Progressive revenue proposals would narrow budget gap by trillions

[웃 910]

Progressive revenue proposals would narrow budget gap by trillions

President Obama has produced a set of recommendations for the committee that would balance additional spending cuts and a winding down of war spending with new revenues and fully financed job creation measures. This issue brief analyzes the revenue proposals in the president’s recommendations and offers a menu of alternative or supplemental progressive revenue options to reduce the deficit and/or finance job creation initiatives. As detailed in this brief:

• The president’s revenue recommendations for the joint committee mark a step toward revenue adequacy and a more equitable tax code relative to current tax policies by raising $1.3 trillion in new revenue over the next decade relative to current tax policies.
• The president’s proposed tax changes would predominantly affect the top 5% of earners (with incomes above $227,000) while cutting average taxes for the bottom 60% of earners (with incomes below $65,000).
• The president’s revenue recommendations, however, fall $3.4 trillion shy of projected revenue under current law. Revenue inadequacy and the Bush-era tax cuts remain prime drivers of budget deficits and are only partially addressed by the president’s recommendations.
• Beyond the president’s recommendations there remains substantial scope for increasing the progressivity of the tax code and raising additional revenue to finance job creation, ease budgetary pressures elsewhere, and reduce deficits.

This brief also identifies eight progressive revenue policies that could complement the president’s recommendations and principles for tax reform. Collectively, these policies would also return revenue levels roughly to those scheduled under current law. These policies and their associated revenue relative to the president’s recommendations (over 2012-21) include:

• enacting a millionaire surcharge ($383 billion);
• taxing capital gains as ordinary income ($168 billion);
• further limiting the tax benefit of itemized deductions ($888 billion);
• enacting a progressive estate tax ($73 billion);
• enacting a financial speculation tax ($821 billion);
• enacting a cap-and-trade program and a refundable climate dividend ($472 billion);
• enacting a sweetened beverage tax ($184 billion); and
• ending the deferral of foreign corporate income ($114 billion).

Severe drawbacks of a spending-cuts-only approach to deficit reduction

The Joint Select Committee on Deficit Reduction is charged with negotiating a plan to reduce federal deficits by at least $1.5 trillion over the next 10 years. It is essential for the long-term health of the nation and the economy that its proposals include equitable amounts of increased revenue. The Budget Control Act (BCA) of August 2011, which mandated the creation of the committee, has already reduced budget deficits by $895 billion over the next decade by focusing strictly on the spending side of the ledger. Statutory spending caps will reduce discretionary outlays by $756 billion, program integrity and education provisions will cut $5 billion in net spending, and debt service will fall by $134 billion (CBO 2011a). Moreover, these cuts build on the spending cuts in the 2011 full-year appropriations bill, which lowered the trajectory for discretionary outlays by $122 billion over the next decade (CBO 2011b). Relative to the Office of Management and Budget’s (OMB) higher baseline for discretionary spending, the BCA cuts to discretionary outlays total $992 billion, or $1.2 trillion when debt-service savings are included (OMB 2011a).

A spending-cuts-only approach to deficit reduction is unacceptable for numerous reasons:

• Deep cuts to spending programs will defund key public investments and undermine economic security programs.
• Without more revenue, spending cuts will disproportionately fall on lower-income and working families.
• Spending cuts are more damaging to the economic recovery than tax increases, particularly tax increases on upper-income households.
• Tax policies of the last decade are responsible for much of the structural budget deficit and roughly half of debt accumulation over the last decade (Fieldhouse and Pollack 2011).

