How to pay for all this new debt
 

A modest proposal. As the Covid crisis continues there will be more rescue bills coming to help individuals and businesses. At the same time, income into the treasury is dropping as income and sales taxes and import taxes all decrease. The trillions of new debt have not been offset by any decreases in spending, domestic or military. So other than leaving the bills for our grandchildren, is there any way to perhaps repay our government, which is ourselves?

According the World Bank, the value of stocks traded in the US in 2018 was

33,027,245,670,000

Round that off to 33 trillion. I propose a stock trade tax of two tenths of one percent. That means you will pay 2 pennies in tax for every 10 dollars in value you trade. Considering that recently the market goes up and down several percent daily, a 0.2% difference is tiny.
If you sell one million in stock value, you pay a tax of two thousand dollars. Not much of a hit. You pay 7% to sell your house to the agent.

Here's the great part. 33 trillion in sales times 0.2 percent generates 66 billion in tax revenue. Keep in mind of course that this is doubled as the buyer also has a stock trade tax of the same amount. So 132 billion in tax revenue per year.

It won't pay off the debt entirely, but it is a nice dent. It covers nearly 1/3 of the Federal interest payments on the debt. Make the tax 1% and you totally cover the interest on the debt and begin to reduce the principle. Can we ask our stock traders to pay 1% for this national emergency? Or do we leave it for our grandchildren?

It wound not be the stock traders that pay this tax, it would be the investors as the trading tax will be passed through. Everyones 401k plan that holds mutual funds owing stocks will be taking the hit. In non 401k/IRA accounts, money that people have invested in stocks was already taxed as income before it was invested.

I have a novel idea. Once the covid 19 thing is behind us and the economy normalizes, how about getting back to the good old days where the government runs a budget surplus during good times and uses the surplus to pay down debt.

It's called fiscal responsibility, and it involves cutting spending, not looking for ways to tax people. Defecit spending is acceptable during crisis times like we are now in, but is unsustainable when done year after year as has become the new norm.

But it would hit the day traders the hardest. That's not bad.

FYI - Day Trading rules have changed substantially. They are taxed pretty much as you and I at a real job. Any profit from a trade held less than 30 days is taxed as income not capital gains. Then there is another thing called the wash rule which in essence limits loopholes that show loses on paper for the purpose of ducking taxes.

I'm not discounting the idea of taxing the market but in reality it would be hard to target a group that ultimately doesn't get back to the little guy - example pension funds and 401Ks.

One thing for sure we will pay one way or another but how and when. Pray that it won't be in the form of inflation which would hit the retired class the hardest.

Just to clarify, if you sell a stock within a year of purchase (not 30 days) the gain is taxed at your ordinary income tax rate. Also, the wash sale rule is not new. It has been in effect for almost 30 years.

How about reversing last year's tax cut??

Are you referring to the tax cut bill in 2017? I don't think there was another tax cut last year.

How did we pay for it 10 years ago?

Let me see, how many years ago were we deficit free, I know, do you, hmmmmmm!

I totally agree. But, I think we are part of a very lonely group. It looks like the national debt will soon exceed $30 trillion dollars, which is about $94,000 for every person in the country.

I think in the areas of science and finance...……..

People should stick with the area they're good at.

I am not suggesting taxing based on whether your trade generated a gain or a loss, or how long it was held or whether it is in a 401K or a Roth. I am suggesting a tax on the transaction itself. Hold your stock that you have. No tax until you sell it. When I used the term stock trader I meant the tax is applied to the person who is buying the stock or selling. I didn't mean E-trade where they would then "pass it on" to the user. I mean that investors is the same as stock trader in my suggestion.

I do believe that the company used to place the transaction should be responsible for collecting the tax, then they would send it on to the gov't. It would be no different than what now happens with your sales tax being collected at the point of sale then sent on to the gov't.

Example: I buy $ 10,000 of XYZ at 100/share. If Etrade charges a 4.95 trade fee. My Etrade account then will show that there was deducted $10,024.95 from my cash available. Etrade keeps the 4.95 and sends the 20 to the gov't. This is at the 0.2% rate.

So, you raise $132 billion for the year, and Congress spends it in a minute. What have you accomplished?

The last time the US gov't had a surplus was a stretch from 1998, 99, 2000, and 2001. Every other year from 1970 to 1997, and every year from 2002 - now have run at deficits. Those 4 good years should be credited to both parties. Clinton was President and the GOP controlled Congress. They actually worked well together on economic issues. Both sides gave in on things they would have liked.

In 2001 the laws were changed because of a belief then that the gov't should not have a surplus and the money should be returned to the people.
As President to be Bush wrote in 1999 :

"There are only two things that can be done with a surplus. It can be used by government, as the president [Clinton] proposes. Or it can be used by Americans, to save and build and invest. As you can see from this tax plan, I have made my choice. I choose the creation of wealth, over the care and feeding of government."

Since the tax changes of 2001 were enacted, no surplus has occurred, no paying down the debt. Additional significant unanticipated costs have also created debt, 9-11, the Iraq and Afghan wars, Medicare expansion to cover drug costs, and more. And more tax cuts.

