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Taking a Look at the GOP’s ‘Road Map’ For America’s Future

By JLP | January 27, 2010

Read: A GOP Road Map for America’s Future by Paul D. Ryan

In the article, Ryan lists several components of the GOP’s Road Map. I thought it would be interesting to look at each of them. NOTE: As you most of you know, I am fairly conservative and vote Republican [although I’m not tied to one particular party, I have never voted for a Democrat]. But, this is not an attempt to push my ideology down your throat. Rather, I want to look at this ‘road map’ to see if it has merit.

Okay, so here are the components mentioned in the editorial:

Health care - The plan ensures universal access to affordable health insurance by restructuring the tax code, allowing all Americans to secure an affordable health plan that best suits their needs, and shifting the control and ownership of health coverage away from the government and employers to individuals.

It provides a refundable tax credit—$2,300 for individuals and $5,700 for families—to purchase coverage (from another state if they so choose) and keep it with them if they move or change jobs. It establishes transparency in health-care price and quality data, so this critical information is readily available before someone needs health services.

State-based high risk pools will make affordable care available to those with pre-existing conditions. In addition to the tax credit, Medicaid will provide supplemental payments to low-income recipients so they too can obtain the health coverage of their choice and no longer be consigned to the stigmatized, sclerotic care that Medicaid has come to represent.

I’m all for giving control to individuals. I like the idea of a tax credit but worry that it would only set a pricing floor for health insurance.

• Medicare. The Road Map secures Medicare for current beneficiaries, while making common-sense reforms to save this critical program. It preserves the existing Medicare program for Americans currently 55 or older so they can receive the benefits they planned for throughout their working lives.

For those under 55—as they become Medicare-eligible—it creates a Medicare payment, initially averaging $11,000, to be used to purchase a Medicare certified plan. The payment is adjusted to reflect medical inflation, and pegged to income, with low-income individuals receiving greater support. The plan also provides risk adjustment, so those with greater medical needs receive a higher payment.

The proposal also fully funds Medical Savings Accounts (MSAs) for low-income beneficiaries, while continuing to allow all beneficiaries, regardless of income, to set up tax-free MSAs. Enacted together, these reforms will help keep Medicare solvent for generations to come.

• Social Security. The Road Map preserves the existing Social Security program for those 55 or older. For those under 55, the plan offers the option of investing over one-third of their current Social Security taxes into personal retirement accounts, similar to the Thrift Savings Plan available to federal employees. This proposal includes a property right, so those who own these accounts can pass on the assets to their heirs. The plan also guarantees that individuals will not lose a dollar they contribute to their accounts, even after inflation.

The plan also makes the program permanently solvent by combining a modest adjustment in the growth of initial Social Security’s benefits for higher-income individuals, with a gradual, modest increase in the retirement age.

Of all the government programs, Social Security ticks me off the most. I hate the fact that they can raise taxes collected each year and we just have to pay in. We get no say whatsoever. Currently, the maximum amount paid into the program is over $6,621.60 (or $13,243.20 if you include the employer’s portion). That’s A LOT of money! Oh how I’d love to have control of that money. I’m 100% positive I could manage it better than the gubment.

I would love to see this program reduced in size and scope. Reduce the taxes and the benefits. I know I’m probably dreaming…

• Tax Reform. The Road Map offers an alternative to today’s needlessly complex and unfair tax code, providing the option of a simplified system that promotes work, saving and investment.

This highly simplified code fits on a postcard. It has just two rates: 10% on income up to $100,000 for joint filers and $50,000 for single filers, and 25% on taxable income above these amounts. It also includes a generous standard deduction and personal exemption (totaling $39,000 for a family of four), and no tax loopholes, deductions, credits or exclusions (except the health-care tax credit).

The proposal eliminates the alternative minimum tax. It promotes saving by eliminating taxes on interest, capital gains, and dividends. It eliminates the death tax. It replaces the corporate income tax—currently the second highest in the industrialized world—with a business consumption tax of 8.5%. This new rate is roughly half the average in the industrialized world and will put American companies and workers in a stronger position to compete in a global economy.

