[Cthulhu D]

http://projects.wsj....y-deficit-plan/

Is a good look at the deficit reduction that the US needs to do. Post your plans! I raised taxes by a billion dollars, so I wouldn't get elected.

[Mbodell]

Cthulhu D, on 2012-December-12, 04:20, said:

http://projects.wsj....y-deficit-plan/

Is a good look at the deficit reduction that the US needs to do. Post your plans! I raised taxes by a billion dollars, so I wouldn't get elected.

I got a $265B surplus through $1250 in tax revenue, $92 cut in appropriations, $25 cut in entitlements. But I don't accept the baseline, as I consider the baseline to be after the Bush tax cuts expire (similar to the simpson-bowles plan), not before hand,so I reject that $550 charge to taxes.

[VMars]

I was annoyed that I wasn't given the choice of taxing capital gains as income (I at least would have liked to know by how much that would affect the budget - if at all).

[Cthulhu D]

VMars, on 2012-December-13, 00:21, said:

I was annoyed that I wasn't given the choice of taxing capital gains as income (I at least would have liked to know by how much that would affect the budget - if at all).

It appears that raising it from 15% to 20% (or letting the tax cuts expire) is worth about 40$ billion dollars. Eliminating the carried interest provision for hedge fund manages raises a further 13 billion dollars.

[ArtK78]

VMars, on 2012-December-13, 00:21, said:

I was annoyed that I wasn't given the choice of taxing capital gains as income (I at least would have liked to know by how much that would affect the budget - if at all).

You may recall that the 1986 changes produced by Ronald Reagan taxed capital gains at the same rate as ordinary income - the top rate under the 1986 changes being 28%.

It was noted at the time that all of the rules relating to capital gains and losses and what constituted capital gains as opposed to ordinary income were kept in the tax code, presumably because future revisions to the tax laws would change the respective tax rates, which proved to be correct.

[helene_t]

I got 199 surplus without doing anything that would hurt significantly imho. Looks like USAs financial problems are insignificant compared to those of most other countries.

If USA has a problem with the deficit then I think it is that the party in control of the house is more interested in blaming the problems on the white house than in solving the problems.

Edit: ok, one thing I did check which might not be such a good idea was the ceiling on tax deductions. I think I would like a reduced ceiling only for certain types of deductions.

This post has been edited by helene_t: 2012-December-13, 10:48

[lalldonn]

I still had a deficit of 207 when I was done, however there were (a lot) more military cuts I wanted to make that weren't offered. I won't deny that I found it difficult. I probably would just about be breaking even at the end.

Having thought about it more, I would want the tax rates on higher earners raised even beyond the bush cuts expiring, plus perhaps a new bracket at something like a million with an even higher rate. That's how I would achieve a surplus.

[phil_20686]

lalldonn, on 2012-December-13, 10:40, said:

I still had a deficit of 207 when I was done, however there were (a lot) more military cuts I wanted to make that weren't offered. I won't deny that I found it difficult. I probably would just about be breaking even at the end.

Having thought about it more, I would want the tax rates on higher earners raised even beyond the bush cuts expiring, plus perhaps a new bracket at something like a million with an even higher rate. That's how I would achieve a surplus.

If you just let the bust tax cuts expire you get most of the way there in one go.

What is the "deduction for state taxes"?

Its generally not recommended to put (total) marginal tax rates above fifty percent. Not sure how high you were thinking. I recall a krugman column where he estimated that if you raised the top rate of tax on people earning over 500,000 dollars you could plausibly raise about 100 bn a year, but not much more.

I think the only things on the list were things that are set annually right? large part of the defence budgets are set on longer timescales, and so don;t necessarily come up for review this year.

[barmar]

phil_20686, on 2012-December-13, 11:23, said:

What is the "deduction for state taxes"?

You get to deduct state and local income and property taxes paid from your income when computing federal taxes.

[mycroft]

I would suggest "top effective marginal tax rate" is a more useful number than "top marginal tax rate". And yes, there's a point where it's too high and you lose money by people working even harder than they do to figure out loopholes that reduce the Effective tax rate. But one of the things we saw this year clearly was that a top marginal tax rate of 30ish percent can be reduced to zero if you have enough money to set stuff up, and if $200K to hire a top tax accountant for the whole year will give 5, 6-fold returns.

[ArtK78]

mycroft, on 2012-December-13, 15:13, said:

I would suggest "top effective marginal tax rate" is a more useful number than "top marginal tax rate". And yes, there's a point where it's too high and you lose money by people working even harder than they do to figure out loopholes that reduce the Effective tax rate. But one of the things we saw this year clearly was that a top marginal tax rate of 30ish percent can be reduced to zero if you have enough money to set stuff up, and if $200K to hire a top tax accountant for the whole year will give 5, 6-fold returns.

"Top effective marginal tax rate" is a meaningless term.

And, with all due respect, the rest of your post is also meaningless (perhaps fantasy is a better term).

[mycroft]

I'll believe you - given who you are. WADR has its usual internet meaning, of course :-) So give me a less meaningless one that measures what that intends to - that, back in those days, nobody was paying anywhere near 90% tax on the money they earned out of the top marginal tax bracket, but it had to be that high to get the amount of tax that the country needed? And that now that the top rate is 28% or so, that they're still not paying anywhere near that percentage? And what percentage is it? Well, nobody knows, because "effective tax rate" is a meaningless term. That is particularly convenient if you make enough money to hire a full-time tax accountant, or if enough of those people exist and you *are* a full-time tax accountant.

Absolutely, fantasy it may be. Show me where reality is, then. Because the stories are that after a point, the bigger you are, the less of that bigger you have to give the government, at least in percentage terms. I'm sure the stories lie, or only show the outliers.

