passage of the fiscal cliff build with donald williamson. then thomas schatz will look at what comes in the fiscal cliff legislation. >> "washington journal" is next . >> good morning and welcome to "washington journal." members of congress are back in their home districts. the house and senate are not in session. that does not mean the debate has stopped. we will like to hear from you. here are the numbers to call.

you can also find us online. end us a tweet to [video clip http://twitter.com/cspanwj. also e-mail us at journal@c- span.org. here's a headline from "the new york time.s." " --

wall street journal" -- the hill has a recent story -- this is from last week. the house speaker prepare we would like to hear what you think.

to give us some context, let us listen to what house minority leader -- senate minority leader mitch mcconnell said yesterday on nbc's "meet the press." >> we have to use leverage and congress to get the president to deal with our excessive spending. what the strategy should be is we should be doing something about the problem. >> there are additional problems that flow from that. after the debt ceiling was resolved in summer 2011, amerco's are grading was -- america's federating list downgradined. i understand your views about spending.

how do you for so spending cuts? the president said we will not negotiate over increasing the debt ceiling. you say despite what the business community thinks, you may have to push it to the brink again. >> the biggest problem confronting the country is excessive spending. when will we deal with it? we have watched the government explode over the last four years. we have dealt with the revenue issue. will the president lead? why should we have to bring him to the table whe ? >> senator mitch mcconnell on nbc's "meet the press." should spending be tied to an increase on the debt limit? cited a poller'

that cited 72% of respondents -- what do you think? kevin is from south carolina. from new york.eve independent. guest: i am a funny person. i am in the green party i voted conservative. i have been on disability for 38 years. iwatch all of the committee hearings on c-span.

i would take the new cost of living cut and offer something to the republicans like no capital gains tax. they are always talking about growth. >> here is a facebook, and. jimmy writes -- join the conversation on facebook. look for c-span. caller: we have to cut spending. it is driving the rest of the country into dirt. washington has no clue what is going on 50 miles from the capital. it is sad what is happening.

there are so many closed businesses and people out of work. be government has distorted acres. -- figures. they have to cut everyone who works for the federal government so they understand they are servants of the americans, not the other way around. if they start doing away with some of these departments that do nothing and make growth and possible in this country. we must wake up. host: are you concerned about the debt limit? there has been some enabling of the accounting so we we have more time before we hit that limit. caller: the government is spending money faster than they had the authority to borrow. we are going to have to make good for the money we have spent. in the future, we have to get the percentage of the gdp that

is spent on government down to a reasonable level. it is growing .25% under obama. -- 25% under obama. that is an unsustainable level. it is choking the private sector of this country. >> president obama has vowed not to negotiate over the debt ceiling again. we hear from minority leader nancy pelosi. the congresswoman from california. she was on "face the nation." >> speaker boehner says we need to match every dollar that goes to raising the debt ceiling.

we need to match every dollar that goes into raising the debt ceiling with at least one dollar spending cuts. would you support cuts that high? >> these two things should not be related. we should subject every dollar we spend to the harshest scrutiny. if the taxpayer getting his or her dollars worth for that spending? that is a judgment we have to make. as we make cuts to reduce spending. having nothing to do with whether the full faith and credit of the us should be jeopardized. resulted in the downgrade of our rating. it is a fundamental discussion. should we cut spending to raise

the debt ceiling? it sounds logical. the debt ceiling is about spending that has already occurred. stop buying stuff so you do not have teacher bills. we have to pay the bills that have been incurred. if you want to say cut spending for what we do next, fine. you do not tie it the debt ceiling. >> should spending be tied to an increase on the debt limit? a tweet -- tom, arlington, texas, independent. caller: it is not so much what the government buys. it is how much the government pays for what they buys. .

one common machine gun is $37 apiece. another is $47 apiece. i've thousand dollars apiece for assault rifles. maintenance cost of airplanes. who will pay that much money? host: how would you change things? caller: gets new vendors. more companies can manufacture stuff. nobody can build submarines for us other than general dynamics.

