Some Suggestions for the 'Supercommittee'

[Guest]

I've made some of these suggestions before, and have yet to read a compelling argument for why they are off base.

America needs to raise revenue and these are the means by which I think we will realize geometrically increased benefits:

Raise taxes on capital gains to the eventual level of 35%. Go from 15 to 20% in year one, 20-24% in year two, 24-28% in year three and a 1% increase each of the next seven years. Capital gains are the monies which are earned without "working". In a decent economy a blindfolded investor can throw a dart and hit a stock or bond winner. Or, if times are good and you don't like darts you can give your money to a reputable broker and earn a decent profit. Of course it is in everyone's best interest to get back to a that kind of economy, and especially for those investors who love to succeed without working. With a front loaded increase in capital gains taxes, investment companies will be almost forced to put billions back into markets asap in an effort to pay lower taxes on their profits. That cash infusion will in itself pump up the economy significantly, That's a geometric benefit.

Revise the tax code for individuals to eliminate the rest of the Bush tax cuts and establish a higher and graduated percentage increase on incomes higher than $350,000. (politically, $250k is a bad place to start. We've heard many sob stories of how those folks would be devastated by any tax increase. If it still alarms you that this would be a real hardship even for the $350k'ers, I'd agree to start even a little higher). This step is the beginning of an effort to get back to the healthy American concept that "all men are created equal". The remaining members of a dwindling middle class just can't understand why the local bank president "earns" $2.3 million, or why Wall Street financiers have been given record bonuses during a struggling, high employment economy. Those who struggle should have the consolation of knowing that large segments of those bonuses go back to "We, the people." So part of the geometric benefit here is a morale boost for the masses. The continued economic success of our nation requires a level of confidence and a positive attitude. The current situation encourages anger, distrust, cheating and hoarding.
As a real life example, my accountant admits he processes tax returns for scores of people who earn amounts above $250k annually. He claims that not a single one of those clients complains about paying their taxes. They are casual, they smile, and say things like "isn't this a great country". On the other hand, he watches many who earn far less pay greater percentages of their incomes and leave his office in great distress.
Here is one of the most important justifications for higher taxes for the wealthy: our forefathers as well as us, and our collective effort, regardless of our station in life, have made it possible for people to become wealthy. It is a blessing for us to be here in stable America, still unlike most other places, the land of opportunity.

Revise the tax code for businesses to eliminate the traditional loopholes for mega corporations and replace them with loopholes for companies which operate here, do research, and hire additional workers. The goals are to entice companies to headquarter and grow here with generally lower corporate taxes, but arrived at through incentives and low interest loans. Reduce payroll taxes to enhance employment. Since the banks are hoarding funds, set up a government operated low interest loan system for business expansion. Supporting the low interest level will force the banks to match that level, which will be an effective way for the Fed to control inflation. Also, let contracts to rebuild the country's infrastructure, and hire more construction watchdogs to eliminate waste. Increase the legal penalties for abusers. Pay for the work with the increased revenues. The extra benefit is an infrastructure which facilitates even more productivity.

My contention is that the costs of accomplishing the above would be more than offset by the revenues realized, and would, in toto, sharply reduce the deficit, increase employment and increase national productivity.

If you respond I'd appreciate it if you focus just on this topic, even though budget issues in the areas of defense, entitlements, etc. are huge.

[Guest]

I've made some of these suggestions before, and have yet to read a compelling argument for why they are off base.

America needs to raise revenue and these are the means by which I think we will realize geometrically increased benefits:

Raise taxes on capital gains to the eventual level of 35%. Go from 15 to 20% in year one, 20-24% in year two, 24-28% in year three and a 1% increase each of the next seven years. Capital gains are the monies which are earned without "working". In a decent economy a blindfolded investor can throw a dart and hit a stock or bond winner. Or, if times are good and you don't like darts you can give your money to a reputable broker and earn a decent profit. Of course it is in everyone's best interest to get back to a that kind of economy, and especially for those investors who love to succeed without working. With a front loaded increase in capital gains taxes, investment companies will be almost forced to put billions back into markets asap in an effort to pay lower profits. That cash infusion will in itself pump up the economy significantly, That's a geometric benefit.

