Embed Doc
Copy Link
Readcast
Collections

CommentGo Back

Download

The Road Less Traveled: An Independent Path to Balance the Budget

Senator Marshall Wagner March 2011

Sen. Marshall Wagner | March 2011

1. The President's Proposal

In 2009, our national debt was $9.3 trillion. Now, in 2011, we are looking at a possiblenational debt of $12.4 trillion – a 33% increase in only two years under PresidentCampbell. The FY2010 budget deficit of $874 billion set a record for largest deficit inU.S. History. Sadly enough, though, the FY2011 budget proposal more than doubles thisdeficit. A $2 trillion deficit is practically unfathomable – the first trillion-dollar deficit inUS history, equal to more than 13% of GDP. To put this in perspective, this is abouttwice the highest mark since World War II.The path to trillion-dollar deficits is five-fold:1. In the previous session of Congress, President Campbell and Congress passed amassive $750 billion bailout of the financial industry - the largest corporate handout inhistory.2. President Campbell and Congress also supported a $470 billion raid of the SocialSecurity and Medicare trust funds – never minding the fact that Medicare was alreadygoing to start running deficits by 2017 anyway.3. The President and Congress have continued massive debt-funded defense budgets -$718 billion for the Department of Defense in FY2010 alone, and $672 billion for Defense and Homeland Security combined in FY2011. These two departments nowaccount for over 60% of discretionary spending in Campbell's FY2011 proposal, andtotals almost as much defense spending as the rest of the world

combined

.4. No major attempts have been made to reduce spending or increase revenue to offsetthese three initiatives.5. While President Campbell and Congress have undertaken these initiatives, the recenteconomic downturn has ensured an appreciable drop in federal revenue.These are the four factors to blame for the sudden explosion in deficits under PresidentCampbell. Clearly, this path is not sustainable; too many more trillion-dollar deficits, andwe risk bankrupting our seniors, our country, and our children.The purpose of this document is to reverse course, to declare that

the era of borrow-and-spend is over

. We seek not to balance the budget at some point in the future - fiveyears, ten years, etc. - but

now

. By tackling the tax code, health care reform, pork,corporate welfare, and other wasteful government spending, we can turn this deficit into asurplus.

Sen. Marshall Wagner | March 2011

2. Overhauling the IRS Tax Code

Our tax code is a mess. Over seven million words long, it's twice as long as the Bible,and most of that text consists of loopholes – exclusions, deductions, write-offs, creditsand tax expenditures. The result is that a small sliver enjoys massive tax benefits, whileworking families suffer. As an illustration, here is a chart showing the average tax break per person enjoyed by each tax bracket as of 2007:For perspective, bear in mind that the federal poverty threshold for a family of four is$20,000, less than the average tax break for the 33% bracket. Even more startling,however, is the tax break for the 35% bracket - $111,671 a year, more than the annualincome for 85% of all households.Granted, marginal rates have risen on higher brackets in recent years. However, this hasdone nothing to curb the massive tax breaks enjoyed by the top two brackets. As we cansee, we need to overhaul our tax code so that we can enjoy

lower rates for all, andspecial preferences for none

.Recommended Reforms:1. Tax adjusted gross income. This will allow us to eliminate the federal income tax for individuals making less than $50,000 a year and for couples making less than $100,000 ayear – effectively eliminating the two bottom brackets. We can also lower the remainingmarginal rates down to 10%, 20%, 33%, and 36%.2. Create a Family Tax Credit of $5,000 per household, plus $2,000 per person. Doingthis will cut the poverty rate down to less than 6%, the lowest rate in American history.3. Simplify the business tax code. As with personal income, this step will eliminatespecial loopholes and tax breaks, allowing us to lower the top marginal rate down to30%; we will also be able to cut the top marginal rate on small businesses from 38%down to 20%.4. Replace FICA with a 0.17% transaction tax, to be levied on both the sender and therecipient. This will replace the regressive 7.65% payroll tax on employer and employee,and will actually make up for most of the Social Security and Medicare shortfalls.

Sen. Marshall Wagner | March 2011