they are building seven new destroyers at $7 billion apiece. host: what do you think about tying it to the limit in the debt limit increase? should we not increase the debt limit unless spending is curved? caller: yes, that would be prudent. >> cyndee wright in -- cindy writes in -- share your comments on twitter at http://twitter.com/cspanwj. stephen moore has a profile of house speaker john boehner in " the wall street journal." he writes --

randy, michigan, democrat. should a debt limit increase be tied to a cut in spending? caller: the debate is to be contingents -- we should have

this as a debate for future spending. you cannot not pay the bills you have ari spent. leaready spent. if you want to go forward with a good debate and one that maybe we gentlemen, we will do that. tying it to what we have already paid is silly. it is not sound. these gentlemen have been on a school board. it is nice to have your ideas. and you look at the facts, you do not get to play. facts are facts. it is fine to do that for the feature. we do not have a government like one in my house. i do not have 100,000 people

added every month to my home ike we do by people being born. there is a lot of leeway. >> from twitter -- we heard from the house minority leader. her picture is in the front page of the washington time with two stories about congress and the economy. charlie, florida, republican.

caller: it is a simple problem. everyone is talking around it. the democrats said we spent the money, we have to pay it. the republicans should not interfere. the republicans do not have a choice. we have a serious debt. the senate has not forth a budget. the obama administration put a budget out. they got one democrat vote. we have a problem. the but he seems to address it. republicans are getting vindicated for their interference.

where will this go other than bankruptcy unless we do something now? host: gail, chicago illinois, independent. caller: our economy is trying to get better. it is in a terrible situation. congress does not, especially republicans, they should not be standing in the way of rescuing our economy. i am against all of this debt ceiling business. i am against all of these cuts. the republicans are not showing

the country any type of leadership in terms of helping to get our economy back on track. host: what would you do about spending? do you have concerns about overspending? someone to see the budget curbed. is there any other leverage other than fighting over the debt limit? caller: the republicans did not say anything when george w. bush raised the spending. he raised it over $4 trillion. under obama, it is less than $2 trillion. the republicans did not say anything. congress needs to take care of the people. there are over three hundred 30 million people in this country.

we are not even -- congress is showing us they do not care. host: a couple of the stories in the news. here is this from the associated press. -- president obama will nominate john brennan. this will be announced at an event this afternoon. he is nominating chuck hagel as his next defense secretary. both must be confirmed by the senate. obama considered brennan for the top cia job in 2008. there were questions about his connection to enhance

interrogation techniques. the associated press says brandy knight involvement -- brennan denied involvement. chuck hagel will be nominated as defense secretary today. here is that story from "u.s. today." this is seen as controversial. president obama's choice of chuck hagel to leave the defense department likely size of a contentious nomination fight in the senate. this came up yesterday in a

sunday talk show. senator lindsey graham addressed it on cnn. >> chuck hagel if confirmed to be secretary of defense would be the most antagonistic secretary of defense for the state of israel in the nations history. he has said you should negotiate with iran. sanctions will not work. israel should negotiate with hamas. he also is one of 12 senators who refused to sign a letter with the european union to designate hezbollah as a terrorist organization. he has severed his ties with the republican party. this is an in-your-face nomination by the president. i do not know what his management experience is regarding the pentagon. it is a controversial choice. the second term of obama will

be an in-your-face term. i will not talk to you about the debt ceiling. here is my secretary of defense nominee. >> senator graham on cnn yesterday. the headline in "the wall str eet ounjournal." -- --"ysusa today" here is an ad in "the washington post" --

what do you think about spending and whether it should be tied to a debt limit increase? that is our question for you this morning. john, california, republican. caller: the debt ceiling should be frozen. c-span and any other public speaker on the airways should make it clear that the debt of the united states will not go into default because the country collects 200 billion in taxes and the debt payment is 40 billion. how would you prioritize any remaining of the $170 billion?

host: how do you think this battle will go down? caller: the republicans need to stick to their guns. vote to not increase the debt limit. engage the public to prioritize spending. social security should be first. the payment to support the injured veterans and any other priorities. there will be $170 billion per month left to do that. let us take a look at the debt clock. this tracks the us national debt and federal spending. you can see the debt limit. carlton, kentucky, democrat. caller: the thing about the debt ceiling and spending, what congress needs to do is start

working out a bill for jobs. you get people back to work and you bring in more revenue and taxes. it would increase the revenue. you have less spending. you would not have to -- the deficit is automatic. it should be used to pay the government's bills, which are our bills. we should not be downgraded again. they are using that as leverage as social security, medicare, medicaid are not entitlements. people pay into that. i paid into it. i worked 50 years. i paid into it. it should not be part of any

plan to cut entitlements. they are not entitlements. host: bill, twitter -- we have a poll on our c-span facebook page axin asking you if spending should be tied to the debt limit increase. so far, the no's are in the lead. it is one comment on facebook -- rick, virginia, independent. caller: for eight years of bush and dick cheney said we did not have to worry about the deficit. they say taxing is off the table because they have a tax on the rich.

