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Tuesday, July 19, 2011

A Trillion of revenue is on the plate

We’re coming down to the wire on the debt limit. “Hard” deals are now being put on the table. The Republicans have said all along they don’t want any new taxes. But only a fool could think this can be done without a significant amount of revenue increase. So if we’re to get a deal what has to give? Easy. Rather than increase taxes the government can phase out deductions.

This data looks at individual deductions. This come to a whopping $950 billion. You tell me, are you on this list? Have a mortgage? Pay state or property taxes? School debt? Health care costs? Charity? Kids? Veterans? At one point or another every American is on this hit list.





Consider the deductions at the corporate level in America. It’s only $65b. Peanuts compared to the tax breaks of individuals.




Now think of yourself in a room trying to negotiate this big deal. It’s all well and good to say that the end result will be more taxes for corporations. But at a ratio of 15 to 1 you have to hit individuals pretty hard in order to raise any serious money. At this point everyone understands that. Cutting personal deductions in a very big way is the only possible outcome where all sides can save some face.

The way that these cuts in deductions will be phased out will hit high incomes the hardest. But don’t kid yourself; this will end up in three to four years as a very middle class tax increase. Should something like this come about you have to look askance at owning real estate. You’ll get hit with a tax from employer 401 contributions. You might think twice about having a child. Those charitable deductions are just that, charity.

I guess this is what has to happen when you need to raise a trillion in revenue to sell a deal. We’re going to hate it a few years from now when all this kicks in.


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17 comments:

  1. Bruce,
    I guess we can just give them all of our money. I mean, what the heck, why work? More than half the folks pay no income tax anyway so why shouldn't we who show up and actually work just give them everything? I have no problem with being taxed on my investments at the same rate as my hourly income, that is only fair. But what you are talking about would shove me into the over 60% bracket by a lot. So, I come back to my initial reaction, screw that, I am firing my 65 employees and calling it quits. I am tired of supporting the rest of the country. If we can't or won't live within our means and the only way we can go forward is by extorting even more money from the working productive American folks then I am out. Levelize taxes to include investment income and income from labor if you will. Income is income under our current system. But remember, we have deliberatly induced people into certain behaviors by shaping the tax code the way we have. To pull the rug out now would harm inumerable families who are not rich but who make a good living and who run businesses which employ others. Be very careful with where you go here.

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  2. Bruce,
    One more thing, Beardsley Ruml, former head of the NY Federal Reserve Bank in a speech printed in American Affairs magazine in 1946 spoke on why income taxes were really obsolete in a fiat currency economy.

    http://www.scribd.com/doc/57808966/Taxes-Are-Obsolete-by-Beardsley-Ruml-Former-FED-Chairman

    Income taxes, in his opinion were really an instrument of social policy, not revenue collection.

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  4. "But only a fool could think this can be done without a significant amount of revenue increase." Well I don't know about that. Seems to me, since the US military budget is bigger than those of all other nations combined, the entire budget deficit could be eradicated by ending all foreign wars and closing bases overseas. You could cut the military budget in half and still have ample funds for defense of the nation.

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  5. Charles Platt,
    Military spending will be about $700b in 2011. Cut that in half and you get $350b. That is a very big number and I (and you) would like to see this happen. But it won't.

    Even if we did cut the military in half it would not address the underlying problem. $350b is still a drop in the bucket.

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  6. But What do I Know?July 20, 2011 5:02 AM

    Seems obvious that they would eventually get around to raising taxes on the middle class. But remember, this is the US version of austerity.

