National debt solutions present a taxing problem
Shedding debt is a hot topic these days.
It's an especially popular debate brewing among federal lawmakers, who are sparring over the plan President Barack Obama released earlier this week that cuts about $3 trillion of the nation's debt over the next decade.
The plan includes cuts to Medicare, Medicaid, eliminating tax loopholes, scaling back spending on wars in the Middle East, savings on interest and embracing a theme from one of the world's most prominent billionaires.
According to a CNN.com story that breaks down the plan, Obama wants to cut $248 billion from Medicare by reducing overpayments in the system and $72 billion from Medicaid and other health programs.
The plan calls for generating $1.5 trillion in tax revenue through eliminating some of the Bush-era tax cuts for high-income households, capping the value of itemized deductions for those same households and closing tax loopholes.
Obama's plan also calls for $1.1 trillion savings by scaling back spending in Iraq and Afghanistan and interest savings of around $430 billion, according to the story.
Also in Obama's debt-cutting blueprint is the Buffett Rule, named after billionaire Warren Buffett. It calls for people making more than $1 million to pay a higher percentage of their income in federal income and payroll taxes.
"I understand why he's doing what he's doing because we live in the world of politics," said Dennis Hoffman, director of the L. William Seidman Research Institute at the W.P. Carey School of Business at Arizona State University.
Hoffman said he wants to see everything on the table and let taxpayers decide how they want to tackle the debt and choose what they're willing to pay for.
"We're going to have to have everybody chip in a little bit, not just target millionaires," he said. "I would have everybody chip in according to their means."
Increasing taxes 1 percent across the board would mean everybody pays more, according to Hoffman.
"Everybody will have a little skin in this game," he said. "I think that's where the plan falls short."
While Hoffman acknowledges that his plan isn't "politically popular" because it asks everyone to sacrifice something, he argues that's where the nation is at this point.
Hoffman surmises Obama would argue that since poor people will bear the brunt of the cuts, high-income people must bare the brunt of tax increases.
"I think he's trying to convey this notion that well-to-do people don't pay any taxes when in fact the data suggests that well-to-do folks pay the vast majority of the taxes and lower-income people pay very little," he said.
Matt Holdsworth, a certified public accountant and the owner of Holdsworth & Co. in Prescott, said Obama's plan represents a rising tide of taxes for wealthy families.
While Obama argues that upper income Americans must pay their fair share, Holdsworth cited data from the non-partisan Tax Policy Center showing that households making more than $1 million this year will pay on average 29.1 percent of their income to federal taxes.
A household with an annual income between $50,000 to $70,000 will pay 15 percent of its income in federal taxes.
When asked if it's a good plan or not, Holdsworth said it depends which side of the fence taxpayers sit on.
"My opinion is that higher taxes will continue the trend of companies and high-income earners to offshore their activities and assets, which ultimately is a bad thing for our economy," he said.