Guest Blogger: Part V: The Debt Ceiling: The Antoine Marshall Proposal

Guest Blogger Antoine Marshall breaks down the Debt Ceiling and puts forward his original proposal (in a 7 part blog series)-- let's hope Congress takes notice.  Antoine Marshall is a rising 3rd year law student at Wake Forest University. http://www.linkedin.com/pub/antoine-marshall/1a/267/148

The Marshall Plan:
(Disclaimer: This plan is constructed under the premise that I had full authority. I understand that it would be politically unfeasible to pass in our current legislature)

New Programs:

-          Health-Care Public Option
This proposal will involve passing the public option that was originally part of the House’s America’s Affordable Health Choices Act. The Public option was taken out of the final version of the bill but it creates a Medicare-type public insurance plan that individuals would have the option of buying into as part of the health care exchanges that will begin to operate in 2014.

Savings by 2020: $400 Billion

Additional Revenue:
-          Tax the Worldwide income of US Corporations as it is earned
Income earned abroad also may be taxed by the country in which it is earned. To prevent such double taxation, U.S. companies are allowed to claim the foreign tax credit, which reduces their U.S. taxes by the amount of any income and withholding taxes they have paid to foreign governments.

The foreign tax credit is subject to limits that are designed to ensure that the amount of credits taken does not exceed the amount of U.S. tax that would otherwise have been due. Those limits also are intended to prevent corporations from using foreign tax credits as a way to reduce taxes on income earned in the United States.

Most income earned by the foreign subsidiaries of U.S. corporations is not subject to U.S. taxation until it is repatriated in the form of dividends paid to the parent corporation.

Under this option, all income earned by the foreign subsidiaries of U.S. companies would be subject to U.S. taxes as it was earned, regardless of when it was repatriated. To prevent double taxation, foreign tax credits would still be allowed. For determining the limit on those credits, however, the U.S. parent corporation’s overhead expenses would no longer be allocated between domestic and foreign activities.
Revenue by 2020: $65.2 Billion

-          Financial Speculation Tax
Tax that is based off of a tax the United Kingdom has had for decades. A modest tax on financial transactions like trading stocks, options, futures and credit default swaps (0.25% on the sale or purchase of a share of stock).
Revenue by 2020: $2.1 Trillion 

-          Carbon Tax or Cap and Trade
There are generally two types of energy taxes in today’s discourse – a direct tax based on carbon or a “cap and trade” regime. A carbon tax would impose a fee based on the estimated amount of emissions released into the air.

A cap and trade solution sets a maximum on the amount of carbon allowed to be emitted, and then allow companies to buy and sell these pollution permits on an open market. If the government auctions – rather than freely distributes – initial permits, this regime would simulate a tax. The Congressional Budget Office estimates that either version could raise over $100 billion a year.
Revenue by 2020: $400 Billion 

-          Raise the wage cap for the Social Security tax to cover 90% of wage income
Currently the Social Security tax has a current cap on taxable wages of $106,800. This option would raise the cap to $180,000 by 2013
 Revenue by 2020: $877 Billion

-          Revive the Estate Tax
For the first time since the early 20th century there was no estate tax (also called the death tax) in 2010 (part of the 2001 Bush tax cuts). By going back to the Clinton-era levels of the estate tax $1 million dollars of any taxable estate would be exempted.

The rate would start at 18% and go all the way up to 55%. The 55% rate would begin at $3 million. A more modest proposal by Obama exempts the first $3.5 million from any taxable estate and all estates over $3.5 million would be taxed at a 45% rate. Ideally my proposal would lie somewhere between the two.
Revenue by 2020: $53 Billion

-          Millionaire Tax
The current top tax bracket starts around $375,000, this proposal that the House passed but the Senate did not, would create a new 5.4% surtax on income above $1 million.
Revenue by 2020: $61 Billion 

-          Allow the Bush Tax Cuts to Expire
Under this option, all of the tax cuts passed in 2001 and 2003 would be allowed to expire at the end of 2010, but the government would continue to “patch” the Alternative Minimum Tax (AMT) to prevent it from hitting middle-class families. The expiring provisions would include lower income tax rates, an expanded child tax credit, a new 10 percent tax bracket, lower capital gains rates, and marriage penalty relief.

Since the Marginal Rates Sunset of the Bush Tax Cuts are expected to expire in 2012 anyways this wouldn’t save any money, in fact by using the AMT it would raise costs by 2020 by $490 Billion. But to continue the Bush Tax Cuts would result in a debt of over $3.4 Trillion over the next 10 years

Stay Tuned for Part VI

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