Gang of Six Banged out a Debt Deal

[sunzt]

4 Tril in cuts over 10 yrs.
Raise 1 Tril in revenue over 10 yrs.
Cuts Medicare and Medicaid.
Reforms SS by lowering inflation rate
Caps operating budgets on agencies
TAX REFORM: Less tax brackets, lower rates, removes many deductions, taxes retirement accounts
500 Bln "down payment" in cuts.
Similar to debt commission proposals.

http://www.cnbc.com/id/43811852/comid/4#comments_top

Out of all the crappy deals being passed around, this is likely the most promising to get support from both sides. Of course it won't get any support from ultra left or ultra right, but hopefully there's enough to get this passed.

 

[yllus]

That sounds pretty reasonable. I don't know if fewer tax brackets is a good idea (seems like you need more of them if anything), but overall, pretty reasonable.

Also, lowering the top tax bracket from 35% to 29%? I guess if you're making that up by eliminating deductions it's all good, but not what I would have wanted.

 

[MotF Bane]

I think they went the wrong way with the tax brackets, unless the deduction removal is really thorough.

As for the 4t in cuts, that'll probably never materialize.
"We'll set a plan to cut $80b from ****** by 2020!" (*cough* we don't plan on being here for that *cough*)

The "down payment" is nice, removing deductions is good, taxing retirement accounts is iffy, cutting the entitlements is good. It's not a bad proposal overall, at a cursory look.

 

[Infohawk]

It's sad that so much of this is designed just to fool constituents. "We're not raising your taxes, we're just reforming the tax code" so that you'll pay higher taxes. "We're not taking away your benefits, we're just not matching them to inflation" so that you'll have less benefits in the future.

 

[dullard]

That sounds pretty reasonable. I don't know if fewer tax brackets is a good idea (seems like you need more of them if anything), but overall, pretty reasonable.

I'm not quite sure what the article means by 3 brackets with tax rate ranges. What does the middle bracket of 14% to 22% mean? Does it mean Congress must still decide on a single percent within that range? Or does it mean there is a formula and the lower middle will pay closer to 14% and the upper middle closer to 22%?

I'm personally in favor of dropping brackets completely and go with a formula where your rate varies continuously with income. It makes no sense for a couple making $69k after deductions to pay the same rate as a couple making $139k after deductions. The descrete jumps just leads to many loopholes (like deferring income payments to qualify for the 15% tax bracket to drop your long term capital gains to 0% in any year you have large capital gains). Those games will end if we eliminate brackets entirely and just have a continuous function.

As for the compromise, it is probably the best we can get now. I'd personally demand far bigger long term cuts and smaller short term cuts though. We have two problems that we are facing: poor employment now and major $20+ trillion long term budgets. The focus on larger short term cuts ($0.5 trillion now) and smaller long term cuts (only a measly $4 trillion total) got the whole thing backwards.

 

[theeedude]

It sounds too reasonable for GOP base to support.

 

[allthatisman]

It's sad that so much of this is designed just to fool constituents. "We're not raising your taxes, we're just reforming the tax code" so that you'll pay higher taxes. "We're not taking away your benefits, we're just not matching them to inflation" so that you'll have less benefits in the future.

This. They do this crap all the time here in California. They don't raise income tax per se, but all the other "taxes" you pay on everything else... and when I say everything, I mean everything that home owning, car registering, utility paying taxpayers pay... I can't wait to see how much less I'm going to get back next year...

 

[Codewiz]

It's sad that so much of this is designed just to fool constituents. "We're not raising your taxes, we're just reforming the tax code" so that you'll pay higher taxes. "We're not taking away your benefits, we're just not matching them to inflation" so that you'll have less benefits in the future.

Yep, another lie by Obama. I was pretty sure I heard Obama say that he would NOT raise taxes on people making less than 250K. Well that just went out the window.

Mortgage interest deduction = reduced
Charity deductions = reduced
Retirement tax benefits = reduced

That all means I pay a hell of alot more taxes. I am talking at least 3-4K more a year I would guess.

Once again, the democrats and republicans decided to let the middle class carry more tax burden.

Yes master, please can I have some more. The democrats and republicans disgust me.

Those three things above ONLY impact the middle class.

The rich pay for their homes outright.
The rich don't need retirement benefits
The rich don't need charity deductions

The poor don't own homes
THe poor don't save for retirement
The poor don't really have anything to donate

I am glad we are giving the middle class the finger.

EDIT: Let me also add, I do NOT believe it is all on Obama. My only point is calling him out for another failure. He did not get us out of wars, he started one himself. He did not close Gitmo. The list continues. Just another failed promise. I shouldn't be shocked.