Revise the tax code for individuals to eliminate the rest of the Bush tax cuts and establish a higher and graduated percentage increase on incomes higher than $350,000. (politically, $250k is a bad place to start. We've heard many sob stories of how those folks would be devastated by any tax increase. If it still alarms you that this would be a real hardship even for the $350k'ers, I'd agree to start even a little higher). This step is the beginning of an effort to get back to the healthy American concept that "all men are created equal". The remaining members of a dwindling middle class just can't understand why the local bank president "earns" $2.3 million, or why Wall Street financiers have been given record bonuses during a struggling, high employment economy. Those who struggle should have the consolation of knowing that large segments of those bonuses go back to "We, the people." So part of the geometric benefit here is a morale boost for the masses. The continued economic success of our nation requires a level of confidence and a positive attitude. The current situation encourages anger, distrust, cheating and hoarding.
As a real life example, my accountant admits he processes tax returns for scores of people who earn amounts above $250k annually. He claims that not a single one of those clients complains about paying their taxes. They are casual, they smile, and say things like "isn't this a great country". On the other hand, he watches many who earn far less pay greater percentages of their incomes and leave his office in great distress.
Here is one of the most important justifications for higher taxes for the wealthy: our forefathers as well as us, and our collective effort, regardless of our station in life, have made it possible for people to become wealthy. It is a blessing for us to be here in stable America, still unlike most other places, the land of opportunity.

Revise the tax code for businesses to eliminate the traditional loopholes for mega corporations and replace them with loopholes for companies which operate here, do research, and hire additional workers. The goals are to entice companies to headquarter and grow here with generally lower corporate taxes, but arrived at through incentives and low interest loans. Reduce payroll taxes to enhance employment. Since the banks are hoarding funds, set up a government operated low interest loan system for business expansion. Supporting the low interest level will force the banks to match that level, which will be an effective way for the Fed to control inflation. Also, let contracts to rebuild the country's infrastructure, and hire more construction watchdogs to eliminate waste. Increase the legal penalties for abusers. Pay for the work with the increased revenues. The extra benefit is an infrastructure which facilitates even more productivity.

My contention is that the costs of accomplishing the above would be more than offset by the revenues realized, and would, in toto, sharply reduce the deficit, increase employment and increase national productivity.

If you respond I'd appreciate it if you focus just on this topic, even though budget issues in the areas of defense, entitlements, etc. are huge.

let me try.

The first thing that you should have said is not that we need to raise revenue that we need to cut unnecessary spending.

You state that capital gains is money that is earned by not working. I think investing in companies that will grow our economy is work. It is a high risk and it should be rewarded. A few increase the capital gains tax I suggest you that you would cause the people who invest in businesses to invest less thereby shrinking the economy more. If you believe that a blindfolded investor could pick successful stocks in a good economy why would you want to take that opportunity away or discourage it? Would you confiscate the winnings in a poker game? There are professional gamblers and I'm sure you would not call that working for a living. Your logic that investment companies would invest more money escapes me.

Yes, all men are created equal. We just don't end up equal. Next shall we kill everyone that reach 30? Some people live longer than others. Life is unequal.

As far as your accountants related experience goes, I agree with him. I myself enjoy paying income tax. It means I have an income. I also enjoy paying capital gains tax. Also because it means I have capital gains. However there is a point at which I would not enjoy paying taxes. "Hint" if they are too high.

Your most important justifications for higher taxes escapes me. Unless of course you are simply calling for redistribution of income.

Let me see if I have this right. You want a government operated system to provide low-interest loans to business. Just like Fannie Mae and Freddie Mac? Are related to Barney Frank? (sorry)

everybody with no experience and no qualifications would be getting low-cost government money for their "business." These loans would eventually be packaged and marketed as securities........ oh wait, we already did something like that.

I'm sure that your intentions are good but the road to hell and economic chaos is paved with good intentions. This is precisely why the progressive way of economic thought will never put time in anybody's pocket. It will only take it out.

Just a thought

[Guest]

let me try.

The first thing that you should have said is not that we need to raise revenue that we need to cut unnecessary spending....Unfortunately, to solve our fiscal crisis we're going to have to cut a whole lot more than just "unnecessary" spending. We're going to have to cut spending on lots of things that we all think are both necessary and desirable. But we'll have to stop spending on them simply because we can't afford not to.

