Build A Budget Plan

[RichardAWilson]

http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=s3uk20r8

I balanced the budget without slashing social spending and without undermining Social-Security and Medicare. I slashed so-called national defense spending, foreign aid and I indexed Medicare Spending with the Consumer Price Index. Everything else on the spending side of the equation was left unchanged.

Meanwhile, I restored Clinton-era tax rates on households earning over $250,000 and lifted the payroll tax ceiling on individuals earning over $108,600. I also instituted pro-growth tax reform and a Millionaire Surtax.

Pro-Growth Tax Reform = Lowered the corporate income tax from 35% to 28% and eliminated tax deductions that have benefited high-worth individuals and households.

[Maslo]

Here you go:
http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=x9xk49nv

I fixed it, even with 318 billion surplus to pay off some of the debt. :thumbup1:

[RichardAWilson]

I like your plan. The main issue is that I wasn't planning on leaving a surplus. The economy needs as much stimulus as we can afford.

I also happen to believe the Bank Tax and Carbon Tax are anti-growth and regressive. The Bank Tax would harm the financial condition of our commercial banking sector. The Carbon Tax would reduce the corporate sector's earnings. I would much rather endorse Carbon Exchange, which redistributes profits from polluters to clean producers instead of implementing a tax that'd reduce overall profitability and lead to higher electric bills for American consumers. As for tax-reform, I picked the Simpson Plan, which would ax tax deductions (save those that benefit lower and middle income families) and use the savings to reduce the corporate tax.

I know this model has much to be desired. I found it cool though. Nonetheless, I'd rather institute an even higher tax rate on those earning over a million dollars in income. (A Higher Millionaire Surtax) I'd also like the option of offering middle and lower class tax cutting (I.e. Increased Earned Income Tax Credit and Standard Deduction). The same holds true with Capital Gains and Dividends. I'd like to abolish Capital Gain and Dividend Taxation for lower and middle income households to stimulate aggregate investing and broad-based wealth ownership, while taxing the returns of the super-rich at the much higher income tax rate.

Here'd be one example that I would favor:

Merge the Employee Payroll (FICA) Tax into the Income Tax

Personal Income Tax

(All tax deductions and write-offs would be abolished, unless they're designed for unincorporated small and mid-sized businesses - proprietorship businesses and partnership businesses).

Nothing - $10,000: 10%
$10,000 - $25,000: 20%
$25,000 - $125,000: 30%
$125,000 - $250,000: 40%
$250,000 - $1,000,000: 50%
$1,000,000 - $10,000,000: 60%
$10,000,000+: 70%

Note: Stock-Options and Financial Commissions would be treated as regular income. (I.e. Corporate Executives, Board Members and Hedge Fund Managers would be subjected to much higher effective marginal rates).

Like I said, Interest Income, Capital Gains, Dividends and Inheritances for individuals and households earning under $250,000 wouldn't be taxable. For an individual earning $1 million, the Effective Capital and Dividend Tax would average 37.5%, meaning the super-rich (I.e. Multimillionaires and billionaires) would be affected more than the small time money.

I'd also make tax avoidance (I.e. Sheltering Income in Off-shore Accounts) a treasonous crime that's punishable with full confiscation and a long prison sentence.

The Corporate Income Tax would be abolished. However, the Employer FICA Tax would be levied on all payroll income. [Including Stock-Options, Bonuses, Severance Packages and Commissions] Regressive federal excise taxes (gasoline, cigarettes, alcohol, electric and communications) would be lifted and replaced with regulations and preventative programs (I.e. Minimum Ethanol Composition for Gasoline, Abolishing User Fees for Mass Transportation, Universal Rehabilitation and Counseling for Alcohol Addiction, Smoking Cessation Programs, Etc.)

This tax approach would be revenue-neutral, meaning we'd bring in as much revenue as under the existing method.

[Maslo]

Yes, I was going for debt reduction, but its true that maybe it would be wise to wait with higher tax increases until recession is over.

Carbon Exchange would probably be better than carbon tax, but I havent found it option there, and even carbon tax is better than nothing, we have to disincentivize fossil fuel use somehow.

As for Bank Tax, that would not harm financial sector if used to stabilise cycles, as proposed -funds raised during growth phase would both mitigate bubbles, and can be used later in the recession phase to help the financial sector.

Thats what was originally meant by keynesian economy and anti-cyclic regulation, but politicians have done exactly the opposite - cutting taxes during growth phase, and now blame keynesian economy for the failure. Of course thats a strawman.

Long term effect of bank tax to raise money for anti-cyclic stabilisation fund would benefit even financial sector.


Merge the Employee Payroll (FICA) Tax into the Income Tax

That I definitely support.

