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Ethics & Religion
Column #2,007
January 30, 2020
How To Cut the Deficit
By Mike McManus

In Obama's last year the Federal Budget Deficit was $567 billion. It jumped to $750 billion in 2018. And that was before Trump's big tax cut fully took effect in 2019 pushing the deficit to $965 billion and $1 trillion in 2020.

Senate Republicans abandoned a key fiscal doctrine by agreeing to a tax cut that would add $1.5 trillion to the federal debt over the next decade. The federal debt recently hit $20 trillion.

Maya MacGuineas, President of the Committee for a Responsible Budget, asserted this week. "We're running trillion-dollar deficits when the economy is expanding. When are lawmakers going to wake up? Every year the Congressional Budget Office warns that our largest trust funds get closer to depleting their reserves."

She asserts "Interest is the fastest growing part of the Federal Budget. It is projected to more than double over the next ten years. It cannot be reversed overnight. We can no longer afford to procrastinate."

Ms. MacGuineas urges lawmakers to "all take the Hippocratic Oath to stop making things worse." Trump actually promised to eliminate all debt before his election!

In abandoning traditional fiscal restraint, Republicans claimed the tax cut will so stimulate the economy that the cuts will pay for themselves. To date there is ZERO evidence of that. The repeal of that tax cut for the wealthiest should be on the table.

What must be considered are ways to dramatically reduce the federal deficit. Social Security, for example, incurred a $65 billion deficit in 2015. If its solvency is not restored, Social Security recipients would suffer a 21% cut in benefits in 2029.

A non-partisan group, Voice of the People, has proposed how to restore its solvency. It has framed possible solutions to a scientific sample of the population. Its proposed solutions include pro and con arguments that are agreed to by Democrats and Republicans. What's encouraging is that three-quarters of a scientific sample of 8,500 people agreed with these proposals that were also supported by both Democratic and Republican staff.

  1. Reduce benefits to the richest 25% of beneficiaries is supported by 75% of people.
  2. Raise the full retirement age from 67 to 68 is supported by 8 of 10 people.
  3. Raise the cap on taxable earnings from $117,000 to $215,000 won 86% support.
  4. Raise payroll taxes from 6.2 % of income to 6.6% was backed by 78% of Americans.

First, it must be noted that not a single presidential candidate has even suggested that there is a need to reduce the staggering $1 trillion annual deficit.

However, both Elizabeth Warren and Bernie Sanders have proposed a "wealth tax" to pay for their more expensive proposals, such as "Medicare For All," free college tuition, and universal child care.

Sanders notes that the wealthiest Americans own more wealth than the bottom half of all Americans. Over the last 30 years, the top 1 percent has enjoyed a $21 trillion increase in their wealth while the bottom half of American has actually lost $900 billion in wealth. "There has been a massive transfer of wealth from those who have too little to those who have too much," he asserts.

The Sanders wealth tax would apply only to those with a net worth of $32 million and would raise an estimated $4.35 trillion over a decade. His tax would not be levied on anyone with less than $32 million of assets.

His proposed tax on extreme wealth is progressive, rising with net worth. A married couple worth $32 million would pay a tax of only $5,000. Those worth $50 million to $250 million would pay 2% of assets. Couples with $250 million to $500 million pay 3% and those between $500 million and a billion, 4%.

Those worth $1 billion to $2.5 billion are taxed at 5% and 6% is assessed from $2.5 billion to $5 billion, 7% from $5 billion to $10 billion. The top rate is 8% on wealth over $10 billion. Finally, the wealth of billionaires would be cut in half over 15 years.

Finally, there would be a tax on major inheritances. These new taxes would substantially trim current concentrations of wealth.

What I propose is that the wealth tax be dedicated to reducing America's massive federal deficit - and not to adding expensive new programs such as Medicare for All. That may be unrealistic politically, but it is time to consider strategies to slash the deficit for future economic stability.

A wealth tax would have to include perhaps a 40% exit tax for all wealthy people seeking expatriation to avoid taxes, and an increase in IRS funding to research American wealth.

It is high time to tax excessive wealth.

__________________________

Copyright (c) 2019 Michael J. McManus, President of Marriage Savers and a syndicated columnist. To read past columns, go to www.ethicsandreligion.comm. Hit Search for any topic.

 

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