Congressional Budget Office: "Reducing the Deficit: Spending and Revenue Options"
The Congressional Budget Office just released a report called Reducing the Deficit: Spending and Revenue Options. There are three sections: Mandatory Spending Options, Discretionary Spending Options, and Revenue Options. I was most interested to look at the "Revenue Options" - the tax increases that are sure to be coming.
A likely one is to increase individual income tax rates (all ordinary tax rates, AMT rates, and dividend and capital gains rates) by 1 percentage point. That would raise $300 billion over the next five years.
Here's one that's really disgusting and raises very little revenue, option three: use an alternative measure of inflation to index some parameters of the tax code. As they say, "the standard CPI-U, however, overstates changes in the cost of living by not fully accounting for the extent to which households substitute one product for another when the relative prices of products change." Yeah, right.
Eliminating the deduction for state and local taxes would increase federal revenues by $345 billion from 2012 through 2016. The CBO says, "The deduction for state and local taxes is effectively a federal subsidy to state and local governments. As such, it indirectly finances spending by those governments at the
expense of other uses of federal revenues. [...T]he deduction largely benefits wealthier localities, where many taxpayers itemize, are in the upper income tax brackets, and enjoy more abundant state and local government services." This would make living in high tax states even more unbearable.
Option seven is to limit the extent to which taxes can be reduced by itemizing to 15 percent of the deductions’ value, thus increasing revenues by $460 billion from 2012 through 2016.
Another suggestion is to tax carried interest as ordinary income, i.e. the hedge fund manager tax increase. There are individual hedge fund managers that make more money than this increase would even raise. I predict it never happens.
Here's one that will probably happen: increase the maximum taxable earnings for the social security payroll tax. "This option would increase the share of total earnings subject to the Social Security payroll tax to 90 percent by raising the maximum taxable amount to $170,000 in 2012. (After being increased, the maximum would continue to be indexed as it is now.) Implementing such a policy change would increase revenues by $182 billion from 2012 through 2016."
Another idea is to impose a European nightmare: a five percent value-added tax. "Because their value is difficult to measure, certain items—such as financial intermediation services, existing housing services, primary and secondary education, and other services provided by government agencies and nonprofit organizations for a nominal or no fee—would be excluded from the base. Under the second alternative, the 5 percent VAT would apply to a narrower base. In addition to those items excluded under the broad base, the narrow base would exclude purchases of new residential housing, food purchased for home consumption, health care, postsecondary education, and all other financial services. This approach would increase revenues by $530 billion from 2012 through 2016." You wouldn't think this would be very likely, but here's what gives it away: "A drawback of the option is that it would require the federal government to establish a new system to monitor and collect the tax." That is a drawback for us but not for the government.
Increasing federal excise taxes on gasoline and diesel fuel by 25 cents per gallon, to 43.4 cents per gallon of gasoline and 49.4 cents per gallon of diesel fuel would increase federal revenues by $140 billion from 2012 through 2016.
1 comment:
Who needs to raise taxes when you can just borrow, and print money!
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