You may be interested on Contribution Bonus tax and welfare reform proposal being implemented here in Slovakia:
https://docs.google.com/document/pub?id=1Yuh_9_Oy5SPeKGppOhNPTpv3h5TTvpB6rQ46SQ54O7 8

[Dumb]

http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=wmx005qv

Spending Cuts:
Cut foreign aid in half (tends to be an arm of US imperialism)
Eliminate earmarks (eh, why not? Tends to be wasteful, and this policy polls well)
Eliminate farm subsidies (end corporate welfare as we know it)
Cut 250,000 government contractors (contrary to the info provided, contractors actually cost more than have an in-house federal worker do the same job)
Reduce nuclear arsenal and space spending (no-brainer)
Reduce military to pre-Iraq War size and further reduce troops in Asia and Europe (no-brainer)
Reduce Navy and Air Force fleets (another no-brainer...)
Cancel or delay some weapons programs (NB...)
Reduce the number of troops in Iraq and Afghanistan to 30,000 by 2013 (NB)
I also marked "Reduce noncombat military compensation and overhead," but I'm having second thoughts about that and actually don't want to touch that; it's cruel to make somebody go through military training and then cut their pay. (The training, in my opinion, often does more damage than the combat - though PTSD cases certainly flip that around).

Also notice that I have not touched Social Security or Medicare.

Taxes:
Return the estate tax to Clinton-era levels (if we can't tax rich dead people, whom can we tax?)
Return (investment tax) rates to Clinton-era levels ("...dividends would again be taxed at the same rate as ordinary income." I'm sold)
Allow (Bush tax cut) expiration for income above $250,000 a year (I was also toying with the idea of letting all the tax cuts expire, but it turned out that I could get away, fiscally speaking, with keeping the tax cuts for people getting paid under $250k)
Payroll tax: Subject some incomes above $106,000 to tax (I'd rather subject all income to FICA, including capital gains/dividends, but whatever)
Millionaire's tax on income above $1 million (f*** yes)
Eliminate loopholes, but keep taxes slightly higher (lowering the rates won't be "pro-growth," as taxes aren't what's keeping corporations from hiring; they're sitting on pools of cash, waiting for demand to pick back up. There's no reason to hand corporations any rate reductions)
Reduce mortgage deduction and others for high-income households
Carbon tax (this is actually a more aggressive policy than carbon trading, as it compels all economic actors to cut back on emissions - not just small emitters, and not just emitters who couldn't figure out how to trade for more "credits")
Bank Tax

All in all, this gives me a $322 billion surplus for 2015 and an $18 billion surplus for 2030, and without even touching Social Security, Medicare, or the public sector workforce. I'd probably use that $322 surplus in 2015 to pay for new stimulus spending if necessary (which it will be), whereas the narrowing surplus by 2030 indicates that a new round of budget-balancing would become necessary in the distant future.

EDIT: Also, 72% of my savings come from tax increases, with 28% coming from spending.

[RichardAWilson]

I support lowering corporate taxes to bring more jobs back to America. One reason that Microsoft, Intel, Pfizer and General-Electric have been creating jobs abroad is that corporate tax rates are much lower, even in Europe, than here in America.

Allowing companies to repatriate off-shore profits and reducing the marginal rate would induce higher-end (I.e. Technology, Pharmaceuticals and Communications) multinational companies to bring jobs home. Furthermore, it'd make America a more attractive location for foreign companies, meaning companies like Toyota, Mercedes and Bavarian Motors would build new American factories.

Combined Maximum Marginal Rate (by nation)

United States: 40%

Canada and Germany: 30% (American jobs have flowed to Canada even though Canadian labor is as expensive as American labor.)

Sweden and Finland: 26% (Finland and Sweden are ranked among the most competitive and innovative economies in the world.)

Denmark and the Netherlands: 25% (Once again, they're more competitive than us and they've been gaining jobs from our companies, even though labor costs are higher than here in America.)

Switzerland: 21% (Switzerland is more than a financial center, it's an advanced industrial manufacturing and production center. We're running trade deficits with the Swiss.)

Ireland: 12.5% (Dell, Microsoft and Pfizer have all created jobs in Ireland, while downsizing their American Locations.)

The combined corporate tax rate is the federal rate plus state and local rates, meaning we have a much higher corporate tax burden than Ireland, Scandinavia, Canada and Germany, which is the reason we've lost jobs to them

Even our Average Effective Corporate Tax Burden is higher than Western-Europe's and Canada's! That's after you've factored in tax deductions, write-offs and incentives.

http://static.seekingalpha.com/uploads/2011/3/13/saupload_corporate_tax_rates_by_country_2010.png

[Demogorgon]

Europe can afford low corporation taxes because of high VAT. Frankly America does not go short in terms of companies based there despite the higher corporation tax. There is no point in taking part in a race to the bottom.

