Deficit to surplus? Possibly, but.....

Report: Budget deficit will turn to surplus if Bush's tax cuts expire
By Richard Wolf
USA TODAY

WASHINGTON — Making President Bush's tax cuts permanent will prolong big budget deficits into the next decade, the Congressional Budget Office projected Thursday.

But if those tax cuts are allowed to expire after 2010 — effectively a tax increase Bush has sworn to oppose — the budget would begin showing a surplus in 2012, the CBO's budget projections showed. Bush wants Congress to make the tax cuts permanent before he leaves office in 2009.

In its annual budget and economic report, the agency estimated that this year's deficit will be $337 billion, up $19 billion from 2005. It said the deficit will be about $360 billion if extra anticipated costs for Iraq, Afghanistan and the hurricane-ravaged Gulf Coast are added.

The White House has pegged this year's projected deficit at more than $400 billion, citing the costs of the war in Iraq and Hurricane Katrina. The White House budget office has overestimated the size of the deficit in the past two years by using what it says are “cautious” economic and revenue projections.

The CBO projected that this year's deficit will be about 2.8% of the economy, using a measure that allows comparisons over time by factoring out the effect of inflation. That exceeds the 2.3% average since 1965 but is below the 6% record set in 1983.

The long-term budget forecast is gloomier, particularly if Bush and Congress agree to extend the tax cuts. In 2016, the deficit would be nearly $400 billion. Beyond that, the costs of Medicare, Medicaid and Social Security are projected to rise to a level that “economic growth alone is unlikely to alleviate,” the report says. “A substantial reduction in the growth of spending, and perhaps a sizable increase in taxes as a share of the economy, will be necessary for fiscal stability to be at all likely in the coming decades.”

The non-partisan budget office also said the new Medicare prescription-drug benefit could cost $979 billion in the 10 years from 2007 through 2016. Last year, the administration put the figure at $720 billion for the years 2006 to 2015. The increase is mostly due to projections that more people will use the subsidized program.

http://www.usatoday.com/printeditio...ficit27.art.htm

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But will the GOP allow the tax cuts to expire?

Not a chance in Hell.

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I've changed my views on this a little recently.

My problem with taxes is when they prevent people who have worked hard through small business or whatever from enjoying the fruits of their hard work.A person that makes maybe a couple hundred thousand a year and buys a house ,a nice car(which you deserve if you earned it) and has a family can still be taxed to the point where they can't enjoy what they have earned.

But when I hear that people who are pulling in multi millions a year are getting tax cuts I think it's bullshit,I mean after you have so many millions you can pretty much use 100$ bills as wall paper from then on.

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Careful, you're sounding dangerously left wing.

-m

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Another thing is that I don't think that we should owe our souls to china.We don't need to be in that much debt.

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That's just common sense.

-m

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It must not be.We are in debt.

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Government and common sense are antithetical.

-m

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Hey! Another round of tax cuts for the wealthy couldn't hurt, right?

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quote:

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Originally posted by billgerat
Hey! Another round of tax cuts for the wealthy couldn't hurt, right?

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Naturally, being the bold proponents of balanced budgets that you all are, what you're advocating is repeal of ALL the tax cuts, right?

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Let me be on record as saying yes. After there is a surplus again, a well thought out tax cut that doesn't bankrupt the country could be done. If not, that's the breaks.

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Hey, we could save some money eliminating the earned income tax credit. That one pisses me off pretty good. How can someone earn $13,000 in a year, pay nothing in taxes, and still get a $5000 refund check come april? We need to ditch that one completely.

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We could save billions simply by repealing the existing tax code in it's entirety, instituting a flat tax on every legal individual with no deductions, allowances, rebates, credits exemptions of any kind. The flat rate would apply to every dollar received as income by anyone or any corporate person from any source. Including political donations to any politician, charitable donations to any non-profit, etc.

Think of all the savings on tax lawyers, IRS gestapo types, etc. Not too mention being the fairest tax structure I can imagine, and very likely generating a great deal more income for the government to retire the national debt with.

Additional savings could be realized by simply removing accounting steps - every federal pay grade would be reduced by the percentage of the tax and no tax would be deducted from the federal employees pay. What you see is what you get.

Last edited by SimpleSimon on 01-30-2006 at 05:36 PM

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quote:

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Originally posted by torque
Hey, we could save some money eliminating the earned income tax credit. That one pisses me off pretty good. How can someone earn $13,000 in a year, pay nothing in taxes, and still get a $5000 refund check come april? We need to ditch that one completely.

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quote:

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Originally posted by SimpleSimon
We could save billions simply by repealing the existing tax code in it's entirety, instituting a flat tax on every legal individual with no deductions, allowances, rebates, credits exemptions of any kind. The flat rate would apply to every dollar received as income by anyone or any corporate person from any source. Including political donations to any politician, charitable donations to any non-profit, etc.

Think of all the savings on tax lawyers, IRS gestapo types, etc. Not too mention being the fairest tax structure I can imagine, and very likely generating a great deal more income for the government to retire the national debt with.

Additional savings could be realized by simply removing accounting steps - every federal pay grade would be reduced by the percentage of the tax and no tax would be deducted from the federal employees pay. What you see is what you get.

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I agree! but when happens when someone invests $10,000 into a project, and only makes $5000 back before the project is closed? Meanwhile, he's borrowed the remaining $5000 from another investor at 3% interest, which he pays, and that invester takes the interest profits and puts it into another larger investment which will not see returns for 10 years. How much tax is collected from whom? Better hire an accountant

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The risk is the investing individuals. Just as the profit would be his, the loss is his. If he invests $10,000, and makes back only $5,000, then he owes tax on the $5,000. No allowances, no exemptions, no investment credits. In effect he pays taxes on every dollar he receives from any source. The outstanding $5,000 is either a debt owed to him, which if repaid he will also owe tax on, or it is a loss.

Again, his risk. Whoever lent him the money has to pay taxes on every dollar they receive as well.

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If he has to pay taxes on the $5000 income, then he would be paying on it twice. Since it was his $10,000 in the first place before investing, he must have earned it somehow and thus already paid taxes on it.

This would create scemes where people would only invest with other people's money, which would create an entirely new field of money managers and lawyers.

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Does the investment buy property, either real or intangible? Such as an interest in a business?

If so, the income from that investment is taxable income, as the investment retains ownership in the business or property. Try buying an investment property today, and selling it at some later time. You will pay taxes on the full sales price of the property, unless it is a principal residence.

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I thought that you paid capital gains tax, rather than on the full price.

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On a principal residence, yes. If the money is re-invested in a new principal residence within a set period, then you don't pay capital gains at all.

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Yeah, but you said that you'd pay tax on full sales price of an investment property, wheras I thought that you only paid it on the capital gains in the property. Either that or you pay it in principle on the full price then deduct the original cost, which works out to the same thing. And then, of course, there's a bunch of other things you can claim, like money spent on improvements.

On principle residence it's two years, I think, and then you pay no tax on capital gains at all. Of course, you have to pay 5% or more to the realtors.

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