In reply to: Not many folks are talking about this (Nicki Haley, I guess) posted by ufl
Pelosi floated the idea back in 2009. Obviously it didn't go anywhere. That said the VAT is how Europe pays for their social spending.
Since cutting spending is not on the table, I'm okay with a VAT. Our debt is exploding, and if more revenue is the only answer then so be it. The fiscal conservatives had their chance, and they never seized the moment. Now we are left with only bad solutions to what was a solvable problem.
European style negotiations on drug spending, changing the rules to reduce administrative spending, etc.
When push comes to shove I bet we'll push the retirement age back, reduce/take away 401k tax advantage age going forward, and raise income taxes. But the issues with the debt will have to get far worse to push those changes.
I'm not sure exactly what you mean.
That mostly goes to high income earners. There's just under 200 billion in revenue lost from it. If you got to a position where you were cutting social security I could see tightening eligibility rules around them as part of a compromise.
Ultimately we need the average person to work longer or consume less before/after retirement. If it took longer to build a jest egg people would retire later and work longer.
entirely?
I don't believe that will happen. What would they replace it with?
Or are you saying that they will make it post tax and not pre tax dollars? I could sort of buy that, but I still doubt that will happen. There is a post tax option currently (Roth) and that's an even worse long term deal for tax revenues.
The main reason for these plans is to encourage people to save for their own retirement and not depend on pension plans (which are largely gone) or social security.
Suggests it hasn't changed savings rates and effectively reduces taxes on the money you save and then used in retirement. Even the tax deferred stuff (based on how the employer match is taxed and that retirement income is generally lower).
They cite a Danish study showing that changing the subsidy for retirement contributions for the top bracket didn't move saving very much.
"The results of this study have been well received and broadly accepted. The weight of the evidence indicates that tax incentives do not increase total saving in a meaningful way."
Per the article, the treasury estimates it loses about 120 billion by allowing defined contribution plans, ignoring Roths (see Table 1)
It's not enough to balance even social security by itself, but if you get into a crisis where we need to right size the budget fast and social security is being cut I could see it. Touching anything that really drives the budget under current political conditions is politically toxic outside of the health system. There might be 100 billion or so a year you could get at outside of an emergency (some drug pricing stuff and maybe minor tweaks in billing). You could maybe get 100 billion in tax increases outside of an emergency. And maybe 100 billion in discretionary spending cuts. But that probably just pushes off reforming entitlements a bit longer.
Now, making them after tax? Possibly. But the roth is a worse long term solution.
After tax, Tax deferred, tax on growth? Maybe
Was setting an upper cap where you can't add more (once you hit 500k or a million) or taking away catch up contributions over an income of 100k or so. Some of their proposed compromises still get you 100 billion a year so that's something.
It'd only be viable if cuts to something else near and dear to America's heart were up for grabs.
Roth IRA let you pay your taxes now in exchange for never paying taxes again.
This is just a timing issue, and potentially a tax arbitrage issue if you think that rates will be higher/ lower in the future.
This is also a play on capital gains rates, since distributions from a traditional IRA are taxed as ordinary income, principal and all. If you take the tax hit on the front-end, then invest and pay capital gains at the end, you could come out ahead depending on where rates are.
With respect to health care, I don't know how we solve our current system. Government spending is subsidized by private insurance, so if we consolidate everything under a government plan, spending will not go down. Somethings will work on the margin, but we need to burn down the system and replace it with someone sustainable from a fiscal perspective.