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My Budget Plan

By: quill67 (Diary)  |  April 9th, 2011 at 10:23 AM  | 

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While I like Ryan’s plan for solving Medicare, the main driver of future deficits, I believe my proposal is simpler and

Institute a 15% VAT. (Generates $750 billion in tax revenue) to pay for the
following:

Eliminatation of the income tax on people earning under $100K (Reduces revenue by
about $230 B)

Reduce income tax rate to 15% on incomes above 100K by eliminating exemptions and
special tax rules. Officially the top 1% pay an average of 23% however this
based upon adjusted gross income so they probably really only pay about 15%
now anyway.

Reduce the payroll tax by 7.5%. Put 7.5 % into medical savings/retirement
accounts. (Reduces tax revenue by $400 Billion)

Reduce corporate tax rate to 15% eliminating any industry specific tax rules. Now watch corporations stay in the U.S. and more choose to locate here.
(Reduces short term tax revenue by $120 billion)

Other savings:

$1 trillion since ObamaCare would no longer be needed if people have 7.5% of their salary to pay for their own healthcare.

Dramatic savings from Medicaid. Again since people will have 7.5% of their own money, they will not be taking money from state until their their Medical Savings Account is exhausted.

Families could save $300 per month compared to traditional insurance by families being able to take advantage of lower premiums of high deductable plans. (This might also solve much of the preexisting problem since insurers would know that even if they took a bad
risk client, much of the initial costs would be paid from medical savings
account)

Long term growth in health care costs should be reduced as patients start
shopping for better deals and doctors no longer have medical claims to fill
out, and hospitals do less cost shifting from people who don’t pay.

Burden of taxation should shift from away from companies producing in U.S.
because of VAT is paid regardless of country of origin.

People who hide income would still pay VAT and the lower tax rate would
encourage people to not hide as much income through tax shelters (or simply
lying)

I also like the simplicity of this idea. 15% VAT, 15% corporate, 15%
personal (above 100k) and SSN/medicare tax reduced to 7.5%. This might also
increase incentive for people to start on business. Now self-employed have
to pay entire 15.3%

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  • drewk

    There are some good things in there, but I have a couple of points.

    1) What’s to keep people from feeling the HSA’s are not just another version of the individual mandate? It’s the government essentially coordinating mandatory individual expenditures on health care, even though the money won’t actually pass through government coffers. Not sure if I’m envisioning it the way you are, but that’s just my initial reaction.

    2) I like what you’ve done to the income tax, though I think you could still include some bracketing above $100k. For instance, one bracket for income from $100k-250k, one for $250k-$1 million, and another for $1 million and up. These changes wouldn’t have to be steep, but they would introduce a little more fairness for those making in the low six figures. They could be done in a revenue neutral way to your original plan, or done to add a slight net positive to revenue.

    3) I’m a little unclear on if the plan would necessarily reduce medical costs, long term. You reference the preexisting conditions problem, but you don’t mention if there would be a ban on insurance companies turning these patients away. I think this is an important issue that needs to be addressed under any plan, and I’m not sure any market-based solution will do; there will always be a fraction of very sick people for whom insurance companies will have a disincentive to turn away.

  • quill67

    #1 Are MSAs like an individiual mandate? The big difference here is that this would not require someone to buy a product from anyone. It is simply putting aside a portion of your money for retirement that can also be used to pay for medical bills before retirement age. If Social Security is allowed to remain constitutional, then this approach should pass constitutional muster.

    #2 I understand your desire to have distinctions for peopel of different income groups, however, this is part of the problem now. We put higher tax rates on higher income levels but along with those rates we have lots of special rules (excemptions, loop-holes) that allow abuse of the system. By having only two brackets 0% for under 100K and 15% on all other income, it makes giving special favors to various groups harder to hide. Additionally, as much as I appreciate the people who earn between 100K and 150K, there are a lot of business that file under the individual income tax and allowing them to keep more of their money should enable them to grow more quickly and encourage others to start up their own business too. Finally, by keeping the rate low there will be less incentive to cheat and less tolerance for those who do cheat. For example, if one is uncertain whether a $1000 purchase is tax deductable, it might be worth having your accountant research the tax laws if it might save you $330 dollars (33% tax rate). However, if the tax rate is 15%, it might not be worth the hassle just to save $150.

