Saturday, April 2, 2011

THIS IS HOW WE FIX THE BUDGET

Want to know how we save $1.1 trillion dollars, and help fix our budget mess? As I pointed out two weeks ago, we need to go after the large but many, many tax deductions that benefit only a select few, but effectively flush the public's money down down a rat hole.


One person who agrees, and has additional common sense proposals, is Martin Hutchinson, Contributing Editor to Money Morning. In this "Five Simple Ways to End America's Spiraling National Debt" piece, Hutchinson argues that we need to think about both reducing reckless tax deductions and imposing tax increases that, "far from having a negative effect on the economy, would end subsidies for activities of little economic value."

This is Hutchinson's list of the things we need to think about eliminating, or imposing:


* Spending Cuts. Agreed.

* Increase Revenue. Agreed. Here's how we begin ...
1. End tax-deductibility for corporate debt. It only encourages damaging leverage.
2. Institute a small "Tobin tax" on Wall Street transactions. This would sharply reduce rent-seeking, "fast trading," and frivolous derivatives activities.
3. Remove the home-mortgage tax credit and end tax deductions for charitable contributions.
* Heed the "Deficit Commission." Don't Agree. Here's why.

* End Wasteful Subsidies. Agreed.

* Stop subsidizing borrowing with low interest rates, which penalizes saving. Agreed.

While we can tinker with the specifics, the framework is a good one. We can save about a trillion dollars if we do this right. Again, this isn't rocket science. 

- Mark

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