[ArtK78]

"Effective tax rate" and "marginal tax rate" and "top marginal tax rate" are meaningful terms.

A person's effective tax rate is tax paid divided by income.

A person's marginal tax rate is the tax rate on the last dollar earned (or next dollar earned, to be more precise).

Top marginal tax rate is the highest tax rate specified in the tax code which was 35% in 2011.

"Top effective marginal tax rate" is a meaningless term. Does it mean the highest effective tax rate paid by any person subject to tax?

There are other odd situations. For example, if one is entitled to the earned income credit, it is possible that one's marginal tax rate is very high, as for each additional dollar earned not only is that dollar taxed but the amount of the credit allowable may decrease. And there are other situations in which one's marginal tax rate may be higher than the rate specified in the tax code because of the loss of deductions or credits with increasing income.

The main reason why many very wealthy individuals pay less tax at the margin than ordinary working stiffs is that the wealthy earn much of their income as capital gains and dividends, which have favorable treatment under current law. Mitt Romney revealed that he paid income tax at an effective rate of about 15%, which is, by coincidence, the rate charged on capital gains and dividends. 15% is of course no where near the top marginal tax rate of 35%.

[awm]

While Mycroft didn't express himself very well, perhaps what he means is: "What is the mean effective tax rate for people who are well above the threshold for the highest marginal rate?" It's naive to think this will be close to the top marginal rate -- it will be increased by state/local taxes and decreased because of capital gains rates and other deductions. It seems that a lot of million-per-year incomes (for example) are paying closer to 15% than they are to 35% under the current system (because of capital gains mostly; it also helps to be able to declare residency in a no-income tax state, which is easy when you have multiple residences).

[Zelandakh]

Art, take the last dollar being earned by a top-rate taxpayer and then calculate all taxes, including indirect taxes, that are taken from that dollar. I guess this is what is meant.

On the spending game, I got down to 189 on a quick run-through; I am sure I could do better if I considered everything in detail. Out of interest, does anyone know how much a small reduction in Corporation Tax would cost? It seems to me that throwing tax cuts that are targeted towards businesses (not individuals) might be a good way to appease Republicans while still improving the overall debt situation without causing a sudden spending crash. But perhaps these are too costly(?) I certainly would not be voting for spending cuts that add an extra load on business, which some of those in the list seemed to suggest.

[kenberg]

I believe that Congress should support the National Science Foundation and NSF should support mathematical research. I don't expect Congressmen to prove , or even to understand, mathematical theorems.

The point is that while I will take this quiz (I haven't yet but I will) it is not my thought that I should be able to write a budget and then Congress should thank me and pass it. They took on the job of constructing a budget and they are supposed to do their jobs. And they are supposed to advance the interests of the country. Yes we must live in the real world, yes we know that money talks, etc. But enough is enough. If Republicans really want to hold to the idea that under no circumstances is any rich person to be remotely inconvenienced then they will thoroughly deserve their coming slide into irrelevancy.

[Cthulhu D]

Zelandakh, on 2012-December-14, 06:03, said:

Art, take the last dollar being earned by a top-rate taxpayer and then calculate all taxes, including indirect taxes, that are taken from that dollar. I guess this is what is meant.

On the spending game, I got down to 189 on a quick run-through; I am sure I could do better if I considered everything in detail. Out of interest, does anyone know how much a small reduction in Corporation Tax would cost? It seems to me that throwing tax cuts that are targeted towards businesses (not individuals) might be a good way to appease Republicans while still improving the overall debt situation without causing a sudden spending crash. But perhaps these are too costly(?) I certainly would not be voting for spending cuts that add an extra load on business, which some of those in the list seemed to suggest.

The only workable plan I could come up with entailed ~1000 million dollars of tax hikes, which the house republicans won't pass. Can anyone come up with a workable plan that doesn't include that much in the way of tax increases?

Anyway, as for the cost of corporate tax cuts, Romney's plan was a 10% corporate tax cut (from 35 to 25%) which cost $100 billion per year or so. Not that the defacto corporate tax rate in the US is actually much lower due to dumb accounting rules you let corporations use, tax treatments for oil and gas companies that amount to huge subsidies because Exxon is notoriously unprofitable etc. Cleaning those up would let you fund the 10% cut in corporate tax rates straight up.

[blackshoe]

ArtK78, on 2012-December-13, 18:40, said:

A person's effective tax rate is tax paid divided by income.

To me, this is the interesting number, particularly if we want to talk about "fair share". Have there been any studies or reports published showing this figure across the broad spectrum of income?

Edit: thinking about it a little more, Federal Income Tax isn't the only tax burden on folks. Can we compute an effective tax rate that includes all taxes? I think perhaps this is what that website does that tell us we're working for the government until Christmas or whenever it is, and for ourselves afterword.

This post has been edited by blackshoe: 2012-December-14, 09:15

[phil_20686]

blackshoe, on 2012-December-14, 09:07, said:

To me, this is the interesting number, particularly if we want to talk about "fair share". Have there been any studies or reports published showing this figure across the broad spectrum of income?

This is not actually a good number. Mainly because, so defined, the effective tax rate is highly age dependent. For example, suppose I was in reasonable job earning $100,000 a year. But i never got promoted. Early in my life, I might get mortgage deductions and child benefit, plus there should be adjustments for benefits received, like public education for children. By the time I was into my fifties, with children all grown up and mortgage paid off, my effective tax rate would be much higher.

The structure of life/the economy is such that the young should generally pay less tax than the old, and often when you look at figures aggregated by income you obscure these essential facts.

[blackshoe]

So also collect age data, and then show the breakdown of various income brackets by age.

A decision as to tax structure without examining such data is purely political. It makes more sense, to me at least, to base such a decision on facts.