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The Center for American Progress publishes the best and most detailed suggestion for a Democratic starting position in the upcoming budget sequestration debate, I've seen so far, in Next Round of Deficit Reduction Must Tackle Hidden Spending in the Tax Code: How to Avoid the Sequester and Achieve Truly Balanced Deficit Reduction in the Wake of the Recent ‘Fiscal Cliff’ Deal.

I've been googling sequestration cuts since the new year and mostly find mostly articles from defense industry lobbyists, or Republicans, talking about their strategies for substituting social spending cuts for the 50% of the sequestration cuts to defense spending scheduled to kick in on March 1, 2013. Here, finally, is the best progressive plan I've encountered, which proposes a plan to achieve the rest of our efforts to balance the budget with increased revenue.

As Washington heads into the next round of budget negotiations, congressional Republicans are again asserting that every dollar of future deficit reduction must come from cutting government programs and services, not from additional revenue. Congress has already cut spending substantially, however: Three-quarters of the $2.4 trillion in deficit reduction that had been enacted since 2011 has been in the form of spending cuts, and only one-quarter has come from increasing revenue. While Congress raised the top marginal tax rate in the recent legislative deal to avoid the fiscal cliff, it has not even begun to tackle the vast array of tax breaks that disproportionately benefit upper-income Americans, nor has it addressed the many loopholes enjoyed by large corporations. These special tax breaks must be on the table going forward if Congress is committed to a balanced approach to solving our fiscal challenges.

This issue brief identifies about $1 trillion in potential savings over 10 years that can be gained from reducing or reforming tax breaks for high-income individuals and corporations. That amount would be more than enough to replace the so-called sequester, the sudden and indiscriminate cuts to government programs that are now scheduled to take effect starting in March.

These common-sense reductions in tax breaks are far preferable to many of the alternatives: allowing the sequester to kick in; enacting deeper cuts to discretionary spending programs, which have already been cut to the bone; or reducing Social Security, Medicare, or Medicaid benefits.

In this well documented, extensive analysis, Seth Hanlon notes that only if we were to use increased tax revenues to achieve the next $1 trillion of budget balancing measures would we be able to bring the ratio of spending cuts to revenue increases over the last two years close to 1 to 1.  

Table 1 suggests gaining over $520 billion by limiting tax deductions to top-bracket taxpayers.  

 photo HanlonTaxBreaks_table1_zps2cec2104.png

While such a plan may appear to have little political chance, now, unless we try to change public perceptions we are likely to get the Republican plan which will include no additional revenue, and substitute social spending for the scheduled cuts to defense spending.    

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Comment Preferences

  •  I was prepared to be hypercritical of the (7+ / 0-)

    proposals, but after reading the report its tough to find much fault with any of them.  they're all pretty solid (and a lot of them come from the Obama administration's Greenbook, issued by Geithner's Treasury Department.)

    •  I was not aware of the Greenbook to which you (5+ / 0-)

      refer, but am eager to check it out, so I can be more effective in helping to move these budget discussion in more progressive directions.  

      So far, in the start of this year, it seems as if the Republican viewpoint is getting the most media coverage.

      Thanks for link Johnny.  

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Tue Jan 22, 2013 at 05:13:58 PM PST

      [ Parent ]

      •  Thanks, HD. Very enlightening indeed... (7+ / 0-)

        I think in any national debt debate we have to first veer away from the false premise the Republicans are trying to shove down our throats.

        This has never been about the debt. It's plainly evident it's about decimating the social safety net. Period.

        If the Republicans were really concerned about the national debt, defense cuts, corporate welfare (in the form of subsidies) and tax loopholes would all be on the table. They're not; no matter what the GOP says to the contrary.

        If the Republicans were at all interested in saving the so-called "entitlements" they'd already have ways to fix Medicare on the table, (which are fairly simple to implement) and they'd be telling the truth about the fact that Social Security has nothing at all to do with the national debt.

        The only way we can fix the debt problem... is to start out with the truth.

        Thanks for the diary.

        "That men do not learn very much from the lessons of history is the most important of all the lessons of history." ~ Aldous Huxley

        by markthshark on Tue Jan 22, 2013 at 05:52:56 PM PST

        [ Parent ]

        •  Your comment here should be a post on its own (4+ / 0-)
          Recommended by:
          markthshark, ontario, simple serf, KenBee

          that should stimulate much discussion.

          As just a few examples, my understanding is that if we just let Medicare negotiate with big pharmaceuticals over drug prices we could save substantial billions.

