Fiscal Commission Draft vs. Center for Fiscal Equity Proposal
The Fiscal Commission Co-Chairs' proposal is at http://www.fiscalcommission.gov/news/cochairs-proposal.
The Center for Fiscal Equity proposal to the Commission is at http://fiscalequity.blogspot.com/2010/07/revised-submission-to-fiscal-commission.html
Here is how the two compare:
The Fiscal Commission recommends strict military and discretionary spending caps, although many of the defense cuts are for overseas bases.
The Center for Fiscal Equity recommends
•regional appropriations based on regional VAT revenue,
•a 10.9% regional VAT and a 2.4% national VAT
•regional discretionary spending for civil and military purposes capped at regional VAT collections,
•an eventual constitutional amendment authorizing a regional VAT rate, which would be adjusted to match expenditure rather than adjusting expenditure to match revenue.
The Fiscal Commission recommends three options for tax reform. The first has four scenarios -
•one with all tax expenditures stripped out and a $30,000 standard deduction for couples, one with only the child tax credit/EITC retained with higher tax rates,
•one with the tax benefits for the poor retained plus
•certain tax benefits for home mortgages, health insurance and retirement benefits and a territorial tax system for business taxes retained at 80% with higher rates and
•one with 100% of those benefits with even higher rates of 13% for the lowest bracket, 21% for the middle and 28% for the highest and corporate rates.
The other two options are Wyden-Gregg and letting the tax writing committees make reforms with an automatic tax reform trigger should they fail to act. The Commission also raises the gas tax.
The Center for Fiscal Equity proposal is not dissimilar in terms of rates, although it would separate spending and taxes into three separate pots. Discretionary spending would be funded by a VAT of 13.3% (as above). In the transition, net incomes would increase by the VAT amount.
Entitlement spending would be paid for with
•an expanded business income tax on all businesses (including sole proprietors) on all value added and
•would start by decreasing gross income to the new net income after the VAT and the employee contribution to Old Age and Survivors Insurance.
• rates would then be increased to cover the full cost of retirement, but not at the expense of employee wages below their current net income for most employees at the lower end.
•eliminates the home mortgage deduction and all state tax deductions, transfers Medicaid to the Federal Government and
• increases the Child Tax Credit to $500 per month per child, makes it refundable and ends the EITC,
•raising the minimum wage to $12 per hour so that there are no low wage jobs requiring tax benefits to subsidize marginal employers.
The income tax would be reformed
•The standard income tax deduction for families would be $100,000 (equivalent to $150,000 before Business Income Tax salary adjustment)
•Income tax rates ranging from 4% to 28% for every additional $75,000 in family income.
•Income taxes would fund net interest, debt retirement and overseas diplomatic and security operations and naval sea deployments.
• Rates could go even higher when it becomes clear that the rich will bear most of the burden of paying the debt back - and if they don't, their children will.
The Center ignores the gas tax, but agrees that a higher tax is a good idea.
The Fiscal Commission goes after doctors, malpractice lawyers, patients, farmers and retirees, capping expenditure growth and inflation adjustments to control mandatory spending.
The Center for Fiscal Equity will allow entitlements to shift to employer-paid benefits from government services in
•health,
•corrections/mental health and
•education
Certain mandatory items for retirement would be funded by personal income taxes rather than the business income tax. Regions would adjust benefits based on business income tax collections. Mandatory farm spending would be funded by the VAT as well.
The Fiscal Commission raises the retirement age but sets an income floor for low wage workers and increases the amount of income subject to taxation to 90%. It also adjusts bend points to reduce benefits for higher wage workers and how inflation is calculated, adopting a Chained CPI for tax indexing, military, federal and FICA retirement. The subject of personal accounts does not come up.
The Center for Fiscal Equity concurs with raising the income cap and raises rates to account for lower gross wages and the exclusion of the child tax credit in calculating income.
We also recommend an equal employer contribution based on the average contribution, so that bend points are not necessary - provided that balances are recalculated based on averages rather than matches. We did not address inflation adjustments, but does not disagree with greater accuracy.
We also left open the possibility of personal retirement accounts provided
•the income cap on contributions is removed
•the retirement accounts are invested not in Wall Street, but in insured employer voting stock
•with union or professional association proxy voting of shares
•the insurance fund serving as the fund used by non-stock employees for their primary accounts.
Note that with personal accounts, there is no need to specify retirement ages - people retire when their balances are enough to replace their wage income and account for growth to offset inflation.
Are we surprised that the Fiscal Commission ignored our recommendations? Not really, though we are disappointed that we were never contacted for more information.
The Fiscal Commission recommendations were a prime example of incremental change. Most of the changes we proposed are radical by comparison and would require a ground swell of support usually reserved for electoral campaigns.
The only way our changes will even be considered is if they are adopted by an existing candidate or party or by a new one. If gridlock continues, we expect that calls for a new approach to these issues will be called for - especially if the Republican Party continues to be seen as bereft of ideas while the Democrats are seen as the party of the status quo.
Moderate Republicans, Libertarians, Greens and Catholic Democrats might yet form a centrist party. If they do, there is something in our proposals for them that is not in the proposal of the Fiscal Commission.
