Monday, December 31, 2012

Avoiding the Fiscal Cliff

As I write this our congress is debating how to handle the looming fiscal crisis and determining if the United States will plunge headlong over the fiscal cliff. My proposal may not be politically correct but I do believe we need to bring some serious change to our spending plans if we are going to remain fiscally strong.

Here are my ideas and would love to hear some of yours.

1. Charitable contributions for everyone! I would move the charitable contribution deduction to the front page of the tax form so that everyone can benefit and not need to itemize. This will provide greater resources to our charities - the ones that should be addressing our social needs. We can start weaning government out of the social intervention business and strengthening charities to do the work they are organized to do.

2. No refundable credits. I understand there are some who would be terribly burdened to pay their portion of the tax bill that funds the services we all enjoy, but I don't believe we should PAY people to file a tax return. It is one thing to get a refund because you overpaid, but another to get a refund beyond your contribution. Several tax credits like the Earned Income Tax Credit EITC and the Child Tax Credit. CTC help people with a boost at tax time but do very little to help sustain these families or to move them out of poverty. A big jackpot at tax time just sets people up to spend on indulgences they would otherwise not afford given their income.

3. Remove the filing burden. Rather than taxing income which serves to discourage work and incentivize non reported income streams, I believe you should tax spending instead. I have been very intrigued by the Fair Tax that adds a national sales tax to all products and services. It will make products and services more expensive but would relieve the taxpayer of the reporting burden and place it on the business owners.

4. Remove government support of higher education. Any government grant or loan program forces the product or service to be more expensive. Education costs have grown much more than other services and have created an environment where young men and women are graduating with loans that are not serviceable. Young families who should begin saving for their retirement have to defer savings to pay back student loan debt that enslaves young people starting their careers. Without the government support school costs would begin a downward slide making education more affordable.

5. Eliminate HUD. I know that housing costs are expensive but this is another agency that administers government loans and underwrites housing for low income families. I am not against helping families - I just believe this is a role best left to charity. This agency wastes more money than they successfully deploy.

6. Eliminate early access to Social Security. I know this is incredibly unpopular but we need to consider how we can provide for the huge numbers of retires in the future. This would encourage greater savings for themselves and be less dependent on government.

7. No Social Security cap. Regardless of the income earned, workers pay into Social Security.

8. Medicare at full retirement age. By tying medical coverage to full retirement age we reduce the bleeding of our Social Security system. We cannot afford our current system. Obamacare will do the same for medical expenses that it has for housing and education costs.

I wish I could think of some ways to encourage more personal savings and discourage unwed parenthood. In my area more than 1/2 of all children are born into single parent families. These families are at the greatest risk for living in poverty. I don't believe increasing access to abortions is a viable solution and I hate to think of children suffering as a result of being born to parents not willing to invest themselves for their children's welfare. This is not a women's issue but a children's issue. Too many unborn children have been murdered and too many born children have been abused and neglected because of parents who are ill prepared to care for their little ones.

These children are the reason we have food stamps and welfare payments. To stop the bleeding we need to change the thinking of these young parents. Hopefully the charities can help to affect some of the cultural change needed.

Well I know my solutions seem harsh but I do believe they offer lasting cultural change that would decrease government dependence, increase charity, incentivize savings, reduce the barriers to work that our current system offers.

Let me hear your ideas maybe the people can create the system that our elected officials seem hesitant to accomplish.