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A Trillion of revenue is on the plate
We’re coming down to the wire on the debt limit. “Hard”
deals are now being put on the table. The Republicans have said all
along they don’t want any new taxes. But only a fool could think this
can be done without a significant amount of revenue increase. So if we’re to get a deal what has to give? Easy. Rather than increase taxes the government can phase out deductions.
This data looks at individual deductions. This come to a whopping $950
billion. You tell me, are you on this list? Have a mortgage? Pay state
or property taxes? School debt? Health care costs? Charity? Kids?
Veterans? At one point or another every American is on this hit list.
Consider the deductions at the corporate level in America. It’s only $65b. Peanuts compared to the tax breaks of individuals.
Now think of yourself in a room trying to negotiate this big deal. It’s
all well and good to say that the end result will be more taxes for
corporations. But at a ratio of 15 to 1 you have to hit individuals pretty hard in order to raise any serious money. At this point everyone understands that. Cutting personal deductions in a very big way is the only possible outcome where all sides can save some face.
The way that these cuts in deductions will be phased out will hit high incomes the hardest. But don’t kid yourself; this will end up in three to four years as a very middle class tax increase.
Should something like this come about you have to look askance at
owning real estate. You’ll get hit with a tax from employer 401
contributions. You might think twice about having a child. Those
charitable deductions are just that, charity.
I guess this is what has to happen when you need to raise a trillion in revenue to sell a deal. We’re going to hate it a few years from now when all this kicks in.
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1) A flat tax on all income including bonuses and other in kind compensation.
2) Impose a 0.05% transaction sales tax on all finanials (stocks, bonds etc).
3) Abolish the IRS and the Federal Reserve (a private) Bank.
Gotta love that Luxury Tax pic at the end of the article. Every time they try a stunt like luxury taxes, they don't raise much revenue. They merely succeed in killing off luxury buying. Why do you think there are so few boat builders left in Amerika? Sure, the rich still buy their boats if they want them, but they just buy them offshore in the Bahamas instead of in Miami...and put boat builders and sellers out of work in the States. Smart..
I will say that a good way to finish destroying the big bankstas would be to eliminate the mortgage tax deduction and all investment tax exclusions. Since the housing market is a fail anyway, why start the scam back up again? Since they are planning on taking our retirement savings anyway, why invest in paper assets? Better assets you can bury in the woods.
Gotta love that Luxury Tax pic at the end of the article. Every time they try a stunt like luxury taxes, they don't raise much revenue. They merely succeed in killing off luxury buying. Why do you think there are so few boat builders left in Amerika? Sure, the rich still buy their boats if they want them, but they just buy them offshore in the Bahamas instead of in Miami...and put boat builders and sellers out of work in the States. Smart..
Gotta love that Luxury Tax pic at the end of the article. Every time they try a stunt like luxury taxes, they don't raise much revenue. They merely succeed in killing off luxury buying. Why do you think there are so few boat builders left in Amerika? Sure, the rich still buy their boats if they want them, but they just buy them offshore in the Bahamas instead of in Miami...and put boat builders and sellers out of work in the States. Smart..
No problem removing VA Disablilty pension tax exclusion, the real problem is then they have to raise what they pay disabled veterans. It is a zero sum gain. Sort of like taxing military benefits, then you have to raise the pay to compensate for the tax. Why not lower or remove taxes on military pay and then lower the pay? Everybody wins except the IRS.
Now Bruce, don't you know that the Holidays are coming, and those Bankers and Politicians are really going to need those bonuses and under the table bribes?
Taxpayers? I think the cows are still hooked up to the milking machines, the sheep being fleeced, and the chickens having their eggs stolen. Is there a problem here?
<sarcasm off/>
How many dollar$ to (murder) kill a person with the hand of the law?
http://www.youtube.com/watch?v=J162pdQ3fu4&feature=player_embedded
Remember to have your train ticket before you board, bitchez. :)
Interesting. But if implemented, defecit reduces to $1trillion without spending cuts. Bond market will love it short term, long term everyone's still fucked.
Liberate the health care costs!
