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Wednesday, November 10, 2010

Oh, Yeah

UPDATE: Here is the link to the current proposal. Pdf, 50 pages. End update.

Early report on the Deficit Commission (Catfood Commission) work. So far, so good. This seems realistic.

We pretty much have to whack across the board to make any impact at all, and this proposal does. WaPo article. The flatter tax structure is good, and the cut in corporate tax rates to 26% is good. That would help with job creation and to generate investment.

So, scream on. There is no way to get this done without raising taxes on the middle class, and that includes a lot of current retirees. One thing about this proposal is that it suggests throwing just about everyone in the barrel.

Bayh has already come out supporting the basic approach. I suspect he is going to run for president in 2012, and I'm interested.

Further update, a graph taken from the proposal:

The "current policy" line includes the doc fix fix, the extension of at least most the Bush tax cuts, etc. That is the path we are on.

This does the trick mostly and would eventually create a huge number of new jobs. It can't do it all - a lot of legislative change is needed in the environmental law/energy areas - put it would make it almost as profitable to run a company in the US as in say, Sweden or Denmark.

If you're not going to compete with Sweden or Denmark, you are not going to compete.

No tariffs, no deal.
Eliminating the mortgage interest and health insurance deductions is pretty easy to defend on economic efficiency grounds (not commenting on the politics of it). Taxing capital gains and double-taxing dividends at regular income tax rates, not so much. Raising those taxes probably decreases revenue enough to blow their projections out of the water. Also, they're still keeping business taxes higher than individual taxes. All of this still incents businesses to finance themselves with debt rather than equity, and the business taxes aren't low enough to encourage capital-intensive manufacturing.

I haven't looked at it in detail, but this seems to me like a poison pill defense. Wrap a bunch of economy- and job-killing proposals up with some plausible debt-reduction ideas, and dare the Republicans to vote "no".
Neil - the link to the current draft is now in the post. If you really think things like:
"Reform and Simplify the Tax Code

Broaden base, lower rates, and bring down the deficit.

Make America the best place to start and run a business and create jobs.

Cap revenue at or below 21% of GDP."

are Democratic in origin, I don't know how to respond to you.
Those are pretty words, indeed. But they're just words. I was looking at the specific proposals on offer, and they don't look to me like they're intended to "Make America the best place to start and run a business and create jobs." Perhaps I have misunderstood.
I will have to pay more for my Medicare and get less SS by about 10%. I'm okay with that. I've known for the last ten years that Medicare was going to have to get patients to pony up more (upfront premiums and copays) or go bust. Giving patients some idea of costs and alternatives can help also. People will think twice before they run to the doctor with the sniffles.

Cutting my SS by 10% and taxing the whole payment is okay with me as well. All in all it'll cut my after tax income by 5-10% and I can live with that if other old codgers are giving their fair share as well.

Ending the real estate loan interest deduction in one fell swoop will finish off the real estate market. I don't think that one will or should fly.

If they want to really cut DOD, then combine the services. I know many of my old Navy squadronmates would shudder in horror at the thought. But it would reduce an enormous amount of duplication and competition for funds. Not to mention cut the number of flag officers by 2/3rds. I know how the military makes its budgets and it is not pretty. It is designed to spend more every year no matter the need. I'm a hawk, but a cheap hawk.

The three year freeze on federal spending and budgets sounds good and is certainly doable. (Maybe not politically possible though.)

It at least gives a platform to launch the debate from. It is a debate the American people, particularly the TEA Partiers, want to have. If nothing comes of this but talk and delay, real cost cutters will be elected in droves in 2012.
To no-tariff Anonymous: You don't need tariffs. All you need is to make imports pay the same taxes domestic production pays. The best way to do this (and the hardest to achieve) is to replace the ENTIRE income tax with a uniform national sales tax.

This would also fix the biggest problem we face right now: the number of people who Pay No Tax At All. Actually, they do pay tax because everything they buy has taxes buried in it (unless they buy directly from overseas) but they don't see it that way, and so feel free to vote for people who tax others to give them stuff.

Conservatives of all stripes: push to reduce the No Tax At All fraction of the population.

I've concluded that deductions for state and local taxes are a subsidy that keeps taxpayers from feeling the effect of high-cost state and local government. I'm glad to see those deductions removed. And the GOP should say plainly that the Feds cannot subsidize free-spending state governments out of the general revenue.
Not only is eliminating the mortgage deduction stupid and wrong, they should re-instate complete interest payment deductions like the pre-Reagan days.

I understand the jealousy behind the "eliminate the mortgage deduction" concept, but that jealousy is wholly assumptive of a casino-based housing market. A normal hosing market doesn't generate lots of equity extraction mortgages.

Ultimately, I don't see any reason the accounting standards for a household should be any different than the accounting of a business.
OK, after looking at the proposal some more, I'll happily admit that it's not a poison pill for the Republican party. There's too much stuff in there that Democrats don't like.

I still can't trust their analysis, though. Anybody who claims that raising rates on cap gains and dividends from their current levels will increase revenue is smoking something. And that calls the whole thing into doubt.
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