Here's a link to an Official White House analysis of the Republican proposal on the Fiscal Cliff. The Republicans propose to cap tax deductions at $25K. The White House analysis concludes that this would raise revenues by $1 Trillion, but only if the deduction limit applies to all taxpayers, not just the rich. Excluding those making less than $250K from the cap lowers the revenue to $800 Billion. Exactly what I'm hearing the Republicans claim. (Note: These numbers are over 10 years)
The analysis argues that this cap should be phased in over a few years to lessen disruptions. Sounds fine, and I agree. Though I don't think the Democrat's proposal to revert to pre-Bush tax rates will be "phased in". Hypocrites. Anyway, assuming a gradual phase in to make the changes more "fair" limits revenue to $650 Billion. Sounds very reasonable.
I find section 3 of the article most fascinating. They argue, quite correctly, that capping deductions will reduce charitable giving. They estimate $10 Billion a year less to charities. Since I believe that the revenue numbers are over 10 years, to compare apples to apples this number then becomes a $100 Billion decrease in charitable giving. The analysis assumes that we don't really want this, and that therefore charitable gifts will not be capped. With this assumption, revenues decrease to $450 Billion.
See something wrong here? In order to support $100 Billion in charitable giving, the analysis proposes to give up $200 Billion in revenue. This makes no sense. I suspect that the numbers and assumptions are flawed, but, if true, this is no reason to "uncap" charitable giving.
Thursday, December 6, 2012
Monday, December 3, 2012
The Fiscal Cliff talks should be more transparent
One frustrating part of the current "fiscal cliff" talks is that I can't really tell what's being proposed. Both sides are being coy, because they don't want to get called out for actually proposing any real solutions like raising tax revenues or cutting entitlements.
For example, Geitner's / Obama's first proposal included 1.6 trillion in tax increases, plus at least 50 billion in additional spending, with the proposal to "somehow" find 400 billion in savings in Medicare at some unspecified later time. If you really think a Democratic administration will find and implement 400 billion in savings in Medicare, I've got a bridge in Brooklyn to sell you. This proposal isn't serious or specific. The New York Times, hardly a right-wing bastion, calls it "loaded with Democratic priorities and short on detailed spending cuts". It points out that the proposed tax increases go beyond what the Democratic Senate approved, such as taxing capital gains at regular rates and potential increases the Estate Tax. Some of the "savings" Obama is trumpeting include "savings" from the military withdraws from Iraq and Afghanistan. Nobody was planning to spend any money to stay there, so it's hard to count that as savings.
From what I can tell, the Republican counter-proposal calls for 800 billion in enhanced tax revenues, through unspecified cuts in deductions. As an aside, I like the Economist's proposal (loosely based upon one of Romney's few good proposals) to skirt the issue of targeting any particular deductions, which will draw way too much controversy from special interests, by just limiting deductions to $50,000 total a year. About 300 billion of these possible savings are investigated by Paul Krugman. And his ideological opposite, the National Review, is calling for the negotiations to be held in public.
I agree. Let's have the negotiations be, at least more public so both parties will be more accountable for what will happen. Now, it seems painfully obvious to me. On the revenue side, any 5th grader could look at the situation and say "o.k., 800 billion in enhancements through less deductions, 800 billion in tax increases". Unfortunately, our Congress isn't that smart, nor apparently is Obama very serious about fixing our fiscal problems.
For example, Geitner's / Obama's first proposal included 1.6 trillion in tax increases, plus at least 50 billion in additional spending, with the proposal to "somehow" find 400 billion in savings in Medicare at some unspecified later time. If you really think a Democratic administration will find and implement 400 billion in savings in Medicare, I've got a bridge in Brooklyn to sell you. This proposal isn't serious or specific. The New York Times, hardly a right-wing bastion, calls it "loaded with Democratic priorities and short on detailed spending cuts". It points out that the proposed tax increases go beyond what the Democratic Senate approved, such as taxing capital gains at regular rates and potential increases the Estate Tax. Some of the "savings" Obama is trumpeting include "savings" from the military withdraws from Iraq and Afghanistan. Nobody was planning to spend any money to stay there, so it's hard to count that as savings.
From what I can tell, the Republican counter-proposal calls for 800 billion in enhanced tax revenues, through unspecified cuts in deductions. As an aside, I like the Economist's proposal (loosely based upon one of Romney's few good proposals) to skirt the issue of targeting any particular deductions, which will draw way too much controversy from special interests, by just limiting deductions to $50,000 total a year. About 300 billion of these possible savings are investigated by Paul Krugman. And his ideological opposite, the National Review, is calling for the negotiations to be held in public.
I agree. Let's have the negotiations be, at least more public so both parties will be more accountable for what will happen. Now, it seems painfully obvious to me. On the revenue side, any 5th grader could look at the situation and say "o.k., 800 billion in enhancements through less deductions, 800 billion in tax increases". Unfortunately, our Congress isn't that smart, nor apparently is Obama very serious about fixing our fiscal problems.
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