what happened to these companies that pay zero dollars and taxes? we take it out on the middle class to cut them from spending. they will not pass the bill we have on jobs or infrastructure, which since we are at war in afghanistan, the stuff the republicans are doing for political partisanship. espionage should be looked at. if you will try to downgrade our country. they are making a profit either way because of inside trading. raise the senators paid. they have not done anything. if i do not do my job, i do not get paid. why should they get paid? take the money from the lobbyists. put it toward the deficit. there are a lot of ways we can reduce the deficit instead of

making the poor people pay so the rich can get their entitlements. it does not make sense to me. this is a great country. i have certain of this country. we should not make the poor and handicap have to deal with it. if we do not tighten up our infrastructure, our education. we are 25th in math. it is unreal. where do they think we will grow if we have nothing to show? we have idiots in congress. there is more greek than anything else. host: you mentioned the republican position on future taxes. here is what the washington post says --

this is from abc's this week with george stephanopoulos. --nator mcconnell said jen, maryland, democrat. what do you think about tidying spending to a debt limit increase? caller: i do not think we have the correct information to make that decision. the us government does not have a rational accounting system. if we buy a house, we fund it with debt over time. we borrow.

in the us, if we build a road, we pay out-of-pocket cash. we have an accounting system that treated infrastructure and associated the cost of that with the debt. where are we? are we spending current s?penses >> we do not kno we do not know. host: do you think that is likely to happen? what would you do? what would you practically do to change things? caller: i would try to get that type of accounting system in place or do the now exists -- analysis that says 50% of our

nding is for lontg-term. let us understand how we are spending our money. compare it with other nations and with our spending and revenue over time. a balanced approach is required. we must do this or that. we must compromise. that is what politicians are therefore. politicians on either side are saying, this is the only way. that is not good. host: harry, west virginia, republican. caller: who are these people?

they were elected to do a job. they put their pants on just like the rest of us. who are they? we hold these people into high regards -- in too high regards for what they are doing for this country. i need to bring this people down to this level so they understand what is going on in this country and not worry about who will be the next president. we have got a president. he should do his job as well as the rest that are in washington. i do not know why people hold these people so high above everybody else. who can take a $218 million a day vacation or a boat ride in this country unless you are a dr. or lawyer? then it will be a short

vacation. who can do that? where do they think this money comes from? it doesn't just come up out of the ground. as far as the debt ceiling is concerned, yes, it should be tied together. if we do not quit spending, we will not have anything left to spend. --ry, twitter a different perspective from twitter -- let us hear from william, virginia, has to say. caller: i consider myself an

independent. i used to be in the cracked and republican. dax i used to be a democrat and independent. they are crooks. they have spent trillions in places like santerre, getting tax from those countries. mpanisees. a new the companies were going out of business. they spend trillions of dollars overseas. we have not won a war since the korean war. nding all of this mo ney and making all of this country's mad at us fighting wars we do nothey do not want. cannot afford to write everyone else's wars. who will pay these trillions of

dollars of debt the country is an? not our great great grandchildren. host: you talked about afghanistan. here is a story from the washington post this morning. sovereignty is among one of the chief issues the afghan leader plans to us discuss with president obama. hillary clinton plans to return to work today. this is from the huffington post and were terse. it says --

there are nearly a dozen weavin meetings at the white ho. one meeting will include leon panetta and tom donnellan. another story in the international press. assad is defiant, the leader of syria. he says he will stay put.

another story in the news. hurricane sandy. a headline in the washington times. senator reid says -- the story is in nola.com.

