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A Republican House takeover looks likely and a Republican wave in the Senate seems more possible every day. By all accounts, the budgetary picture they will confront has serious problems that, in all probability, can’t be solved without policies that restore healthy economic growth. But the mathematical realities of current entitlement programs combined with the current lackluster economy also mean that it’s probably impossible to move towards a balanced budget with spending cuts alone. If Republicans want to show they’re serious about governing, they do need to at least give consideration to some polices designed to bring in more revenue. Five ideas may make some sense.
- Limit deductibility for state and local taxes: The total deductibility of many local and state taxes provides an effective subsidy to high-tax, high-spending local governments. (You can read more here.) Although total elimination is probably unfeasible, limiting the amount of local taxes that people can write off on their federal returns could bring in more revenue to the federal treasury while encouraging local governments to watch their spending.
- Cap the mortgage interest deduction: The mortgage interest deduction will never go away. But it’s difficult to see the public benefit of letting multi-millionaires write off the costs of new beach front mansions. Capping the deduction to rule out the very rich makes a lot of sense.
- Encourage employers and financial firms to make “taxed now” (Roth) savings plans the default option for employees: Right now, most workers can choose between taxed later (traditional) and “taxed now” (Roth) retirement savings vehicles. Economists and financial planners believe that the difference between the two washes for most people in retirement. The overwhelming majority of employees and employers, nonetheless, go with the time-tested “taxed later” options. Without eliminating any options for employees, simply requiring employers and financial firms to make the “taxed now” option the default for savers would very could bring in more revenue without making anyone worse off.
- Broaden the tax base: Presidents Bush and Obama both pursued policies that eliminated millions of Americans from the nation’s income tax rolls. Just about half of the population no longer pays any net income taxes. While raising taxes on the poor in the midst of a serious recession is heartless, at least some middle-income people who currently pay nothing at all should probably pay something to Uncle Sam.
- Impose new transportation user fees and raise those that exist: Almost all forms of transportation receive some subsidies out of general revenue. A Republican Congress could set a goal of asking all (or almost all) modes of transportation to pay for themselves. On roads, new toll collection technology makes it much easier to collect tolls without causing traffic jams. The government should embrace it as well as allowing states to toll interstate highways. On inland waterways, the tiny user fees (imposed by the Reagan administration) don’t even come close to covering the Army Corps’ of Engineers’ budget. In the air, individual tickets to dozens of smaller airports get subsidies up to a few hundred dollars each. Amtrak, although small potatoes in terms of the federal budget, simply wastes a lot of money. Some types of cross subsidies are inevitable and maybe even helpful but, overall, transportation should pretty much pay for itself.
Tax cut and spend seems to still be the war cry from my Republican Party.
Could there be anything more foolish than to support making all the Bush tax cuts PERMANENT without any intention of paying for them?
I’m all for tax cuts, but I would like to see any / all paid for.
I get the feeling if the Repubs are given control of the House and continue with trickle down / voodoo economics it will do nothing but GUARANTEE an Obama re-election.
To the Author:
Your first point doesn’t raise any revenues. Every dollar increased in federal taxes is reduced in state/local taxes under that plan basically.
Your second point is already reality. Mortgage interest as a write off is capped at around 700,000 dollars for a mortgage. They should do away with the write off completely but reducing it further is something I’d support.
Third point seems peculiar. I’d have to do more research as to why both options are ‘washes’ as you say before forming an opinion.
Your forth point seems to be thinking that the reason we are in a budget shortfall is because of the earned income tax credit and not because tax rates are too low. This misses the point about why the deficit is structurally unfixable with current policies. It isn’t just heartless in a recession to raise income on poor Americans, it’s poor policy as well.
I disagree with your last point since I feel that we pay for our roads and transportation through indirect revenue sources like income tax, sales tax, gasoline tax, and property taxes. Toll roads raise revenues for sure, but they are best used when no alternative roads are available such as bridges.
Re: While raising taxes on the poor in the midst of a serious recession is heartless, at least some middle-income people who currently pay nothing at all should probably pay something to Uncle Sam.
How is it possible to be middle income* and pay nothing? Consulting my tax tables from last year, the income tax kicks in when your AGI hits $9350 (that’s the standard deduction for an unmarried person plus the personal exemption of 3650). That’s a long, long way from middle income, and the numbers for married people are quite far away from the median income too. Unless you have an extraordinary number of children (multiply that 3650 by each child) I cant see how a middle income person would remain tax-free on the income tax.