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  7. We are going to default on all of our debts. WE have over 14 trillion in debt, this is only going to make it harder for Americans to survive as what's left of our economic system collapses. NO amount of new taxes is going to fix this. The only thing that will help is the reenactment of the Glass Steagall Act and the banning of all derivatives, credit default swaps, and consolidated loan obligations. That would put an end to all of the fraud that got us into this mess. The big boys on Wall Street are making a killing off of these fraudulent schemes and in order to keep the ponzi scheme going they demand more money from the feds to stop the financial "end of the world". The whole economic system in this country is a giant scam, when was the last time General Electric payed taxes on its income? Only the "suckers" pay taxes in America now not the people who actually "make" money, this is how those people on wall street think about you and me. The only way to fix this is to reenact Glass Steagall, and get rid of the federal reserve system, giving the power to coin money BACK to the congress where it belongs according to the constitution. The federal reserve is a private bank that prints money out of executive fiat to monetize the national debt while at the same time debasing the currency paving the road to Weimar Republic style hyperinflation. All of you will see. As long as we have a federal reserve and an economic system based entirely on fraud this will NEVER end it will only get worse. No amount of taxes or spending cuts can fix 14 trillion of debt, we have to default, make a new national currency backed by gold or silver and approved and controlled by congress, and we need the Glass Steagall Act. Without these things we are on the road to becoming a hyperinflated 3rd world United States of Zimbabwe. Mark my words.

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  8. gee everyone bitching about taxes, everyone wants to balance the budget, but no one wants to take a cut in their government welfare. i for one am tired of paying money to every one else (rich and poor)who has not done a damn thing to even earn what is given them. cut government by 95% and let people take care of themselves and send the foreign bankers back to where they came from. this country is a constitutional republic, not a god damn welfare state.

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  9. Hey, Frank. Get off of GE's case. Don't think you can read a New York Times article and become an expert of taxes. That article was silly. You would bitch and moan if you were not allowed to carry forward your losses to then use them to offset your tax liability. You sound like you are reading a lot of Ron Paul stuff. Worse yet you sound like a bumper sticker telling everyone just how ignorant you are. You mentioned Glass Steagall 3 times in your post without even understanding just WTF you are talking about.

    "No amount of taxes or spending cuts can fix 14 trillion of debt, we have to default, make a new national currency backed by gold or silver and approved and controlled by congress, and we need the Glass Steagall Act."

    You're a jackass. Our debt can be eliminated over time. It will be hard and it will be painful. It also hinges on our elected officials in DC to execute with our country's interest first instead of making their own first. In taht case we are all f%$#ed.I think Bruce's article articulates that the pain will be felt more by the tax payers then the corporations. If we were to default as you say we should the world economy would implode. And as for GOLD and Silver being a standard good luck with that. There is not enough GOLD and Silver on the planet to accomplish that. And as for Glass Steagall, go read up on that so you can better understand WTF it was.

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  10. Anon
    you offer no solutions yet attack everyone else, probably an MSNBC watching Obama sheep

    RON PAUL 2012

    ReplyDelete

  11. Anon is a moron, his solution "our debt can be eliminated over time. It will be hard and it will be painful. ".. while trashing everyone else, Gold Standard or silver standard is the solution, JFK thought so, ohhhh but your masters at MSNBC forgot to tell you JFK felt the same way as that evil Ron Paul. f*cking Obama sucker

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  12. poor Anon, still worshiping GE and MSNBC and his idol Obama, libs are devoid of any ideas

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  13. One poster had it right. As soon as the welfare parasites are willing to give up their food stamps and housing subsidies while driving their new SUVs or Cadillacs and don't do a damn thing to receive the money except pound out a new welfare baby every year or so, I'll think about giving up more of my hard earned money so the socialists in DC can steal it from me.

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  14. Wow this discussion has gotten childish awfully quickly.

    Hmm I wonder what that majority of the population who don't pay taxes would do if the pathetic "social safety net" was cut from beneath them? Between them and the bleeding heart liberals, you would see the Democratic version of the Tea Party come to power and then you would actually have something to complain about.

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  15. To spoil the whole barrel, it takes only one rotten apple called “anonymous,” usually venting “personal” anger issues on a “public” site that he can flout his hate language and hatred without any consequences, and usually a hatred having nothing to do with the subject matter, but he enjoys spewing hatred all over like a kid taking his icey cone and smearing it all over the tables, chairs and floor when Mommy did not do such and such according to his wants. We mostly just skip over such “childish” posts, and we think, “If he is an adult, what a puny mind.”

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  16. i love your article about business. i learn a lot from it,because i am a studying a business course.

    ReplyDelete

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