    #3) You address two issues here: Prexisting conditions and how the plan saves on costs. This plan saves on costs for three reasons:

    1) Since the Medical Savings Accounts would be funded by 7% of your salary (up to current limit of appox. 110K), many more people would switch to very high deductable plans. I would not be opposed to taking the savings from canceling ObamaCare to help people get started. By the way, this would be around $6000 per worker! ($900 B divided by 150 million workers) As people started paying more of their bills with cash (MSAs are simply checking accounts that can only be used for retirement or health care), they would see how much things cost and I believe they would shop around for the best deals. This would help keep prices down as people shopped for lower prices.

    2) Right now doctors offices have to hire lots of people to fill out the paper work. A government provided plan does not reduce these costs because there would still be lots of paperwork–just going to government instead of insurance companies. Also doctors/hospitals play games with how each visit is classified( called up-coding) to try to get more money. The patient paying these bills would limit this behavior.

    3) MSAs would reduce fraud. There are estimates that Medicare, for example, loses $60 billion on fraud each year! Imagine how much more that will be if everyone gets their coverage from government. One could make false claims but it would simply be taking their own money. Ideally, I would like to see only 10-20% of all medical expenses paid by insurance companies. This would allow insurance companies to investigate and monitor to prevent up-coding and investigate possible fraud.

    On the prexisting condition issue. There is a short-term issue and a long-term issue. The short term issue is that there are currently people that now have medical conditions that make them uninsurable. But this is understandable, one can not buy fire insurance, AFTER their house has burned down. The government could provide a one-time incentive for insurance companies to take those with prexisting conditions with the requirement that they can never be dropped. This would be much easier for the companies to accept if this only applied to very high deductable plans because many times the reason the insurance company denies coverage is not because of a difference in the cost of the customer developing a major health issue but rather the prexisting conditions make a virtual certainty that the insurance company will have to pay relatively small amounts, 10s of thousands of dollars. So while these amounts are relatively small, they make providing traditional health insurance impossible. However, with a very high deductable plan since most of these smaller amounts would be paid by the MSA, the insurance company would be more inclined to take on these potential customers.

    The long-term issue comes down to this question: Why do we want people to have health insurance? There are two answers to this question. First, we don’t want them not getting the medical treatment they need. The second is that we know that they will get most of the treatment they need but these costs will simply be passed on to us through higher prices for the rest of us or through government paid services (such as county hospitals, Medicaid, etc) The MSAs help with this issue as well. If a person does not have insurance, at least the government would be able to receive some compensation from that person’s MSA. If they don’t have any money in their MSA, then it is no different than today, that person would be covered under Medicaid. Since Medicaid is paid by the states, each state would have an incentive to require catastrophic coverage. An individual mandate at the state level would obviously not infringe on U.S. constitution.

    Finally, why are so many people not buying insurance today? Because it is so expensive! While regular insurance plans over the last 5 years have increased payouts (and hence the premiums we pay) at 8% per year, high deductable plans saw 0% increase in payouts! This is why I believe my plan would reduce medical costs.

  • pcyoung

    We formulate a fiscally conservative plan consistent with basic Conservative Tenets. For example: Subsidiarity -

    1) Federal Budget – review what federally subsidized projects can be turned over to the states. Currently states such as CALIFORNIA receive 299 billion from the Federal Government. Now this is money that comes from taxpayers in California and is then returned to the state with a 25% loss. States should be able to handle local issues such as education, Transportation, Housing etc. Mandate a date when these projects will be handed over to the state and money is no longer exchanged at a huge loss. Conceivably this can account for nearly a trillion dollars a year.

    2) Future spending moratorium – pending balanced Federal Budget. – no future projects can be funded based on money that does not exist or has no visible means of support. This also entails mandating that shuffling of funds not be permitted to provide funding for projects which are not on the books and permit continued slush funding.

    3) Balanced budget amendment – Further federal acquisition of funding from states ceases until a balanced budget can be submitted to Congress for approval with a standard quorum. Special provisions for voting with this 2/3 rd straight majority are not permitted.

    4) Freeze on wage increases for all elected representatives pending the submission and approval of a balanced federal budget at which time, raises which are scheduled into the budget will begin. In this case federal lawmakers will have earned this raise. It may not exceed 5% of existing salaries and no allowances for inflation.

    5) A reduction in corporate taxes and an evolution over 5 years into a simple flat tax. This tax rate shall be lower than existing taxes sufficient to take into account payment of salaries for new hires which is only applicable to domestic corporations and mandates manufacturing facilities within the continental borders of the United States.

    6) A domestic job growth clause mandates a review of existing taxes and regulations which are punitive for corporations willing to relocate facilities domestically. Prior to this a review board consisting of non- corporate officers for a fact finding to determine necessary conditions to stimulate corporate redeployment in the states to achieve a goal of less than 5% unemployed nationally by 2020.

