ish on dollars made in excess of $1/1.25 M. I would suggest no change in corporate tax rates.
Regarding the spending cuts, I'd like him to suggest that at least half of those have to come from the military. It's not a sticking point, but I don't see how the WWJD folks and the liberals can't come together to see that torching planned parenthood or programs for the poor isn't the most obvious or ethical way to cut our budget.
4. Congress has very little that it MUST do, and balancing the budget is one of those things. Plus, they need to quit asking the President to do their homework for them and solve their problems.
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TL,
I'm with you on items 1,2 and 4. To get close to balancing the budget here's my proposal:
New Taxes/Revenue:
a) Eliminate Bush Era tax cuts on incomes over 250K - 42 billion $
b) Eliminate SS cap on income subject to FICA tax - 293.3 billion $
c) Eliminate the capital gains loophole TL mentioned previously - 2 billion $
d) Restore Estate tax to 2001 levels - 68 billion $
e) Impose an additional 5% Tax surcharge on incomes over 1 million $ - ~70 billion $
f) Increase capital gains tax rates to max of 20% - 23 billion $
g) Cap the allowable mortgage interest deduction for those making more than 250K$ - 4 billion $
Total new revenue - 502.3 billion $
Notice that the Bush era cuts for the middle class are still in effect as are the EIC and several other credits designed specifically for lower and middle class families.
There are only three other revenue sources that come to mind:
(a) Tax all capital gains as normal income. That would raise approximately 100 billion dollars.
(b) Partially repeal some of the Bush Era tax cuts for the middle/lower class. The estimated cost for those (excluding the portion from taxes on the upper incomes) for 2012 in ~230 billion dollars. If you raise taxes in those brackets to recover a quarter of that money, you actually generate a surplus in the budget. I chose to leave them out for this exercise.
(c) Income Phaseouts for Itemized Deductions and Personal Exemptions for High-Income Taxpayers - In 2010, income limits have been repealed, and the recent tax relief act extends the repeal for two more years, through 2012. Reinstating the phase out is only a short term fix.
Political footnote: The Republicans will scream bloody murder about this proposal on general principle as all of the new revenue comes from the upper income levels. They'll likely pull out their antiquated and bogus "trickle down" theory of economics as a defense. Raising tax rates across the board might mollify some of those arguments. The one obvious offset would be to replace the millionaire's tax surcharge with a very slight increase in the lower tax rates to diffuse some of that debate.
TL, if you want to go with your gut instinct of a 33/66 split between spending cuts and revenues, the Bush era tax cuts for the lower class and/or some of the other low income tax breaks will have to come onto the table. Setting aside any discussion about whether that's fair or appropriate, I simply can't see any other way to generate a total of 800 billion $ of new revenue without including them.
Spending cuts:
a) 15% across the board - no programs eliminated = 559.4 billion $
No programs are eliminated - quite frankly I am NOT going to go thru the entire budget and make decisions on individual programs as which should go and which should stay. In this proposal, every department in the government is forced to tighten it's belt. I'm not even going to address whether this should be modified to eliminate specific programs as Azred has attempted - frankly that would require a lot more time and effort than I am willing to put into this. Whether this is the BEST way to do things, I'll leave to you. I know TL advocates extremely deep cuts in defense spending but not everyone agrees. I took the simplest approach.
Following TL's lead, I left corporate tax rates untouched. Is that the right thing to do? Probably not, since the current corporate tax code probably has as many loopholes as the individual tax code which allow major corporations to avoid paying their "fair share" of taxes. In the interest of simplicity, I'll simply sidestep the issue.
The Bottom Line:
Total deficit reduction:
$1.059 Trillion
Current 2012 deficit:
$1.102 trillion
Remaining 2012 deficit:
$43 billion
Notes:
- The cost of the Bush Era tax cuts for the rich might be a bit low. I've seen numbers as high as 70 billion dollars, but the most frequently quoted number I have seen from multiple sources is 42 billion$.
- The SS revenue is much higher than Azred's number due to the matching fund principal. Employees pay 6.2% and employers match it. Self employed people have to pay BOTH. I used Azred's figure of 2.365 trillion $ in untaxed (for FICA purposes) income x 12.4% to arrive at the 293.3 billion dollars.
- The millionaire's tax revenue is just an estimate. I used Azred's income percentile's and calculated 1.396 trillion dollars from the top 0.5% of income earners and applied 5% to that to arrive at 70 billion $.
- The cap on mortgage deduction is another estimate. The average tax savings for those with incomes above 250K is 5459$, for those making 125K to 250K it's 2703$. Capping the allowable deduction so the tax savings in the upper income group matches that in the next lowest bracket raises an additional 2756$ per return. I used Azred's estimate of the number of earners in that bracket to arrive at the 4 billion $.