Taxing healthcare is the trojan horse than can partially undo spiraling healthcare costs. Once employees see the full value of their health benefits on their paycheck, not a few will decide to forego insurance and take the cash. The employer-employee link can only be severed this way and what follows is the wholesale reform of healthcare. It will be messy, but this is a great stealth move if Republicans can get it done.
Again: there will be a run into T-bonds, because the creditworthiness of the USA will rise significantly with this plan. All the doomers can leave town, even no QE3 needed.
Nicely done Bruce, but don't think the politicians will allow this to happen as it will cost them their job, and we cannot have that.
Diebold will fix that.
Take Not thy thunder.....But take away my pride.
+ Infinity again.
Well worth repeating Gromit.
Great work Bruce, but have you read the "Cut, Cap and Balance" plan? I assume you have, so is this what it states will happen if the plan is passed? Or is this how you think the $1 trillion in "revenue" will be made?
Bruce,
A trillion extra in TAXES ("revenue" is so Orwellian) whether gathered in total over 10 years or as a new annual increase will not patch up all the holes in the debt dike or the new ones that are going to come on line in the next few years. All the new taxes will do is push us closer to economic collapse - and we are already headed there at a pretty serious clip. Anyone thinking additional taxes will be applied to solving the problems we have is delusional.
Like our local county auditor, who is undertaking his second effort (this year) at selling the idea that most homes in the county have increased in assessed value over the last three years .... amazing chutzpah on his part. My place is up 18% over that time period - according to the "similar homes sold" and the math his department used. Interestingly enough, they left all the foreclosed properties out of their sample. If they did honest property evaluations, 50% of the taxes they collect would evaporate and a lot of county and city employees would get to join the unemployment lines.
I have a question for you, Bruce. Do you believe there is a way out of this man-made mess other than massively cutting back government at all levels?
barliman
According to the books this is easy to fix. All you have to do is stimulate growth and all problems are solved.
But "they" have been trying to create growth and have not succeeded. So my answer to your question is NO. There is no way out but to cut back and raise taxes.
Like I said, we're going to hate that plan....
I think we would agree we are outside the economic theory books' boundaries, Bruce. We are now into the upper levels of adult courses, Business 630 - Applied Business Practices and Case Studies.
When you can't pay your bills no matter how wildly optimistic a growth outlook you use, you are in arrears and the deep end of the cesspool.
When you can't pay your bills and management's solution is to be able to pay off some of the bills, eventually, by raising your prices now; you are in default whether you acknowledge it or not.
When your CEO holds a press conference to praise a senior managment idea (they haven't gotten the difficult parts worked out yet) that although you can't pay your bills, the new business plan will:
Then, at the very least, you are bankrupt and it is time to start breaking the business apart into the pieces that deliver value at competitive prices and permanently shutting down the rest of the nonsense.
If you were the bankruptcy court appointed receiver, Bruce, would you increase prices for lower services so you could keep the non-service, overhead-only divisions open? Or would you immediately close them down, so you could save the divisions that provide needed services?
barliman
P.S. Bruce, I agree. We are all going to hate the path we have to follow. If you treat this like a business (not government economics), the best path is to get rid of the deadwood so your customers have faith that they are only paying for the people & services they need from this "sole source provider".
Welcome to Democracy. There is no constituency in the world that wants to cut benefits and raise revenue.
Well said. 'chutzpah' - great word (also a great sammich shop in NYC and Fairfax, VA)
BTW...what the h*ll is your avatar? Markings of a cow, shaped like a lemon. Or is it a balled up cat?
m_k,
A picture is worth 1,000 words. The best momma cat I have ever known coming into my office, climbing into a bowl to hide from her kittens and settling in for a nice long nap ... that is a zen moment I captured to help me to maintain my zen.
barliman
Do nothing and the Bush tax cuts expire. Do nothing and the massive government spending cuts continue. "Call it something" and move on. Mike McKee has been all over this story on Bloomberg. Simple as that. Yet again "another kudo to Tom Keene." He's created quite a monster over there. They appear to be hungry, too.
http://www.youtube.com/watch?v=Ow-dkIuIaz8&feature=player_detailpage
looks like a warning to all you gold bugs out there.
.