our question for you this morning is whether spending should be tied to a debt limit increase. should there be a refusal to increase the debt limit until spending as cut? lauren, baltimore, democrat. caller: here is my problem. if there was not spending, there would not be a debt limit. why should there be a question concerning the issue? in terms of governmental spending, i am not sure if very many are aware that government officials are making 2, 3, and

four times as much as the average individual when they are using the numbers between 250,000 dollars and 400 thousand dollars. these government officials work six months out of the year. there are getting four-time -- full-time pay, which is four or five or six times more than the average individual. those are the same individuals who are caulking -- talking about government spending. the average individual is living paycheck to paycheck. even if you are in a good position and you are pulling down a hundred 50 thousand

dollars, for the average individual, that is good money. these guys are not only getting that close that, they are getting kicked back's. they getting lobby money. they are living way beyond the american interest. how about they take their salaries and cut them down to 100 $25,000 per year? let us look at comments from facebook. we will be talking about taxes later on. here is what scott says -- all of this conversation is happening on our facebook page on c-span. we have a poll asking you

whether you think there should be a tie between the debt limit increase in spending. ahead., the no's are robert, utah, republican. caller: it says what the people are thinking. why would we discussed something like this? there is no way you can live in the red the way that we are doing. i hear your callers. they are muddying up the water with things that have no relevance to what the question is. the question is the survival of the united states of america as a solvent and great nation.

we cannot continue spending what we do not have. those who hold the debt, and many of them forward -- for rent, are looking to us as a leech nation. our interest rates are low. it is not costing the government a lot to finance the debt. this contains so quickly. we will have to recycle this debt at higher interest rates. host: go ahead. caller: will the us survive as a sovereign nation? the rest of the things that are going on on this talk show have nothing to do with the question. some have said we should not hold the debt limit hostage. they should not be tied

together. the money is spent. where do you draw the line? caller: stop the increase in the size of the federal government. the reason there is no budget necessary is because the government increases from five percent to 10% each year. they do not need a budget. it keeps going up. revenue is not going up. how can the spending bill up? stop growth of government. you do not it get larger. i am 75 years old. i live on social security. if they have to take part of my social security to save this nation, i am willing. host: sandra, democrats, california. caller: i do not believe that

there should be any spending. pay our bills so we can get a downgrade credit rating so it makes us harder to borrow money in the future. that does not make sense. i am against it. we should have gone off the fiscal cliff. let the sequester go through. if the republicans want to hold us hostage over our credit, let them do it so we can vote them out next time. host: sandra, republican, utah says spending has to stop. what do you think about that? caller: social security and medicare are not causing the death the kid -- deficit. ti iit is the wars.

they are being reduced by taking troops out. we have millions of contractors that was a trillion dollars under george bush. we have to get rid of it. we have to rebuild our spending. no one on the republican side is talking about this. host: facebook -- twitter -- you can share your comments with us on twitter. this tweeter writes --

thank you for your comments and call so far. coming up, we will talk about how the fiscal cliff affects your tax bill with donald williamson. also, another angle of the fiscal cliff agreement with special interest provisions added. we will be right back. >> cybersecurity is the top priority because of its national security implications. congress failed to reach an agreement on cybersecurity. they are far apart.

this industry is opposed to cybersecurity stances. hot issue is unlicensed spectrum that powers wi-fi in the other devices the tech sector is coming up with. >> net neutrality could be a big issue. the d.c. is considering verizon's challenge to the fcc's rules. it is unclear how the court will rule. there are indications that the dc circuit has been scar skeptil of the fcc's authority. >> tonight on the communications at eight: 00 on c-span2. entries are dueo industrie

friday,. january 18. for details, got to cstudent cam.org. inues.ngton journal" contunr >> donald williamson is the executive director of the kogod tax center at american university. >> the alternative minimum tax retroactively expired. avery activity increased in the extinction. the other change was the basic change in the rates. that only applies to the higher income americans. >> here is a story from "time"

magazine == -- >> if you fill out your return, there is a form in which you recalculate your entire tax. one of the elements is an exemption. it was scheduled to be $45,000 for 2012. congress reenacted what had been the exemption which was 75,000. that is for a married couple. millions of people will not have to pay that tax in 2012. >> donald williamson is a certified public accountant. the payroll tax holiday ended with the fiscal cliff deal. americans received two percent

more taken out of their paychecks. who will it affect? >> that will start right away. the changes have to be made no later than february 15. it is in everyone's interests that it be done as soon as possible. an extra two percent will have to be taken out. they are worth 6.2% be taken out february pay. an extra two percent will be taken out of february pay. >> there are bigger changes for those making over 400,000 dollars or couples making over $450,000. >> the rates will change.

it will be 39.6%. in 2013, there was an increase in the tax on investment incomes. >> here are numbers on the u.s. senate. >> the payroll tax surcharge is 8.9% tax on paychecks. if your adjusted gross income exceeds $200,000.

