How far are you willing to sacrifice for the financial good of the country? In the last year we have heard a lot about the national debt and the annual deficit (yes, there is a difference between the two). The debt was the main driver of the 2010 elections, many new members of Congress won on the issue that the government is too big and are calling for spending cuts. After the election, The House GOP immediately announced that they would cut $100 billion from the current fiscal year budget, which was never proposed because of legislative holds and other political BS. There are three bills in the House Budget Committee that will cut spending, but the total cut is only $32 Billion, a little short of the target. Some would say it is a start, but it is like paying the bookie $32 when you owe him $100, he will not let you slide without a slight injury. My problem is that we all know it is a problem, but only one party has done actually real things to try to solve, not so quick GOP and do not give yourself a high-five Dems. If we (the citizens) are going to get serious about solving the national debt, or at the very least making a health dent in it quickly, I have an option: suspend individual and corporate income tax refunds for five years.
Yes, no income tax refund for five years. Okay before you go scream that I am crazy or that is outrageous, or think I am talking tax increase (which it is not); take a deep breath, according to the IRS data in tax year 2008, $324 Billion was paid in individual tax refunds on 111 million individual tax returns. To give you a quick comparison, the total proposed budget for FY 2009 for non-security discretionary spending (agencies like Labor, HHS, HUD, Education and about 21 others) was $437 Billion, that is a difference of just over $110 Billion; Medicare is $425 Billion.
The total number of individual tax returns for tax year 2008 was just over 144 million returns. 77% of individual tax rates led to a refund on average of $2,902.
So, hear me out, I propose that you keep the credit which for many of us are vital to lowering our tax burden and clearly help the economy. However, once you get to zero, you are at zero no refund. The refund is not really overage of what you paid in withholding tax through the year, but the fact you get refundable credits or had other deductions, like the mortgage interest deduction, that lower your tax burden; we have been lucky enough to get the remainder as our tax refund. Can we sacrifice our remainder to pay down the debt?
My proposal is simple, suspend the individual and corporate tax refunds for five years, just five years to take effect for tax year 2012 (so no refund in April 2013). The credits and deductions still count to lowering individual tax burden. If you owe after doing your tax return you still owe, if you are at zero, you at zero. Mandate that the remainder of about $300 Billion (Based on the current projection rates) be used to pay down the national debt. Total reduction of national debt is $1.5 Trillion over five years.
I know this is a tough choice, I know after doing my first itemized tax return that I really like the refund total, but if we are going to seriously address this crisis then we need to open up all options.
Do we have the stomach for sacrifice?
