T Nation

Tackling the Entitlement Crisis

From Paul Ryan, R-Wisc. - if the Republicans can get behind this and make it a national platform, good things will happen… McCain should jump on the bandwagon as well.

[i]
How to Tackle the Entitlement Crisis
By PAUL D. RYAN
May 21, 2008; Page A19

While Congress will have a partisan debate over the federal budget this week, there is a growing, bipartisan consensus about the greatest threat to our nation’s long-term economic prosperity: the explosion of entitlement spending. Unfortunately, Washington is not planning to address that problem this week, or any time soon. By doing nothing, we are shackling our future with unsustainable debt and taxes.

According to the Congressional Budget Office, Social Security, Medicare, Medicaid and the rest of government will consume nearly 40% of the economy by the time my three young children reach my age (38). This will require more than doubling the average tax burden of the past 40 years just to keep the government afloat. Continuing down this path will eventually strangle our economy.

To meet this challenge and secure our fiscal future, I’m introducing a comprehensive legislative plan called “A Roadmap for America’s Future.” Here are its components:

  • Health Insurance. The bill provides universal access to affordable health insurance, by shifting the ownership of health coverage from the government and employers to individuals. It provides a refundable tax credit �?? $2,500 for individuals and $5,000 for families �?? to purchase coverage. Individuals will be able to buy insurance offered by any provider in any state �?? not just the one where they live �?? and carry it with them if they move or change jobs.

This will encourage, and enable, people to shop for the coverage best suited to their needs and financial circumstances. Insurance companies will also have an incentive to diversify coverage at competitive prices. The active participation of individuals and families in a national, competitive market will restrain health-care costs.

The plan also establishes transparency in health-care price and quality data, so this critical information is readily available before someone needs health services. It also encourages the adoption of health information technology.

  • Medicaid and Medicare. The bill modernizes Medicaid by giving states maximum flexibility to tailor their Medicaid programs to the specific needs of their populations. It also allows Medicaid recipients to avail themselves of the health-coverage options open to everyone else through the tax-credit option.

The bill secures the existing Medicare program for those over 55 �?? so Americans can receive the benefits they planned for throughout most of their working lives. Those 55 and younger will, when they retire, receive an annual payment of up to $9,500 to purchase health coverage �?? either from a list of Medicare-certified plans, or any plan in the individual market, in any state.

The payment is adjusted for inflation and based on income, with low-income individuals receiving greater support and a funded medical savings account.

  • Social Security. Workers under 55 will have the option of investing over one-third of their current Social Security taxes into personal retirement accounts. These personal accounts are likely to grow faster than the traditional benefit. They are also the property of the individual, and are thus fully inheritable. The bill includes a guarantee that no one’s total Social Security benefits from the personal accounts will be less than if he had chosen to say in the current system.

Combined with a more realistic plan for growth in Social Security benefits, and an eventual increase in the retirement age, the Social Security program can thus become sustainable for the long term.

  • Tax Reform. The current federal tax code is complex, burdensome and discourages economic growth. It cannot be fixed with incremental changes; it needs a complete overhaul.

To accomplish this goal, the bill first of all offers individuals a choice of how to pay their taxes �?? either through the existing law, or through a simplified code with a tax return that fits on a postcard, just two rates and virtually no special tax deductions, credits or exclusions (except the health-care tax credit). Taxpayers themselves choose which code serves them better.

The rates in the simplified code are 10% on income up to $100,000 for joint filers ($50,000 for single filers); and 25% on taxable income above these amounts. There is also a generous standard deduction and personal exemption totaling $39,000 for a family of four. The alternative minimum tax is eliminated. And to promote long-term investment in economic growth, taxes on capital gains, dividends and estates are also eliminated.

On the business side, the bill gets rid of our uncompetitive corporate tax �?? currently the second highest in the industrialized world �?? and replaces it with a business consumption tax of 8.5%, which is half the average industrialized world rate.

The roadmap I’m offering is a real plan, with real proposals, real numbers to back them, and real legislation to implement it. Based on the analysis of government actuaries, it is projected to make Social Security and Medicare permanently solvent, lift the growing debt burden on future generations, and hold Federal taxes to 18.5% of GDP.

Many will disagree with this approach. But it is my sincere hope that it will spur Congress to move beyond simply rehashing the problem �?? to the politically difficult, but critical task of debating, and implementing actual solutions.


Mr. Ryan, a Republican congressman from Wisconsin, is a member of the Budget Committee and the Ways and Means Committee.[/i]

Why not just make taxes the same across the board?

What incentive does any person have to get a 3% raise above $98K knowing they will be taxed at a larger amount the next year?

Any mathematically proficient person would know they would need a raise of at least 20% just to break even after taxes. In other words this tax plan punishes productivity in this income bracket.

I like the deduction for individual medical coverage and should be extended to all private insurance and retirement savings accounts.

FairTax.

[quote]LIFTICVSMAXIMVS wrote:
Why not just make taxes the same across the board?

What incentive does any person have to get a 3% raise above $98K knowing they will be taxed at a larger amount the next year?

Any mathematically proficient person would know they would need a raise of at least 20% just to break even after taxes. In other words this tax plan punishes productivity in this income bracket.