>> do taxes get easier? >> no. the preparation of our tax returns will be more complicated. they will be more complicated as they have every year. >> if you have questions on the changes part of the fiscal cliff law, here is the number to call. we have been talking about things that will happen in 2013. is there anything in the legislation that reflects 2012? are there anythings people should think about as they prepare taxes? >> the us irs is wating foitingr

congress to act. there is a line under 1040 that permitted teachers to deduct up to $250. at had to be reenacted. there was a deduction for more insurance premiums. i was under $100,000. that was reenacted. the forms will not be ready. no one will be able to file their returns until the end of this month, maybe the beginning of next. >> here is a story from "usa today" --

>> the surface last month had announced that its nothing was done and we fell off the cliff, they would not be able to process refunds until the end of march. that was the a kick in the pants for the people at capitol hill. the machinery at the internal revenue service is gearing up to deal with the changes in the law. it did not happen until january 1. >> frank, florida, independent. caller: i was surprised when you did not know if the tax

increases have already taken effect because i would first pay check this month, my wife lost $40 out of her paycheck because of the increases. what are they altogether? host: tell us more about the paycheck. was that from december? caller: the first of january. guest: that was a wise thing for the employer to do. increased by two percent in the social security tax. the holiday was 4.2% on the first $10,000 will be an extra two percent, six point two percent on the first $113,000 that your wife earns this year. that was a good thing your employer did that right away.

they would have to do a catch- up. what you can expect an extra two percent of tax to be withheld, up to about $113,000. do not forget the medicare tax at 1.5%. that is 7.65%. host: jack, indiana, republican. caller: my question concerns the capital gains and qualified dividend rate for people in the 15% bracket. with one of the ocean tax cuts, it lowered it to five percent. h taxth on e of the bus cuts, it lowered it to 5%.

when you own stock in a corporation, you are paying the corporations tax. you are being double taxed. , there is double taxed. there is a debate on whether that corporate tax should go down. that goes beyond the tenure of your question. the former question about the capital gains tax rate, you are correct. it is zero percent until your regular tax rate exceeds the 15% bracket. it will remain at zero. the overall tax rate is 50% -- 15..%. >> from twitter --

there was a payroll tax holiday that expired. do we call it an increase in taxes? >> i am not a political person. i was expecting that we would fall off the cliff. all of our tax rate would increase. congress would enact legislation to reduce those rates and call it tax cuts. that is what we are seeing with social security taxes. it was a holiday. they got caught politically and had two extend it for the whole year. i do not call it a tax increase. it is the exploration -- expiration of a holiday. >> you are executive director of the american university's kogod

tax center. from twitter -- guest: there is talk of tax reform every year. whether it ever happens, i do not know. the 1986 act everyone referred to as the big tax cut act. i do not consider it a major reform act. i don't consider tax reform and adjustment of rates. i consider it a simplification of rules. the rules have gotten more complex every year, and there is no expectation that will change. int: let's go to ed columbia, maryland.

caller: 80 professor williams and can talk about the estate tax -- maybe professor williams and can talk about the estate tax, about the rates, to whom does it apply. at if i am looking down the road of making some kind of gift to my kids or my grandkids, how does the estate tax come into play, and how do the new tax rates come into play with respect to that? i will hang up and listen to his response. host: don williamson may have follow up. any questions about -- any answer to his question about the estate tax, giving gifts to his kids? guest: there is a whole other regime of taxation in this country called the estate tax, and there are gift taxes that go with it. those rules -- there was a time where, in 2010, there was no

estate tax in this country, and it was a wonderful opportunity that died, came back in 2011. it was going to come back in 2012 were only people making more than $1 million would be subject to the estate tax. that law has been changed to permit $5 million to be -- even if your viewers feel they do not have anything approaching $5 million, were one spouse to pass away, it behooves the surviving spouse to file a state tax return for the deceased spouse, even though the threshold has not been met. that is to use the unused exclusion on the state tax to be available to the second spouse when he or she passes away.