"You can't have open borders and a welfare state"
Milton Friedman
You can, but it's a zero hedge - the long enough timeline seems to be about 50 years before fail. We just got there.
Bruce, ALL the money is Uncle Sam's, don't you know? They just let some people keep some and give the rest away.
It would be hilarious to see Democrats increasing taxes indirectly on people living in MA, CT, NY, NJ, and CA. This is why I don't think deductions for home mortgages and state and local taxes are likely to actually be cut and/or phased out. The oxen gored vote Democratic for the most part.
Yah! Good observation.
Bruce's main point is correct. Some taxes will go up (or deductions go down).
But, cutting SPENDING is the BIG ENCHILADA!
Yes, only to be bent over and gored even more.
If that goes through, just go ahead and stick a fork in me, I'm done.
Recovery bonds. It's the Patriotic thing to do. Make them mandatory........something like 10% of your gross income. Automatic withholding. Force employers to match the "contribution". Opt out clause for mega corps. Only a terrorist would bitch about that.
We already have that, but we call it social security.
And don't give the bastards any ideas, dammit!
http://www.youtube.com/watch?v=TMY9Wrh1oPA
let's change it. and get away from the blind side of life..........
"But only a fool could think this can be done without a significant amount of revenue increase." Sorry, but me be fool numero uno. Cut the frigging spending.
+14trillion
Thanks Bruce! Keep exposing the truth.
Lulz under the gun tooday : (
Thanks TD for all you do. Resist! Resist! Resist!
The cascade has begun, keep on keepin on yall!
The vast majority of MF'ers in DC are wealthy, many lawyers or bankers, and get all their campaign money from wealthy lawyers and bankers.....soooooo who the eff do you really think is going to wind up paying the taxes? C'mon people, the problem is DC and the SPENDING, not the taxes
Bruce writes: "Consider the deductions at the corporate level in America. It’s only $65b. Peanuts compared to the tax breaks of individuals."
I realize some sarcasm may be intended. But strictly speaking, this isn't true. It's apples and oranges. Not much in my individual life is deductable. My rent: not deducted. My car: only mileage. My food: no. My utilities: No. My clothing: no. My kids' school costs: no. (at least in our case). Sell your house and lose big money: no deduction. One could very easily spend more than ones after-tax income - operating at a net loss - and it won't deter the tax man.
But for a business, nearly every item of expense can be deducted. For the wealthy, and for the big corps, this yields windfalls compared to us serfs. And it really limits risk. But for the new American serfs, we'll be bound in debt slavery forever. Never mind if expenses exceed income. We'll deplete our savings and 401k's while bleeding out in taxes. It's already happening. Whatever deal gets passed will make it worse.
Start your own business and start filing Schedule C.
Nah, too hard. Easier to worry and whine about what break someone else is getting, or at least what breaks CNN says they are getting. Plus, then you may have to hire people (job creation, go figger) and that's too much of a hassle. Let Uncle Sam figger it all out for me.
Basically, your solution is to become like them?
Good example of the human selection forced on humanity by the US.
This is the inevitable conclusion to moral hazard... engage in more moral hazard than your neighbor.
The Corporate Person: All the rights of a citizen, with very few of the obligations . . . and those poorly enforced.
He's the family psychopath--and he keeps us locked in the attic.
Just when you thought the housing market couldn't fall any lower...ix-nay the deductions. Push this toad through the snake and we gon hab sum reel cheep real 'state...
I've done 10,000 tax returns in the past 20 years, across the spectrum from lower class to mostly upper middle. Euphemistic guidelines only so far from the Gangbang of 6, but with past experience it's not hard to see where these hit. Most of the references I've seen changes alluded to are already phased out by upper middle class. The ones that start to hit there like AMT will be gone. More taxes, less taxes...I can go either way, but I'm as much mule now already as I will ever except being. They won't hit me hard, but avg Joe in each of the middle class rungs, I think they are going to hit the sweet spot - he who can pay but can't afford not to.
You were supposed to go back to veterinarian school, Raymond.
+1
And incur more debt? No thanks.
We quit one full time work and went to two part timers.
The income generated meets our monthly billing and also stays below the magic annual number necessary for either taxes or refunds.
Zero is zero is zero.