Obama to propose cuts to Social Security

[Torie]

..and now Boehner has already rejected it.

http://www.politico.com/story/2013/04/obama-budget-medicare-social-security-89658.html?hp=t2_3

It seems that is the case as to the overall package Obama is proposing, but not the chained CPI concept, which is a non brainer, because with the chained CPI concept, the purchasing power of the SS payments will remain intact, but not grow to the extent the purchasing power of wages grows over time.

[Torie]

No, I think at the end of the day, if you look at the two choices 1) no more revenue, and enough cuts to keep the debt level below say 90% of the GDP, or 2) more revenue and less cuts to keep the debt level below say 90% of the GDP (and making sure the government future pension and SS entitlement liabilities are booked at a reasonable number without having an unrealistically high expected rate of return, and added to the total debt number), I think it will become clear that the level of cuts necessary to effect to pick option 1 is just not very appealing, either politically, or to me personally (although I no doubt would be spending a fair amount of the money in different places).

So that is a long winded way of saying I suspect when the choices are laid out with real numbers, and real choices, that I will depart from my party's current position, and indeed support more revenues.

I hope I have made everything clear as to where my little brain sits on this at the moment. Did I sbane?

[Torie]

A chained CPI is not equal to destroying Social Security.

Yes, I thought I made clear that it kept the SS purchasing power the same over time. And I do think one way to raise more revenues (if needed, and I suspect they will be, or at least that will be my point of view), is means testing stuff, so for those with means, maybe more of their SS payments will be taxed (to wit, all of that portion of the SS payments which represents "interest" earned over time above and beyond what was paid in), and/or their benefits based on same formula might be trimmed. Ditto with medicare.

[Torie]

Why not just limit deductions?

That, if it were me, would certainly be part of the mix, starting with nixing the deduction for state and local income taxes. Just what the mix should be depends on how much more revenue is "needed" to meet the metric, and frankly while I said 90% of GDP as a max, I would prefer that cruising speed be around 75%, so in downtowns, there is some elbow room for that percentage to grow.

[Torie]

Why not just limit deductions?

That, if it were me, would certainly be part of the mix, starting with nixing the deduction for state and local income taxes. Just what the mix should be depends on how much more revenue is "needed" to meet the metric, and frankly while I said 90% of GDP as a max, I would prefer that cruising speed be around 75%, so in downtowns, there is some elbow room for that percentage to grow.

I completely disagree going after the state and local income tax deduction. It punishes states like California that provide more benefits at the state level (of course there is a lot of waste aka pensions). Still, I like having sidewalks.....

I would just have a hard limit on how much you can deduct from your taxable income. The middle class still benefits but the rich do not. And you don't have to raise rates to raise revenues.

Yes, we do indeed disagree about the state and local income tax deduction. I see no reason why the Feds should tax subsidize high income taxing states.  The Feds should be neutral about that, rather than subsidize and encourage that.  You obviously do favor such a subsidy.  Different strokes for different folks.

Hard caps make no sense (that is what I call a "cliff mechanism," which if in place makes the marginal tax of one extra dollar of income, like 10,000% or something), but as now, there could be a phase out - just one that starts at a lower AGI level, and progresses at a faster rate as AGI goes up until you lose them all (and AGI should include unlike now tax free municipal bond income).

[Torie]

There might be a better way, sbane, to send states some money on a more neutral basis, and more weighted towards their relative wealth, adjusted for the cost of living. But I digress, and have not honed my ideas into something akin to a gleaming granite kitchen countertop yet. If interested in what the gleaming granite countertop might look like, I will get back to you with that.

The race to the bottom is always an issue, but yes sending dough to states that love the income tax, is using a meat ax to effect lasik eye surgery as it were. But I have been for decades now quite hostile to States Rights. We are one nation. The States are useful for laboratories, but no more. However, well, we have our little Constitutional  history to contend with, and that is that.

