Category Archives: tax related issues

the cost of our system

Should taxpayers be concerned by our National Debt?

Broken in the USA, Finance, Government Issues, tax related issues

Chapter 57 Should taxpayers be concerned by our National Debt?

I think this is an important question. Let’s review some of the facts as of August 2017 and you can decide for yourself:

The national debts stands at just a fraction below $20 trillion which equates to almost $166,000 per taxpayer.

The projected deficit is near $700 Billion and is currently accelerating behind that number at rate of $200,000 per minute.

Look at the major budget elements, they are changing at the following rates:

Medicare & Medicaid:  increasing at the rate of $70,000 per minute

Social Security: increasing at the rate of $49,000 per minute

War & Defense: increasing at the rate of $48,000 per minute

Interest on the debt: increasing at the rate of $57,000 per minute

Income Security (Welfare & Disability): decreasing at the rate of $15,000 per minute

Federal Pensions: decreasing at the rate of $9,000 per minute.

Of even more concern is the amount of unfunded liability

The current overall level of future debt that is not supported by funding stands at over $107 trillion which equates to over $888,000 per taxpayer! It is increasing at a rate of almost $8,000,000 per minute!

Of this the major contributor is again Medicare & Medicaid. It, along with Social Security, are growing at the fastest rates.

Source: http://www.usdebtclock.org/

Polarization & Control

Broken in the USA, Education, Health Care, tax related issues

Chapter 56 Polarization & Control

Having friends that lean politically both to the right I find it interesting that both groups tend to enjoy discussing the “opposition”. One comment that I often hear from both positions is “I know they have some very intelligent folks in their group, so why are they so dense on………..”

I find that this sort of political discussion tends to dominate our morning coffee group which, politically, leans dominantly to the right. I also belong to a few left leaning community action groups where I have had similar experiences.

In my opinion, the animus between these groups has increased significantly over the past few decades. My theory is that our elected leaders encourage this polarization to their benefit. If they can keep the electorate fighting among themselves on relatively minor issues they are free to ignore the critical issues facing our country. The sad fact is that they do not have viable solutions to our major challenges (or at least are not willing to face the consequences of suggesting certain actions).

Our most daunting issue is the budget deficit and the national debt. Related to this is the country’s “unfunded liability” which is approaching $101 Trillion! The most significant contributor to this problem is the cost of health care. Several of my early posts have described in detail this issue and workable solutions. However, the solutions will not be in the financial best interests of several special interest groups; insurance and drug companies included. Regardless of your political leaning, as a tax payer, you should be concerned that our cost of health care per person is almost 3x that of several European countries that are providing a higher level of care.

My point is that there many issues on which both sides of the political discussion can find agreement and many of these are significant items. In my opinion, we need to resist the temptation to fight among ourselves. We need to take back the power from the D.C gang and solve our problems. We need to force them to leave by the rules that they make and this may take an amendment to our Constitution. The imaginary amendment 28 was not a bad idea of how we, the people, could take back some power.

My plea is for us to band together as patriots with a goal to improve our nation for future generations. If we continue down the current path of derision I sincerely fear for my grandchildren and their progeny.