I actually disagree with this one. I think as long as we have an income tax, we should tax interest, capital gains, and dividends. My reasoning is that it’s not fair to not tax these since it’s conceivable that very wealthy families could have nearly all of their income come to them in the form of interest, capital gains, and dividends, leaving them with no or very small income tax burden. Having the same rates for everyone and taxing all income is the only fair way to treat an income tax.

So, what are your thoughts on this ‘plan’? Do you like it? Do you dislike it? Like I said earlier, I am conservative. I don’t like the government making decisions for people that they should be making for themselves. The government’s job should be to provide for national defense and basic infrastructure and then get out of the way and let us handle the rest.

Topics: Miscellaneous | 11 Comments »


11 Responses to “Taking a Look at the GOP’s ‘Road Map’ For America’s Future”

  1. Cynner Says:
    January 27th, 2010 at 3:07 pm

    It seems to me that all tax proposals for single people are always 1/2 that of married? It makes no sense and is discriminatory (for lack of a better word) against singles.

  2. John Says:
    January 27th, 2010 at 3:35 pm

    Health Care – What good is a $2300 credit for singles and a $5700 for families? Most people will still not be able to afford health insurance.

    Medicare – Middle and lower class people can barely pay their bills, where are they going to get money to fund Medicare MSA’s?

    Social Security – People with good investing knowledge cannot manage their 401K’s to have enough to retire. Allowing everyone to invest their Social Security money will only make the brokers rich.

    Tax Reform – Here is the biggest scam of all. The top rate goes from 39.6% to 25%. I wonder who is going to benefit from that. And not taxing dividends, interest and capital gains is more of a giveaway for the wealthy. 84% of the equities in the US are owned by the top 5%.

    When are the middle class people in this country realize that Republican Party offers them nothing when it comes to economic and tax issues?

  3. Jason Bontrager Says:
    January 27th, 2010 at 4:21 pm

    Cynner: Singles don’t (or shouldn’t) be having children. Couples do. It’s in society’s interest, even that of singles, for society to perpetuate itself, hence rewarding couples so as to encourage them to have children, and to reduce the burden that children impose.

    John: Whether “most people” can afford medical insurance is up to those people. I can find a high-deductible policy for just over $100/mo. Most people who don’t have insurance could afford it but choose not to buy it, for whatever reason.

    Middle class people certainly *can* pay their bills, and most lower class can too. It just takes self-discipline and planning. The Road Map appears to provide subsidies to low-income citizens to help them with that.

    On Social Security, you don’t need “good investing knowledge”, you just need to buy mutual funds. You won’t make massive fortunes, but you’ll do well enough if you keep saving more over time, and switch to bonds as you approach retirement age.

    On Tax Reform, so what? Why should the rich be punished for being rich? And currently many of them use existing loopholes to pay far *less* than the law ostensibly says they should. Simplifying the tax code would both reduce the number of loopholes and reduce the incentive to cheat. I’d prefer a sales tax myself (can’t “forget to pay” ala Geithner), but I realize that’s not likely any time soon.

    I agree that not taxing dividends, interest and capital gains has its downside, and should probably be reconsidered. Dividends and interest definitely *should* be taxed. Capital gains, maybe.

    The Republicans *are* offering the middle class something in economic terms. They’re offering to take less of our money. When are the poor going to realize that the Democrats have a vested interest in *keeping* them poor, and thereby keeping their votes cheap?

  4. Jade Says:
    January 27th, 2010 at 4:56 pm

    To preface, I consider myself a staunch Conservative Liberal.

    I like the idea of managing my own SS funds. Unfortunately, about 40 years after this type of plan were enacted; we would be in trouble as 1/2 of the people involved in the plan would not have managed this bonus responsibly and it would the other 1/2s “duty” to help them out.

    They should tax income from investments for the points JLP mentioned. The rate should be lower than income tax, however, to meet the goal of encouraging people to invest.

