Comments on: The deficit commission’s plan http://blogs.reuters.com/felix-salmon/2010/11/10/the-deficit-commissions-plan/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: johnbachar http://blogs.reuters.com/felix-salmon/2010/11/10/the-deficit-commissions-plan/comment-page-1/#comment-21257 Tue, 23 Nov 2010 23:06:23 +0000 http://blogs.reuters.com/felix-salmon/?p=6081#comment-21257 Preserving Social Security and Burying the Obama Deficit Commission Proposals on Social Security
By Emeritus Professor of Mathematics, CSULB
President Obama’s National Commission on Fiscal Responsibility and Reform, co-chaired by Alan Simpson and Erskine Bowlers, has issued a doomsday report on “fixing” the Social Security retirement system (OASDI) as a part of its proposals to reduce the Federal deficit. This flies in the face of the fact that, not only has Social Security not contributed a dime to the deficit, it has a $2.52 trillion surplus! Amongst other things, the co-chairs would drastically cut retirement benefits and increase the retirement age to 69. Not a single member of this commission, or of the vast TV/audio/print media, has mentioned nor studied other solutions to the alleged Social Security “crisis”.
There is no crisis and there is most definitely no need to advance the retirement age to 69 nor to cut the retirement benefits. .
Based on the data in the totality of individual income tax returns for the 16 year period of 1993 through 2008, there are easy structural changes that can be made to the Social Security (OASDI) taxation system that will easily provide for sufficient annual contributions and assets growth to take care of the retirement needs of the increasingly aging population for the indefinite future, as well as the replacement of the existing 73-year old REGRESSIVE OASDI taxation system by a PROGRESSIVE one, and without reducing retirement benefits nor increasing the retirement age. Regrettably, the ever-present plethora of “privatization” and “fix-it” advocates are clueless about this analysis.
To illustrate the regressive nature of the OASDI taxation system, the data from the calendar year 2008 shows the following. Tax returns listing an Adjusted Gross Income (AGI) of over $200 K (= only 3% of all tax returns) held 30% of all AGI, yet less than 3% of the listed AGI was paid to OASDI; returns listing over $1 Million (= only 0.23% of all tax returns) held 13% of all AGI, yet less than 0.6% of the listed AGI was paid to OASDI; finally, the $10 million and over AGI class had an average GROSS income (AGI plus all exclusionary gross income) of $37 million, yet paid an average of less than 0.006% to OASDI
By using a progressive tax rate system (applied to ALL INCOME, not merely to salary/wage income) for OASDI, the rate for OASDI payments for 85% of all tax returns (= below $100,000 annually) will be LOWER than the current rate of 6.2%. This is because the total income of this class is in the form of salaries/wages, and everything below the salary/wage cap of $100,000 is taxed at 6.2% for OASDI contributions.
Here are the details for a typical progressive OASDI tax rate system: 4% rate on all income below $30,000 (40.3% of all tax returns in 2008); 5% rate for the range $30,00 to $75,000 (24.6% of all tax returns in 2008); 6% rate for the range $75,000 to $200,000 (22.1% of all tax returns in 2008; currently, those from $100,000 to $200,000 pay as little as 3% to OASDI); 7% for the range $200,000 and up (13.0% of all tax returns in 2008; this group pays from below 3% to as little as 0.006% to OASDI).
In addition to providing more than the annual retirement/disability needs produced under the existing regressive taxation system, the annual OASDI Trust Fund assets at the end of 2009, for each of five progressive tax systems that were analyzed for the 16 year period, would have INCREASED from the current $2.52 trillion (2008) to:
$3.47 trillion for tax-rate system 1; $4.17 trillion for tax-rate system 2; $4.27 trillion for tax-rate system 3; $4.41 trillion for tax-rate system 4; $4.83 trillion for tax-rate system 5.
Clearly, this revised progressive OASDI tax rate system would preserve Social Security, the most successful US government program in history, for the indefinite future, and would silence the plethora of “privatizers” and “fix-it” advocates.

