Location: Pantego, Texas, United States

Friday, July 15, 2011

Today President Obama said that you can't get to $2.7 trillion in spending reduction without increasing revenue. He mentioned two potential revenue enhancements; closing the tax loopholes on corporate jets and oil companies. (It is curious that the corporate jet loophole was part of the vaunted Obama stimulus package and the oil company loophole is depreciation and investment credits that all companies get; his problem with the oil companies seems to be that they make a lot of profit.) Closing the corporate jet accelerated depreciation loophole will generate about $300 million per year, and the oil company change would generate at most $4 billion per year. (Both of these estimates assume that the companies will nor change their behavior, something that Obama assumes, but is by no means certain.) At any rate, the most revenue generated by these changes would be $43 billion over 10 years, a rather paltry amount compared to the desired reduction of $2.7 trillion, or about 1.6%. The discussion has been that there should be a 3:1 split between budget cuts and revenue enhancements indicating that the revenue enhancement should be 25% of the spending reduction. Obama obviously has some other revenue enhancements in mind. Why doesn't he spell those out rather than talking about minor things that he assumes appeal to the masses because they are aimed at those he demonizes.


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