Taxes and Deficits

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The fiscal cliff.  Or, the fiscal stepstool.   I’m not trying to say it’s not important- it is. (See my previous post on this matter, here.) We need our politicians to get off their own cliffs and negotiate- honestly.  But, that rarely happens. We have at least two problems.  We have a deficit problem- and we have a recession problem.  To some degree, they are related.  If we were booming, then our deficits would be down- way down.  But, we’re not-we are barely keeping even.  (Sorry, 2% growth is just that. )

We know (ok, those of us who don’t have a political axe to grind) that our infrastructure is badly neglected.  We need to fix our roads, our highways, our electrical grid (did you miss the results from Sandy?), among other items.  That costs money- big money.  Cutting our budget won’t solve those problems. Right now, costs are low.  Borrowing rates are low.  Our people are out of work.  Now is the time to fix the infrastructure.  And, begin setting up a real system to maintain it. And, where will we get the money?  From taxes is one big start.  Yes, we need to raise them. Right now, the rich are a prime target.  Yes, the plan to raise the rates on the richest 2% (250K gross taxable income) will only raise $ 50 billion.

But, that’s one start. The response from the Right is to NOT do that.  Because they are job creators.  Sorry, they aren’t.   Most of the job creators make about ½ that amount of money.  But, again, that revenue pot is not enough to solve our problems.

We need to eliminate the special tax rates that were instituted on “qualified dividends”.   This will affect more of our seniors, than our rich.  Not that it won’t affect the rich, who receive dividends aplenty, but because most of our seniors who are not totally reliant on social security receive their income from dividends.  And, I’m not advocating (as some have) to raise the rates to match that of ordinary income.  But, I am advocating limiting the rate break for only the first $ 15K in dividend income a year.  Anything over that gets taxed at the rate obtaining for the rest of the person’s income.

And, that mortgage dividend exclusion?  Whether it’s set at $ 30K or $ 35K is really immaterial.  It will stifle our housing industry more than we can afford right now.  (Yes, that means we may need to consider it later.)   And, many folks who do pay significant mortgage interest actually do so on two homes-  and,  all they have to do is rent one out and then there is no mortgage deduction limitation.  (It falls onto another form.)

No, we would be better off limiting all deductions on Schedule A.  To keep the amount of money that can be deducted from taxable income to a total of  $40,000 for those with taxable income less than $ 250K, and to $40K or  25% of taxable income (whichever is higher) for those making more than $250K.  [Actually, the answer is to start out with that limitation: the higher of  $40K or 25% of taxable income.] That limits the affects to the top earners in the country.

Let’s not forget that our corporations need to pay their fair share, too.  Too many of them are skirting their obligations, claiming they “made” their profits is “NoTaxIsStan”, and are not subject to our tax.  (The European countries have determined the same facts about our companies.  And, plan to collect their fair share, too.)  We need to insure that no corporation can get away without paying at least 5% of their net income as profits- and no corporation can pay dividends that exceeds the amount of money they pay in federal taxes. (After all, dividends are supposed to be distributions after profits and taxes.)

(fear) the Fiscal Cliff...
(fear) the Fiscal Cliff… (Photo credit: MyEyeSees)

And, the biggest thing we have to do is get our health care expenditures under control.  Not only for the Medicare and Medicaid programs, but for all taxpayers.  If we can cut the waste in our health care expenditures (generally computed at $ 750 billion a year), we have come a long way to solving our deficit problem.  Because over 10 years- that’s ½ our total projected deficit.

So, Mr. Politician… when will you take that first step?  (And, when did we stop being Mr. Statesman?)Roy A. Ackerman, Ph.D., E.A.

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6 thoughts on “Taxes and Deficits”

    1. As you know, I am far from the right, David. I agree, however, that deficit spending is not a desired condition. But, first we need to get our economies growing- and that takes more spending than revenues (since NO tax rate will accomplish what a growing economy can). Moreover, very few countries have been maintaining or upgrading their infrastructure- the time to do so is when construction costs and interest rates are low- like right now. Which gets money into circulation, jobs get formed, and the economy picks up- which means more tax revenue.

  1. It just seems we keep digging a bigger and bigger hole Roy. My head is spinning but also know that too many Americans don’t understand all of this. I’m not saying I understand it all, but I do agree with you about the infrastructure, which has been discussed for what, the last 10 years! And nothing gets done.

    There are too many opinions and not enough people willing to negotiate and make a darn decision and go with it. Seriously, do you think we (in our lifetime) will really see this so called ‘change’… I have hope and I enjoy people like you Roy that put out information that people can at least understand and have a better grasp of what is at hand. Thank you for always sharing your wise words!
    Lynn Brown recently posted..Beat The Work at Home Blues – Use your Downtime Efficiently

    1. I think that we may get somewhere this time, Lynn. It won’t be where you and I want to go- nor where Tommy and Sue want to go, either.
      And, that may be among the best solutions. A compromise where everyone is unhappy.

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