Thursday, January 3, 2013

US Debt Reduction Sequester Solution Should Be Equal Amount of Cost Cuts and Tax Loophole Closings

If my math is right, in the Grand Bargain so far we have reached $1.7 trillion in total US Budgeted Cost Cuts and $.6 trillion in total US Tax Revenues Raised over the next ten years.  Thus, 74% of the total US Debt Reduction is coming from Cost Cuts and only 26% from additional Tax Revenues.

I think it would be wise to shoot for $5.0 trillion in Total US Debt Reduction over the next ten years.  That would really step up our US National Security to a completely different level.

Thus, we would need $2.7 trillion of additional US Debt Reduction.

Given the present 74% overweighting to the Cost Side of the Equation, to reach the goal of a fair balanced way from here on out, I think it would be best to shoot for both $1.35 trillion of additional US Budgeted Cost Cuts and a like amount of Additional Tax Revenues, nearly all of the latter wisely raised by fair Tax Loophole Closings.

It is only fair that the $1.35 trillion of additional US Budgeted Cost Cuts would include the Interest Savings from this huge total reduction in the US Debt.  Interest savings are clearly just as much of a cost reduction as are US military cost cuts and Medicare Cost Savings.

At first thought, finding $1.35 trillion of additional Tax Revenues from fair Tax Loophole Closings may seem like quite a stretch, but from thoroughly studying the issue, it is frankly quite easy to get there.

Included in these additional Tax Revenues are Corporate Tax Loophole Closings and Individual Tax Loophole Closings, including some of the massive amount of income earned by tax-free entities, such as Partnerships, SubS Corps, LLCs, and REITs, which is passed through and thus taxed at the individual income tax level.

When I get some time, I’ll be presenting in a series of separate posts some of the many of these Corporate and Individual Tax Loophole Closing Choices that the US Government has available to them.

As one overall thought in tackling Tax Loophole Closings, both the economic and earnings damage to a Corporation or other entity from closing one of their many tax loopholes is substantially softened when the result is that the tax benefit from the income tax deduction is not lost, but rather it is received much later.  But yet in this case, there is still a substantial reduction in US Debt over the next ten years, which the CBO will be able to positively score as real US Debt reduction.  And probably even more importantly, the US Debt reduction from this will continue growing on a compound basis by leaps and bounds after the first ten years.