Republican proposals for Medicare center around the use of a voucher system, where the government issues vouchers of predetermined value for the purchase of private health insurance. The idea is that a voucher system would simplify the amount the government disburses to Medicare recipients and would make long term cost analysis easier as fewer variable rates of expense are easier to account and track.
On the income side, Republicans would lower all marignal tax rates by 20% across all income levels. For those unfamiliar, the United States employs a progressive income tax, which taxes at an increased rate at higher levels of income accounting for deductions. As an example of how the tax is calculated see here. In 2011, the tax rates and income threasholds were thus:
A 20% reduction in these rates would mean that individuals earning less than $35,350/yr in gross annual income would incur no federal income tax, while those earning $35,351 and higher would only be subject to a maximum rate of 15%. Married couples filing their taxes jointly wouldn't pay tax on the first $70,700 of their gross annual income and individuals filing as Head of Household wouldn't pay tax on the first $47,350.
Republicans also want to repeal the Alternative Minimum Tax. The AMT is the second of two federal income taxes that U.S. wage-earners may be required to pay. According to U.S. tax code, a person must either pay the AMT or the Marginal rate based on whichever amount would be greater in accounting for possible exemptions. Overall, the AMT levies a fairly flat rate (though the percentage is considerably higher) and uses a predetermined amount for exemption based on income. The AMT was originally intended to target high income individuals as the rates on captial gains (which they're more likely to have) and regular income are higher, while the amout retained through exemptions is phased out to zero at the highest levels of income.
2012 AMT Tax Structure:
Lastly, Republicans want to cut corporate tax rates to a maximum of 25%. Similar to individual income taxes, corporate taxes in the U.S. are also progressive so higher levels of income are taxed at higher rates.
Article comments
1 - Glenn Contrarian
Problem is, the conservatives have never been able to answer this one nagging question: why is it that with the exception of certain OPEC nations, ALL first-world nations are socialized democracies with what the conservatives would think are economically-disastrous tax rates and regulation, whereas ALL of the many nations around the world which have small governments, low taxes, and little regulation are third-world nations?
If the economic structure of socialized democracies was SO bad, then they'd never have become first-world nations to begin with! And if small government, low taxes, and little regulation were the path to national prosperity, there's a whole lot of third-world nations who would first-world nations already.
But none of the conservatives have been able to answer this particular conundrum...not that it matters, because the nation's economy can go to hell in a handbasket as long as they get their way, they're in charge, and they get their money.
2 - Glenn Contrarian
And Alex -
Great article, for those of us who are not facts-and-figures challenged.
3 - Igor
That business about "...tax incentives will encourage new economic activity from private sector industries. " doesn't seem to work out at all, and it certainly hasn't the last few years as businesses are just banking their tax gifts so that the money goes dormant.
4 - Alexander J Smith III
Glenn
As always i greatly appreciate you taking the time to read and comment on my work. I really appreciate it
5 - Alexander J Smith III
Igor
Yeah that's one of the reasons I think that the Fed continues to expand its balance sheet. Ideally, its job is to create conditions that make investing attractive from the private sectors POV, but they aren't using the capital, like you pointed out they're just sitting on it and so the Fed keeps pumping liquidity into the economy to keep money flowing. Demand for it is out there, but it seems the federal government are the only ones really looking to capitalize on that demand
6 - Igor
IMO our entire tax break idea, which is little more than trying to bribe businesses to actually do business, is a failure. Take away ALL business tax breaks, create a sensible system of outright subsidies, like SBA, and finance too-big-for-private-money jobs outright, and vigorously enforce anti-monopoly laws to break up overgrown capital concentrations that are stifling entrepreneurship by small bussinessmen.
We've got to cut back overgrown sunset behemoths the way that a good gardener cuts back any wildly overgrown plant in his garden.
7 - Igor
The republicans basic economic idea is wrong: they wish to move more money into the hands of capitalists (they assume, I guess that those older wiser hands will better administer the money than the silly whim-driven masses).
But it is wrong. Demonstrably wrong. Economies prosper, or not, according to the demand created by the most numerous consumers, for the simple reason that their high Marginal Propensity To Spend gives them the highest Economic Multiplier. Every dollar they spend is echoed through the economy 3 or 4 times.