Deficit Panel: Something For Everyone To Hate!

There's something for every taxpayer to hate about the deficit panel's recent trial balloon, released earlier this week. I've taken the liberty to help out the commission, by drafting a sample letter that they might consider sending to US taxpayers. Here goes...

Dear Taxpayers,

We understand that you're all wrapped around the axle about our deficit reduction proposal. First of all, everyone take a deep, cleansing breath. You have to know that we basically threw a pound of pasta against the refrigerator to see what might stick.

Here's a quick rundown on our responses to your "feedback" (read: temper tantrums):

Social Security:

• Increase the full retirement age to 69 by 2075: Is anyone seriously worried about this one? We seemed to have gotten a rash of you-know-what from AARP and advocates for senior citizens, which frankly, represent the group least affected by this proposal. Even France has extended retirement ages, for goodness sakes--THE FRENCH! Our advice: suck it up.
• Change the Cost of Living Adjustment ("COLA") calculation: We weren't even going to tell you about this one, since none of you knows how we Mickey Mouse with CPI and COLA now. That said, we're going to push this one through. Our advice: suck it up.
• Raise threshold on SS payments: Quit your whining on this one--we're going to increase the amount on which we apply FICA taxes from the current $106,800 to something higher. We'll do it this to avoid means-testing benefits. If you want us to take that step, then all that's going to happen is a bunch of CPAs and investment folks will be working overtime to limit your income tax bracket in retirement with a bunch of costly products. Our advice: suck it up.

• Tort Reform: Who doesn't hate plaintiffs' lawyers, except their powerful lobbyists and the Democrats who are the recipients of all their money? We see this move as correcting the "oversight" (Democratic caving) from health care reform. Our advice: suck it up.
• Make You Pay More: Um, this is going to happen, either now or sometime soon. Our advice: suck it up.

• Limit mortgage interest deduction: Sorry for you folks on the coasts, but we're thinking that most people don't have mortgages more than $500K, so this was a no-brainer. Realtors, don't you dare tell us that this will mean the demise of the housing market--it didn't hurt the credit card industry when President Reagan signed the Tax Reform of 1986, which eliminated the deduction for personal interest, including interest on charge card purchase of consumer items. Still, we know that this idea has no chance of getting through, but it's a fun one to rock your world, isn't it? We might be able to limit the deductibility of state and local taxes (oops, sorry again to NY and CA residents!)
• Hike capital gains and dividend income taxes: Let's make this easy--this will effectively double taxes on investments for rich people. This is going to be a tough sell with the financial services lobby, but heck, everyone hates them still, right? Oh, except for all of the lawmakers who cashed those checks! Hmmm, maybe you need not worry about this one for a while, but eventually this is likely to rise. Our advice: suck it up.
• Limit child care/earned income tax credit: If we're going to whack the rich (see above), you out there in middle-income land are going to suffer too. Our advice: suck it up.

Summary:
All of you have said that you want us to address the deficit, but I guess you thought that was going to mean sacrifices for someone else. Guess what? We're all going to pay the price for the collective financial sins of the past two decades. Our advice: suck it up.

Fondly,

Your Bi-Partisan Deficit Commission

Jill Schlesinger

Jill Schlesinger, CFP® is the Emmy-nominated business analyst for CBS News. She covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." Prior to her second career at CBS, Jill spent 14 years as the co-owner and chief investment officer for an independent investment advisory firm. She began her career as a self-employed options trader on the Commodities Exchange of New York, following her graduation from Brown University.

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