Federal Deficit Commission Draft Proposal a Good Start

[MasterComposter]

The bipartisan Federal Deficit Commission that Obama launched earlier this year has released it's draft proposal. Recommendations would reduce the federal deficit by $4 trillion over ten years using a combination of tax increses (including some sacred cows such as reducing the mortgage interest deduction) and significant spending cuts in every area of government (including other sacred cows such as cuts to Medicare, Social Security and Defense).

I think it is a good starting point for a serious plan to reduce the deficit and debt. One of the reasons it seems realistic to me is that there is something for everyone to hate in it. The deficit is a big s**t sandwich, and everyone is going to have to take a bite.

Here is a link to the draft report: http://www.fiscalcommission.gov/sites/f ... _Draft.pdf

Here is a CNN article about it: http://www.cnn.com/2010/POLITICS/11/10/ ... =allsearch

 

[JeffreyNYA]

ya, its really a great time to eliminate the mortgage interest deductions. First it starts on homes over 500k then moves right on down. So people with a 500k home are looking at a tax increase of probably 20k. Great idea. Think home ownership and foreclosures are high now. just wait.

 

[MasterComposter]

ya, its really a great time to eliminate the mortgage interest deductions. First it starts on homes over 500k then moves right on down. So people with a 500k home are looking at a tax increase of probably 20k. Great idea. Think home ownership and foreclosures are high now. just wait.

Your spirit of compromise is so admirable...

It's attitudes like yours that will definitely doom any progress at all on fixing the deficit. Taking any items off the table out of hand, without looking at what is being offered in return, is not a way to make progress.

In addition, your numbers are flat wrong. "People with a 500k home are looking at a tax increase of probably 20k" --- not true. Let's break that down by working backwards from S20k. What is the maximum tax rate right now? 33%? Using 33%, the interest being deducted would have to be about $60,000. What kind of morgage has interest of $60,000 a year? Homes well over a $1 million. My thought is that maybe someone buying a million dollar home does not need a housing subsidy from the government.

Also, a person in that position to buy a million dollar home might actually like the simplified tax code being proposed and probably would appreciate the lower rates being proposed in return for fewer deductions.

 

[JeffreyNYA]

I would have to look, but I think I paid about 14k in interest last year on my home. I was able to write that off. If that goes away that is a 14k tax increase. Great way to treat the middle. And as the value of the loans go up so does the increase. A tax increase is a tax increase. If you think they will stop at the rich you are deluded. Its just the best place to start. From there they move right on down and eliminate it across the board.

Actually think a national sales tax or fair tax is the way to go. Dump all this tax crap and just set it on purchases or everything. No more income tax. Not sure on property tax as that is really the only thing that pays for most local services.

 

[MasterComposter]

I would have to look, but I think I paid about 14k in interest last year on my home. I was able to write that off. If that goes away that is a 14k tax increase.

Wrong!

If you write off $14,000, then that comes off your INCOME, not off your TAXES. You don't save a dollar on taxes for reducing a dollar of income! Multiply by your tax rate!

Maybe you make around $373,000 a year and are in the highest possiblle tax bracket, and your tax rate is 35%, then that means your taxes would go up by about $4,900, not $14,000. (But you make $373,000 or more, so maybe you can handle 5 grand). Or maybe you make a LOT less than $373,000, and your taxes would go up by a lot less. There's no way to tell unless we know your actual marginal tax rate.

Also, you said this increase would apply to mortgages of over $500,000, and if your interest is $14,000, then my guess is your mortgage is much less than $500,000, and this doesn't even apply to you, and your tax increase would be ZERO!

Can you afford to pay ZERO more? If not, how much less than zero would be satisfactory?

 

[adrenalynn]

$500k. Almost a starter home 'round these parts. If you still have your pre-crash home, you paid $675k ish for a little 3 bed/2 ba tract home.

Only the rich people, I guess.

 

[MasterComposter]

$500k. Almost a starter home 'round these parts. If you still have your pre-crash home, you paid $675k ish for a little 3 bed/2 ba tract home.

That is true. A 1,200 square foot tract home in my neighborhood would have cost that much at the peak --- down about $200K now (but I'm still ahead!). But the SF Bay Area is not like a lot of the country where FANTASTIC homes are far less than $500,000.

That isn't really even the point.

The point is, would you take the trade? Would you take a much lower simplified tax rate, in exchange for fewer deductions? Or would you take a higher total tax bill for cuts in spending? Look at the WHOLE proposal. If you are just focusing on only one piece, then you are missing the point. And the country will defniitely go broke as each interest stakes out its own sacred cow to be spared.

 

[adrenalynn]

It's all just numbers to me. Whichever one is net positive for me at the end of the year. Whichever one means the government has their hand buried less in my pocket, and funds less illegal activity, and transfers states rights back to the states where they belong.