          Also, last week I read that each service branch is doing their own custom version of the new F-35 jet fighter, but two are way over budget and behind schedule so experts are suggesting we could save over $60 billion if we just canceled to two worst and standardized on one design which would save in parts, training (of pilots and repair), etc.

          Another excellent article I found last week details about three dozen overseas military bases, that are now totally obsolete - hangovers from the cold war, which could be closed, with little consequence to our national security, or maybe even improvements over across the board sequestration cuts which will hurt future training.

          The means is the ends in the process of becoming. - Mahatma Gandhi

          by HoundDog on Tue Jan 22, 2013 at 06:19:08 PM PST

          [ Parent ]

          •  Yes, negotiating prescription prices would go.. (2+ / 0-)
            Recommended by:
            HoundDog, simple serf

            a long ways towards cutting costs in Medicare. Ending the "fee-for-service" program would also help enormously.

            Add the basic "waste, fraud and abuse" savings and you have a formula for extending Medicare for decades.

            And don't even get me started on defense cuts. lol

            We could easily cut 1/3 of the Pentagon's budget and the only noticeable change would be seen by accountants and lawyers for the MIC.

            Not only would we see a big reduction in the national debt. We'd also see a much-needed attitude adjustment to our misguided imperialistic aspirations, which tend to make more enemies than friends.

            "That men do not learn very much from the lessons of history is the most important of all the lessons of history." ~ Aldous Huxley

            by markthshark on Tue Jan 22, 2013 at 06:56:57 PM PST

            [ Parent ]

            •  Amen brother. We could even put aside the wasteful (2+ / 0-)
              Recommended by:
              Roger Fox, musiccitymollie

              spending on defense and just zero in on folks paying their fair share. You want a quick fix, go back to the tax rates during Eisenhowers Administration. Too drastic? Ok, let's take baby steps.

              1. Raise the cap on FICA - any perceived SS problems resolved.

              2. Negotiate prescription drug costs and allow buy in to Medicare for 55 and older - perceived Medicare problems resolved.

              3. Eliminate fluff tax breaks for the rich and famous - we're now getting close to evening the books.

              4. Reform tax code to give incentives to American job creators - we now have a thriving economy to allow for rebuilding infrastructure.

              5. And not meant to be last on the list strengthen our public education system - utopia.

              •  We used to do #5, (0+ / 0-)

                The 1986 Tax Reform Act removed tax shelters for domestic investment.

                We used to have #1, after the 1983 SS deal, the income cap was at 90%, today its at 84%. Today 90% is about 186k.

                FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

                by Roger Fox on Wed Jan 23, 2013 at 08:24:58 AM PST

                [ Parent ]

              •  Agree with your list, but would add to #2 (0+ / 0-)

                allow "subsidized" buy-ins to Medicare (otherwise, only affluent and wealthy seniors would be able to do so).

                Thanks for the recommendations!

                Mollie

                “If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

                by musiccitymollie on Wed Jan 23, 2013 at 09:10:21 AM PST

                [ Parent ]

              •  2. is far from true. There are (0+ / 0-)

                deep seated problems with Medicare which the ACA is starting to solve. But we do not  need to expand it to an additional set of people, all of whom would be sicker than average, until we get some of the problems worked out.

                Besides that is what Medicaid is for if they are low income. And Medicaid is far better than Medicare any way.
                 

                I'm asking you to believe. Not in my ability to bring about real change in Washington ... *I'm asking you to believe in yours.* Barack Obama

                by samddobermann on Thu Jan 24, 2013 at 04:37:02 AM PST

                [ Parent ]

                •  Respectfully, you might want to doublecheck your (0+ / 0-)

                  facts regarding the Medicare and Medicaid programs.

                  Medicare needs some reform, but the Medicare system itself is definitely not the "cost driver" in our health care system.  Just the opposite.  In many ways, it should be the model for our health care systems (which is not to say, that no reform is needed).

                  Medicaid as a program is next to non-existent in many states.  I'm in a Red State that opted out of federal Medicaid funding years ago, and has only a system that supplements medical care.  It is not even referred to as health insurance.  It is simply a meager 'health supplement.'

                  And eligibility for Medicaid has been greatly narrowed (in many states), benefits are bare bones, the program has been pretty much privatized in some states (including my Purple Turned Red State), and many of the medical services have been contracted out to managed care companies.