On the revenue side, we will have to increase tax revenues. In the long run, there's simply no question about it. The proposals in the initial post are several thoughtful ways revenues can be increased. Are they the "right" ways? The "only" ways? No.

I think tax policy is going to take a whole lot of thought. In the end, someone's ox is going to be gored. Personally, I'm still in favor of higher taxes on those who can afford to pay them and who have benefitted the most from some pretty rewarding tax policy over the last couple of decades. I'm also in favor of lowering corporate tax rates. Some of those costs could be funded by totally eliminating tax loopholes and benefits--do the sugar beet farmers need sugar price controls? Is the ethanol program that has enriched corn producers worth it? Do milk producers have to be subsidized? Are the billions and billions of dollars spent on low income housing, which enrichs mainly bankers desirable? (That was a business I know a LOT about as I was one who was enriched.) The list could go on and on.

We continually talk about the power of the free market, yet imbedded in our tax policy are billions and billions of dollars we spend as the result of businesses having paid lobbyists to create loopholes and benefits to take the risk out of their businesses. Is this right? Should we be funding the high risk end of the free market, guaranteeing profits to those who say they are "risk takers"?

In the end, someone is going to be paying higher taxes. The skill will be in choosing to increase taxes on those who will have the minimum bad effect on the economy.

Does our Congress have such skill? Please...I really don't want to be depressed today.

[Guest]

This nation needs to stop trying to incentivize and discourage actions through the tax code. Examples:

Mortgage interest tax deduction & home real estate tax deduction– These brought us MacMansions, urban sprawl, rejection of energy efficient apartments, the death of mass transportation in most of the country, the destruction of personal wealth and a host of other illnesses.

Incentives to buy LSV’s, electric cars, solar panels, etc. None of these have addressed any real problem in an effective way.

‘Green’ energy subsidies that have zero payoff and to date none of them do.

Charitable contribution deductions. Why should I take money from you to subsidize my church or you take money from me to support your contributions to the charity of your choice? If an individual wishes to give, let them give out of their own pocket and not those of the rest of us.

Long-term unemployment benefits that encourage people not to seek out work

Bio-fuel subsidies. These have. helped create real food shortages worldwide and driven up the cost of fuel here in the United States.

Farm subsidies.

Eliminate all income tax deductions where the individual has any control over what has happened to them. I would retain tax deductions for catastrophic medical costs and personal exemptions but little else.

Corporate taxes can be equally simplified. Eliminate all deductions including depreciation, using up of assets, etc. Taxable income equals sales and investment income minus expenses. It does not matter if the expense is a new plant or a new pencil. Repatriated profits are not taxed if the earnings have been taxed in another country.

Entitlement programs must be reformed. Today our government is promising more than it can deliver, much like Bernie Madoff.

Tax rates can then be set to be competitive worldwide and bring business and jobs into this country. Setting them to match the accumulative wishes will bankrupt us.

[Guest]

Why are the susidies to other countries not listed?
How about the Medicare abuse? Always discussed...a known problem....nothing gets done. The benefactors must be a large contribution group.
How about military installations around the world where there is no conflict? No danger of conflict again? Must be the benefactors...ditto above.

How about the susidies to places like Iraq? Afganistan? Where the politicians don't like us but like the payola.

How about wasteful programs like still coining the one dollar coins (for 5 years after they were deemed not usable by the public) and another 5 years of coining to go....$350,000,000 cost to taxpayers SO FAR plus a new vault $650,000 to store the coins no one will use???

If there were a true line by line analysis of the budget via a zero based budgeting process there would be more than enough spending cuts identified.

The politicians, their contributors, their special interest groups, their lobbyists will not let that happen, hence go after programs that affect the average citizens....AGAIN.

And the average citizens will do nothing to change the cycle.....AS PER USUAL.

And now there is even an identity assigned to the miserable way the country is run...THE NEW NORMbarf


BTK

[Guest]

Why are the susidies to other countries not listed?
How about the Medicare abuse? Always discussed...a known problem....nothing gets done. The benefactors must be a large contribution group.
How about military installations around the world where there is no conflict? No danger of conflict again? Must be the benefactors...ditto above.