At the same time that tax policy was adding to the deficit, income and wealth have accrued disproportionately to high-income individuals, and tax policy over the last decade has reinforced these trends. Thus, relatively modest tax proposals aimed at the top can generate large sums of revenue (Fieldhouse and Shapiro 2011), potentially exceeding the Joint Select Committee’s deficit reduction mandate. Evenly splitting the primary budget savings (excluding net interest) required by the BCA between spending cuts and revenue increases would require roughly $1 trillion in revenue from the Joint Select Committee’s recommendations to match the roughly $1 trillion in spending cuts already enacted.¹

In his recommendations to Congress for the Joint Select Committee, the president is seeking near-term job creation measures and long-term deficit reduction that exceed the committee’s mandate. The recommendations propose that Congress undertake comprehensive tax reform to raise $1.5 trillion over the next decade. This new revenue and the $1.2 trillion in spending cuts from the first phase of the BCA would meet the Joint Select Committee’s mandate, but are also coupled with $1.1 trillion from capping funding for Overseas Contingency Operations, $320 billion from health savings, $257 billion from other mandatory savings, and an additional $436 billion in debt-service savings. The president also proposed the American Jobs Act, a package of tax cuts ($254 billion) and job creation spending ($193 billion) frontloaded for 2012 and 2013, as well as offsets for its $447 billion cost. Net of the American Jobs Act, the president’s recommendations represent $3.2 trillion in new savings and $4.4 trillion in savings with the spending cuts from the first phase of the BCA, relative to OMB’s Budget Enforcement Act (BEA)–adjusted baseline.² For the contingency that Congress fails to overhaul the tax code, the recommendations also propose $1.6 trillion in specific revenue policies as a backstop, including $479 billion in offsets for the American Jobs Act.³

This issue brief analyzes the revenue proposals in the president’s recommendations for the Joint Select Committee and offers a menu of alternative or supplemental progressive revenue options to reduce the deficit and/or finance job creation initiatives.

Policies are scored relative to a current law baseline, with the exception of the repeal of the upper-income Bush-era tax cuts and the reinstatement of the estate tax at 2009 parameters; these are scored relative to OMB’s BEA-adjusted baseline. Regardless of what baseline the joint committee uses, any of the policies discussed in this memorandum could be constructed to be scored as revenue positive. Under a current law baseline, for instance, the repeal of the Bush-era rates for top brackets could be constructed as a “surcharge” in order to achieve a revenue-positive score for the Joint Select Committee. Repeal would then be accomplished by (1) adding a surcharge through the Joint Select Committee process, and then (2) holding a separate vote to extend all the Bush-era cuts outside the committee process.⁴ All revenue scores exclude associated debt-service savings. For the purpose of this brief, interaction effects (i.e., the combined effect of two proposals may be greater or less than the sum of their parts) are ignored as well, including those with the alternative minimum tax. However, any final plan will obviously need to be estimated taking into account various interactions.

MUCH MORE IN THIS LONG REPORT THAT I DID NOT READ ONE SENTENCE OF (might get to it later)! HERE

Edited October 22, 2011 by Lord Infamous

[dalegg 143]

Someone sure wasted a lot of time writing that.

[웃 910]

Someone sure wasted a lot of time writing that.

All I see is this (but I understand your point):

• enacting a financial speculation tax ($821 billion);
• enacting a sweetened beverage tax ($184 billion);

Edited October 22, 2011 by Lord Infamous

[luckytxn 2,265]

Has never occurred to this moron for a president that maybe not spending so much more than we take in may balance the budget. We could roll back the government to a decade ago levels and we would be solvent.

It has never occurred to this idiotic President that it is not the Feds job to create jobs but to have the best business friendly atmosphere. Now Socialists and Communists believe that the state should ensure jobs for the masses so maybe that is his way of thinking.

Just picture this for once. If the Feds were to try and be responsible fiscally and not create a hostile class warfare maybe we would not be where we are now. Just imagine if the Feds were to slash spending. Get out of the way of the economy and not try to control it. If they would just do what the Feds by the constitution said was their job then we would be OK.

If the Feds want to be our nanny state and have cradle to grave care then it is going to cost a lot of money and even confiscating the riches will not be enough. We will all have to pay and heavily. Now do we all want to pay heavily in taxes to have a bloated Federal bureaucracy running our lives? If so then keep voting Socialistic.