>> Or would you take a higher total tax bill for cuts in spending?

See, that's just silly. If they cut spending, they don't need more money, they need less. Cut spending for a lower total tax bill.

 

[blass]

It's all just numbers to me. Whichever one is net positive for me at the end of the year. Whichever one means the government has their hand buried less in my pocket, and funds less illegal activity, and transfers states rights back to the states where they belong.


>> Or would you take a higher total tax bill for cuts in spending?

See, that's just silly. If they cut spending, they don't need more money, they need less. Cut spending for a lower total tax bill.

How is the government removing a tax deduction on a legitimate expense of yours the "government having their hands in your pocket"? This isn't money earned. This is money owed by you to the bank? Why should I have to subsidize your interest expense?

This is exactly the problem. Everybody wants the budget cut unless it's money that you can't get back from the government. Whether it's welfare or an interest deduction. It's still FREE money.

 

[adrenalynn]

Help me understand.

You're entitled to the money in my purse right now. Your not stealing as much of it is you giving me a handout?

How thoughtful of you!

 

[blass]

Help me understand.

You're entitled to the money in my purse right now. Your not stealing as much of it is you giving me a handout?

How thoughtful of you!

So let me get this straight...you also support the tax credits for cash for clunkers, the new home credit, the stimulus package...oh and welfare and other social programs too?

After all...they're not stealing as much as giving a handout? Right?

Oh wait...those other programs don't benefit YOU so they count as the government having their hands in your pocket?
Gotcha.

 

[adrenalynn]

You seem to believe that the money in my purse belongs "to the government". That's what I don't understand. It doesn't. It belongs to me. You want to steal it from me, give it to the government, so that they can give it to someone else after pocketing 75% of it, losing another 4% of it, and wasting 20.8% more of it.

 

[blass]

You seem to believe that the money in my purse belongs "to the government". That's what I don't understand. It doesn't. It belongs to me. You want to steal it from me, give it to the government, so that they can give it to someone else after pocketing 75% of it, losing another 4% of it, and wasting 20.8% more of it.

You didn't answer my question. So you support all those I mentioned as well then...right? After all...it's just giving the money back to people so that it can't be pocketed by anyone else. Since the interest deduction is just reimbursing to you from other tax payers a valid expense you have with the bank...it's the SAME thing...right?

 

[adrenalynn]

No. Let the crackheads keep their money too. We all just tithe a flat 10% to the almighty Fed and eliminate all that junk period.

 

[blass]

No. Let the crackheads keep their money too. We all just tithe a flat 10% to the almighty Fed and eliminate all that junk period.

That's fine about the flat tax. But you can't say you support one deduction that benefits YOU on the claim that it's just keeping money out of other people's pockets, while saying that you don't also support the deductions or program that benefit others. Because they can claim the exact same thing.

The reality is that we have income redistribution going two ways in this country. From the middle class to the poor...and from the middle class to the wealthy. It's no wonder the middle class has shrunk. It's because the middle class is subsidizing both the poor and the rich.

Give the middle class more tax cuts, and make the rich pay more if we need to balance the budget. And cut like crazy all the spending.

There...fixed.

 

[adrenalynn]

I support no deductions. In trade for no excessive taxation. It's simple.

As long as we have excessive taxation, I will employ experts to make sure I don't pay it.

 

[mental_avenger]

I wonder how much this commission has cost the taxpayers so far.

I always thought that debt consolidation, such as Chapter 11, were negative solutions to a problem. Consider that a person is $20,000 in debt. They file chapter 11 and pay the court fees. Then a hearing is held, and a bank is appointed as the executor. The debtor pays an $800 fee and a percentage to the bank for handling the Chapter 11. End result? The debtor, who originally owed $20,000, now is about $25,000 in debt.

The point is that some solutions cost more than the debt they are supposed to eliminate.

 

[blass]

I support no deductions. In trade for no excessive taxation. It's simple.

As long as we have excessive taxation, I will employ experts to make sure I don't pay it.

As will others in whatever way they can.

 

[dragon04]

The painful truth is that we have to reduce the Debt and discontinue Deficit Spending. I never have, do not now nor will ever accept they Keynesian notion that our Government can spend us out of trouble that doesn't have back-end costs that make the spending prohibitive to begin with.

The truth and fact is that our exercises is Deficit Spending leave us further in Debt. We already spend over 25% of Federal Revenues just paying the interest on that Debt.

A "Good Start" would be eliminating Deficit Spending regardless of circumstance. A "Good Start" would further be a real plan that reduces that Debt even if it means increased taxes and reduced Federal Spending. But there's the rub. Increase my taxes if you must, but I had better see a reduction in Federal Spending coupled with those increased taxes in a plan to eliminate at least 75% of the current Debt.