 

[HendrixFan]

I'm personally in favor of dropping brackets completely and go with a formula where your rate varies continuously with income.

Since they are graduated it effectively varies continuously but on the whole I agree with you. A continuously variable rate would be easy to implement these days since everything is computerized. It would have been a pain 50 years ago.

I think it is likely kept as is because it creates wonderful talking points and heated political debate so real issues can be ignored by the public.

 

[Bowfinger]

This. They do this crap all the time here in California. They don't raise income tax per se, but all the other "taxes" you pay on everything else... and when I say everything, I mean everything that home owning, car registering, utility paying taxpayers pay... I can't wait to see how much less I'm going to get back next year...

Unfortunately, those are all regressive changes that shift more and more taxes to the poor and middle class while further reducing the effective rate of the wealthy. I hope that's not the track taken with this deal, but I'm not optimistic.

 

[sunzt]

Yep, another lie by Obama. I was pretty sure I heard Obama say that he would NOT raise taxes on people making less than 250K. Well that just went out the window.

Mortgage interest deduction = reduced
Charity deductions = reduced
Retirement tax benefits = reduced

That all means I pay a hell of alot more taxes. I am talking at least 3-4K more a year I would guess.

Once again, the democrats and republicans decided to let the middle class carry more tax burden.

Yes master, please can I have some more. The democrats and republicans disgust me.

Those three things above ONLY impact the middle class.

The rich pay for their homes outright.
The rich don't need retirement benefits
The rich don't need charity deductions

The poor don't own homes
THe poor don't save for retirement
The poor don't really have anything to donate

I am glad we are giving the middle class the finger.

EDIT: Let me also add, I do NOT believe it is all on Obama. My only point is calling him out for another failure. He did not get us out of wars, he started one himself. He did not close Gitmo. The list continues. Just another failed promise. I shouldn't be shocked.

"To be rich is glorious" [or something like that]

-Deng Xiaoping

 

[allthatisman]

Unfortunately, those are all regressive changes that shift more and more taxes to the poor and middle class while further reducing the effective rate of the wealthy. I hope that's not the track taken with this deal, but I'm not optimistic.

It's totally the track taken with this deal! I know this because when they have to make hard choices here in California, they do the same exact thing! At the state level, they add the increases to places that most people fail to notice until it's too late, like your water bill, sewage, electricity, gas, telephone, cable, waste, car registration, boat registration, at the gas pump, when you buy a 12 pack of soda, a gallon of milk... I can go on and on... these are the places where they can sneak in a measly (in supposedly our eyes...) tax increase without EVER touching income tax.

Look at the highlights of the article... where are the real tangible cuts?

 

[GuitarDaddy]

Unfortunately, those are all regressive changes that shift more and more taxes to the poor and middle class while further reducing the effective rate of the wealthy. I hope that's not the track taken with this deal, but I'm not optimistic.

Yep, sound like a bum deal. Top rate drops from 35% to 29%, and no change to the capital gains rate = more for the wealthy

 

[Attic]

Reforms SS by lowering inflation rate

Read: Lowers SS payout by lying about the rate of inflation.

This is an exceptionally cowardly stance on the SS issue.

 

[sunzt]

Read: Lowers SS payout by lying about the rate of inflation.

This is an exceptionally cowardly stance on the SS issue.

SS benefit cuts were coming.... everyone knows this.

 

[Attic]

Yep, sound like a bum deal. Top rate drops from 35% to 29%, and no change to the capital gains rate = more for the wealthy

The low cap gains rate is in theory to encourage investment and savings. The extreme wealthy are unfairly using this to not pay their fair share of income tax. I can't blame them, but this type of exploit enjoys little support from the majority of Americans.

I'd like to see the cap gains tax fixed so that income from investments is taxed at a progressive rate that gets the high income at a higher rate while leaving the majority of Americans with a strong incentive to invest and only pay 15% on their investment earnings.

The intention of the tax should be carried out, not exploited. Resolving this should not require punishing those Americans who deserve to benefit from the intention of cap gains tax being at a level lower than their federal tax.

Cliffs: Punish those exploiting the tax, not those intended to be served well by it.

 

[TheSlamma]

Looks like military and defense made it out unscathed, wow agencies get a "cap".

Looks like the republicans only count it as "raising taxes" if it happens to the rich.. if a tax increase happens to the middle class it's just called "revenue generation".

 

[Attic]

SS benefit cuts were coming.... everyone knows this.

Then it should be called what it is, a cut in benefits for those who pay into the program their entire working lives.