Over here the party that is effectively the main centre left party, the SNP (both main parties are officially centre left but Labour tends to be more pure centre or even centre right sometimes) is pushing the bright idea of a corporation tax cut claiming that it will mean more business here and that they will be able to fund more social spending as a result. I doubt it will work. A lot of people buy into the notion that low tax rates mean more income (the Laffer curve) because it seems to allow them to have their cake and eat it, but as my Mother taught me when I was small, if something seems too good to be true, it probably is. Even if Laffer were right and there were a single profit maximising point after which revenue falls off smoothly, that does not mean we have tax rates higher than that point. Tax cuts mean less revenue.

[Dumb]

I support lowering corporate taxes to bring more jobs back to America. One reason that Microsoft, Intel, Pfizer and General-Electric have been creating jobs abroad is that corporate tax rates are much lower, even in Europe, than here in America...

...Even our Average Effective Corporate Tax Burden is higher than Western-Europe's and Canada's! That's after you've factored in tax deductions, write-offs and incentives.

http://static.seekingalpha.com/uploads/2011/3/13/saupload_corporate_tax_rates_by_country_2010.png

That chart is very suspect. Bear in mind that the top statutory corporate tax rate is 35% before exclusions, write-offs, and any other goodies thrown in there. I highly doubt that the average tax rate is a mere 0.4% below the maximum tax rate. I even followed the URL of the chart, found it here (http://seekingalpha.com/article/257977-high-u-s-corporate-tax-rate-a-barrier-to-economic-growth), and noticed that the source of that chart is "a research study by the Cato Institute," a right-wing think tank responsible for publishing corporate propaganda with just enough numbers to come off as credible.

As a percentage of GDP, US corporate taxation is among the lowest on the planet - 1.8% of GDP (http://graphics8.nytimes.com/images/2011/05/31/business/31economist-bartlett2/31economist-bartlett2-blog480.jpg), compared to 1.9% in Germany, 2.8% in Spain and Ireland, 2.9% in France, 3.3% in Canada, 3.6% in the UK, 3.9% in Japan and 4.2% in South Korea. Given how low entrepreneurship and public sector work are in the U.S. as compared to most of the world, I'd also guess that corporate income is a higher proportion of GDP than in most other countries; therefore, the low corporate income taxation percentage shows that the effective tax rate is even lower.

As for Microsoft, Intel, Pfizer and General-Electric sending jobs overseas - when I was in high school, I remember Bill Gates saying something to the effect of, "If I could find enough people educated to be software engineers in the U.S., I'd hire software engineers in the U.S." I know Gates is at the top of the capitalist food chain, but I find that he tends to be candid about his views and motives. If he says that the U.S. economy is failing to educate enough people to do what his companies does, I'm inclined to believe him.

[Revolution starts with U]

http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html

That was easy.

But I would have rather had it let you set your own limit to the cuts, rather than just choosing from plans.

[RichardAWilson]

The maximum tax rate is much higher once you've factored in state corporate income taxes. California, for instance, levies a high state corporate tax. Nevada, on the other hand, doesn't levy a corporate income tax. The CATO Institute's calculation is accurate.


I'd also guess that corporate income is a higher proportion of GDP than in most other countries

You'd be guessing wrong on this one. Before-tax corporate earnings, as a share of GDP, are lower here in America than in Western-Europe. We have a more service-based economy, which suffers from lower profitability than Europe's more manufacturing oriented economy.

As you've said, the average effective rate is often lower, albeit it's still higher than Canada's and Western Europe's.

[RGacky3]

Don't forget single payer healthcare and nationalize the banks, would do more than taxes and cuts.

[RichardAWilson]

It's unfortunate that those aren't available in the New York Time's Model. The tax reform on millionaires and billionaires and axing imperial defense spending would provide the needed financial resources for the Single-Payer =)

After all, I do subscribe to Keynesian Economics and would never favor balancing the budget during a recession. Can we say counter-productive?

[RGacky3]

We don't need financial resources for single payer, Medicare for all would actually save money on the budget, not to mention money for the nation.

[RGacky3]

You suscribe to Keynesian? What about Marx?

[RichardAWilson]

One doesn't have to exclude the other.

Keynesian solutions can be just as useful under a socialized market economy.

[Dumb]

You'd be guessing wrong on this one. Before-tax corporate earnings, as a share of GDP, are lower here in America than in Western-Europe. We have a more service-based economy, which suffers from lower profitability than Europe's more manufacturing oriented economy.

As you've said, the average effective rate is often lower, albeit it's still higher than Canada's and Western Europe's.

You're confusing composition of GDP with profit margin. Europe has a less corporate economy; small businesses (and new start-ups) are much more common to find in Europe, and most European countries have public sectors that, as a proportion of GDP, are significantly larger than in the US. If corporations take up a larger portion of your economy, then even if those corporations aren't as profitable, their earnings are still going to be a larger share of your economy.

