Contours of a deal?

by Idéfix Mon Nov 26, 2012 7:22 pm

The fiscal cliff negotiations are entering an interesting phase. It is no longer just Senate Republicans, but also Tea Party favorites like Eric Cantor who are now distancing themselves from the Grover Norquist pledge. Perhaps the GOP will come to the table with some new revenues. The pressure will be high on Obama to "give" on so-called entitlement reform in return for the GOP's flexibility on taxes. My preference is that such a deal be done, provided the Bush tax cuts for the rich are allowed to expire. I would personally prefer that the cut-off income for Bush tax cut extension be $1 million a year, but I am fine if they go ahead and keep it at $250k as originally proposed.

What I would like to see in such a deal:

Extend Bush tax cuts only for people making under $1 million (or $250k) a year
Legislate Buffett rule to ensure people like Mitt Romney don't pay less than half my tax rate (e.g. 30% on all income between $1 million and $10 million regardless of source, 35% on income above that)
Increase retirement age for future social security payments / medicare coverage
Reform corporate tax code to close loopholes
Cap deductions on mortgage interest
Reduce defense expenditures to post-Cold War levels before the Bush wars

What do you want to see? What do you think the final deal will look like?

by MaxEntropy_Man Mon Nov 26, 2012 7:28 pm

whatever you wrote, but instead of capping deductions on mortgage interest, treat capital gains as ordinary income and in return consider ratcheting down corporate taxes to zero.

by Idéfix Mon Nov 26, 2012 7:41 pm

I like the idea of treating capital gains as ordinary income. But my suspicion is that Wall Street lobbyists won't let through any deal that contains that provision. That would basically upset private equity too much, and they have a strong influence on both parties. Mortgage interest cap may be easier to pass, although not as elegant IMO.

I think there ought to be some corporate income tax -- not 35%, but not 0% either.

by MaxEntropy_Man Mon Nov 26, 2012 7:44 pm

the actual numbers can be worked out, but the cap gains rate protectors always cry about double taxation. hence the suggestion of ratcheting down corporate taxes. then there is no cause for whining and hopefully some of the corporate capital held outside the US can be brought back in thus spurring investments in US businesses and job growth.

by MaxEntropy_Man Mon Nov 26, 2012 7:46 pm

in any case i am loving watching grover norquist getting his teeth kicked.

by MaxEntropy_Man Mon Nov 26, 2012 7:49 pm

is the woman in this video jon huntsman's daughter?

http://www.huffingtonpost.com/2012/11/26/republicans-grover-norquist_n_2193785.html

mamma mia!

by Idéfix Mon Nov 26, 2012 7:59 pm

MaxEntropy_Man wrote:the actual numbers can be worked out, but the cap gains rate protectors always cry about double taxation. hence the suggestion of ratcheting down corporate taxes. then there is no cause for whining and hopefully some of the corporate capital held outside the US can be brought back in thus spurring investments in US businesses and job growth.

I see your point about double taxation, and bringing corporate taxes to zero in return for treating capital gains as ordinary income would be a good compromise. I don't think they will take it though, given that many companies are already paying a lot lower than their supposed corporate tax rate, while investors do benefit from low capital gains rates.

by truthbetold Mon Nov 26, 2012 10:26 pm

Neither side is averse to spending money on its pet philosophies.
Experts are talking about a 17 to 24 percent of GDP as a requirement to run USA. My understanding is that we are at the low end of revenue spectrum. We need some tax revenue to bounce back to a normal economy.
But dems have a habit of distributing money that we do not have. I prefer not to give dems money and force them to rein in expenditures.
Defense is an opportunity but shoving major cuts on defense while allowing Medicare and other budgets go bonkers is the most unproductive use of capital.
Entitlements should be cut down to an agreed percentage of revenues and barrowing to support such expenditure should be curtailed. If USA does not learn to control its entitlements expenditure it's future is bleak.

by Idéfix Mon Nov 26, 2012 10:39 pm

truthbetold wrote:Neither side is averse to spending money on its pet philosophies.
Experts are talking about a 17 to 24 percent of GDP as a requirement to run USA. My understanding is that we are at the low end of revenue spectrum. We need some tax revenue to bounce back to a normal economy.
But dems have a habit of distributing money that we do not have. I prefer not to give dems money and force them to rein in expenditures.
Defense is an opportunity but shoving major cuts on defense while allowing Medicare and other budgets go bonkers is the most unproductive use of capital.
Entitlements should be cut down to an agreed percentage of revenues and barrowing to support such expenditure should be curtailed. If USA does not learn to control its entitlements expenditure it's future is bleak.

