An Open Letter to Speaker John Boehner

Speaker Boehner, 

As our nation rests on the perilous brink of insolvency, the Government of the United States needs to raise taxes, somehow, on individuals and companies, until the economy has achieved a strong growth rate for two consecutive years. 

The governmental debt of this great nation has ballooned to around 70% of our Gross Domestic Product, far above what is considered healthy for the economy.  We need a way to lower it.  Doing so would enable us to ensure the financial flexibility typical to a period of strong growth.  Keynesian Deficit spending is an option, but with an economy slowly rebounding, with unemployment now at 7.7%, we feel that it is time to address the debt problem.

In order to do this effectively and responsibly, we must employ a balanced approach.  According to the Congressional Budget Office, the well-regarded nonpartisan organization that provides economic data to congress, only raising taxes or only cutting spending could have drastic effects on the nation’s growth, crippling the economy here in the United States and sending ripple effects across the world. While cutting spending and increasing taxes would have some short term detrimental effects, it pales in comparison to the alternative proposals.

Therefore, there is a need for increased revenue.  The question remains: how do we get it?  Here, we must also look for a balanced approach.  The government, when seeking out ways to increase the amount of dollars going into the treasury, must look for ways to spread the load of tax increases, making sure those earning very little will not suffer any undue burden.

There are two ways to increase revenue-we can either raise the base rate that people pay or we can eliminate tax deductions.  A deduction is money that the government gives back to taxpayers for reasons varying from making a charitable donation to owning a private jet.  Now obviously, some deductions are more important than others.  By capping deductions, yet keeping the base rate the same, we can obtain revenue for the government.  In addition, by changing the tax code by including revenue from stocks and dividends in this new tax, which are now taxed lightly, for higher income earners will generate much needed revenue for the government and will cut into the debt. 

These tax increases, though levied on many Americans, would not affect all people equally.  Moreover, since richer people tend to have more deductions and more income from the stock market, the tax increase would be progressive.  This ensures equity and limits any economic damage that might occur.  The money gained can be used for targeted stimulus, or as we have been saying, to pay down the debt, ensuring a stable future for the United States economy.  

However, only capping deductions will not get us all the revenue we need.  In order for this plan to be truly balanced, we also need the people who can afford it the most to pay slightly higher rates on income taxes.  How much to change these is up in the air, but please ensure that tax increases are spread fairly on consumers and do not unduly burden the poor and the middle class. 

We should maintain there tax increases until necessary growth has occurred sustain a tax decrease.  When we have strong growth, the base will be large enough to finance a cut in taxes.  We need to get this debt problem under control.  Spending cuts, as well as tax increases, must be part of the plan to get this done.

Please communicate with the rest of your caucus that legitimate tax increases must be on the table.  Deductions, as well as base rate increases may be necessary to cut the debt.  Reforming the tax code, making it simpler and fairer can also help us in this problem.  You can push the President on spending cuts all you want, but a stronger plan, on that includes revenue, is necessary to ensure our nation's economic stability for the future.

The Auxilia Party

Simpson Bowles on Taxes

Any plan that congress agrees on to avert the fiscal cliff must include some sort of tax reform.  There is little way around it.  The politicians tend to skirt the issue, we need to have a grown up conversation about how to improve our tax code.  We can make it simpler, and we can make it fairer.  There won't be any magical plans that promote 10% GDP growth and eliminate all debt by 2015.   It's just not going to happen.  What can happen though, is small steps in the right direction.  The Simpson-Bowles plan makes such a step, pushing the dialogue forward on meaningful tax reform.

Below is a graphic illustrating the Simpson Bowles plan on taxes.

While the above chart might seem complicated, we've set out to describe, in simpler terms, the major elements of the Simpson-Bowles tax proposal.

First off, the Simpson-Bowles plan eliminates the Bush era tax cuts for the wealthiest Americans.  This is done before changes are made to the tax code.  The elimination of these breaks are built into its baseline.

Additionally, there are a lot of tax increases in the Simpson-Bowles plan.  This is necessary to make any large scale dent in the debt.  As a balanced approach, the revenue increases and spending cuts are roughly equal.  The Simpson-Bowles plan also taxes dividends and capital gains as normal income.  This basically results in a huge tax increase for the rich, who hold more of their wealth in stocks and would be taxed more in capital gains and dividends.  Therefore, the Simpson-Bowles plan is able to lower the actual rate while still maintaining equity in taxation.  The Simpson-Bowles plan also significantly cuts deductions for taxes, which allows it to lower some overall rates while still getting revenue increases.  The difference is that people would be paying a higher percentage of their income, because they have less deductions from the baseline rate.

The Simpson-Bowles also recommends raising the gas tax by 15 cents.  While this would undoubtedly hurt some Americans who need gas for travel, work, etc, It could be a much needed revenue booster and a way to get on the right track for green energy.  Americans consume a lot of gasoline, so having a gas tax increase could dramatically increase the revenue into the government's coffers.

We'll have more on tax reform tomorrow.

Fiscal Cliff: Part 2-Taxes

If Congress does nothing to act on the expiration of the Bush Era tax cuts, many will see a modest rise in the amount of taxes they must pay.  When planning for the future and trying to work a deal, Congress must balance cutting the deficit with economic recovery, as raising taxes would lead to a decrease in consumer spending, the principle part of Gross Domestic Product (GDP).

In order to balance spending cuts, increased revenue must be on the table for a fiscal cliff deal.  In order to get enough revenue, limiting deductions and raising taxes on millionaires is necessary.