An ex post facto cut that does not fulfill the promise or intention of the program.

Leave the inflation rate alone and stand behind the cut in clear view of what is intended to be done. Do this so that future generations see accurately what they are getting with government management of this aspect of their retirement savings and so that they can demand and receive a better solution in the future.

 

[Munky]

This looks suspicious.
"Reforms SS by lowering inflation rate" = change the way we count inflation so we can pay you less.
"taxes retirement accounts" = this is just insane. Retirements are already taxed, either when you're putting money in, or taking money out. If they want to tax it twice, they can go to hell.

 

[HomerJS]

Read: Lowers SS payout by lying about the rate of inflation.

This is an exceptionally cowardly stance on the SS issue.

What was wrong with removing the income limit?

 

[Dulanic]

Something like that will never pass. Hell would freeze over before democrats let the middle class get hit with at least 3 big tax increases from that while the rich get hit with... none?

 

[JS80]

What was wrong with removing the income limit?

Because there is no return from people who pay at the lion's share. SS is designed so that people who pay less into the system get back way more at the expense of those you pay in the most.

 

[GuitarDaddy]

The low cap gains rate is in theory to encourage investment and savings. The extreme wealthy are unfairly using this to not pay their fair share of income tax. I can't blame them, but this type of exploit enjoys little support from the majority of Americans.

I'd like to see the cap gains tax fixed so that income from investments is taxed at a progressive rate that gets the high income at a higher rate while leaving the majority of Americans with a strong incentive to invest and only pay 15% on their investment earnings.

The intention of the tax should be carried out, not exploited. Resolving this should not require punishing those Americans who deserve to benefit from the intention of cap gains tax being at a level lower than their federal tax.

Cliffs: Punish those exploiting the tax, not those intended to be served well by it.

Great post:thumbsup: And I agree whole heartedly

Keeping the 15% up to a specific $ value would preserve the intended purpose of spurring and rewarding investment.

Unforetunately I see no plans put forward so far that would reform capital gains taxation

And I would like to see more specifics on the tax "loopholes" that they propose to close. If their only idea of closing loopholes is reducing the home mortgage deduction and charitable contributions deductions I couldn't go along with that as it is targeted squarely at the middle class.

Everything I see so far looks like more handout to the rich, and more burden on the middle class. Lowering of the top tax rate, elimination of the alternative minimum tax, reduction of SS and medicare bennies, etc...

Put the repeal the Bush tax cuts and reform capital gains taxation on the table, and we can talk

 

[Fern]

4 Tril in cuts over 10 yrs.
Raise 1 Tril in revenue over 10 yrs.
Cuts Medicare and Medicaid.
Reforms SS by lowering inflation rate
Caps operating budgets on agencies
TAX REFORM: Less tax brackets, lower rates, removes many deductions, taxes retirement accounts
500 Bln "down payment" in cuts.
Similar to debt commission proposals.

http://www.cnbc.com/id/43811852/comid/4#comments_top

Out of all the crappy deals being passed around, this is likely the most promising to get support from both sides. Of course it won't get any support from ultra left or ultra right, but hopefully there's enough to get this passed.

Tax retirement plans?

IMO, that's stupid. I didn't see any info on this in your link so can't be sure of what they're talking about.

But since Defined Benefit Plans (DBP) have disappeared (the old type plans where your pension amount was guaranteed) we don't have much for the American people. The disappearance of DBP has resulted in many more retirees depending upon SS.

Taxing of retirement accounts just depletes what retirees have in them and forces even more reliance upon SS retirement.

And there are tax increase in here? It doesn't even say they're aimed at the rich.

This won't pass.

I've heard some opine that the deal was over when McConnell came up with his plan to basically give Obama everything he wanted and hoping he'd get political blame for increasing the debt even further without reducing the deficit.

Once that option was put forth, tactically it was over. Everyone can posture for political points all they want because that fall-back means Obama has to accept nothing but what is on his terms.

In your article everybody's mentioning it as "Plan B", even Boehner. IMO, the writing is on the wall.

While praising the broader plan, Obama said it was still important to have a "Plan B" option being worked on by Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell as a fallback

...Boehner said he was exploring other alternatives to avoid government default.

"I do think it's responsible for us to look at what Plan B would look like," he said at a news conference a few hours before the opening of debate on the legislation backed by conservative lawmakers.

Fern

 

[brencat]

SS benefit cuts were coming.... everyone knows this.

Yep. Anyone realize that the average life expectancy when SS was created was only 58yrs? Now it's ~ 78 for men, and 83 for women I think. SS age threshold MUST be raised higher than 65, among other reforms as well.