Tuesday, May 17, 2011

Tax the middle class!

Are you there, PBM and PL?

1 comment:

Patrick_L said...

he later wrote a follow-up article, which also includes some good points

And yes, I think all the Bush tax cuts should expire. From that level, we should do revenue-neutral tax reform that broadens the base and lower the rates. However, since letting all of the Bush tax cuts expire is significantly greater source of revenues than anyone is currently pushing- we can use those reveneus to permanently offset/fix the AMT. Funds could also be used to offset any revenue losses from the corporate sector if that's what it takes to lower the corporate rate to match the new, highest-individual rate. The remaining increase in revenues should be used for deficit reduction, combined with about $2 trillion in spending cuts from discretionary and mandatory programs over the next decade. This all should be backed by the BPC's SAVEGO proposal or something similar- which would prevent backsliding and actually force Congress to be proactive. There should be additional enforcement mechanisms on Social Security, Medicare, and Medicaid. Social Security should be reformed by 2013 or 2015 (far enough away from a major election so that neither party runs the risk of blowing themselves up tackling the rail). Since SS reform is so easy, the enforcement mechanism for this can be unusually harsh becuas the point is to just force Congress to make the politically-difficult, policy-easy decisions (raise cap on taxable income to match original 90% level, chain adjust-CPI, and one or two other reforms- that's all it takes to close the SS 75-year shortfall).
On Medicare & Medicaid, their growth should be capped to GDP+1 for first five years, and then GDP+.05 afterwards (all terms defined in per-beneficiary growth rates, to compensate for demographic changes). This is similar to Obama's standard- and is quite tough to achieve, especially considering health care is probably a superiorior good so it should grow faster than GDP. This growth control should be matched by stringent enforcement mechanisms. Conservatives should take confidence in that they don't think ACA will work, so the goal won't be achieved so the enforcement mechanism will kick in. Since the enforcement mechanism is designed to be imperfect, this will create the incentive to further structurally reform the systems (particularly Medicare). This will create the political pressure to move to some form of premium-support or modified Medicare system, which many liberal policy analysts (like Henry Aaron and Bob Reischauer)have some sympathy for- though they are far more modified than Ryan's ridiculous approach which simply shifts costs and does nothing to control them.