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My Plan To Reduce the National Debt

Thursday, 10 Jan 2013 12:15 PM

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Following is a letter that I sent to the New York Congressional Delegation proposing a project to reduce the national debt by raising revenues of several trillion dollars over the next 10 years.

chuck-schumer.jpg
New York Sen. Chuck Schumer
(AP Photo)
These revenues would be placed in a lock box so they could only be used for that purpose. What do you think of the proposal?

January 3, 2013

The Honorable Charles E. Schumer
United States Senate
Washington, D.C. 20510

Dear Chuck:

First, let me congratulate you for your role in causing the Congress to enact the legislation on New Year's Day that made the necessary changes in the tax code that protect individuals earning up to $400,000 and married couples earning up to $450,000 from having their marginal tax rates go up while at the same time, increasing the marginal rate for those earning above those amounts.

What is disappointing is that while throughout last year everyone — the President and the Congress — was talking of a combined $4 trillion revenue increase and expense reduction package over a 10-year period, with expense cuts to be three times that of revenues, that didn't happen. The New York Post reported, "Indeed, according to the Congressional Budget Office, the package raises taxes by $620 billion while cutting spending by only $15 billion — a 41-1 ratio. Plus it adds $329 billion to the federal deficit in 2013, increasing it by $3.9 trillion over 10 years."

Simpson-Bowles provided a plan which would have saved $4 trillion over 10 years using the 3-to-1 formula of expense cuts over revenues. Regrettably, and for reasons that appear unfathomable, Simpson-Bowles was never accepted by either the President or the Congress.

I am suggesting to you that there are a number of ways to raise revenues that would, in my judgment, be very acceptable to the American public, both liberal and conservative. They are:
  1. Have Medicare use its volume purchasing advantage to purchase the drugs now provided the elderly. Also, have the government negotiate prices that drug companies can charge retail, as is done in Canada, where American-manufactured drugs can be purchased at costs up to 50 percent less than their price in the U.S. Billions would be saved annually.
  2. Reexamine every so-called non-profit corporation now exempt from paying taxes. Much of their money, while not given to shareholders by way of dividends, is distributed to the employees who draw huge salaries. In an article entitled "Tax-Exempt Firm Gets $600 Million Profit Flying First Class" that appeared in Bloomberg Markets Magazine authored by David Evans, there was a brilliant examination of the non-profits with this statement: "There are 1.63 million tax-exempt organizations in the U.S., according to the Urban Institute. Nonprofit charities reported revenue of $1.51 trillion in 2010 from donations, government grants and contracts. Zerbe says that the U.S. Treasury could collect tens of billions of dollars annually in taxes from nonprofits that make money essentially as for-profit companies." The article can be retrieved at www.bloomberg.com.
  3. Create a national stock transfer tax. New York City raised hundreds of millions of dollars with that tax, but had to give it up when the stock exchanges threatened to move. However, those exchanges, even if moving to London, would still — so far as sales involving Americans — be subject to the long arm of the I.R.S.
  4. Require all corporations retaining profits overseas to repatriate those monies within a reasonable time set by the I.R.S. or be subject to a 5 percent annual surcharge until repatriated.
There is the potential collection of up to $4 trillion in revenues over 10 years or more if these four proposals are implemented. My suggestion is that the New York Congressional Delegation take on the project in the new Congress of making these revenues available. I also suggest that you propose a lock box for these revenues to be used for only one purpose — reduction of the national debt now $16 trillion to increase, reported The New York Post, by $3.9 trillion over the next 10 years.

Edward Koch was the 105th mayor of New York City for three terms, from 1978 to 1989. He previously served for nine years as a congressman. Read more reports from Ed Koch — Click Here Now.

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