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United States Tax Code Revisited Simpson-Bowles  Feb. 18, 2010, President Obama created the bipartisan National Commission on Fiscal Responsibility and.

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Presentation on theme: "United States Tax Code Revisited Simpson-Bowles  Feb. 18, 2010, President Obama created the bipartisan National Commission on Fiscal Responsibility and."— Presentation transcript:

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2 United States Tax Code Revisited Simpson-Bowles  Feb. 18, 2010, President Obama created the bipartisan National Commission on Fiscal Responsibility and Reform to address our nation's fiscal challenges.  The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run.  Specifically, the Commission shall propose recommendations designed to balance the budget, excluding interest payments on the debt, by 2015

3 United States Tax Code Revisited Simpson-Bowles  In addition, the Commission shall propose recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.  The Commission will meet as a whole once a month while Congress is in session.  The Commission will vote on a final report containing a set of recommendations to achieve its mission no later than December 1,  The final report will require the approval of at least 14 of the Commission's 18 members.

4 TTYN: In light of what you now know about Simpson – Bowles: what do you think? Good idea? Do you believe it to an effective method to address the country’s economic woes? The Proposal  Nov. 10, 2010  It’s big. It’s complicated. The highlights  Six-part plan to put our nation back on a path to fiscal health, promote economic growth, and protect the most vulnerable among us. Taken as a whole, the plan will:  Achieve nearly $4 trillion in deficit reduction through 2020, more than any effort in the nation’s history

5 The Proposal  Reduce the deficit to 2.3% of GDP by 2015 (2.4% excluding Social Security reform), exceeding President’s goal of primary balance (about 3% of GDP).2  Sharply reduce tax rates, abolish the AMT, and cut backdoor spending in the tax code.  Cap revenue at 21% of GDP and get spending below 22% and eventually to 21%.  Ensure lasting Social Security solvency, prevent the projected 22% cuts to come in 2037, reduce elderly poverty, and distribute the burden fairly.  Stabilize debt by 2014 and reduce debt to 60% of GDP by 2023 and 40% by 2035.

6 The plan has six major components: 1) Discretionary Spending Cuts: including significant cuts in both security and non-security spending by cutting low-priority programs and streamlining government operations. 2) Comprehensive Tax Reform: Sharply reduce rates, broaden the base, simplify the tax code, and reduce the deficit by reducing the many “tax expenditures 3) Health Care Cost Containment: Replace the phantom savings from scheduled Medicare reimbursement cuts that will never materialize.

7 4) Mandatory Savings: Cut agriculture subsidies and modernize military and civil service retirement systems, while reforming student loan programs and putting the Pension Benefit Guarantee Corporation on a sustainable path. 5) Social Security Reforms to Ensure Long-Term Solvency and Reduce Poverty: Ensure sustainable solvency for the next 75 years while reducing poverty among seniors. Reform Social Security for its own sake, and not for deficit reduction. 6) Process Changes: Reform the budget process to ensure the debt remains on a stable path, spending stays under control, inflation is measured accurately, and taxpayer dollars go where they belong.

8 TTYN: Again, i n light of what you now know about Simpson – Bowles: what do you think? Good idea? Do you believe it to an effective method to address the country’s economic woes? Partisan Politics At Its Best  Analyzing the plan, It called for:  Deep cuts in domestic and military spending starting in  Overhaul the tax code  Eliminating or reducing the $1 trillion a year in popular tax breaks for individuals and corporations and using the revenues mostly to slash income tax rates but also to reduce deficits.  Make Social Security solvent for 75 years,  Raise payroll taxes for the affluent and reduce future benefits, including by slowly raising the retirement age for full benefits to 69 from 67 by 2075.

9 Partisan Politics At Its Best  Both Republicans and Democrats bash the proposal…. WHY?  Tax increases for upper-income Americans and the scale of proposed reductions in future health care and Social Security programs  Republicans opposed to it, suggested that it failed to cut spending deeply enough and did not include a repeal of the Democratic health care law. TTYN: What’s Next? How should the President and Congress respond to the failure of Simpson-Bowles?


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