The Center for Fiscal Equity proposal to the Commission is at http://fiscalequity.blogspot.com/2010/07/revised-submission-to-fiscal-commission.html
Here is how the two compare:
The Fiscal Commission recommends strict military and discretionary spending caps, although many of the defense cuts are for overseas bases.
The Center for Fiscal Equity recommends
•regional appropriations based on regional VAT revenue,
•a 10.9% regional VAT and a 2.4% national VAT
•regional discretionary spending for civil and military purposes capped at regional VAT collections,
•an eventual constitutional amendment authorizing a regional VAT rate, which would be adjusted to match expenditure rather than adjusting expenditure to match revenue.
The Fiscal Commission recommends three options for tax reform. The first has four scenarios -
•one with all tax expenditures stripped out and a $30,000 standard deduction for couples, one with only the child tax credit/EITC retained with higher tax rates,
•one with the tax benefits for the poor retained plus
•certain tax benefits for home mortgages, health insurance and retirement benefits and a territorial tax system for business taxes retained at 80% with higher rates and
•one with 100% of those benefits with even higher rates of 13% for the lowest bracket, 21% for the middle and 28% for the highest and corporate rates.
The other two options are Wyden-Gregg and letting the tax writing committees make reforms with an automatic tax reform trigger should they fail to act. The Commission also raises the gas tax.
The Center for Fiscal Equity proposal is not dissimilar in terms of rates, although it would separate spending and taxes into three separate pots. Discretionary spending would be funded by a VAT of 13.3% (as above). In the transition, net incomes would increase by the VAT amount.
Entitlement spending would be paid for with
•an expanded business income tax on all businesses (including sole proprietors) on all value added and
•would start by decreasing gross income to the new net income after the VAT and the employee contribution to Old Age and Survivors Insurance.
• rates would then be increased to cover the full cost of retirement, but not at the expense of employee wages below their current net income for most employees at the lower end.
•eliminates the home mortgage deduction and all state tax deductions, transfers Medicaid to the Federal Government and
• increases the Child Tax Credit to $500 per month per child, makes it refundable and ends the EITC,
•raising the minimum wage to $12 per hour so that there are no low wage jobs requiring tax benefits to subsidize marginal employers.
The income tax would be reformed
•The standard income tax deduction for families would be $100,000 (equivalent to $150,000 before Business Income Tax salary adjustment)
•Income tax rates ranging from 4% to 28% for every additional $75,000 in family income.
•Income taxes would fund net interest, debt retirement and overseas diplomatic and security operations and naval sea deployments.
• Rates could go even higher when it becomes clear that the rich will bear most of the burden of paying the debt back - and if they don't, their children will.
The Center ignores the gas tax, but agrees that a higher tax is a good idea.
The Fiscal Commission goes after doctors, malpractice lawyers, patients, farmers and retirees, capping expenditure growth and inflation adjustments to control mandatory spending.
The Center for Fiscal Equity will allow entitlements to shift to employer-paid benefits from government services in
•health,
•corrections/mental health and
•education
Certain mandatory items for retirement would be funded by personal income taxes rather than the business income tax. Regions would adjust benefits based on business income tax collections. Mandatory farm spending would be funded by the VAT as well.
The Fiscal Commission raises the retirement age but sets an income floor for low wage workers and increases the amount of income subject to taxation to 90%. It also adjusts bend points to reduce benefits for higher wage workers and how inflation is calculated, adopting a Chained CPI for tax indexing, military, federal and FICA retirement. The subject of personal accounts does not come up.
The Center for Fiscal Equity concurs with raising the income cap and raises rates to account for lower gross wages and the exclusion of the child tax credit in calculating income.
We also recommend an equal employer contribution based on the average contribution, so that bend points are not necessary - provided that balances are recalculated based on averages rather than matches. We did not address inflation adjustments, but does not disagree with greater accuracy.
We also left open the possibility of personal retirement accounts provided
•the income cap on contributions is removed
•the retirement accounts are invested not in Wall Street, but in insured employer voting stock
•with union or professional association proxy voting of shares
•the insurance fund serving as the fund used by non-stock employees for their primary accounts.
Note that with personal accounts, there is no need to specify retirement ages - people retire when their balances are enough to replace their wage income and account for growth to offset inflation.
Are we surprised that the Fiscal Commission ignored our recommendations? Not really, though we are disappointed that we were never contacted for more information.
The Fiscal Commission recommendations were a prime example of incremental change. Most of the changes we proposed are radical by comparison and would require a ground swell of support usually reserved for electoral campaigns.
The only way our changes will even be considered is if they are adopted by an existing candidate or party or by a new one. If gridlock continues, we expect that calls for a new approach to these issues will be called for - especially if the Republican Party continues to be seen as bereft of ideas while the Democrats are seen as the party of the status quo.
Moderate Republicans, Libertarians, Greens and Catholic Democrats might yet form a centrist party. If they do, there is something in our proposals for them that is not in the proposal of the Fiscal Commission.
posted by Michael Bindner at 11:11 PM
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