NY Times: You Fix the Budget

The New York Times has a cool interactive graphic, Budget Puzzle: You Fix the Budget (printable version here):

Today, you’re in charge of the nation’s finances. Some of your options have more short-term savings and some have more long-term savings. When you have closed the budget gaps for both 2015 and 2030, you are done. Make your own plan, then share it online.

Below the fold are the 15 tax options:

Existing taxes

Modifying estate taxes: choose one or none

• The Lincoln-Kyl proposal. For the first time since early in the 20th century, there is no estate tax in 2010 – a feature of the 2001 Bush tax cut. (The tax is schedule to return in 2011, but this exercise assumes the cut will continue.) A proposal by Senators Jon Kyl, an Arizona Republican, and Blanche Lincoln, an Arkansas Democrat, is the most moderate of the estate-tax options here. It would exempt the first $5 million from any taxable estate and index this level to inflation over time. Any estate value above $5 million would be taxed at a 35 percent rate. $12 billion (2015); $20 billion (2030).
• President Obama's proposal. President Obama's proposal is more agressive than Kyl-Lincoln, but would still cut the estate tax when compared to the Clinton years. The Obama plan would exempt the first $3.5 million from any taxable estate. Any estate above $3.5 million would be taxed at a 45 percent rate. These are the same provisions that applied in 2009, as part of the 2001 Bush tax cut. $24 billion (2015); $45 billion (2030).
• Return the estate tax to Clinton-era levels. Under President Bill Clinton, the estate tax exempted $1 million from any taxable estate. This level would not grow with inflation over time, subjecting more estates to the tax. The rate would start at 18 percent and climb to 55 percent, as it did in the 1990s. The 55 percent rate would begin at $3 million. If Congress takes no action, this would become law on Jan. 1, 2011. $50 billion (2015); $104 billion (2030).

Investment taxes: Choose one or none

• President Obama's proposal. Capital gains and dividends are now untaxed for couples with incomes below $68,000. For everyone else, the tax rate is 15 percent. This option, proposed by President Obama, would raise the rate to 20 percent for households making roughly $250,000 a year and above. $10 billion (2015); $24 billion (2030).
• Return rates to Clinton-era levels. This option would return rates to their level under President Bill Clinton: 10 percent on capital gains for low-income households and 20 percent for everyone else, while dividends would again be taxed at the same rate as ordinary income. $32 billion (2015); $46 billion (2030).
 

The Bush Tax Cuts

• Allow expiration for income above $250,000 a year. This option would allow the expiration, on Jan. 1, of the Bush tax cuts for the top 2 percent or so of households on the income distribution – those making $250,000 or more. On average, the change would equal about 2 percent of a given household’s pretax income. $54 billion (2015); $115 billion (2030).
• Allow expiration for income below $250,000 a year. This option would allow the expiration, on Jan. 1, of the Bush tax cuts for the bottom 98 percent or so of households on the income distribution – those making $250,000 or less. On average, the change would equal about 2 percent of a given household’s pretax income. $172 billion (2015); $252 billion (2030).
• Payroll tax: Subject some incomes above $106,000 to tax. When the payroll tax – which finances Social Security and Medicare – was created, it covered 90 percent of all income. Today, with a ceiling at $106,800, it covers closer to 80 percent. This option would gradually raise the ceiling, until 90 percent of income was again subject to the tax. $50 billion (2015); $100 billion (2030).

New Taxes and Tax Reform

• Millionaire's tax on income above $1 million. Currently, the top tax brackets starts at about $375,000. In past decades, it started at much higher income level, after inflation is taken into account. This option – which the House passed last year but the Senate did not – would create a new 5.4 percent surtax on income above $1 million. $50 billion (2015); $95 billion (2030).

Closing tax loopholes: choose one or none

• Eliminate loopholes, reduce rates (Bowles-Simpson plan). The deficit commission proposed a series of tax overhaul plans. Each one would reduce tax breaks for companies and individuals, while lowering tax rates. On the whole, the plans would raise revenue. One plan would cut all tax breaks other than the child and earned-income tax credits and those for mortgages, health and retirement benefits. The corporate tax would then be cut to 28 percent, from 35 percent, while individual tax rates would be cut for all brackets too. $75 billion (2015); $175 billion (2030).
• Eliminate loopholes, but keep taxes slightly higher. This option is the same as the previous one – except that tax rates would be cut less, raising more revenue to reduce the deficit. $136 billion (2015); $315 billion (2030).
• Reduce mortgage-interest deduction by converting to credit. The benefits of the mortgage-interest deduction (and several other tax breaks) flow mostly to high-income households – because they tend to have larger mortgages and have marginal income-tax rates. This option would reduce the value of some of those breaks to high-income households. $25 billion (2015); $54 billion (2030).
• National sales tax. Nearly every other rich country has a tax on consumption, also known as a value-added tax or national sales tax. This option would impose a 5 percent consumption tax, exempting education, housing and charitable giving. $41 billion (2015); $281 billion (2030).
• Carbon tax. This option would tax carbon emissions, starting at $23 per ton of CO2. The tax rate would increase at a constant annual rate of 5.8 percent, from 2012 through 2050. $40 billion (2015); $71 billion (2030).
• Bank Tax. This option would tax banks based on the size of their holdings and the perceived riskiness of those holdings. Larger, riskier banks would pay more tax, both to discourage them from taking big risks and to help cover the costs of future financial crises. $73 billion (2015); $103 billion (2030).

(Hat Tip: Rebecca Kysar.)