    Lastly, neither of the parties are offering anything to middle class until they agree to STOP SPENDING MONEY THEY DO NOT HAVE!!!

  5. Stacey Says:
    January 28th, 2010 at 12:42 am

    Skimmed your points, JLP and I wonder how benefits will be paid to those 55+ if those 55 and under get to direct their SS to private funds instead of being used to pay current claims.

    I’m disgusted by it all…nothing will change. And a $39,000 deduction (which incl exemptions!!) is not quite that generous compared to the current std deduction and personal exemptions for a family of four. And for us, $39K would be chump change given the RET, mortg int, IL inc tax on our earnings, charitable giving, etc we currently itemize, even if some does get phased out b/c of our AGI (and the dang RET, etc. gets added back for the AMT calc which cost us an extra $6K in tax this year.) Love that bullseye on our backs. And no, we are not wealthy…nor are we poor. Yes, I know, many would change places w/us. But is it worth it? My husband’s constantly on the road for his work in sales, I’m always working cleaning up other peoples’ acctg messes and for what?… To pay almost 1/3 of what we make to Uncle Sam and the multitude of *his* failed social policies/war plans. Both political parties need to vaporize and we can start over…

  6. Courtney Says:
    January 28th, 2010 at 11:19 am

    I’m a slightly left-leaning libertarian, and I agree with some points, but not others.

    Health care – don’t agree. USA Today reported that the average health insurance plan for a family of four was over $13,000 (http://www.usatoday.com/money/industries/health/2009-09-15-insurance-costs_N.htm). A $5,700 tax credit wouldn’t even cover half of that.

    Medicare – agree.

    Social Security – agree, but only if the investment options are limited unless you perhaps take an investment course or some other sort of education before selecting your investments. Personally, if I was allowed to take my social security money and invest it elsewhere I’d put it in fixed income investments (money markets and/or treasuries only). I’d hate to see people gambling a third of their SS (which is supposed to be a “fall-back” guaranteeing a minimum income) on some risky stock or something. Maybe they could set up some sort of limited investment options on a sliding tier – cash investment, treasury/bond investment, or target retirement fund and let people pick from among those few options.

    Tax reform – agree some, particularly with the elimination of the AMT and death tax. Don’t agree with the elimination of capital gains entirely, as has already been pointed out. The proposed standard deduction is generous if you don’t currently itemize ($11,400 + $3650 x 4 = $26,000 for a current family of four) but I know personally we’d take a hit on that…our itemized deductions and exemptions for two add up to over $46,000. Don’t know enough about business taxes to form an opinion, other than that I’ve been told that even though we have the second-highest RATE that the effective percentage is much lower.

    And in response to Cynner – how in the world is the tax for singles being 1/2 that of married couples in any way discriminatory?? I think more couples than not are two-income households now, and from 1969-2003 married couples actually paid more taxes on a joint return than they would have as two single earners. Also, singles are still getting a huge break on their Roth IRA income eligibility – a married couple can only have $166K in income for full contribution eligibility (an average of $83K each), but two single people can have up to $105K each and still be eligible for a full contribution. AND a married couple would be totally phased out of contribution eligibility with only $10K of additional *combined* income, but a single person can earn $15K more before they are completely phased out of contribution eligibility. THAT’S discriminatory.

  7. Michael Harr @ Wealth...Uncomplicated Says:
    January 29th, 2010 at 11:31 pm

    I’ll skip health care and Social Security and get straight to the tax plan. It might be the most juvenile attempt at a tax code that I’ve ever seen. There are so many problems that this kind of system presents that it boggles the mind.

    (1) Eliminate the estate tax – this is an incredibly foolish idea as estate tax has existed for centuries and with good reason. It reduces the probability of a wealthy family continuing to amass wealth to the point that they reach critical mass. A study was conducted years ago and it found that without an estate tax, the Medici family would own the entire world by now.

    (2) Eliminate capital gains taxes – again, why eliminate taxes on new income?