                  My Red State actually proposed to "cap" at $12,000 annually the benefit to individual beneficiaries.  [This proposal failed 3-4 years ago.  I haven't kept up to see if there was a subsequent attempt to cap the beneficiary benefit.]  But, for Pete's Sake, if you broke a toe or finger and had to have it cared for, you'd run up a bigger bill than that allowance would cover.

                  Plus, the FPL for a couple is only $15, 130 for a couple not residing in Alaska or Hawaii.

                  Here's the 2012-2013 [through June 30, 2013]
                  Poverty Guidelines for the 48 Contiguous States  

                  Family/household    
                  1     $11,170
                  2     15,130
                  3     19,090
                  4     23,050
                  5     27,010
                  6     30,970
                  7     34,930
                  8     38,890

                  For families/households with more than 8 persons,
                  add $3,960 for each additional person.

                  My reference wasn't to these folks, or those even making up to 130% of FPL.  It was to those couples that are "working class" (making under $60,000 annually).

                  They would obviously be far above the Medicaid eligibility, but could hardly afford unsubsidized health insurance premiums.

                  Check out the Massachusetts "Exchange" sometime, to get an idea of the cost for seniors' monthly premiums who are age 55 and over.  I have calculated it for me and Mr. Mollie.  [We're on the lower end of senior age.]  Some catastrophic policies are in the neighborhood of $1,000 monthly.  [The last time I checked a couple of years ago.]

                  Remember, these policies are "age rated," and seniors are charged up to a ratio of 3:1 (compared to the least expensive policy to the "Young Invicible" crowd--what a silly term, LOL!)

                  The cut-off for subsidized insurance through the federal exchanges is $46,000 for a couple.
                   

                  So, clearly, couples with a combined income just above the cut-off, could very well find it difficult, if not impossible, to fork over a couple thousand (or for that matter, $700, $800, $900) per month, per person, and pay a mortgage payment, one or two car payments, etc.  Especially those making $47,000 to $60,000.  You do the math--it ain't rocket science.  :-)

                  And that seems like a reasonable expectation since a Family of Four is subsidized making up to $88,200 (by the Wikipedia Chart).

                  I also just found out that tobacco users "will be rated."  Didn't realize that.  Thought the only "rating" was age-based.  [Not a factor for us, but obviously this will detrimentally impact many folks.]

                  Now, if you're in Vermont, or maybe Oregon or Washington state if they have better Medicaid programs, that's wonderful.  But please realize that many states have shredded their Medicaid programs (by opting out of federal funding, through waivers) over the years, especially since the "Crash of 2007-2008."  Or that is certainly true of many states, including my own.

                  So, we very much need to reenforce our health care system for this vulnerable group of seniors [age 55-64].  And whereas Obamacare will help some seniors, something needs to be done to help those working class seniors earning between $46,000 and $60,000 annually.  My guess is that this would be a pretty big chunk of that group, to have "fall through the cracks."

                  [Apologize if this is a "mess."  On my way out the door, so very rushed.]

                  Mollie

                  “If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

                  by musiccitymollie on Thu Jan 24, 2013 at 08:44:48 AM PST

                  [ Parent ]

                  •  Forgot my main point! According to Ezra Klein (0+ / 0-)
                    By the end of this year, the federal government must establish health-insurance exchanges in as many as 25 states where (mostly) Republican governors have refused to set them up. That will be a gargantuan task.

                    Even worse, the Supreme Court’s decision upholding the law also ruled that state participation in the Medicaid expansion, which accounts for about half of the new insurance coverage, is optional. Currently, only 22 states have committed to the Medicaid expansion.

                    Need I say more, regarding relying on Medicaid.  We need to strengthen the exchange subsidy program ASAP.

                    Here's the link to the entire piece.

                    Mollie

                    “If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

                    by musiccitymollie on Thu Jan 24, 2013 at 08:52:41 AM PST

                    [ Parent ]

          •  Thanks for the excellent diary. I hope that they (0+ / 0-)

            listen to CAP.

            Bowles-Simpson, Domenici-Rivlin, etc., etc., are recommending that employer-paid health care premiums (group insurance) be counted as "wages," therefore raising taxes considerably on all of us who participate in an employer-based group health insurance plan.

            We must be vigilant, and send a very strong message to our congresspersons and the White House, that this is simply unacceptable.


            Mollie

            “If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

            by musiccitymollie on Wed Jan 23, 2013 at 09:16:13 AM PST

            [ Parent ]

  •  the first three items (4+ / 0-)

    would go along way toward fixing the budget.

