The Tax Trial Balloon Floats Again

Here are a couple of items that are at first glance only semi-related yet when you think about them in a little more detail, they’re critically intertwined.

First, Treasury Secretary Timothy Geithner on ABC today was once again floating the new taxes trial balloon.


“We’re going to have to look at – we’re going to have to do what’s necessary,” Geithner told ABC’s George Stephanopoulos, host of “This Week.”

“Remember the critical thing is people understand that when we have recovery established, led by the private sector, then we have to bring these deficits down very dramatically. We have to bring them down to a level where the amount we’re borrowing from the world is stable at a reasonable level. And that’s going to require some very hard choices. And we’re going to have to do that in a way that does not add unfairly to the burdens that the average American already faces.”

Pressed on whether he was ruling out new revenues, Geithner said: “[W]e’re not at the point yet where we’re going to make a judgment about what it’s going to take. … I think what the country needs to do is understand we’re going to have to do what it takes, we’re going to do what’s necessary.”

This isn’t the first time we’ve heard this discussion and it won’t be the last. It’s pretty apparent that the current tax system is not generating the volume of revenues that the country needs to dig itself out of the hole it’s in let alone take on additional programs like health care reform. But we’ll come back to that in a second.

The second item that caught my eye was an editorial in the New York Times concerning health care which was surprising for its pragmatism. Two interesting points were made.

First, rather than trying to force massive changes and reforms into the entire health care system as part of the reform package, Medicare should be used as the testing ground. A variety of ideas both big and small should be experimented with within that system and those that prove viable brought forward to the larger system.

Second, the Times came out in favor of taxing employer contributions to health care plans. They couldn’t quite bring themselves to the point of recommending an across the board tax imposition, rather they recommended a tax on expensive plans. Their rationale for the tax — forcing employees to recognize the costs of the benefit and inducing them to work to control those costs — nevertheless argues in favor of a broad based tax on benefits.

I hope you can see where Geithner and the Times come together. It’s obviously on the tax issue. Ideally, one would recognize the revenue problem and sit down and draw up a new tax regime that incorporated enough revenue to service exixting and plannned expenditures. Once a tax scheme sufficient to service those needs was in place, then you would craft health care plan and whatever else was anticipated to operate within those revenue constraints.

We don’t live in that ideal world. Actually, we do it backwards by enabling programs that the citizenry demands and comes to count on and then telling them that they now need to buck up and pay for what they’rer getting. Human nature probably wouldn’t let us do it any other way. So, the trick is to devise the structure that we are going to have to eventually move to in a manner that does the least damage.

I’m not an advocate of higher taxes but I am a realist and that part of me acknowledges that I have to concede that the government is going to take a higher percentage of revenues from the economy than they have historically. Given that admission, the point becomes one of lobbying for the most efficient system possible, and one that will actually raise the revenues that it proposes. The discussion needs to be joined not ignored.

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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3 Comments on The Tax Trial Balloon Floats Again

  1. You’ve got it completely bass ackwards Mr. “I’m not an advocate of higher taxes but…”

    No buts. Period. No higher taxes. Period. The government doesn’t ‘take revenues from the economy.’ Revenues are taxes. Taxes are taken from people.

    It’s ‘pretty apparent’ that the spending side of the federal government is obscenely out of whack with the volume of revenues generated by the current tax system.

    You cook up a new taxing scheme to generate yet more revenue and the spending side will invariably increase as well. Handing more money over to the federal government is like handing a crack addict a ten dollar bill, and thinking the crack addict will spend it on food.

    Now go collect your fifty cents from Obama for posting your more-taxes drivel — and be sure to pay taxes on it.

  2. A pay for outcome / value payment system, key to the deficit-neutral, might be capable of bringing all groups together.

    Supporters of the agreement say it could save the Medicare System more than $100 billion a year and ‘improve’ care, that means more than $1trillian over a decade, and virtually needs no other resources including tax on the wealthiest. (Please visit for detailed infos).

    As much as 30 percent of all health-care spending in the U.S. -some $700 billion a year- may be wasted on tests and treatments that do not improve the health of the recipients,” Thus the remaining $239 billions over a decade do not matter. Supposedly even the conservative number of such savings might be able to meet the goal.

    Dr. Armadio at Mayo clinic says, “If we got rid of that stuff, we save a third of all that we spend and that is 2.5 trillion dollars on health care. A third of that and that is 700 billion dollars a year. That covers a lot of uninsured people.”

    Apparently, just in case of the difference between the estimate and result, or the worst case of scenarios, Obama officials may have made a statement taxes may rise to pay health care.


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