Friday, July 08, 2011

Ten easy ways to balance the budget:

1) Make all earned income, not just the first $106,800, subject to the 6.2% Social Security tax on employees and match that by 6.2% of all earned income from employers.
2) Get rid of Bush tax cuts.
3) Get rid of mortgage tax deduction on everything but the primary residence.
4) Means test the mortgage interest tax deduction, the property tax deduction and Social Security income.
6) Change tax laws to eliminate loop-holes such as hedge fund manager allowing income to be taxed as investment income.
5) Means test co-pays for Medicare for high income individuals on a sliding scale.
7) Eliminate tax breaks for oil and gas industries
8) Eliminate ethanol subsidies
9) Eliminate ability to write off depreciation on corporate luxury items such as yachts and corporate jets.
10) Tax investment income the same as earned income.

1 comment:

Brooke Allen said...

One easy way to balance the budget:

1) Tax Wealth

In fact, this is the only way. And it is the fair way that will work. Somehow people think that outflows from the government's budget should be paid for with inflows into existing endeavors.

But our deficit (a income statement item) comes from servicing our debt (a balance sheet item) and our debt is due to past tax rates that didn't cover past tax expenses. That is why we need to tax wealth (a balance sheet item) to cover the whole in the balance sheet caused by prior tax rates that were too low to cover expenses. Put differently, a wealth tax retroactively taxes the beneficiaries of past tax cuts. Future tax increases taxes future generations that inherit our debt.

I am one of the wealthy people who would be hurt significantly by a wealth tax, but that is fair because I have been a beneficiary of tax cuts since Reagan that I didn't ask for. (However, you can implement every one of your 10 suggestions and I won't care or pay more; I don't have a mortgage, don't have much investment income since most of my wealth is on load to the taxpayers and those bonds pay next to nothing, etc.)

The wealth tax can happen two ways.

1) The explicit (i.e. intellectually honest) way - institute a wealth tax other than home property tax and call it what it is.

2) The backhanded way; monetize the debt - print money to pay off the debt and erode the purchasing power of wealth (i.e. savings)

Either way, it is the only thing left.

Since most people are without savings to speak of, why isn't everyone gung-ho for this? I don't understand it any more than I understand why everyone is upset with an inheritance tax when for 99% of people a $1million exemption meant it didn't apply to them. Some genius calls it a death tax and we get upset? come on.

My dad taught me that getting wealthy doesn't make you greedy or selfish. It is how you get wealthy and what you do with it afterward that counts.