    I don't expect much, though - these are the guys who objected to a couple of million a year for beekeepers.

    (Is it time for the pitchforks and torches yet?)

    by PJEvans on Tue Jan 22, 2013 at 05:22:59 PM PST

  •  I see $$'s and the FP in your future. You (3+ / 0-)
    Recommended by:
    HoundDog, simple serf, phonegery

    always make important and pertinent posts regarding policy and politics. Please keep it up HoundDog. You are much appreciated.

  •  I like all of the proposals (4+ / 0-)
    Recommended by:
    HoundDog, phonegery, jec, Words In Action

    and wish we would even be able to enact half of them.

    Corporations (especially the big ones) have gone far too long enjoying their tax holidays/loopholes brought about through intensive lobbying.

    The political system is now designed to favor the business world from the Federal level down to State level. Local and State government’s give corporations tax breaks to lure them to move there. The burden shifts to the people living there that now have to make up the tax base shortfall through higher property or sales tax rates. The community may also face lower investments in infrastructure and schools. All this just to have a business move in and create some jobs (maybe) for some undefined period of time? (no guarantees)

    Influencing national political figures is included in every large corporations annual strategic plan. They put investment money aside to use for "influencing” congressional leaders (campaign donations) in order to extract favorable policy changes that will give them a business advantage over others.

    Sorry for my rant, It kind of makes me sick thinking about it.

    Thanx HoundDog for the great post!
    Cheers

    •  Yep. Big business convinces communities (2+ / 0-)
      Recommended by:
      HoundDog, simple serf

      to play the lottery. Buy the ticket(give them the tax break) and win big. Who's to say that the business will create the jobs or stick around long enough to see the return on investment. It's very much the same with Major Sports. An owner gets the community to foot the bill for the stadium and reaps all the profits. All in the name of recognition for the city.

      No one understood the American psyche quite as well as PT Barnum.

  •  The fact that the gold mined on federal (4+ / 0-)

    lands is not taxed at all boggles my mind.  

    Time is a long river.

    by phonegery on Tue Jan 22, 2013 at 05:57:34 PM PST

  •  Of Hanlon's list, the only one that I'd be (1+ / 0-)
    Recommended by:
    HoundDog

    hesitant about is #4, special breaks for inventory. I could foresee the need for this break with a business going through a downturn. I see jobs on the line with that item versus the others which are all fluff for the rich and famous.

    •  I sort of snagged on that one myself. I founded (1+ / 0-)
      Recommended by:
      Roger Fox

      and owned a consulting firm that built and customized company and industry strategic simulators as one aspect of our services, long ago. I was surprised to learn how many kinds of special circumstances certain businesses are built around.

      I don't know which industries depend on these inventory breaks but I'm sure we'd hear a lot from them PDQ if we tried to change this.  But, it still might be worth it, I just don't know.

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Tue Jan 22, 2013 at 08:01:53 PM PST

      [ Parent ]

      •  Look at from the Detriot perspective (1+ / 0-)
        Recommended by:
        HoundDog

        Car parts are built and shipped in the "just in time" format.

        Which businesses have to maintain larger inventories? Which dont. I'll guess that this would hurt some but not all businesses, like you said I dont know.

        FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Wed Jan 23, 2013 at 08:28:09 AM PST

        [ Parent ]

        •  Great point, perhaps, its the Mom and Pop hardware (1+ / 0-)
          Recommended by:
          Roger Fox

          stores that have to carry massive inventories of odd nuts and bolt sizes to serve their niche.

          This is an example of why it is good to discuss these things in open and transparent ways a whole lot before passing legislation.

          I'm growing concerned about the number of last minute secret deals we seem to be getting into the habit of pulling off.

          The means is the ends in the process of becoming. - Mahatma Gandhi

          by HoundDog on Wed Jan 23, 2013 at 03:30:26 PM PST

          [ Parent ]

  •  I want the pre 86 tax reform act tax shelters back (1+ / 0-)
    Recommended by:
    HoundDog

    Those tax shelters incentivized long term domestic investment.

    In 1980 the top 1% paid an effective rate of 23% on income. The Statutory rate was 70%.

    Today the about 60% of those deductions, exemptions and shelters are gone, the statutory rate is 35% and the effective rate is about 20%.

    The uber rich no longer feel compelled to invest in America because of the great deal they used to get from tax shelters, instead they invest in the markets and overseas.

    Thats why the last 3 recessions (1990, 2000, 2008-2013) have all had jobless recoveries. While downward wage pressure continues to make income disparity worse.