I like the deduction for individual medical coverage and should be extended to all private insurance and retirement savings accounts.[/quote]

I think the higher tax rate only applies for the income above $100K, not that it becomes applicable to all the income.

[quote]DK 14 wrote:
FairTax.[/quote]

Nein.

http://www.volokh.com/archives/archive_2007_12_23-2007_12_29.shtml#1198966908

[quote]BostonBarrister wrote:
I think the higher tax rate only applies for the income above $100K, not that it becomes applicable to all the income.[/quote]

Even still, why not just one rate for everyone? As it stands here, those families of four who make below the median income will be paying virtually no taxes while they still receive the benefits of taxation. The lesson to “poor” people, as always, is just to keep spitting out children.

I am in favor of no income tax and a cut in government spending. Government spending would need to go down to 1997 levels in order to meet a deficit incurred by 0% income tax. That would reduce entitlements…

[quote]
BostonBarrister wrote:
I think the higher tax rate only applies for the income above $100K, not that it becomes applicable to all the income.

LIFTICVSMAXIMVS wrote:
Even still, why not just one rate for everyone? As it stands here, those families of four who make below the median income will be paying virtually no taxes while they still receive the benefits of taxation. The lesson to “poor” people, as always, is just to keep spitting out children.

I am in favor of no income tax and a cut in government spending. Government spending would need to go down to 1997 levels in order to meet a deficit incurred by 0% income tax. That would reduce entitlements…[/quote]

I would love a one-rate flat tax - but I would like this proposal a whole lot better than what we have…

SS/Medicare will have to be means tested. That’s just about the only solution that the opposing party (to whoever suggests it first) can’t demagogue.

If people could have invested their SS money, they’d be much more wealthy and our economy would probably be twice as rich, because of the huge capital inflows.

Rotten Democrats…

[quote]DK 14 wrote:
FairTax.[/quote]

I don’t want a fair tax because then the richies flooding our country with illegal immigrants will have to pay less of their medical and welfare bills.

…I love it.

Am I a Republican now? Damn… I already reserved my spot in Heaven too, they’ll have to give it to someone else I suppose. I should call and cancel, but then again, if I’m going to Hell I might as well be an asshole for convenience.

(PS: I’d prefer a flat tax as well, but I don’t think the people will easily realize that a flat tax actually favors the poor, as the rich currently pay a smaller percentage in the end due to their ability to find the thousands of loop holes. At least this plan will simplify the tax code.)

Consumption tax…

[quote]vroom wrote:
Consumption tax…[/quote]

Is regressive and unfairly shifts the burden to the poor.

[quote]Agressive Napkin wrote:
vroom wrote:
Consumption tax…

Is regressive and unfairly shifts the burden to the poor.[/quote]

At first glance, yes.

However, it has been implemented successfully in various countries. It also gets around various issues related to complexity and tax evasion/avoidance quite easily.

Finally, as I’ve argued in the past, it allows people access to the money they earn, their money, prior to taxation – such that they can defer paying tax by choosing to save or invest instead of consume.

Once poorer individuals are protected from potential regressive effects it offers a lot of advantages…

I second the Fair Tax. I am not going to argue for it here. If you want to know more read the book. Something does need to be done to revamp our tax system and the entitlements said tax system supports. The current income tax provides fodder for politicians from both of the major parties to continue class warfare as a tactic for getting elected. That is what I truly dislike the most in our election process.

  • Fat Tax. If you need a gastric bypass you can fucking pay for it yourself.

  • Pay double air fare if you take up two seats on a fucking plane.

  • Stop penalizing people who earn more just because they earn more. Giving the government more money isn’t much incentive for me to get a raise.

  • No more long-term unemployment benefit. Get a fucking job or file for the sickness benefit. Which you won’t get if you’re not sick.

OMFG how much money did I just save? Hey look, all I had to do was not be PC.

/rant

[quote]Beowolf wrote:
…I love it.

Am I a Republican now? Damn… I already reserved my spot in Heaven too, they’ll have to give it to someone else I suppose. I should call and cancel, but then again, if I’m going to Hell I might as well be an asshole for convenience.

(PS: I’d prefer a flat tax as well, but I don’t think the people will easily realize that a flat tax actually favors the poor, as the rich currently pay a smaller percentage in the end due to their ability to find the thousands of loop holes. At least this plan will simplify the tax code.)[/quote]

Please define “poor”.

The people who I would consider to be poor currently pay almost no tax at all, while still receiving the benefits of government services.

[quote]Regular Gonzalez wrote:
Beowolf wrote:
…I love it.

Am I a Republican now? Damn… I already reserved my spot in Heaven too, they’ll have to give it to someone else I suppose. I should call and cancel, but then again, if I’m going to Hell I might as well be an asshole for convenience.

(PS: I’d prefer a flat tax as well, but I don’t think the people will easily realize that a flat tax actually favors the poor, as the rich currently pay a smaller percentage in the end due to their ability to find the thousands of loop holes. At least this plan will simplify the tax code.)

Please define “poor”.

The people who I would consider to be poor currently pay almost no tax at all, while still receiving the benefits of government services.
[/quote]

Err… I should have included flat tax + prebate for those making below the poverty line.

Edit: Pretend when I said poor, I said middle class, which is what I meant. Sorry for the black/white statement.