I also think state and local governments have become more and more dysfunctional, particularly as newspapers have become animated corpses, just spitting out AP stories, and  largely ceasing to do investigative reporting of the pond scum state and local governments are awash in. So the doctrine of susidiarity, to the extent it ever had any merit, certainly does not now. The Federal government is in general, and putting aside its ability to run deficits, and print money, and so forth, much better run -much better, with higher quality public employees as well.

I am thinking of leaving a fair chunk of my estate, to a foundation that will fund state and local government investigations and studies, doing stuff newspapers have ceased to do. That and schooling for kids in low SES zip codes. Those are the two things that are most important to me right now.

[Torie]

Well, California and the local governments within at pretty dysfunctional. Many other states around the nation are not. Businesses in many cases would rather deal with them, Democrat or Republican, rather than Washington DC bureaucrats of either party.

What high income taxing states do you have in mind as havens for "businesses," at least vis a vis their dealings with state and local government bureaucrats?

[Torie]

Why not just limit deductions?

That, if it were me, would certainly be part of the mix, starting with nixing the deduction for state and local income taxes.

AMT already does that. Just in a rather silly manner. It is of course a proper thing to nix if something is to be nixed.

The AMT only bites the upper middle class, not the rich. That is one of the ironies. You make more than say 400k-459K per year, and the AMT is gone (even in high tax states like CA, where the income tax deduction can be a big number. Medical deductions, investment expense and miscellaneous deductions however are only allowed when they exceed an amount based on percentage of AGI, so they disappear as AGI goes up.

[Torie]

The AMT should just be dumped, with dividends paid out deductible from C Corp income. Dividends  should yes, be taxed as ordinary income, along with muni bond income, but long term capital gains taxed at a lower rate (with a higher rate for gains attributable to the recapture of real estate depreciation, as now). Then phase out Schedule A deductions, all of them, not just medical and investment expenses, as your income goes up. Just put me in charge to do it. Thanks.

[Torie]

You think Obama can have his way with the GOP Pubs in the House Grumps?  Really?

[Torie]

I have an idea.  What if, for everyone under the age 40 right now, we split SS/Medicare into two plans: Limited and Full benefits?  At the age 40, when you're just settled enough to look at future planning, you get to choose which one you want to go on when you retire.  The catch is that if you select Full your payroll taxes go up to a higher rate.  Limited will still be a decent plan, but full will include things such as Part D and maybe add some additional programs to sweeten the pot.

My guess is, given a clearly list of benefits paying the higher rate would provide, even the most anti-tax conservatives would opt in to the tax hike as part of their retirement plan.  Considering the 40s and 50s are priming earning years for most people, it would produce enough revenue to cover the shortfall.  And the ones who don't take it will save the government a ton of future spending.

Will the "limited" option lead to the moral hazard that in retirement the "limited option" pickers will be a moral hazard, because they will need government subsidies to avoid being old bag ladies and gentlemen. That is the question. I have next to zero confidence that 80% of Americans can adequately plan for their retirement future, and thus the need for a stream of income that creditors cannot touch, that is enough for the basics, when one reaches that certain age when their human capital is de minimus.

Do you agree King?

[Torie]

Where is the money for this going to come from again?

[Torie]

Where is the money for this going to come from again?

http://en.wikipedia.org/wiki/Tax

And the price tag? And from who?

[Torie]

Well since no one else bothered, I clicked the link, and the price tag is that to do this taxes would need to be increased by an amount equal to about 5% of the GDP (versus 1% to 1.5% of the GDP to maintain the current levels without cuts). That's about 800 billion per year in additional revenue needed. And we have the medical subsidy bomb on top of that to contend with, with the global warmists out there also sporting that lean and hungry look, with their hand out. The next step for the Left given this set of little abstract numbers, is to propose just whose taxes would be raised by how much to cover all of this, and its macro-economic impact on growth, as even more dough is transferred from the productive young to the recipient old.

All very interesting. The odds of this happening?  Yes, you guessed it - asymptotically close to zero.

[Torie]

an amount equal to about 5% of the GDP

insignificant then.  Your class certainly should be paying about double your current rate.

At least until such time as you harvest your expectancy.