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This document consists of two slides (pages 401 and 402) from a presentation titled 'USA Inc. | What Might a Turnaround Expert Consider?' produced by KPCB (Kleiner Perkins). The slides discuss US economic policy, specifically mathematical illustrations regarding tax rate increases versus broadening the tax base to address budget deficits (referencing F2010 and F2019E). It analyzes policy options such as value-added taxes, carbon taxes, and reducing subsidies for housing and healthcare. The document bears a 'HOUSE_OVERSIGHT_021042' Bates stamp.
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Key Quotes (3)
"To eliminate F2010 deficits by increasing individual / corporate / payroll tax rates across-the-board would require +12 percentage points of tax rate increase (raising $1.4 trillion)"Source
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Quote #1
"Subsidies create incentives to consume more health insurance and housing – both account for 20% of GDP, vs. 11% in 1965"Source
HOUSE_OVERSIGHT_021042.jpg
Quote #2
"A carbon tax could raise some additional revenue to reduce the deficit, while encouraging sustainable economic development."Source
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Quote #3
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Illustrating the Revenue Tradeoffs –
Changing Tax Rates vs. Broadening the Tax Base
Changing Tax Rates vs. Broadening the Tax Base
Mathematical Illustrations*
1) To eliminate F2010 deficits by increasing individual / corporate / payroll tax
rates across-the-board would require +12 percentage points of tax rate increase
(raising $1.4 trillion) – and would likely damage economic growth? or
rates across-the-board would require +12 percentage points of tax rate increase
(raising $1.4 trillion) – and would likely damage economic growth? or
2) To eliminate primary budget deficit** by F2019E by increasing top two tiers of
income tax rates would require moving marginal rates to 72% / 77% from 33% /
35% – also likely to damage growth and encourage tax avoidance? or
income tax rates would require moving marginal rates to 72% / 77% from 33% /
35% – also likely to damage growth and encourage tax avoidance? or
3) Broadening tax base could require reducing ‘tax expenditures’ and subsidies,
e.g., limiting deductions and subsidies for housing & healthcare?
e.g., limiting deductions and subsidies for housing & healthcare?
Policy Options
1) A combination of somewhat higher rates and a broader tax base? and/or
2) Changing taxation of individual income to encourage saving / investment
rather than consumption (perhaps a value-added tax and/or carbon tax)? and/or
rather than consumption (perhaps a value-added tax and/or carbon tax)? and/or
3) Changing taxation of corporate income to reflect global competition?
Note: *The simple tax math presented here are pure mathematical illustrations – we simply calculated how big a broad-based tax rate increase (for
individual and corporate income, as well as payroll) would have to be for USA Inc. to financial break-even. These calculations are merely mechanical
illustrations and are not meant to portray realistic solutions. **Primary budget deficit is the budget deficit excluding net interest payments.
individual and corporate income, as well as payroll) would have to be for USA Inc. to financial break-even. These calculations are merely mechanical
illustrations and are not meant to portray realistic solutions. **Primary budget deficit is the budget deficit excluding net interest payments.
KP
CB www.kpcb.com
USA Inc. | What Might a Turnaround Expert Consider? 401
CB www.kpcb.com
USA Inc. | What Might a Turnaround Expert Consider? 401
Changing USA Inc.’s Tax System Could Help
Rebalance the Economy & Reallocate Resources
Rebalance the Economy & Reallocate Resources
• Though there would be adjustment costs, reducing subsidies and ‘tax
expenditures’ could broaden the tax base and collect more revenue, while
allowing income tax rates to stay low or go lower.
expenditures’ could broaden the tax base and collect more revenue, while
allowing income tax rates to stay low or go lower.
• The current system favors consumption, penalizes saving; a tax based on
consumption (or “value added”) could offset some of that penalty, though there
are risks and drawbacks.
consumption (or “value added”) could offset some of that penalty, though there
are risks and drawbacks.
• Subsidies create incentives to consume more health insurance and housing –
both account for 20% of GDP, vs. 11% in 1965¹ – and take resources from other
sectors like education, technology, infrastructure.
both account for 20% of GDP, vs. 11% in 1965¹ – and take resources from other
sectors like education, technology, infrastructure.
• A worldwide corporate tax system with a lower tax rate could reduce incentives
for companies to keep income offshore.
for companies to keep income offshore.
• A carbon tax could raise some additional revenue to reduce the deficit, while
encouraging sustainable economic development.
encouraging sustainable economic development.
KP
CB www.kpcb.com
Source: 1) per BEA and CMS.
USA Inc. | What Might a Turnaround Expert Consider? 402
CB www.kpcb.com
Source: 1) per BEA and CMS.
USA Inc. | What Might a Turnaround Expert Consider? 402
HOUSE_OVERSIGHT_021042
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