I agree fixing social security and medicare is important, but it has to be accompanied by changes to the tax code that make it impossible for people making millions to pay 14% in effective tax rate. There is, however, a caveat around fixing social spending at a percentage of revenues right away. In bad economic times, tax revenues plummet (because the federal revenues depend a lot on income and payroll taxes both which fall in recessions). At the same time, the need for government to undertake social spending -- e.g. unemployment benefits that has a positive impact on getting the economy back on track -- increases. This is why I think any deal should include some trigger provisions on the spending side -- i.e. spending to be reduced as and when employment and GDP growth reaches and sustains above predetermined threshold levels, and a two-thirds majority in both houses required to override those future cuts/thresholds.

I know lots of people on the left will be up in arms about touching so-called entitlements, but Obama has an opportunity to do something bold and long-term. If he accomplishes that, passes immigration reform, and moves to implementing Dodd-Frank including the Volcker rule, I will consider his second term a success.

by Idéfix Mon Nov 26, 2012 10:43 pm

MaxEntropy_Man wrote:is the woman in this video jon huntsman's daughter?

http://www.huffingtonpost.com/2012/11/26/republicans-grover-norquist_n_2193785.html

mamma mia!

Yeah, it is fun to see Republicans running away from Norquist. It looks like it is Jon Huntsman's daughter: http://en.wikipedia.org/wiki/Abby_Huntsman.

by MaxEntropy_Man Tue Nov 27, 2012 10:02 pm

the wiki page mysteriously disappeared. in any case, hubba-hubba!

by truthbetold Tue Nov 27, 2012 10:33 pm

Wiki page is still there. Above link was not correct.

by truthbetold Tue Nov 27, 2012 10:48 pm

PP,
Repu licans are boxed in by their own idealogical propaganda. Their servitude to corporate interests and fear of tea party activists proved highly regressive influence. They want to wiggle out of democratic electoral victory aftermath. They are not sincere in their effort.
obama has to rise to the occassion and find a solution to deficits.

by Petrichor Wed Nov 28, 2012 12:21 am

http://www.washingtonpost.com/blogs/wonkblog/wp/2012/11/27/absolutely-everything-you-need-to-know-about-the-fiscal-cliff-in-one-faq/

by Idéfix Wed Nov 28, 2012 12:23 am

truthbetold wrote:Wiki page is still there. Above link was not correct.

Yes, this is the correct link: http://en.wikipedia.org/wiki/Abby_Huntsman

by Idéfix Wed Nov 28, 2012 4:55 pm

Politico reports that Obama is "supremely confident" he can get the GOP to come around on raising rates for the top 2%.

http://www.politico.com/news/stories/1112/84333.html?hp=t1_3

Business executives and others who’ve met with President Barack Obama in recent days describe a president who’s supremely confident that he’ll come out on top of a fiscal cliff deal — with Republicans bending to his will on tax increases for the wealthy and Democrats sucking up deep spending cuts.

These people say Obama is dismissive of the idea that deduction limitations and loophole closings alone are a sufficient or even desirable way to achieve the $1 trillion or more in new revenue he is seeking. And they say the president believes his relentless public campaign — which continued Wednesday and hits the road on Friday — along with widespread support in polls for letting the top George W. Bush-era rate cuts expire will overwhelm any remaining GOP resistance.

Meanwhile, GOP divisions on the topic are becoming more visible: http://www.cnn.com/2012/11/28/politics/fiscal-cliff/index.html

by Petrichor Wed Nov 28, 2012 5:23 pm

I am looking for these magic words:

500K or 1 M limit, Dividends!, Cap Gains!, Carried Interest!!, Deductions Cap @ 50K

by Idéfix Thu Nov 29, 2012 9:18 am

atcg wrote:I am looking for these magic words:

500K or 1 M limit, Dividends!, Cap Gains!, Carried Interest!!, Deductions Cap @ 50K

This Politico article about the emerging contours of the deal has most of that: http://www.politico.com/story/2012/11/84364.html?hp=t1

Per this writer, a deal will go through with a 250K limit, and increases in rates for capital gains, dividends and carried interest.

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