* Median income for last year was $49,777.00 per wikipedia at least.
Typo at the end of the 3rd graf: “Without eliminating any options for employees, simply requiring employers and financial firms to make the ‘taxed now’ option the default for savers would very could bring in more revenue without making anyone worse off. ”
The CATO Institute has just released a paper about raising revenue (and cutting spending) via ending drug prohibition: http://bit.ly/bb5wx4. The author estimates a budgetary impact of $88b, assuming that politicians have the courage to cut security spending, which isn’t much but isn’t negligible either.
Back To Make Money Online | Affiliate Internet Marketing Plan // Sep 27, 2010 at 10:43 am
[...] Five Revenue Raisers the GOP Should Back | FrumForum [...]
These “revenue raisers” all amount to taxing the poor, working, and middle classes. Sure the wealthy would pay road and transportation taxes but for them the cost would be an insignificant percentage of their income while it could significantly impact working class people, perhaps rendering some potential jobs financially unfeasible.
I also note the phrase “policies that eliminated millions of Americans from the nation’s income tax rolls”. While true it ignores the reality that those millions do pay SS and Medicare taxes. Since these programs are reported as part of the overall federal budget honest discussion requires that we talk about total federal taxes on income, a phrase I use when referring to federal income, SS and Medicare taxes combined. It is dishonest (as well as meaningless) to talk about the overall federal budget deficit and only refer to part of the tax base.
So . . .
1) Shift Tax income from the State/Local government to the Fed
2) Raise Taxes (well, reduce/remove tax loopholes, but if not stopping preset tax increases from happening is “Washington Liberals propose raising your taxes”, then this is raising taxes too)
3) Fed government pressuring small buisnesses to dictate how hard-working Americans should spend/save their money
4) Tax more people
5) Charge you for driving down the street
As an aside, these are all good/debatable ideas, that practically address the problem and seek realistic solutions.
Your “get the f**k out you tax-n-spend RINO Socialist” letter is on its way . . .
#4 and 5, as pointed out above, are heavily regressive. Moreover, there’s a reason why we don’t shift tax burden to the poor, and it’s not because it would be “heartless” – it’s because in the long run all you’d end up doing is increasing the governmental need to provide services for these people since you’re siphoning away the funds they need to barely eek by in poor-man’s America. It’s counterproductive.
If we want to tax transportation, let’s at least do it rationally. Toll roads levy the same costs to a 1600 lb Smartcar as to a 6000 lb HumVee – while the latter causes significantly more wear and tear to our road system.
Gas taxes are the best surrogate for vehicle weight – why not just suck it up and propose a radical increase in the gasoline tax?
transportation should pretty much pay for itself.
Why? Our economy is based on transportation – it’s not necessarily bad policy to subsidize transportation in order to enhance other commercial activities. This little toss-off is a nice bumper sticker, but leaves itself open to a lot of debate.
Just what do you consider middle-class? $30,000? Also you are ignoring all the other taxes people pay that effects the budget discussion.I think these numbers are a few years old but they couldn’t have changed for the better.
Distribution of financial wealth in the United States.
Top 1 percent———–55%
Next 19 percent ——-40%
Bottom 80 percent——5 %
Yet you think that 5% needs to pay a bigger share of the costs of running this country (for the benefit of those 95%)? One party seems to be overly enjoying the fruits of this country’s resources and productivity yet they shouldn’t actually shoulder any burden? Can you spell aristocracy?
Also Mr. Lehrer, are you aware that one in eight Americans rely on food pantries? This fact may have something to do with the reason presidents keep lowering their federal tax…
Rabiner, great rebuttal, he is also ignoring that high tax, high spending states send far more to DC than they get back and it would produce an absolute revolt in these states against the GOP if they tried it.
As to #3, I do that now but I do it because since I don’t live in the states I am not taxed now and won’t be taxed later, however if I were living in the states I would prefer to split the difference, put half in a Roth and half in the other so I could save on my taxes. I like my right to choose and he risks people putting less in each year, which is counterproductive, and, of course, it is not a wash, people who do Roth IRA’s save far more taxes in the long run or Eli Lehrer has never heard of compound interest.
