Just when you thought Congress would never solve its tax and spending problems, it has taken a bold step forward: It has suspended the laws of nature and arithmetic starting January 1, 2010. Just wait until you see what it has in mind:
Make 2010 Deaths Retroactive to 2009
Congress has left in place a law that will forgive estate tax for anyone who dies in 2010. Unfortunately, many decedents who would never have paid that tax will be hit with an additional capital gains tax. To solve this problem, congressional Democrats have declared their intent to make any death in 2010 retroactive to 2009. Of course, small business owners and farmers worth less than $10 billion will be allowed to defer death for an extended period. Republicans have objected, stating that they would make all past deaths prospective to 2010, thereby refunding all past estate taxes, since they are pro-life and Democrats are pro-death. They would also eliminate all future capital gains taxes, since that would increase revenues to government and probably make people want to live longer.
Reduce the Deficit by Giving Government Money Away Through 2010 Roth Conversions
Congress has decided to let taxpayers pay a few dollars of tax today to avoid paying hundreds of dollars of tax tomorrow, merely by allowing them to shift their retirement assets from traditional tax-deferred accounts to Roth-style IRAs. This would reduce the budget deficit for the near term, although it would cost the Treasury tens of billions of dollars over the long run. Democrats insist the long-term doesn’t matter because we don’t know the future…and since we don’t know the future, we can continue to give as much of it away as we want. Republicans also love the Roth rollover, but for a different reason. They believe that with a bit of deductible borrowing, Roth accounts can generate negative tax rates on capital income, which will actually increase long-term government revenues. Word has it that bank and hedge fund managers have figured out how to put highly leveraged “net equity” investments into Roth accounts that will generate billions of dollars of nontaxable earnings. This will create a stronger banking and financial sector.
Spend Medicare Savings Twice Starting in 2010
In their health bills, congressional, Democrats have attempted to generate some saving in Medicare to help pay for expanded benefits for the nonelderly. Unfortunately, the hospital insurance (HI) portion of Medicare cannot pay out money unless it resides in its trust fund, which is running dry. Therefore, Medicare “savings” can now be used to fund other Medicare benefits and forestall other reforms. Democrats say, therefore that there will be no cut in net “guaranteed” benefits for the elderly. But Republicans object, insisting government should keep its hands off of Medicare, and that no Medicare saving should be spent on the elderly or the non-elderly or on deficit reduction. Thus, GOP candidates will run on their new platform: No elderly person anywhere should pay for anything for anyone else.
Unite Keynesians and Supply-siders in 2010
Although deficits are at levels unseen since World War II,, Democrats assure us that deficits don’t matter as long as we are in a recession, coming out of a recession, or in danger of moving into another one. Thus, in any circumstance, the best time to deal with the deficit is after the next election. Besides, stimulus spending pays for itself by increasing incomes and revenues in the long run. Republicans object. They say we need lower taxes, not more spending. Lower tax rates pay for themselves by increasing incomes and revenues in the long run. And, even if they don’t, deficits don’t matter anyway.
And you wondered whether Congress would deal creatively with our problems!