How about the susidies to places like Iraq? Afganistan? Where the politicians don't like us but like the payola.

How about wasteful programs like still coining the one dollar coins (for 5 years after they were deemed not usable by the public) and another 5 years of coining to go....$350,000,000 cost to taxpayers SO FAR plus a new vault $650,000 to store the coins no one will use???

If there were a true line by line analysis of the budget via a zero based budgeting process there would be more than enough spending cuts identified.

The politicians, their contributors, their special interest groups, their lobbyists will not let that happen, hence go after programs that affect the average citizens....AGAIN.

And the average citizens will do nothing to change the cycle.....AS PER USUAL.

And now there is even an identity assigned to the miserable way the country is run...THE NEW NORMbarf


BTK

I have always wondered about the money we give to other countries...and yet we are looked upon so unfavorably in the world? What the heck...They must think we are a bunch of gullible dummies. Maybe they are right!

[Guest]

Foreign Aid: Money taken from the poor people of a rich country and given to the rich people of a poor country. The examples are too many to list but two come to mind: Yassar Arafat had a fortune estimated at $1.3 billion and his wife living in Paris subsisted on a $100,000 monthly allowance paid by the Palestinian government - not Arafat. Imelda Marcos of shoe fame http://www.youtube.com/watch?v=QcUXtb1uQ8Qhas a fortune estimated at well over $10 Billion.

Being leader of a country that gets American Foreign aid is a very profitable profession.

[Guest]

Why are the susidies to other countries not listed?.....If there were a true line by line analysis of the budget via a zero based budgeting process there would be more than enough spending cuts identified....I'm pretty sure the costs of foreign relations are seldom mentioned because they are so insignificant in relation to total federal spending. The US spent about $25 billion in foreign aid in 2009, a miniscule percentage of the $3.9 trillion in total spending (.00006%). Of the total foreign aid we give away, about 90% is given to Israel. In fact, the total amount that we spend for the State Department, including all its employees and the cost of all the embassies around the world as well as the foreign aid it gives away, is less than we spend for the IRS agents we hire to collect delinquent taxes!

And if you think the U.S. is still overly generous, we should understand that we don't even rank in the top 20 countries measuring foreign aid as a percentage of GDP.

I'd surely agree with a line-by-line zero-based budgeting approach. But I think you might be surprised that even if such an approach was taken, it wouldn't come close to producing "more than enough" spending cuts. Remember, just to balance the budget will require more than 40% in spending reductions. If we don't change the Medicare and Social Security entitlement programs pretty substantially, we could eliminate ALL government expenditures categorized as "discretionary" (that's pretty much everything that we know as "government") and we wouldn't be close to balancing the budget.

That's why those who come to grips with the numbers in the budget and understand the gravity of our problem always conclude that to balance the budget will take decades and will require massive cuts in the entitlement programs as well as life-changing cuts to other government programs that we've become very dependent on, as well as increased tax revenues. The numbers simply don't add up any other way.

[Guest]

That's why those who come to grips with the numbers in the budget and understand the gravity of our problem always conclude that to balance the budget will take decades and will require massive cuts in the entitlement programs as well as life-changing cuts to other government programs that we've become very dependent on, as well as increased tax revenues. The numbers simply don't add up any other way.

Good plan! Let's get started!

[Guest]

(...to balance the budget will take decades and will require massive cuts in the entitlement programs as well as life-changing cuts to other government programs that we've become very dependent on, as well as increased tax revenues.)...Good plan! Let's get started!I'm with you Katz. The only problem is that the heavy lifting must be done by the 535 we elected to those sweet jobs in Washington.

I did laugh today when the latest opinion poll on Congress came out. 82% of the public believes we should replace the entire Congress.

I think that's a good plan too. Want to join me in getting started in 2012?

[Guest]

I'm with you Katz. The only problem is that the heavy lifting must be done by the 535 we elected to those sweet jobs in Washington.

I did laugh today when the latest opinion poll on Congress came out. 82% of the public believes we should replace the entire Congress.

I think that's a good plan too. Want to join me in getting started in 2012?

Oh yeah! I'm in! Time to start with a completely clean slate! Definitely not voting for anyone who likes KoolAid!