]]>
By: TFF http://blogs.reuters.com/felix-salmon/2010/11/10/the-deficit-commissions-plan/comment-page-1/#comment-20704 Fri, 12 Nov 2010 23:36:56 +0000 http://blogs.reuters.com/felix-salmon/?p=6081#comment-20704 Thanks, y2kurtus, I thought it might be something like that. You gave the clearest explanation that I’ve seen yet.

And yes, bringing that capital back to the US matters more than reaping taxes on it.

I’m well aware of the foreign profits of the major companies, and in fact am reluctant to invest my money with any company that DOESN’T get the majority of its revenues from overseas. (Too risky…) The big companies range from 50% to 75% of their revenues from overseas.

]]>
By: y2kurtus http://blogs.reuters.com/felix-salmon/2010/11/10/the-deficit-commissions-plan/comment-page-1/#comment-20686 Fri, 12 Nov 2010 20:17:39 +0000 http://blogs.reuters.com/felix-salmon/?p=6081#comment-20686 On eliminating taxes on foreign profits by US corporations:

Currently when an “American” company like Coke produces markets and sells a beverage entirely overseas… say in Brazil and they earn a profit on that transaction they owe US taxes on it if they “repatriate” those profits to world headquarters in Atlanta.

The United States has no claim on that profit whatsoever… nothing took place in the US. Because the US currently does tax that profit, (but only if Coke brings the money home) Coke will do anything in it’s power to reinvest the profit overseas rather than move it back to the us.

By eliminating the tax on foreign profits many billions of dollars that the US goverment has no rightful claim to will return to the United States some of that money will be reinvested in capital equipment in the US. Some of that money will go to nine figure CEO bonuses… but who cares every dime that is spent in the US for any reason still boosts our economy rather than some other nations economy.

For any protectionists out there please consider the alternitive… several high profile US companies have changed their articles of incorporation to outside of the US. This allows them to pay US taxes only on their US profits.

Contrary to popular belif most profits of the 50 largest “U.S.” companies are produced outside of the US.

Over all great list of proposed cuts… I support them all except the V-22… verticle takeoff and 1000 miler range is a huge force multiplier allowing fewer troops to engage a larger area. Cut something else in the DOD but not the Osprey.

]]>
By: TFF http://blogs.reuters.com/felix-salmon/2010/11/10/the-deficit-commissions-plan/comment-page-1/#comment-20638 Fri, 12 Nov 2010 02:31:51 +0000 http://blogs.reuters.com/felix-salmon/?p=6081#comment-20638 libertarian, I must admit that I like almost all the proposals. They are fiscally conservative and socially responsible at the same time, stepping away from our current path to ruin.

I am, however, puzzled by this one: “eliminating taxes on foreign profits by US Corporations”. Can anybody shed some light on this?

]]>
By: libertarian723 http://blogs.reuters.com/felix-salmon/2010/11/10/the-deficit-commissions-plan/comment-page-1/#comment-20636 Fri, 12 Nov 2010 00:39:02 +0000 http://blogs.reuters.com/felix-salmon/?p=6081#comment-20636 I came here hoping to hear that we finally had a bipartisan group that had a balance approach to tacking a tough issue that we should all get behind. Is it really such a problem for the people born in 2000 to retire at 69 instead of 67? Is it really such a problem for everybody to pay 15 cents / gallon more? Is it really such a problem to eliminate some of the deductions for high income earners. These guys balance economic reality with fiscal sanity and you guys are crucifying them. Instead I hear a lot of silly ideas that won’t work in the real world ranging from let’s tax everything and everyone making money (this is another way of saying. communism) to let’s tax everything we buy from overseas (which is another way of saying protectionism). Has anybody on this site taken a fundamental economics or history class.