So I am offering for your consideration a tax increase. I know in some circles there is never a reason to increase taxes. I actually believe in taxation and in trying to get it equitable. Gracie thinks I should only offer opinions on medicine. Fair enough. But I'd even like to hear hers about a stock transaction tax. I'd have no problem with wording in the legislation limiting the income from this tax to use in lowering the debt for those who worry it would just be diverted into general funds.

Debt
 

How about no spending: on illegals - No aid without drug test Congress lives like we do stop use of military transportation for useless trips by officials. Everyone on public assistance works for local community or federal . no more pork allowed in bills!!!!
Lots of things could be done if we vote in the right people. I don't pretend to know who all of the right ones are but voting for the man and not the party would be a great start.

Thanks - For the record please no one take my post as advice on how to day trade and that I'm up on the rules. Been a long time since I dabbled in that arena. My point was day traders were typically looked at as the bad guys even unpatriotic. There was some loopholes they got to duck under but that is pretty much cleaned up. They were an easy mark for someone to blame if the market went into a sudden downturn.

yes

Personally-I like the concept.

Another idea, in addition to...when I was in business, the counties I operated in charged a BPOL tax (Business & Professional Occupancy). It was a fairly small amount, currently 0.2% on GROSS revenues.

I suggest the Feds do this to ALL individuals and corporations at the Adjusted Gross Income line and apply it directly to the national debt (and yes I understand Congress will quickly find a way to p**s it away).

If you make $100K, you pay $200 towards debt, if a corporation generates $100M in US activities, and turns "no profit", they still pay $200K. It becomes a "charge" for doing business in the USA.

JMHO

Ever hear about the debt ceiling? It is legislation that limits the amount of Federal debt to a specific amount. The problem is that Congress passes new legislation almost every year to raise the limit.

Yes, I am aware of the debt ceiling. It gets increased to prevent default. But you raise an interesting question. As these stimulus bills are spending trillions without any adjustment to income, how are they fitting under the debt ceiling limitations? So I looked it up.

I had forgotten that Congress and Trump suspended the debt ceiling in 2019 for two years. So right now there is no debt ceiling. We can borrow and spend whatever is needed that can pass Congress and get signed.

My modest suggestion would decrease the debt, so the ceiling, when it returns, would be benefitted.

In my opinion, the only way to get everyone focused on the debt is to require everyone to pay taxes. This could be done with a national sales tax. There are too many people who pay no tax, so why would they care how much money the Government spends?

Problem with a National Sales Tax is it is regressive. I believe taxing needs to be done at the top-line. It'll hurt me, but it's the only way.

I agree. But, my point is that, when people pay no tax, they have no stake in the game, and their vote can be bought because they don't care how much money the Government spends. You can raise taxes all you want, and Congress can spend it faster than you bring it in.

Great idea! Where do you feel the surplus should come from? I mean before you can run a surplus, you have to pay off the debt. You have to have a 0 balance, before you can have a +1 balance.

Who should pay for this? Seriously, I'm totally game to consider and assume and play the numbers game.

My idea for your proposal:

Impose a luxury tax on all "new" motor vehicles with an MSRP over $35,000. Make that a 1% luxury tax. And if the MSRP is over $50k, make it a 1.5 luxury tax. For vehicles with an MSRP of over $100k (Bentley, anyone?) make it a 2% luxury tax.

Impose a 1% income tax on all income, PRE-deduction, on any salary over $200,000. Take that 1% right off the top, and THEN you can do all your deductions as usual. No one earning more than $200k per year in salary should be getting so many deductions that they don't pay anything in income tax. This guarantees that they'll pay *something* and that whatever amount it is, won't put them in the poor house.

Impose an additional 1% tax on all income derived from interest, capital gains, stock dividends, PRE-deduction. If you cashed it in, you pay a tax on it. Period. Deduct to your heart's delight AFTER the coffers get their first 1%.

Reduce the deductions available to corporations to a 1% minimum. That way, if a corporation does a bang-up job at generating revenue and is able to find every possible tax loophole to avoid paying any tax - they'll still be on the hook for 1% of their gross receipts.

Add a millionaire tax - not on millionaires who HAVE over 1M - but rather, anyone who EARNS more than 1M per year. These days, it's not uncommon for somewhat wealthy people to have more than a million in assets, and still only be earning a modest (by today's standards) salaries, and put their kids through law school and cover the cost of a yearly vacation without a headache. But I'm talking about the people who earn that much in a single year, on a yearly basis.

If you earned over 1m (gross) in 2018 AND you earned 1m in 2019 (gross) then you hit the jackpot. And you should pay for it. You can pay however little you can get away with paying on the first $500k - but anything over that will cost you a 5% pre-deduction tax. So if you can manage to not pay any income tax at all on the first $500k, you did a good job (or your accountant did, anyway) and congrats. You'll still be on the hook for 5% of the rest, and that 5% can't be offset by deductions.

