A Tax Policy for 2010 and Beyond

            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. 

-S. Martin

The Commission

         Yes, you are all aware that we are facing a recession and I don’t have to tell you that it’s bad. Now the government is getting the big picture as to making strides in the right direction. President Obama has taken Erskine Bowles (D) and Alan Simpson (R) and made them co-chairs of the National Commission on Fiscal Responsibility and Reform. This bi-partisan thinking is a step in the right direction 2 years too late. A compromise deal is only going to get us so far. From the Democrats we have seen tax cuts to the lower classes, loss of revenue means then the need to over tax big business to offset the cost and stunt our economic growth. The Republicans have given us just the opposite tax breaks to the big businesses to promote the creation of jobs and more individual or small-scale tax to make up for it. Either way our economy isn’t responding to conventional pick me ups, and that’s the problem. This commission needs to see something else some outside the box thinking. The people of America are so scared by inflation and recession that they have lost the will to spend. Allowing spending is going to get us on course. So before actions can be made to adjust the economy they need to reinstall trust in the American people. That’s the kind of out of the box thinking that’s going to get us started up. I’d like to hear comments and concerns below, do you have a better idea?

     -J. Sullivan

The Case For Tax Reform

In the New York Times today, there appeared an editorial describing possible tax reform. This publication stands firmly behind true tax reform. However, this liberal stands firmly behind the rich paying their share. A few (including Mr. Hubbard, author of said article), have made the argument that the Rich pay too much in taxes, and that it is mere correlation, not causation that the rich tend to be taxed at the highest rates during  times of great prosperity. Simple logic shows that this cannot be the case. The poor and middle class spend far greater proportions of their incomes on basic, and not so basic, needs. Once a few goals are achieved, though, these people being to save. Warren Buffet, Bill Gates and The Koch Brothers could not spend all their money if they tried (although the Kochs seem to be doing their level best in terms of campaign spending). Wealth redistribution is a four letter word in American politics today, but taxing the rich at rates that do not impoverish them, but still allows the government the revenue it needs is pure economic sense. However liberal he may be, this columnist still stands for lowering the taxes of businesses and corporations within the United States. Between state and federal taxes, American companies spend far more to the government than even countries with far sounder fiscal stati, like Germany.

            Taxing the people who make exorbitant amounts of money from large corporations, rather than the corporations themselves, is far less likely to hurt the country economically. GM and GE both can (and have) moved jobs overseas. Other corporations have also moved their headquarters overseas. The interesting thing is that these corporations almost always keep their functional heads in the United States. This is because the leaders of these companies would rather not move. Thus, lowering taxes on corporations but raising them on heads would encourage companies to create jobs in the United States, spurring domestic spending, and hopefully dragging the economy, kicking and screaming, out of the recession, allowing tax revenues to rise even further, and hopefully financing the federal government without bankrupting its citizens, which is the primary goal of any tax policy.

 -G. Ferrante