This is super naive. For much of the past decade, congress could have removed the entire discretionary budget (yes, including the military) and still had a deficit.
The deficit is driven by social security, medicare, and medicaid. If you want to balance the budget, you have to reform those.
> For much of the past decade, congress could have removed the entire discretionary budget (yes, including the military) and still had a deficit.
Two fiscal years in the past decade (2010 and 2011) had deficit exceeding discretionary spending. That's not "much of the past decade". (The highest deficit was in 2009, but discretionary spending was actually higher.)
> The deficit is driven by social security, medicare, and medicaid. If you want to balance the budget, you have to reform those.
The deficit is driven by a shortfall of revenue vs. spending. Even if your portrayal of the spending side was accurate, ignoring the revenue side is not. If you want to balance the budget [0], you probably shouldn't ignore one side of the balance.
[0] The question of whether you should want to is one which is rarely addressed directly, merely assumed.
> Or increase taxes? Social security taxation is limited to the first ~$120K of someone's income. Why?
The theory, I believe, is that this is tied to the maximum amount of income that is counted in the benefits formula for SS. OTOH, there's no reason you couldn't count more income toward benefits (there's already at least one bend point where the amount of benefits for each additional dollar of lifetime qualifying income/contributions is reduced, so if you are concerned with the distribution of benefits if more income is counted, you could also add additional bend points.)
If you wanted to go further, you could include personal capital income (perhaps with some limit, or perhaps open ended, with additional bend points, as necessary, as discussed above for increasing/removing the limit on labor income) as SS taxable (and in SS benefit calculations). Given that at least some capital returns are a result of active personal management that can become less practical with age or disability for the same reason that labor can, it makes as much sense to preserve a safety-net retirement for those retiring from such active management as for those retiring from wage labor.
Because taxing those people won't solve the real issue? I pay more in taxes every year on my income than many millionaires do because my income is primarily salary instead of stocks, etc.
120k may seem like a lot, but it isn't in several parts of the US now (e.g
SF Bay Area, New York).
> Because taxing those people won't solve the real issue? I pay more in taxes every year on my income than many millionaires do because my income is primarily salary instead of stocks, etc.
Taxing capital income like other income is another possible solution.
Yes. The shareholders are rent-seeking. They should be taxed as if it was normal income. They don't provide an real value to the company, its output or consumers. For the most part, they are a determent to all outside themselves (specifically their holdings).
Shareholders do not provide value. They provide a 1 time infusion of cash in exchange for a future return of either increased value of their stock or dividends. They only infuse cash when the stocks are released either at IPO or later offering of new stock.
The reason stocks are sold is due to cost of capital. A company can make money in a few ways. First is they make a product or service and receive money from customers. Second, they can IPO or some other form of shareholder investments. Third they could finance their needs either with a direct loan or through bond issuance.
Now, most bonds are considered junk if they are from a small company, especially one where people are working out of their garage. This means the debt has a rather high rate (because people think you're going to default). So now you've got to find a buyer (requires middlemen and their costs) that's will to bet on you. Good luck (no seriously I'd prefer this over opening my company to an IPO).
Bank financing is hard to get for pretty much the same reason that bonds are junk. Unless you can show positive cash flow for a few years (you know with your just formed startup and a dream), you probably not going to get a loan. It is due to this that often people, including Elon Musk, self-debt finance via credit cards. Again, ridiculously expensive lending terms.
Let's say you are making money. That's great, you're in the top 40% of startups. You are now constrained by the amount of money you make. If you make 100k a year, but need 1mil to bring a new product to market, we'll see you in 10 years (probably more like 13 with taxes removed over those years).
This brings us to stocks. Find people that are a) suckers, b) chumps or, and good luck o' bearer of dreams, c) actual believers in your product/service. They buy at the IPO price. Your company gets a percentage because the financial house that offered your stock takes a chunk. VCs might cash out after their sale moratorium ends. But after all of this you have a pile of money. That 1mil product is probably doable now. So is an office complex with open floors, and a coffee machine and free lunches and a dog kennel for when your employees just need to feel something that proves they're alive.
You also have an asset to back bonds. So you can, after a small period of time, issue bonds.
At no point did the shareholders add a penny in value to your product directly. They are just there hoping to the FSM that they can leave your stock at some point with a gain. They DO GET TO BITCH. They can have you legally removed from your own company because you have a long view that says in 10 years doing X, Y, Z will increase this companies value 100 fold, but it won't help (probably will hurt) the next 3 quarters.
As a stock holder I can say this about other stock holders. Fuck'em. They get 10-50% return for literally parking their money. As they have more capital related income, they should be taxed as income (outside of reasonably tax-protected vehicles like retirement plans).
> As a stock holder I can say this about other stock holders. Fuck'em. They get 10-50% return for literally parking their money. As they have more capital related income, they should be taxed as income (outside of reasonably tax-protected vehicles like retirement plans).
Word. As a TSLA stockholder with >10K shares, I couldn't care less if it went to 0. It was a gamble, and only because I believed in what Elon was trying to do.
> 120k may seem like a lot, but it isn't in several parts of the US now (e.g SF Bay Area, New York).
And national tax policy shouldn't be dictated by ~2 major urban metros.
I agree that tax policy needs to encompass more than just the salary of the working class, but let's not joke ourselves. Medicare already taxes your entire wage base, there's no reason Social Security shouldn't.
We keep kicking the can down the road, and its time to own up to the liabilities we've created.
>We keep kicking the can down the road, and its time to own up to the liabilities we've created.
I'm afraid it's quite impossible to 'own up' to those liabilities. Look at the debt clock:
http://www.usdebtclock.org/
The GAAP liabilities of USG amount to $100 trillion, yet the net assets of the entire US are only $116 trillion. Nearly all of the assets in the entire country would need to be sold to pay for the liability to be incurred.
I'm afraid the only solution is to reduce benefits, primarily reducing social security payments (particularly when most of the boomers are drawing on them) and cutting medical spending - probably by instituting controls on what the government will pay for in terms of end-of-life care.
> Or increase taxes? Social security taxation is limited to the first ~$120K of someone's income. Why?
Because social security is billed as a retirement scheme, not a wealth transfer scheme. The idea being that you get back out approximately what you get in.
Since benefits are capped, payments necessarily are. If you want to change social security into an explicit wealth transfer scheme, expect heavy resistance.
> Since benefits are capped, payments necessarily are. If you want to change social security into an explicit wealth transfer scheme, expect heavy resistance.
Increasing taxes and redistribution for "quality of life" necessarily decreases savings and investment. investment is where long term quality of life is determined.
The deficit is driven by social security, medicare, and medicaid. If you want to balance the budget, you have to reform those.