The Bowles-Simpson Commission is a step in the right direction. My colleagues are correct in saying that we need to cut the corporate tax rate in order for the United States to become more competitive and to give small to mid-size companies a break when they need it. A tax rate cut of 10% would pay for itself and put the American tax rate closer to the levels of our competitors. The proposal to close the vast majority of the loopholes in the tax code makes sense. It is mainly wealthy people and medium to large business that are able to exploit these loopholes because they have the money to pay for the accountants necessary for this to happen.
But long-term entitlement spending is going to be a problem. Social Security, Medicare, and Medicaid are expected to be about the size of the entire federal tax revenue. Important actions must be taken to extend the longevity of the programs. This includes increasing the age for collection. It is estimated that this alone would cut the deficit by 200 billion by 2030 and 42 billion by 2015 People such as Paul Ryan are correct in keeping this under control by indexing it for inflation. Additionally, changing inflation measures could save additional money. Another step could be taken for Social Security and its funding mechanism, the payroll tax. It would be wise for there be a rate cut down to 5.5% but make the tax subject to $250,000 of compensation. This would help out the average worker and his employer. Additionally, it would bring in more revenue in order for the program to be solvent long-term.
On the issue of medicare, its tax must also be subjected towards more income. The Congressional Budget Office states that medicare will became 50% of the deficit in this country. The FICA tax for Medicare is about 1.45% for both the employer and the employee. This should be increased to 1.7% We must control this spending. Reducing the tax break for employer based insurance would also bring in a substantial amount of revenue. By 2015 it would increase revenue by $41 billion and by 2030 cut the deficit by $157 billion.
What remains is the final entitlement, Medicaid. The Congressional Budget Office found that the federal government funds 57% of all Medicaid expenses. Potential options to funding Medicaid for the Federal Government includes, a bank tax for risk investing banks, a millionaires tax, slightly higher rates than the Bowles-Simpson proposal, and a more aggressive estate tax.
These could raise hundreds of billions and make the country more sustainable long term. The point is clear the United States must cut spending and raise more revenue. The consequences are too great.