Tax Reform

The GOP Federal Budget proposal calls for tax code reform and includes a maximum 25% tax rate. This sounds good but what else is included?

Most ardent tax reform advocates want just about all deductions and credits to be eliminated. That includes deductions for dependents, the mortgage, and piles of other deductions and credits. In return we should receive a simple tax code where the average person could do their own tax return.

There is little or no chance we will see this type of brave reform but its intriguing to think about its possibility and implications.

Lowering the marginal rate from 39.5% to 25, however, begs the question “will this mean Christmas will be every day?”

Representative Ryan says everyone will see lower tax bills. This may be true but Ryan’s plan is beginning to sound like the “free lunch” ploy. How can everyone be saving on taxes? The only answer must be that under the GOP plan, the Government will be spending a lot less.

This means there will be a lot less government services. This further means that if the services are important, someone else (State, City or Individual) must now bear the cost. In other words, the cost for these services will be transferred to others.

The GOP plan for healthcare involves repealing the Affordable Care Act. While their exact “replace” plan is not set, most of the proposals lead to “you are on your own”. The GOP claim that the marketplace is the best strategy to gain control of health care costs. Hmmm.

Let’s consider Medicare and Medicaid which are designed to provide healthcare security for the elderly and those who cannot afford the cost of premiums. For Medicare the GOP plan would freeze the amount the Government pays. Recipients would then buy their own coverage and pay what ever difference there may be between the government subsidy and the actual market price. Most observers predict this to be an ever increasing amount. Maybe not so much security in the future.

Medicaid recipients could see even more drastic cuts in coverage and increases in cost, depending upon the State they reside in. The GOP proposes outsourcing health care to States. Block grants which are not indexed to inflation will similarly be insufficient when faced with inflation. Medicaid roles will shrink leaving many uninsured, and those who qualify for coverage could face co-pays and deductibles.

The GOP predicts this greater use of the marketplace, however, will lead to lower overall healthcare costs. Hmmm. No ACA and less coverage for the elderly and poor seem ready made for discontinuing efforts on preventive care and a return to the healthcare world pre-ACA.

If so, we should expect that healthcare costs will return to double digit annual increases. In turn this will increase the out of pocket costs for everyone. If you are on a fix income, what do you expect someone to do?

For sure this potential scenario must have been considered by the GOP. Why have they continued to push the plan? It would appear that conservatives have decided that their best strategies are ones which are the opposite of those proposed by moderates or progressives. For sure this approach is the most straight forward if your goal is to differentiate your position and you believe the electorate is gullible.

The most generous explanation is that the GOP, once elected, will modify their proposals. Trust me?

The current American deficit and debt situations are unsustainable. It should be clear that any plan to remedy deficits will require less spending or more taxes or some combination. Our goal should not be to lower income taxes but rather to determine what services are best provided by government (Federal, State, and Local) and seek to provide them in the most cost effective, high quality manner. If that leads to lower government need for tax revenue, then taxes should be reduced.

Shame on Democrats for not having any viable proposals to maintain current entitlements and to balance the budget. Double shame on the GOP for proposing a path which is patently unfair to those who need government services.

Explore posts in the same categories: Barack Obama, Democratic Party, Politics, Republican Party

Tags: congress, debt, deficit, gop, Healthcare, healthcare cost, medicare, paul ryan

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