Deficit Panel's Leaders Push Cuts - WSJ.com

First, I would like to see an analysis of the income & wealth distributional effects of the proposed reforms before committing to anything. Maybe Emmanuel Saez & friends will take a crack at it?


That said, my off-the-top-of-my-head take? Well, how about...

• First, given that both organized labor (AFL/CIO) -and- Americans for Tax Reform are already harping about the proposals, it is at least a reasonable starting point for discussion. Nothing like pissing off all sides to confirm you're on the right track.

• Cap - at 68 years - and slow the raising of the SocSec retirement age. The deomgraphics trends and changes since the inception of the program probably DO warrant a rethinking of the future retirement age. I just do not believe an age of 70 is merited, particularly in light of the availability of other reforms to pay for maintaining the already modest SocSec benefit levels.

• Forget about cutting SocSec benefits... except maybe means testing for retirees with non-SocSec earnings over $X (e.g., over $200K)?

• Remove the income level caps on salary + wages subject to the SocSec payroll tax.

• Broaden the tax base even further, by - among other things - eliminating nearly all corporate special exemptions, allowances, credits, etc., except for some very specific, targeted incentives for both near- and long-term job creation.

• Elimination of loopholes in the treatment of foreign taxation of corporate income. Doing so would help disincent off-shoring of American jobs, improve tax fairness (Profitable Fortune 500 corporations paying little, if any, US federal income tax? That's absurd & morally repugnant!), and help resolve the repatriation of retained earnings problem.

• A Financial Transactions Tax, especially for derivatives. Maybe also an Excess Reserves Tax on banks?

• Simplify & index the AMT, instead of outright repeal.

• Provide MORE individual marginal tax brackets, NOT FEWER. Instead of the proposed three brackets - 9%, 15% & 24% - I would prefer a structure more like:  6%, 9%, 12%, 15%, 21%, 27% and 33%. [Note: I need to do more research before identifying specific income levels for these brackets.] The number of tax brackets has little, if anything, to do with simiplication of the tax code. How hard is it, really, to either refer to a pre-computed table or implement a standard linear equation in the form of y = m + bx?  Real simplication - i.e., shrinking the size the tax code from a near-mountainous paper pile to something more like a mere ant hill - is about broadening the tax base and eliminating the dizzying aray of exemptions & complicated credits, vastly reducing the need for advice from or expertise of professional tax accountants & lawyers. These guys may not appreciate the near-term dent in their practices, but presumably their education, experience & skills translate rather easily to other, more productive uses.
• Enable Medicaid/Medicare spending constraints by allowing the government and/or private exchanges to collectively negotiate prescription drug prices, including from cheaper Canadian (or other forign) sources.

• Automatic triggers for implementing a public option for health care insurance if Medicaid/Medicare spending benchmarks are missed... and an additional automatic trigger for a single-payer system in the event that public option savings benchmarks are also missed.

• Tying the proposed 10% federal workforce reduction to reduced private sector unemployment levels.

• A "Balanced Budget" Amendment requiring rough balancing of the budget (within +/- tolerance ranges) over the course of long-term business cycles (not individual fiscal years, or even Presidential administrations).

• Rebalancing the mix of spending cuts vs. tax revenues closer to 50%/50%, rather than the proposed 75% spending cuts/25% raising of tax revenues... particularly in ways that reduce & reverse the after tax income inequality trends.

I am certain that there are many others to consider. Suggestions welcome.

Deficit Panel's Leaders Push Cuts - WSJ.com