Tax & Spend vs. Reducing Taxes

Broken in the USA, Finance, tax related issues

Chapter 67 Tax & Spend vs. Reducing Taxes
I think few of us would argue against tax reform that results in a much less complicated tax and less costly tax return process. However, tax reform usually involves political motives.
Past arguments regarding the role of taxation in stimulating the economy have been primarily two sided. A left leaning side argues for increasing taxes and using the proceeds to create jobs (as if we can trust our government to manage these funds), while a position to the right argues for a reduction in taxes. This will free up funds for investment which result in a stimulus to growth, employment and expansion of the tax base. Unfortunately, both of these tend to be politically motivated solutions that are focused on tax revenues and neither are especially effective in balancing the budget.
One additional factor is an expectation that our economy has the potential to return to the historical rates of the latter half of the 20th century (average of 4 -5 % in “real GDP” growth). Consider the rate of “real” growth for the past 17 years at just over 2 %. At best, we should not be planning on real growth rates much in excess of 2%. The good news is that slow growth can provide a more stable economic base while keeping inflation in check. Also, keep in mind that this rate has been further supported by artificially low interest rates. It should be apparent that we will not be able to “grow” the economy out of our financial dilemma. If we are serious about achieving financial stability the obvious focus ought to be on spending reductions.
So what can be done in this area. Here are a few suggestions:
The initial challenge is to require a budget that is close to being balanced. That is the deficit, if any, cannot exceed a rate in excess of the prior year’s rate of price inflation. Any Congress that fails to pass this form of a balanced budget would not be allowed to stand for re-election. The annualized budget deficit, 9 months into a republican controlled government (both administration & congress) is running at almost $700 million and accelerating. A private auditing firm would be contracted to audit all governmental administrative functions with a stated goal of improving any audited area’s productivity by a minimum of 10%. Documented adjustment recommendations would be binding and the audit would be funded out of savings. Since this process might well take many years or even a decade the process needs to be binding on all future administrations. Civil service wages need to be frozen at current levels and need to stay that way until they equate to levels for comparable positions in the private sector. Future incremental spending for new projects needs to be funded out of savings achieved through cost containment, but only after a balanced budget is achieved.
Quit making disability payments blindly. I am not opposed to assisting disabled persons, especially those that have been injured in service to their country. What we all know is that many folks who receive this payment are still able to perform productive tasks. Let’s require all, but the severely disabled, to perform some productive task either in service to the country or, in certain cases to industry (where they would actually make the payment), to qualify to receive these payments. Using this method, we could probably save 1/3 or more of this cost. The same review and requirement needs to apply to all income security areas including welfare.
Tax deductions need to be limited to two children.
We cannot afford to be the “cop” for the world. Bring our boys and girls home, especially those in harm’s way.
And finally, abandon our broken healthcare system in favor of a single payer system that will provide a higher level of care at half the cost. Examples would be those in France & Italy.
er 67 Tax & Spend vs. Reducing Taxes
I think few of us would argue against tax reform that results in a much less complicated tax and less costly tax return process. However, tax reform usually involves political motives.
Past arguments regarding the role of taxation in stimulating the economy have been primarily two sided. A left leaning side argues for increasing taxes and using the proceeds to create jobs (as if we can trust our government to manage these funds), while a position to the right argues for a reduction in taxes. This will free up funds for investment which result in a stimulus to growth, employment and expansion of the tax base. Unfortunately, both of these tend to be politically motivated solutions that are focused on tax revenues and neither are especially effective in balancing the budget.
One additional factor is an expectation that our economy has the potential to return to the historical rates of the latter half of the 20th century (average of 4 -5 % in “real GDP” growth). Consider the rate of “real” growth for the past 17 years at just over 2 %. At best, we should not be planning on real growth rates much in excess of 2%. The good news is that slow growth can provide a more stable economic base while keeping inflation in check. Also, keep in mind that this rate has been further supported by artificially low interest rates. It should be apparent that we will not be able to “grow” the economy out of our financial dilemma. If we are serious about achieving financial stability the obvious focus ought to be on spending reductions.
So what can be done in this area. Here are a few suggestions:
The initial challenge is to require a budget that is close to being balanced. That is the deficit, if any, cannot exceed a rate in excess of the prior year’s rate of price inflation. Any Congress that fails to pass this form of a balanced budget would not be allowed to stand for re-election. The annualized budget deficit, 9 months into a republican controlled government (both administration & congress) is running at almost $700 million and accelerating. A private auditing firm would be contracted to audit all governmental administrative functions with a stated goal of improving any audited area’s productivity by a minimum of 10%. Documented adjustment recommendations would be binding and the audit would be funded out of savings. Since this process might well take many years or even a decade the process needs to be binding on all future administrations. Civil service wages need to be frozen at current levels and need to stay that way until they equate to levels for comparable positions in the private sector. Future incremental spending for new projects needs to be funded out of savings achieved through cost containment, but only after a balanced budget is achieved.
Quit making disability payments blindly. I am not opposed to assisting disabled persons, especially those that have been injured in service to their country. What we all know is that many folks who receive this payment are still able to perform productive tasks. Let’s require all, but the severely disabled, to perform some productive task either in service to the country or, in certain cases to industry (where they would actually make the payment), to qualify to receive these payments. Using this method, we could probably save 1/3 or more of this cost. The same review and requirement needs to apply to all income security areas including welfare.
Tax deductions need to be limited to two children.
We cannot afford to be the “cop” for the world. Bring our boys and girls home, especially those in harm’s way.
And finally, abandon our broken healthcare system in favor of a single payer system that will provide a higher level of care at half the cost. Examples would be those in France & Italy.