Then - the whole medical insurance thing. If you have MORE than a certain amount of money, and choose not to buy into health insurance, you can just go ahead and kick in $1000/month to the pool. That way - god forbid you end up with a disease that keeps you alive for a LONG time - but only at so much expense that you end up losing your mansion and housekeeper and Bentley - you'll be covered. And if you don't get sick, that money can cover the housekeeper, who you're probably paying off the books anyway.

How many times does it have to happen before you realize that when taxes are raised the congress spends it not to reduce the deficit but for pork projects and vote buying? Where have you "more tax" people been living, under a rock? For years now the congress keeps raising the debt ceiling and the "more tax" people clamor for more taxes to lower the national debt that never happens. When it gets to the point where taxes eat up all your income leaving you with an existence wage will you finally realize you have been fooled?

I don't understand the mental gymnastics that says a low income person will vote for a politician who supports policies that will benefit them economically, and that is terrible; but a rich person who votes for a politician that helps rich people is a virtuous example to be emulated.
It seems to me that a poor person has much more justification voting in their economic self interest than a rich one. For the poor it means survival. For the rich is means a nicer car or a larger estate.

I think it is obvious how the deficit will be resolved. After the next election, there will be significant changes (cuts) to Medicare and Social Security because that is where the money is. The 2017 tax cut exploded the deficit even before Covid 19. I remember Trump saying that it would generate 3%, 4%, even 5% growth which it never did. Corporations used most of the benefits to do stock buybacks as they stated they would, instead of capex.

I agree with everything you said. But, I don't see how it is inconsistent with my point.

I think it’s time we considered a flat tax rate for EVERYONE of perhaps 10%

If you earn $100 - you owe $10
If you earn $1000 - you owe $100
If you earn $10,000 - you owe $1000
Etcetera

No deductions for anything.

As was shown above, there were 4 years of surpluses at the end of the Clinton years. The deficit returned not because of increased spending but rather because of decreased tax revenue in 2001-2002.

I believe that our national debt represents a security issue as well as a financial issue. I am not a learned individual but let us solicit the best of minds behind the solutions - maybe a citizen driven issue in that the legislators will just kick the can down the road.

Your point was, if I understood it correctly, that poor people paying no tax were having their votes bought by politicians who supported policies that helped the poor. I am suggesting that it is even less virtuous to have wealthy people having their votes bought by politicians who will support policies that help rich people.

If poor people paid a small tax do you think that would in any way change the economic calculation of whom they would support? Of course not. So your suggestion that non-tax payers are specially susceptible to having their votes bought lacks support. But I am pleased to see we are in basic agreement that all politicians make economic promises in the hope that voters will see how those promises will benefit their own family. As I watch a large percentage of my neighbors cheating within the letter of the law to have their old roofs replaced while railing against welfare mothers and people who don't pay taxes, I see hypocrisy.

The budget and deficit has gone up every year or haven't you noticed.

Apparently you didn't read my post. What exactly do you not understand about the difference between cutting spending versus increasing taxes? There is more than one way to skin a cat.

That sounds great, if you can afford to pay 10% tax with no deductions. Some of us are paying 20% on our after-deduction "adjusted gross income" and don't have the opportunity to save.

Some are in even worse situations, and not being able to take a "standard deduction" could mean they lose their homes.

That might be okay by you, but are you willing to have those newly homeless people sleeping on YOUR front yard?

Again - I'm asking for verbs in sentences here. What do you propose the government cut, to make up for the multi-trillion-dollar deficit AND produce a surplus?

Should they cut health care subsidies? Careful with your answer: millions of people are healthy because they can afford health care, currently. If you say cut them - be prepared to have sick people in your community who can't afford to get well, shopping at the same stores you shop at, sleeping on the benches you sit at when the squares are open, washing themselves in the public restrooms you visit when you're out and have to go, begging on street corners you have to stop at while waiting for traffic to allow you to cross...

Or how about we just cut out all public education funding? Let the rich send their kids to school and people who are "anything other than rich" - including middle class, can just home-school, quit their jobs, become poor, and hope to die young so they don't have to endure suffering for the rest of their lives as uneducated plebians/servants/indentured slaves.

I know - let's just get rid of military spending. We don't need no stankin Navy, amirite? Except - we do.

We could tell Congress and Senate no more salaries - but all their salaries combined, including that of their secretaries, the mail room clerk, and the cafeteria workers - don't even put a dent into the first trillion dollars of the debt.

We can call in all the debts owed to us by other countries...
but then they will no longer be beholden to us, and the current administration hasn't exactly made friends with the ones who owe us the most so maybe that's a bad idea.

So - what exactly do you propose our country cut, that will equal not just the deficit, but create a positive balance?

This is regressive taxation. Hits the poor disproportionately.

Do you not get that you would no longer have to worry about 20% rate on after deductions because there would be no need for deductions. A flat tax makes perfect sense to me and would basically be the new payroll tax. If no one has deductions - and I mean no one - it’s a level playing field. The lesser paid is in the same boat as the mogul. Works well. If you earn less, you pay less. If you earn more, you pay more.

Ummm could you explain that one. 10% is 10%. We’d all be level in responsibility. No deductions for ANY ONE. If you make less, you owe less. If you make more, you pay more.