    Not all tax deductions, exemptions and shelters are bad, New Deal tax policy used then to good effect until the 1986 TRA.

    FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Tue Jan 22, 2013 at 08:03:32 PM PST

    •  If the shelters would be tied to American job (2+ / 0-)
      Recommended by:
      HoundDog, Roger Fox

      creation than I'd have no problem with it. Where I have a BIG problem is when we give the tax shelters without ties and depend on trickle down economics. You insinuate that the rich won't invest in America because of the tax rates. I contend the rich will put their money wherever it offers the most profit.

      •  Same thing right now (0+ / 0-)

        Tax policy now incentivizes capital flow to markets and overseas.

        And yes, there needs to be a quid pro quo.

        FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Wed Jan 23, 2013 at 08:22:25 AM PST

        [ Parent ]

    •  {rolling eyes} (0+ / 0-)
      The uber rich no longer feel compelled to invest in America because of the great deal they used to get from tax shelters,
       
      Most of those tax shelters lacked real economic benefits for the investors or America's infrastructure/job creation.  They were purely paper tax write-offs.

      My Karma just ran over your Dogma

      by FoundingFatherDAR on Wed Jan 23, 2013 at 10:58:23 AM PST

      [ Parent ]

      •  86 TRA changed the domestic investment (0+ / 0-)

        environment, then add tax breaks for outsourcing....

        And it had nothing to do with infrastructure, the Government used to spend 5% of GDP on infrastructure, while tax policy incentivized domestic investment perhaps as much as 2% to 3% of GDP.

        With 28 million unemployed or underemployed.....

        If we spend 5% of GDP on infrastructure, thats about 750 billion @ a multiplier of 2 to 2.5.  15 to 22 million jobs.

        We're short 6 to 13 million jobs.....

        If tax shelters added domestic investment that created jobs, I'll use a Multiplier of 1.5 to 2.0, (4% of GDP) 600 billion would create between 9 and 12 million jobs.

        5% unemployment might be 7 million, so 9-12 drops to 2-5 million jobs. About 100-250 billion in todays dollars.

        Somebody created those jobs, and seeing as how after the 86 TRA all 3 recessions had a jobless recovery, the lack of infrastructure spending doesnt account for the entire jobs deficit.

        Somebody spent about 1.6% of GDP, and unless you can come up with a better explanation than the 86 TRA, the 86 TRA remains the prime suspect.

        FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Thu Jan 24, 2013 at 09:22:11 AM PST

        [ Parent ]

  •  Great ideas (1+ / 0-)
    Recommended by:
    HoundDog

    Didn't the GOP keep saying that there are loopholes to close ... Of course, they would never get specific but cap has done so.

    "The real wealth of a nation consists of the contributions of its people and nature." -- Rianne Eisler

    by noofsh on Tue Jan 22, 2013 at 08:46:12 PM PST

  •  Geez some of those are pretty ridiculous (1+ / 0-)
    Recommended by:
    Roger Fox

    Vacation homes, yachts, jets, and horses? I'm not saying people aren't entitled to splurge, but the government shouldn't be subsidizing it.

  •  I call shenanigans (1+ / 0-)
    Recommended by:
    Roger Fox

    This so called well documented and extensive analysis misses a critical fact.  These tax increases are still austerity.  Any plan that imposes austerity will INCREASE the deficit by putting people out of work increasing unemployment, food stamps, and other safety net spending and decreasing income tax revenue.

    Are the options in the analysis less austere than perhaps other spending cuts/tax increases?  Yes.  But, they are still austerity and will result in an increase in the deficit as the economy returns to recession and more people lose their jobs and safety net spending increases and tax revenue decreases.

    The only plan that will actually reduce the deficit is one that puts people to work.  It will increase income taxes and decrease safety net spending and inject the missing demand back into the economy.

    This is the thing that is missed, the Federal Government does not directly control its deficit.  Cutting spending and raising taxes creates feedback into the economy causing second and third order effects such that one cannot say that spending cuts + tax increases = less deficit. The results of austerity in the Eurozone appear to show that the result is increased deficits as a percent of GDP, massive declines in GDP, and huge increases in unemployment.

    •  Excellent comment (0+ / 0-)

      Short of infrastructure jobs stim to create 10's of millions of jobs, everything else is less efficient.

      FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

      by Roger Fox on Thu Jan 24, 2013 at 08:48:43 AM PST

      [ Parent ]

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