Well, we’ve heard the first ideas from the chairs of the Catfood People...and it would seem that pretty much anyone with a brain and a heart have rightly condemned it. I figured it was time to come up with my own ideas. It took Bowles and Simpson months and months to dream up their insanity, it took me 60 minutes to type this stuff up.
I've tried to keep this as straight forward as possible. No sense in ranting and raving because 1) its pointless and 2) that's been done more than enough already.
The most important thing to know about Social Security is that it pays for itself. At least it will until 2037. Raising the retirement age will not save anything. Keeping Social Security benefits at their proper levels, calls for nothing more than modestly increasing the income levels that the FICA tax currently applies. Right now it only covers the first $106,000 of income. Raise that to $125,000 and on income above $400,000 tax at a smaller rate, say 3.125% (50% of the norm).
That would certainly raise enough money to keep Social Security as is until that magical year, 2075. Actually, it probably would keep things going longer than that.
The easiest way to keep Medicare solvent is to make it bigger. It currently insures the oldest Americans who need the most medical services. Well, open the system up to 55 to 64 year olds who would have to pay the full premium for its coverage. If I remember correctly, when this idea was brought up during the HCR debate, such a premium would be about $9000 a year. Not only would this open the job market a bit due to a pile of early retirements, it would give Medicare an income stream similar to private insurers that would help cover the higher costs for the older, traditional Medicare recipient.
I heard Erskine Bowles say we can’t tax ourselves out of the deficit or cut our way out, but there needs to be a combination of both. In that statement, he was correct. His suggestions however, well, suck. So first, how to increase the revenue stream:
Income Tax rates:
Yes, those top two rates need to go back to 36% and 39.6%. That would raise about $70 billion a year. But I would go further. We have a lot of people making huge sums of money, and the 39.6% rate would hit at about $357,000, keeping things relatively low for those with seven and eight figure incomes. Let’s add two more tax rates: 42% for income over $750,000 and 45% for income over $2,500,000.
Raise the current rate of 15% to 20%. For Capital Gains that make up more than 50% of total income, they should be taxed as regular income. (In other words, if your total taxable income was $500,000, and $300,000 of that came from capital gains [not including the sale of a primary residence], those gains become regular income.)
This is the money paid to many hedge fund managers. It is a share of the profit made and currently it is taxed as a capital gain- 15%. With some of these people making nine, even ten figure amounts in carried interest, they are truly ripping off the tax system. Someone who makes a billion dollars in a year and pays just 15% on that is really getting too good a deal. Carried interest should be taxed as regular income. That billion dollar a year hedge fund manager would pay about $300 million more a year in taxes.
These taxes should be lowered to around 15% or 20% but all the deductions, except for health insurance costs need to be eliminated. Too many large corporations pay nothing in corporate income taxes, and that needs to end.
It is also vital that all the loopholes that exist to make it possible for hundreds of billions of corporate profits to go untaxed must- absolutely must- be killed. I just heard Bernie Sanders say on Rachel Maddow that Exxon/Mobil made $19 billion in income and paid no corporate income tax because of loopholes. If there was an absolute, must pay minimum of 15%, Exxon/Mobil would have paid $2.85 billion in taxes!
A financial transaction tax should be implemented. A tax of .25% (1/4 of 1%) on stock and mutual fund and commodities futures trades outside of retirement accounts would raise about $150 billion a year. For the average person who might be investing a few thousand a year in a mutual fund, the cost would be $12.50 for a $5000 trade. If you can risk $5k in the stock market, you can afford the price of a movie ticket (plus a bit).
Another tax increase should hit the gasoline pump. Not only does it raise revenue, it encourages conservation. Currently, the Federal gasoline tax is 18.4 cents a gallon. I would raise it to 35 cents a gallon over a period of four years- 4.15 cents a year. This money would be dedicated to infrastructure repair and expansion including mass transit and intercity rail.
The other side of the coin is to cut spending. Cutting farm subsidies by $3 billion a year is definitely a good idea. Much of that money is going not to Joe or Jane Farmer, but to multi-billion dollar corporate farming companies.
Finally, the Pentagon. When I hear people say we should cut the Defense Department 50% or 75%, I cringe. Look, let’s be realistic, and as studies have shown, being realistic still cuts a lot of green stuff. The Center for American Progress has a study that shows that over $100 billion can be cut- per year- from the DoD without hurting our safety.
All of this together would go a long way towards getting rid of the deficit that is not due to the recession and its after effects like continuing high unemployment. Beyond that, it would go a great way in lessening the massive wealth gap that has developed between the top 2% of the population and the other 98%.