In the campaign this year, Mitt Romney championed limiting deductions as a way to make his proposed tax cuts revenue neutral.  If applied to the fiscal cliff, we can use these same limits on deductions to increase the revenue that the government is able to collect.  Capping total deductions at $50,000, according to the Tax Policy Center, would raise around $750 billion over a ten year period.  Deductions would actually hurt the richest Americans the most, leaving middle class America unscathed.  80 percent of additional revenue would come from top earners in the 1%. Some deductions that are on the chopping block specifically appeal to rich Americans, as you can see in the table below of prospective plans.  A tax break for corporate jets is such a deduction.  Working with the deduction system could bring in even more money, though it would hurt more Americans in the process.

Another option is to increase personal income taxes to the pre-Bush tax cut levels.  This would make a modest dent in the deficit, so more revenue is obviously needed.

All in all, we need a balanced approach on revenue increases just like we need a balanced approach on the whole fiscal cliff crisis.  Congress needs to make sure that it is not unduly hurting anyone, especially the middle class and the poor.  We're not out of the woods yet, with our economy in a sluggish recovery.  Prudent fiscal policy is just what we need to continue or recovery and make a dent in our debt for the future.

Taxing The Rich-A More Liberal View

We must understand that while the rich in many circumstances can be job creators, the Democratic Party view does hold weight with many Americans.

When the rich are taxed more than the middle class are, as we have stated before in posts, they are still rich.  The taxes aren't going to change that.  When the middle class is taxed a bit less than the rich are (which doesn't happen) then they are most typically still in the middle class.

Suprised?

It's not class warfare.  It's not redistributing the wealth.  It's just providing a bit more fairness in our tax system.  we know that the government is broke.  We need to pay off our debt soon, or much of it, for posterity's sake.  A huge debt cripples our nation and allows less fiscal flexibility in hard times such as these.  Because the times could get even harder if we only cut spending and do not increase revenue, someone must see their taxes go up.

The rich are those who are able to weather such a burden.  The middle class has already been screwed.  They need the extra money.  What they save, they are likely to put back into the economy purchasing goods, food, and electronics for themselves and their families.  The rich have money to spare, and more often hoard their money than the middle class.  Taxing them more is not going to make as much as a difference for them.

Taxing job creators is one thing.  Allowing people who don't spend and have plenty of money to spare pay lower taxes than the working middle class is another.

Debt Ceiling Political Shenanigans Are Ridiculous

It is time for the politicians to stop trying to gain leverage over each other politically and form a lasting deal that will save this country from financial ruin.  A deal that could help in the long run and not hurt as much in the short turn could look like this:

*Cuts to Entitlements--Entitlements are a severe drain on the budget.  They will soon become unaffordable.  A reasonable deal to limit the cost of these programs is necessary.  The Ryan plan may be unreasonable, but it does bring up the issue that we need to change what is broken.  We cannot afford to spend loads of money on entitlements down the road.

*Cuts to Defense--We spend WAY too much money on foreign wars, foreign bases, and expensive military technology.  We're not saying get rid of all of this, but surely some dough could be had from limiting foreign involvement and doing without a few new ships, tanks, or joint strike fighters.  These projects do bring money to several special congressmen's districts, so it may be hard, but limiting the expenditures of the state will surely help us down the road

*Cuts to make government more efficient--Lots of businesses are saving money simply by the way they operate.  The government could take a lesson from SOME private sector companies (HINT: NOT BANKS) in order to lower operation costs of some departments.  Trimming some here and some there may not seem like much, but applied to the whole government, one can have real and significant change.  People might not like it, but hey, we've got to trip money, and that's one way to do it.  Trim from the first and second bullets first though.

*Increase in revenue--Notice we didn't say "increase in taxes".  While others debate of what the exact meaning of not raising taxes is, there is no denying this: the governmental needs money.  In order to temper what will likely be harsh cuts, revenue must come to the government.  Taxes are how the government gets its money.  So, in order to ensure the severity does not fall to America's industrious middle class, who are fighting for their lives in the recession, we must turn to those who can stomach it, the rich.  We have tried trickle down economics, and it has not worked.  We need a strong middle class in America, so they shouldn't have to bear the burden of the recession and debt. Another note:  if the rich are taxed more, they're still rich, just as if the middle class are taxed less, they are also still in the middle class.


There are doubtless other ideas at how we can cut, trim, increase, decrease, or whatnot.  If we come up with any more, we'll definitely post them.  Feel free to tell us your own opinions.  We shouldn't throw out ideas just because of where they come from.  The citizens of this country must have their voice too.

Reform Needed to Spur Economy

The middle class is reeling after a long recession, which is still not over.  In order to facilitate recovery, we must have a middle class tax break in order to help families cope with the economic downturn.  Seeing as the middle class is often hurt he most in a recession like this, they should get the tax break, not the wealthiest Americans, who can afford it.  Cutting taxes for the rich in a time where we have extreme debt is not prudent or logical.

In addition, we need to make it easier for people to start small businesses.  Encourage lending and venture capital, as well as tax breaks for America's smallest companies, which help drive struggling local economies forward as large corporations are sending jobs overseas.  renewed economic reform is critical as we aim to rid ourselves of the bonds of this recession.

Economics

Democrats and Republicans go on and on about spending and taxes but none of them have the real solution.  The Democrats have to realize that there is more in life than spending government money as much as they want, and the Republicans have to realize that they can’t always demand no taxes.  Taxes are essential for government to function.  But also, the government must also be more efficient and careful in the way they spend money.  No wasteful spending is mandatory.  Tax cuts should be for the poor and middle class and the super rich, who can afford it, should be taxed more.  One thing politicians don’t realize is that these taxes aren't going to redistribute the wealth.  When the rich are taxed more, they’re still rich.  When the middle class gets a tax cut, they’re still in the middle class.   The tax cut just helps them to stay where they are.  This compromise is the best solution to our economic problems.