The title to an essay by A.J. Spiker’s recently published in the Des Moines Register was, “Republicans must ignore pleas to raise our taxes”. (11/262017 – see link below.) The essay advocated for not raising tax rates on carried interest income – bonuses earned by hedge fund managers and real estate development managers. He urged our Senators to make sure the tax bill did not get rid of the special low capital gains tax rate for carried interest. Regular people who earn the same type of bonuses pay taxes at ordinary Earned Income tax rates. For years, carried interest has been tax at this lower special rate and those who benefit from it simply don’t want to lose it. (The same seems to be true for people in every special interest group that gets politically favored tax breaks. The ask our elected representatives to get rid of all the special tax breaks… except for mine… which is vitally important to job creation!)
I thought that a stated goal for tax reform is to simplify our 70,000+ page the tax code. In large part, this means getting rid of the many many special interest tax breaks, and then lowering the tax rates for all. If certain individuals lose their precious special interest tax breaks and actually have to pay more in taxes, so be it. They should feel lucky for what they got in the past. This is part of “draining the swam” that our President has called for. I urge our elected federal representatives to resist the tremendous pressure that they are under from those who received the tax breaks and their lobbyists, and proceed to get rid of the carried interest and many other special interest tax breaks, and lower general tax rates for all.
Republicans are right to not increase the debt ceiling without some action to reduce our Country’s spending deficit. They are not right to pick out Obamacare as the only possible target. President Obama and the Democrats are wrong to insist that the Republican in the House of Representatives pass a “clean” debt limit expansion bill. The compromise should be to agree on spending cuts that are not specifically related to Obamacare. The four big drivers of the Federal budget deficit are Medicare, Medicaid, Social Security and Military spending. Any other spending cuts, although helpful, do not really solve our long-term problem. Republicans should propose some type of binding agreement on entitlement and military spending cuts in return for passing a debt increase bill. The real problem to be solved is that we must stop spending beyond our means.
Republicans propose to reduce food stamp spending by $20 billion to $40 billion over the next 10 years. As reported in the Des Moines Register, we currently (2012) spend about $75 billion per year, up from $ 15 billion in 2001. The number of people receiving food stamps has gone from 17 million in 2001 to 46 million in 2012. So, the number of people receiving food stamps has gone up 170% and the dollar amount has gone up 400%! The $40 billion in proposed cuts over the next 10 years equals an average of $4 billion per year. That is only a 5% cut from the current record high numbers.
Under the Republican proposal, many of those who will have their benefits cut have incomes that are too high to meet the normal food stamp guidelines. Their states allows them to automatically qualify because they qualify for one or more other safety net programs. Others who will have their benefits cut include able bodied individuals who fail to either work or attend job training for at least 20 hours per week.
Given the improving economy, declining unemployment, and our tremendous budget deficit, these cuts appear very reasonable. How can we ever solve our budget deficit problems if we can’t make cuts like these?
Maybe it would be best to let the Sequestration spending cuts to take effect. It appears that elected politicians are unable to make significant cuts to any specific federal spending items.
If cuts could be prioritized, here would be my short list in order of priority:
The Medicare eligibility age should be coupled with Social Security and they both should be gradually moved to age 70. The federal government should not be responsible to pay for 15 – 30 years of retirement for healthy adults. (see below)
Freeze the dollar amount of federal spending on Medicaid – block grant the money to the states and let States decide on the priorities. There will always be more demand than there is supply for free medical care.
Cut military spending, in actual dollars, by at least 5%. Let the defense department decide on priorities to give us the best defense that the budget can buy. We would still have greatest defense on Earth.
Eliminate the Dept. of Education – leave education to the states entirely.
Limit farm subsidies to $50,000 per farmer maximum, $100,000 per family maximum. Phase out all subsidies for farmers who have a Adjusted Gross Income between $100,000 and $200,000. Require 100% of the cost of crop insurance to be charged to the farmers. Why do we keep paying subsidies to farmers when they have record profits? Something is wrong.
Cut the FEMA budget by 50%, and make States pay a 50% co-insurance payment for all federal money that flows into any State. States would be much more efficient, and there would be much less abuse and fraud.
Eliminate subsidies and special tax breaks for all forms of energy. All energy producers fight to protect their subsidies by claiming that the other forms of energy get subsidies and all they want is a fair playing field. Well, lets make the playing field very fair – no subsidies for anyone.
Eliminate spending on arts, and humanities, public broadcasting, etc. Contributions to these kinds of organizations should be left to charitable organizations.
I’m sure the list would be different and much larger if I took enough additional time.
According to data compiled by the Social Security Administration:
A man reaching age 65 today can expect to live, on average, until age 83.
A woman turning age 65 today can expect to live, on average, until age 85.
And those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.
As we work to avoid the fiscal cliff and solve our federal budget deficit problem, we need to ask what we Iowans are willing to give up. We cannot solve our deficit problem by only increasing taxes on other people or by only cutting other people’s benefits. Here is a partial list of federal expenditures that benefit Iowans: crop insurance subsidies, ethanol subsidies, wind power subsidies, biodiesel subsidies, Medicare, Medicaid, Social Security, National Guard installations, Silos and Smokestacks national park funding, Harkin grants, student loan subsidies, mortgage interest deductions.
Will you do your part? What cut to your current or future benefits are you willing to accept? If we don’t solve our deficit spending problem, sooner or later we will end up with a crisis like Greece. Contact your Senators and Representative and tell him which of your benefits you are will to have cut.
I just don’t believe most people think we should raise the top income rate above the current 35%. All of the examples given are of the super rich, like Warren Buffet and Mitt Romney, who earn millions each year and pay a total tax of between 15% and 20%. This is the unfair situation that most people think of and most politicians describe when they ask the rich to pay their fair share. Maybe the easiest way to fix this problem is to revamp the Alternative Minimum Tax. Why can’t we simply tax all earnings over $250,000, no matter the source, at the maximum 35% rate? This would include interest earned on tax exempt bonds, dividends, capital gains, carried interest, and any other type of income that is otherwise tax exempt or taxed at lower rates. It that doesn’t generate enough revenue, then start taking away itemized deductions based on income. If need be, take away all itemized deductions.
The idea above presumes that we need to increase revenues (taxes) to help solve our deficit problem. Of course, the biggest cause of our problem is that spending has increased too rapidly. So, the biggest part of the solution should be to reduce spending.
The chart at the link below shows clearly that our deficit problem is due to uncontrolled spending, not that revenues (taxes) are too low.
Chart showing the history of federal revenues and federal spending: http://www.heritage.org/federalbudget/growth-federal-spending-revenue
To solve our government spending deficit problem, we must mostly reduce spending. But, increasing revenues by closing unfair tax breaks for politically favored businesses or individuals is a reasonable part of the solution. We do not need to raise tax rates. We do need to make sure that all similar types of income are taxed at the same rate.
One of the unfair tax breaks is the 15% income tax rate on “carried interest.” Hedge fund managers not only charge a fee based on a percentage of assets under management, they also may get a bonus if they are successful in their investment results for their customers. For example, they might get a bonus of 20% of the profits, if any, when profits are taken on an investment. Under current law, it is called carried interest and is taxed at 15%. In any other business, they would call it a bonus and tax it as earned income – at the full income tax rates of up to 38%. This is one of the unfair tax breaks that needs to be ended.