Think of it this way: the US is tied for the lowest corporate taxes as % of GDP (1.8% - as I mentioned above, this is lower than the figures for all the countries you mentioned above); this gives us the lowest numerator in the world. Given that so much of our economy is controlled by relatively few large corporations, this also gives us one of the largest, perhaps even the largest, denominator - corporate earnings (http://ycharts.com/indicators/corporate_profits/historical_data?start_month=9&start_day=25&start_year=2006&end_month=9&end_day=25&end_year=2011) as % of GDP:

1.8% taxation by GDP / 9.6% earnings by GDP = 18.8% taxation of earnings

This notion that corporate taxes are burdening the economy is laughable.

[Dumb]

One doesn't have to exclude the other.

Keynesian solutions can be just as useful under a socialized market economy.

"Socialized market economy"? What's the part that would be "socialized" and where would the "market" come in?

[Sperm-Doll Setsuna]

"Socialized market economy"? What's the part that would be "socialized" and where would the "market" come in?

He's a Green Party/ACLU cappie. He just calls himself "market socialist" to try and get some socialist cred or something.

"Market" socialists aren't socialists anyway.

[CornetJoyce]

The Times doesn't mention a Tobin tax. I wonder why.

[RichardAWilson]

Authoritarians aren't socialists either.


Market-Socialism resembles a more progressive version of the Scandinavian Economy:

(Large Sectors of the economy would be socialized and transformed into National Companies, Worker Cooperatives and Localized Cooperatives. The State would take a more active role in the economy through long-term spending programs (I.e. Infrastructure Spending).All Public Services would be universal.

Socialized businesses would still have to compete and individuals could still form small-businesses, as long as those businesses complied with established social, labor and environmental standards.) However, once a private company were to go public via an Initial Public Offering, the state and working classes would be the larger shareholder.

[RichardAWilson]

Corporate Tax

Once again, you're forgetting to add in state corporate tax collections into the figure.

Ireland, for instance, doesn't levy regional and local corporate taxes.

On another side note, federal corporate tax collections, as a share of GDP, are down because of the recession.


The numbers you cited are from 2008, when American profits collapsed.

In 2005 and 2006, federal corporate tax revenue surpassed 3% of GDP.

Manufacturers and exporters are still contributing on the same level as in 2005 and 2006. (Much higher than Germany's)

Financial businesses are the ones that benefited from the recession, as those financial losses can be deducted during more prosperous periods. As such, the federal tax revenue to GDP ratio will remain low for an extended period.

[Dumb]

Authoritarians aren't socialists either.

Ah-ha! So you admit it - you're not a socialist! Restrict! Restrict!

(Kidding).

[RichardAWilson]

As for the Exchange Transaction Tax, I'd wager that it's because it's the New York Times.

[RichardAWilson]

:thumbup1: Well, yeah, I guess adding "either" was a bad idea.


Socialists aren't authoritarians.

[ÑóẊîöʼn]

Here's my attempt: LINK (http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=d3tl05qt)

[Winkers Fons]

I remember a much more in-depth budget puzzle but I can't seem to find it. Does anyone know what I am talking about?

[RichardAWilson]

Yes, the one provided by the New America Foundation.


http://crfb.org/stabilizethedebt/

I don't believe that one allows for sharing though.

[RichardAWilson]

In the New America's Model, I enacted a demand-sided stimulus program.

The normal deduction was doubled to $7,000, the Bush tax-reductions for those earning below $250,000 were retained, the Earned Income Benefit was increased, the Making Work Pay Incentive was extended and the maximum federal corporate tax was lowered from 35% to 30%. Research tax incentives are retained and the American College Tax Incentive is extended.

Meanwhile, a Millionaire Surtax is added into the equation, the Payroll Tax is extended to wealthier households and traditional tax deductions for employer health benefits, state and local taxes, mortgages and life insurance were axed.

A 5% Value Added Tax is introduced with a partial rebate for lower income individuals and households.

(VAT could have been avoided if the Model would allow extending Payroll Taxes to 100% of income instead of 90%.)

Serious spending reforms were instituted. However, due to the introduction of a minimum old age pension and more spending on research, education and infrastructure, overall federal expenditures weren't lowered much.


The U.S. indebtedness to GDP ratio falls to 60% in 2027.

[Maslo]

"Market" socialists aren't socialists anyway.

Citation needed. There is nothing in "democratic ownership of the means of production" that says money or markets must disappear. Dont confuse socialism with communism. Market socialism is still socialism (And I would say the only realistic vision of socialism ;) )

[RGacky3]

Market Socialism IS socialism, the definition feature of socialism is democratic control of production and the economy, markets can be compatible with that (even though I don't think markets are a good way to organize distribution).