Category Archives: Federal Budget

Income Taxes

According to a recent article in CNNMoney, ‘a little more than 43% of U.S. households — or 70 Million homes will end up owing no federal income taxes for 2013.”  Of these households, 67% have incomes of below $30,000.  23 millions households pay nothing to the Federal government, when you consider payroll taxes to support Medicare and Social Security.

These statistics highlight a couple of problems that needs to be addressed.  First, approximately 33% of households with incomes over $30,000 pay NO Federal taxes.  This is due to, too many exemptions, exclusions, credits and deductions.  The Federal debt and deficit are too large and the need in America is too urgent for this to continue.  I am not advocating higher rates, just that everyone should pay something, every year, regardless of who they are of what they have.

Our Legislative brand looks at each “special” tax break in a silo, in many cases ignoring the compounding of these breaks.  Households can and do take multiple breaks to minimize their tax liability.  The Legislative branch needs to consider the bigger picture and how these combined breaks impact households.  The Legislative branch needs to take support the view that ‘everyone’ pays someone (with perhaps the exception of the elderly and disabled).

Additionally, there needs to be either a “cap or ceiling” on deductions taken each year.  This cap should be a percentage, thereby making sure that everyone pays something.  So that taxpayers do not feel like they are being shortchanged, I would allow the “excess” tax break to be rolled forward for 3-5 years.  Thereby, bringing in more tax revenue while at the same time, not ‘taking’ away anything from taxpayers.

Another option is to create a minimum tax that everyone pays, a floor.  It can be something modest, to pay for the military, national parks, food inspectors, and etc.  For example, every household in the U.S. must  pay a minimum of $500 in taxes.  You might exempt the elderly and those with a disability.  The idea being that everyone pays something.

There will be those who say that the poor would be paying a higher percentage of their income than those at the higher income brackets.  In an ideal world, you would incorporate both the ideas.  Put a cap on tax breaks, combined with a minimum tax that everyone pays.  This will bring in more revenue and be must fairer to everyone.

The second issue that these statistics highlight is there are far far too many households in the U.S. making below $30000 a year.  Too many families are having to support themselves on an income with no room for savings, emergencies or the extras that make for a good life.  Higher quality, higher paying jobs is the solution for this.  Some might believe that businesses should be ‘forced’ to pay more, I don’t think that is the solution.  A thriving economy and manufacturing jobs would help.  If this were to be improved, the Federal government would also bring in more revenue.

The U.S. can’t ignore these statistics any longer, something needs to be done.  The Congress and the President needs to take action.

 

 

Federal Reserve and Monetary Policy

The non-elected Federal Reserve has had far too much power over the US economy.  Governments and investors around the world watch and listen to the leaders of the Federal Reserve for any indication on what strategies they will be employing to help the US economy grow, while keeping inflation in check.  While these economist are experts in their field, they yield far too much power over the United States economy.

There was a time when Congress and the President balanced out the Federal Reserve with the fiscal policy of the United States.  The amount of Federal debt, the annual deficit, taxes and spending are in the control of elected officials.  However, they have not been doing their job so as a result, it seems as though we are almost fully dependent on the Federal Reserve to take proactive steps to improve the economy, while it should be more of a partnership or a joint effort between fiscal and monetary policy.

It has been over 15 years since the Congress has passed 13 appropriations bills to fund the Federal government.  This to me is unbelievable and unacceptable.  Who gets to keep their job for over 15 years while NOT completing a core responsibility.  These appropriation bills set the priority for the Federal government.  The bills can help business sectors grow, can fund or create whole new ones, they can leave more money in the hands of taxpayers or they can take in more to pay down the debt or fund new programs.

With about 6 weeks until the October 1st deadline, it appears that once again Congress will not be completing its job.  The consequence of this this are both direct and indirect.  The most significant being the incremental power that it gives to the Federal Reserve.  I hope that at some point a future Congress and President will see this and do their job and take back some of their power and influence on the US and World economies.