Thinking Outside The Box On Taxes
I realize this tax deal has been done but CNN just reported that Moody's thinks it is a bad idea for our debt (makes sense) and I'm wondering how this helps cut the deficit everyone says we want to cut. How could we balance this equation since low taxes = growth + more debt + higher borrowing costs, leading to more deficits.
Why not make the tax cut dependent on cutting the deficit? Maybe it could go something like this...
2011: Tax cuts stay for everyone as we recover from the recession.
2012, 2013: If the deficit is below 3% of GDP all tax cuts stay. If 3%-5% half of the cuts stay. And if above 5% taxes go up to Clinton levels for everyone.
2014 and beyond: If the deficit is below 1% of GDP all tax cuts stay. If 1%-3% half of the cuts stay. And if above 3% taxes go up to Clinton levels for everyone.
Talk about an incentive to cut spending...
Can you imagine a congressman campaigning and saying, "I know you don't want your taxes to go up but we just couldn't cut SS, Medicare, Medicaid, Military or any number of discretionary programs enough to get under a 3% deficit".
Maybe it's just a Foolish idea?