 

[blass]

The painful truth is that we have to reduce the Debt and discontinue Deficit Spending. I never have, do not now nor will ever accept they Keynesian notion that our Government can spend us out of trouble that doesn't have back-end costs that make the spending prohibitive to begin with.

The truth and fact is that our exercises is Deficit Spending leave us further in Debt. We already spend over 25% of Federal Revenues just paying the interest on that Debt.

A "Good Start" would be eliminating Deficit Spending regardless of circumstance. A "Good Start" would further be a real plan that reduces that Debt even if it means increased taxes and reduced Federal Spending. But there's the rub. Increase my taxes if you must, but I had better see a reduction in Federal Spending coupled with those increased taxes in a plan to eliminate at least 75% of the current Debt.

That's exactly the attitude that everybody who truly wants the deficit reduced is going to have to adopt. Sacrifices are going to have to be made one way or the other. Whether through taxes or programs people desire.

Another very large chunk which is off limits to many (Republicans ) is spending on the military. 54% of the federal funds outlays go to military spending. somebody can't tell me that we can continue to support this where over half of our actual funds spent is spent on basically one program. For all the complaints against welfare and social programs, they account for 30% of outlays. EVERYBODY is going to suffer if we actually tackle the deficit.

 

[dragon04]

It's documented fact that the United States spends as much on Defense as the next 13 Industrialized Nations combined.

You're absolutely correct that Defense spending must be cut. A 50% reduction in Defense Spending would be a useful start, and certainly ahead of cutting Medicare and Social Security benefits. While I personally believe that Social Security will need to be phased out and privatized over the next 2 decades, I don't believe that we can cut the baby boomers off at the knees in terms of reduction of SS and Medicare benefits.

That will require us to reduce spending in significant ways in other areas as well as increasing taxes on those who can afford it. We also cannot continue to allow spending on entitlements such as Welfare, Food Stamps ad Medicaid to increase. Those who do not work will have to go to work. Those who are here illegally and receiving benefits that have to be paid for via Taxpayer revenue will either have to be found and deported, or otherwise forced to pay their fair share of taxes.

This whole thing is a Hydra, blass. It's a multi-headed monster. Being a member of the lower middle class, of course I don't want to have to pay more taxes. I don't know that I can afford to, to be honest. I'd probably have to file bankruptcy, but at some point, a combination of higher taxes and lower Federal Spending has to occur, or America will end up being insolvent.

The sooner we take the pain, the shorter the duration of that pain will be. Again, I will say that the only acceptable increased taxation scenario is one in which Federal Spending is significantly reduced.

 

[adrenalynn]

The obvious solution is to just surrender to Iran. Then we can spend zero on defense and not have to worry about any debt.

 

[MasterComposter]

I support no deductions. In trade for no excessive taxation. It's simple.

Then maybe you should actually READ the draft proposal before piling on in favor of a particular tax deduction, because that is exactly what is being proposed --- fewer deductions in return for lower rates.

I actually asked you this question directly when you first posted, but you did not answer it, "Would you take a much lower simplified tax rate, in exchange for fewer deductions?" It sounds like now you would. So why choose to ignore the chance of actually agreeing on something in favor of arguing for a deduction that it seems you would be willing to trade for a lower rate?

Sometimes it seems like you just like to argue, even if it means you are arguing against your self.

 

[adrenalynn]

I answered the question directly when you asked it.

You gave me an either or. I responded that it was just a question of how much theft was involved.

The _fact_ is that they will always endeavor to seal up deductions and then raise rates. You don't think they're going to permit the government to get any smaller, do you? Ever voluntarily decrease the nannystate?

 

[MasterComposter]

The painful truth is that we have to reduce the Debt and discontinue Deficit Spending. I never have, do not now nor will ever accept they Keynesian notion that our Government can spend us out of trouble that doesn't have back-end costs that make the spending prohibitive to begin with.

The truth and fact is that our exercises is Deficit Spending leave us further in Debt. We already spend over 25% of Federal Revenues just paying the interest on that Debt.

A "Good Start" would be eliminating Deficit Spending regardless of circumstance. A "Good Start" would further be a real plan that reduces that Debt even if it means increased taxes and reduced Federal Spending. But there's the rub. Increase my taxes if you must, but I had better see a reduction in Federal Spending coupled with those increased taxes in a plan to eliminate at least 75% of the current Debt.

You shoould take a look at this draft proposal. I think you will probably like it. There are several ways proposed to restructure the tax code, but in one, they show new proposed rate tiers, and they also show alternative tiers for if we decide to keep certain deductions. In every alternative case, the tiers are calulated based on a premise that some figure (i think $80 billion) must go to deficit reduction.

That's part of the tax side. But this proposal is a package, and the spending cuts you talk about are there too.