]]>
By: Pete_Murphy http://blogs.reuters.com/felix-salmon/2010/11/10/the-deficit-commissions-plan/comment-page-1/#comment-20625 Thu, 11 Nov 2010 19:27:36 +0000 http://blogs.reuters.com/felix-salmon/?p=6081#comment-20625 Looks like the commission completely missed what would do far more than anything else to both reduce the deficit and restore the economy: impose tariffs on imports.

Beyond that, the report only needs one other recommendation: pass an amendment to the constitution requiring a balanced budget, with an exception for periods of declared war.

]]>
By: MiddleClassGal http://blogs.reuters.com/felix-salmon/2010/11/10/the-deficit-commissions-plan/comment-page-1/#comment-20623 Thu, 11 Nov 2010 19:11:58 +0000 http://blogs.reuters.com/felix-salmon/?p=6081#comment-20623 I read in my paper, the Seattle Times, this morning that the panel also recommended eliminating taxes on foreign profits by US Corporations (I use the phrase euphemistically). My sense is that this panel’s recommendations are about protecting our wealthiest citizens and corporate interests at the expense of the middle/working classes and senior citizens. I have often wondered if a senior has medical coverage under medicare if they cannot afford to the copays. Seems like they are essentially uninsured.

It is time for average americans to become seriously involved in politics – I mean 24 hours a day, seven days a week. We need to establish a middle class PAC or our own corporation dedicated restoring the middle class in Amercia. Just think: $1 dollar a week x 52 weeks x 25,000,000 working class citizens would yield $1,300,000,000 per year. Even someone on unemployment could manage a $1 per week. I could easily support an organization like this to the tune of $30.00 per month. It would have to be independent and not support any candidate that took corporate money. We could raise a fortune and really fight back.

]]>
By: DanHess http://blogs.reuters.com/felix-salmon/2010/11/10/the-deficit-commissions-plan/comment-page-1/#comment-20616 Thu, 11 Nov 2010 17:39:10 +0000 http://blogs.reuters.com/felix-salmon/?p=6081#comment-20616 @comment1

“1. The proposal is regressive. It dramatically reduces tax rates for high income earners, and the reduction of deductions and the gas tax will disproportionately hit the middle and lower classes.”

Reductions in deductions do not hurt lower income families. They generally pay no income tax at all (ex payroll) even without deductions, and haven’t in many years. Middle income families will pay more, but there is no other way.

Cutting tax rates for high earners? Where??

Capital gains are taxed as ordinary income. This would be a major tax increase for the wealthy, for sure.

]]>
By: ChristineRegenc http://blogs.reuters.com/felix-salmon/2010/11/10/the-deficit-commissions-plan/comment-page-1/#comment-20612 Thu, 11 Nov 2010 16:32:29 +0000 http://blogs.reuters.com/felix-salmon/?p=6081#comment-20612 All parties, from insurers to the government to individuals, have a role to play in helping to control health care costs. Check out Whatstherealcost.org for what you can do and what the health care system should be doing.

]]>
By: TFF http://blogs.reuters.com/felix-salmon/2010/11/10/the-deficit-commissions-plan/comment-page-1/#comment-20607 Thu, 11 Nov 2010 14:39:22 +0000 http://blogs.reuters.com/felix-salmon/?p=6081#comment-20607 The mortgage interest deduction is of far greater value to the wealthy than to the median household, ESPECIALLY since it is a “Schedule A” deduction that goes up against the standard deduction. A lower-middle-class household only sees small benefit above the standard deduction, while an upper-middle-class household gets essentially the full benefit (and at a higher tax rate). Limiting or eliminating the mortgage interest deduction is truly a no-brainer.

Why repeal the AMT? It is a simpler and fairer taxation system than the STANDARD income tax. Why not keep the AMT and eliminate the income tax? Remember, it isn’t an additional tax — it is an ALTERNATE tax system. One that has much to recommend it. Before the AMT was passed, wealthy individuals had plenty of opportunity to eliminate their entire tax liability. That is an improvement?

]]>