And 4 and 5 are nuts. The poor and middle class already pay almost as much from a raw perspective in taxes as the wealthy do, if you add up state, local, social security, etc. taxes up. Remember, many middle class don’t itemize so they don’t write of their state taxes (which is another reason why eliminating it is a bad idea for Republicans)
As to transporation, good lord we should be increasing subsidies, not decreasing them. How many trillions are we spending militarily in the middle east to secure access to their oil, not counting the trillions we give them in buying the oil. Buses, trains, shipping, etc. are all things we should devote far more resources to (in China they are making fuel cell buses, so can we)
Nice to see concrete ideas for once, whether regressive or not. LauroNo hit it on the head with her 95%, and Rabiner is right as usual-4 and 5 make no sense. It would be sensible to see gas taxes go up to levels like Australia, (~4.50/gallon tax incl. ), where nobody bitches about the cost. There the “utes” as they call them are international models with a lot less weight and better mileage. But that too is regressive, especially for those in the rural west. However, just because you got away with it for so long don’t mean that we have to continue. Housing has already taken that lump.
But the real elephant in the room is the issue of subsidies. I won’t repeat my earlier post, but between oil, agriculture and trucking, we have vast sums that skew rational markets. Without the oil subsidies, you would see alternative energies being competitive without having to resort to cap and trade. Without the trucking subsidies, rail would be more competitive. Without ag. subsidies, we wouldn’t be flooding the world market and keeping our neighbors down, and thus reducing exports.
Eliminating subsidies would not be a tax, so tea partiers and all republicans should love the idea. Except wait till you hear the howl from these industries. Then you get the gleeful prospect of seeing your tax dollars that subsidize them going to pay for ads to retain the ability to take more of your money. (Thanks Supremes!) Some system huh?
I disagree with all of Mr. Lehrer’s solutions. Instead, I would raise the top income tax rates at $ 1 million + to 50 % and go after the liberal elite. I would also tax every stock transaction in an effort to go after the stockjobbing elite on Wall Street.
On #4, why limit this to just the poor? Policies also have some of the largest corporations paying no tax. You don’t think might be a consideration?
http://abcnews.go.com/Business/Tax/ge-exxon-paid-us-income-taxes-09/story?id=10300167
balconesfault: why not just suck it up and propose a radical increase in the gasoline tax?
Because that hasn’t got a snowball’s chance in hell of passage. As I, who used to favor that proposal for years, have come to admit.
I learned my lesson when Americans got hysterical when the price of gasoline rose to just $3.70 a gallon a few years ago. Remember?
See? I’m willing to admit when I made a mistake.
The nice things about the ones that Mr. Lehrer is proposing, is that I can actually envision Congress passing them.
Sinz54:
“Because that hasn’t got a snowball’s chance in hell of passage. As I, who used to favor that proposal for years, have come to admit.
I learned my lesson when Americans got hysterical when the price of gasoline rose to just $3.70 a gallon a few years ago. Remember? ”
Sadly knowing what is good policy and passing good policy are often at the opposite spectrum.
Sinz: “I learned my lesson when Americans got hysterical when the price of gasoline rose to just $3.70 a gallon a few years ago. Remember?”
Americans became hysterical in part because the increase to $3.70 was so sudden. While I favor a substantial increase in taxes on gas, those increases should be phased in over time so that consumers and makers of alternative energies/conservation devices will have time to adjust.
Raising middle class income taxes? Yeah that’ll be popular, as well as confirming everything Democrats have ever said about Republicans being the party of the rich.
Seriously, Eli?
The way to stop spending is to not spend. No more no-bid contracts for Cheney’s Halliburton, no more pointless wars.
Get this through your head: Your head-in-the-sand rich need to be taxed more. Nonsensical tax breaks for companies in the US need to be eliminated – no more offshoring of jobs, no more offshoring of profits, no more gratuitous tax shields. They’ll leave the US? Really? Bring it on – don’t forget, once a citizen of the US, you’re always a citizen of the US.
Starve the beast? The Republican party is the beast. Instead of trotting out kooky wedge issues, just cut your own spending.
Your tax dollars at work:
http://domesticfuel.com/2010/09/27/clean-energy-policy-under-fire-by-big-oil-friends/
No wonder why we have an incoherent energy policy.
Your tax dollars at work:
http://domesticfuel.com/2010/09/27/clean-energy-policy-under-fire-by-big-oil-friends/
There Is No Libertarian or Conservative Argument for Higher Taxes | Cato @ Liberty // Oct 7, 2010 at 10:40 pm
[...] Lehrer has an article on the FrumForum entitled “Five Revenue Raisers the GOP Should Back.” He argues it would be good to get [...]