    7) Form a new federal office – the office of Applied science, technology and manufacturing science It shall be a central repository to attain national and statewide convergence on requirements to reeducate, retool and regain our preeminence in all areas of engineering and science. Its primary function is to maintain focus and communicate progress on national goals for education and what is needed to regain global competitiveness. This office will set goals but not dictate how these are to be achieved which will be left to each local community. Measurement will be based on review of patents, growth in specific industries and level of attraction for expertise as well as salary and percent US graduates employed.

    8) the implementation of a flat tax and prevent inclusion into new legislation for special interests or otherwise subvert the tax structure for special interests. This will assist in reducing pressures exerted on legislators to appropriate funding and make such more transparent. It would eliminate the loop holes which currently stop monies from reaching the government to assist with the deficit. Similarly it would equalize taxation for companies,

    9) All financial institutions will be subject to anti trust and conflict of interest requirements precluding access to funding or manipulation of interest rates- federal reserve rates and or any treasury related functions of the government and these offices shall be subjected to over sight committees each and every year. Setting up a regulatory agency similar to the SEC for stocks. to monitor manipulation and fraud, misrepresentation. This oversight committee will be composed of elected officials which will be selected each new year for a term of no more than one year.

    These are some of the ideas that I am putting forth as a first cut to tackle fiscal issues facing this nation while working on rebuilding our country economically.

    Your feedback would be appreciated. I hope that an agenda similar to these points can become part of a unified Conservative party. We consolidate and subject our actions to a committee composed of the most trusted conservatives with the highest credibility to review for consistency with Conservative Principles and Tenets
    It has long been my position that we , as Conservatives, in our zeal and or haste, may not review our positions or statements for compliance with our own tenets and principles.
    One we establish this committee we can then work on generating a 10 year plan based on similar to those points I have raised above.

    Thank you very much for your time and consideration.

  • quill67

    #1 Great Idea and something on which Reagan put emphasis. Give power back to states. They have to live within their budgets and are most responsive to needs of their people.

    #2 Not bad, but perhaps allow them to cut existing programs to pay for new one. I would love to see Dems fighting amonst themselves.

    #3 Balanced budget ammendments make me nervous because the budget can be balanced (in short run) by raising taxes or if the economy temporarily grows during a bubble. I prefer limits on new spending but lots of people support balanced budget ammendment. Perhaps an ammendment that requires defense spending bills be approved before any other spending with a separate vote.

    #4 Not bad, but would mean little to limousine liberals (think Kennedy, Pelosi, etc) who would then claim they are being selfless to “represent the poor”

    #5. I’ve toyed with this type of idea, but would be hard to administer and potentially dangerous. What about a company that doesn’t hire American workers directly but buys products made by Americans. If you only allow special tax break for salaries of their own workers it may lead to the merging of many companies–reducing competition and driving up prices which may cause the public to demand government regulations! This is the advantage of value added tax. It taxes foreign companies as well as domestic and since the 15% VAT would be the same as Europe there would be no incentive for a company to shift costs from one country to another to avoid taxes.

    #6 Great idea and one which I have been considering BUT with one important condition. These would not be specialized tax breaks or changes in regulations for these select companies. They would apply to every person/company equally and if they can’t then it should not be done. No laws that some have to follow but not others. We are a constitutional government (or should be) and laws should apply equally.

    #7 Disagree. Understand concept, but companies would use this as a platform to gain more government spending. Besides, lower corporate tax rates to 15% and reduce over-regulation and you won’t have to form committtees to get reinvestment, they will come on their own. Point #6 should be enough to drive development.

    #8 This is basically, the idea I described except that mine is a combination of a consumption/corporate VAT tax and a flat tax with the first 100K untaxed.

    #9 Disagree but the Dems would love that one because it would give lots of power to the government. Prior to the Federal Reserve, banks formed what were called Clearinghouse Associations (because these institutions were originally formed to allow the “clearing” of checks due from one bank to another) Anyway, these associations expanded into organizations that would agree to help fellow banks in need should they suffer unexpected withdraws. The beauty of it is that because they were obligated to lend to their fellow members, they established a standard set of rules to make sure they did not make crazy loans (think lending money to people who could not pay it back and who put nothing down) It was self-regulating. No need for government officials and banks did not make crazy loans for fear of getting kicked out of organization.

    Not a bad list. Thanks for your ideas.