    (3) Top marginal tax rate of 25% – if you ever take some time to study the economics of taxes, you’ll find that we should be raising top marginal tax rates (some estimates surrounding the Laffer Curve suggest that 55 to 68% should be the top tax rate). Granted, this would only be on a small portion of the population, but Warren Buffet is already on record that 35% (current) is ridiculously low.

    (4) Eliminate AMT – as all wealthy individuals know, there are many ways to bypass paying taxes on investment activity. As a result, the AMT is a kind of last resort to tax folks that have otherwise exhausted other loop holes. Instead of eliminating it, index it back to its origins based on the CPI. This solves a lot of headaches.

    (5) Eliminate deductions – this must be a joke. Deductions exist to promote issues/items/whatever in a way that pushes dollars to one area or another. Home ownership, charitable giving, education, job training, health care, etc. all have deductions or credits associated with them because these are areas where we want people to shift their resources. Killing deductions hurts these incentives in a disastrous way over the short run. In the long run, it would be difficult to believe that charitable giving would recover to pre-newtaxplan levels.

    Last point. A massive shift in tax reform like this is likely to be an utter catastrophe when it’s implemented. If they guess wrong on their tax revenue projections and we come up short, we’ll end up adding to the national debt (meaning we pay the tax in the long run…plus interest). If we collect too much in taxes, we’ll go into a recession even as the government runs a surplus.

    Overall, these kinds of ‘plans’ are hilarious. They sound great at a political rally, on television, in an ad, or even over a beer at the local bar, but it’s closer to a frothy cup of crapuccino – it might look good in that Starbucks cup, but if you get too close or take the time to lift the lid, you’ll see it for what it’s worth.

  8. Jad Says:
    January 30th, 2010 at 12:26 am

    Here is what the plan should say.

    Step 1: Cut spending 33% across the board over a 4 yr period
    Step 2: Get rid of all forms of personal income tax
    Step 3: Keep spending down

  9. Bill Says:
    January 31st, 2010 at 12:15 pm

    Is anyone else troubled by the arbitrary age cut off proposed for Medicare and SS, denying the same benefits to those unfortunate enough to be only a couple years younger. If the programs require revamping, such as means based premiums for Medicare, they should apply to everyone. To exclude multi-millionaires drawing SS income for pin money and enjoying the subsidies under our current Medicare from the pain that they propose inflicting on the “next generation” is disturbing. I don’t see the trade off between being able to invest $2K of my SS benefits for 10 years offsets losing around $30K/year for every year they push back eligibility. There is no way that investment earnings from a bucket of around $20K will replace the $30K lost- possibly $90K if they push it out to 70, which seems like a distinct possibility. Again, everyone on SS should be affected by the change, as politically unpleasant that sounds. To discriminate solely on when you were born is ridiculous.

  10. Abhi Says:
    January 31st, 2010 at 7:10 pm

    My only question to republicans is that why was this ROAD MAP FOR AMERICA’s FUTURE not implemented when they were rulling. Republicans have left the country in the dumps and now pointing fingers at others for not recovering the country in one year. I heard on FOX the other day aboutthe solutions for SOCIAL SECURITY =Tax credit for producing a baby. How ridiculous is that. I am ashamed that americans still believe in Republicans. Believe me I am not a democrat.

  11. RaymondC Says:
    February 1st, 2010 at 1:14 am

    In my humble opinion, we need to take tax reform to the ultimate end: repeal the 16th Amendment and replace the current, broken down income tax system with “FairTax” (H.R. 25/S. 296).

    Our current income tax system has literally strangled the economy from its near US$500 billion per year compliance cost, drove US$15 trillion in American owned assets out of the US financial system, and drove many millions of jobs overseas–not to mention causing unprecedented issues with invasion of privacy in regards IRS trying to get taxpayers to comply with paying taxes and so on. Dumping the income tax would result in potentially over US$20 trillion coming in the US financial system, since every would want to put their personal savings and capital investments in a place that no longer impose taxes on _earning_ money. And that could mean all those idled factories and offices will go from being near worthless to nearly priceless because every “Tom, Dick and Harry” would want to put their money in the USA.

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