that is a little-known provision in the law that many middle income americans or people who do not consider themselves wealthy will need to consider, that when one spouse passes, even though you do not have to file an estate tax return, you may want to. host: a color like ed may want to leave his children money before it -- a caller like ed may want to leave his to the money before he dies. is there any issue with giving money to family members? host: there is a print -- guest: there is a provisional law that enables anyone to give $13,000 a year to anyone they want. one would do that if they would otherwise pay wealth transfer tax because the side of -- the size of their estate -- a lot of

people that more than $1 million or maybe less than $5 million would make those gifts for less than $13,000 a year. they would not have to because congress kept the exemption at $5 million, so those $13,000 gifts were not required. as an aside, the exemptions this year actually rises to $14,000. host: as dawn williams -- as don williamson mentioned -- the estate tax cuts in the to -- let's go to the net in alabama on our republicans line. caller: would you explain why the -- host: you have a 2% increase that goes from 4.2% to 6.2% on

the first $113,000. your reference to the 50%? caller: it is two percentage points increase from 4.2% to 6.2%. that is a 50% increase. guest: that is a 50% increase in the rates, correct. it is a 50% base increase, but a 50% increase in the rate. it goes back to what it was the year before last. host: tina, is this making a difference in your life? caller: 20 years raising children, self-employed real estate agent, i have yet to see. host: ok, so you will be watching your paychecks to see how they balance out for you. caller: i will know this week. guest: yourself employed? caller: yes, sir. guest: so you will have to pay

it yourself. you will have to pay the 15.3% self employment tax rather than the 17.65% fica tax. you are looking at some new taxes, no question about it. caller: yes, sir. it is a privilege. guest: oliver wendell holmes enjoyed paying taxes, enjoyed buying freedom. host: on twitter -- "there should be eight two-year tax holiday on all taxes if for no other reason than people would suddenly realize how much they take." do you want to show us what we are talking about in terms of what we need to think about when doing taxes? guest: this is the first volume of the code. it would have been about this high or more. we have to contrast it to the

revenue code when it was first enacted in 1913, only a few pages. it is exponential growth, and it will continue. host: let's hear from maxine in ohio. where are you calling from? caller: chillicothe. thank you for letting me in to talk to you. i would like to talk about this governor we have up here that the brothers play here. he has taken away our estate taxes. chillicothe, the city i live in, and all over the state ohio, is suffering from that. i went to write a letter to him

that he should come to our soup kitchen and bring his own suit. why does he want to privatize everything? he has taken are estate taxes away, and they have actually kept fire men, all the civil workers. they are having a devil of a time down here getting their finances straightened out. we are in debt needy. i asked him to give back our estate taxes so they can have more fire men and civil workers down here. he needs to go and go fast. host: maxine offering her political opinion. guest: first and foremost, you are right, ohio eliminated its estate tax. it used to have an exemption of only about $385,000, one of the lowest in the country's estate

death taxes. but ohio is one state that is repealing its estate tax. here in our neck of the wisdom of virginia no longer has an estate tax, while the district of columbia and maryland do. as a result, people are moving from d.c. and maryland, crossing the potomac river and taking up residence in virginia in anticipation of the death and estate tax. as far as income tax in ohio, you have township taxes in addition to the state income taxes. there is a very interesting wrinkle or sometimes it is better to file separate then -- separate than file joint returns. host: "the new york times" has a piece that talks about the high earners, but it says the legislation approved by both houses of congress would increase taxes on people with

incomes that are not quite as high as well, because the bill includes language that begins to do what president obama and mitt romney propose that various points in the past, limit certain tax breaks available to people who are affluent. it's like people in that $250,000 to $300,000 range still are not in that $400,000 range. guest: specifically for the personal exemptions, online 6 we returns, they begin to phase out on an individual return, on a joint return, merit return. they did for itemized deductions of schedule a. mortgage interest, chair of contributions, they start to be cut back when adjusted gross income reaches $200,000 on an

individual turn -- on an individual return or $250,000 on a joint return. the tax code in this country is not driven by a provision, it is driven by the score and how much revenue is gained or lost. should it be $250,000 that the reits should increase, or as we ended up, at $400,000? host: don williamson is the executive director of the kogod tax center. we are talking about tax changes in the so-called fiscal cliff law. jim is up next in baton rouge, louisiana, a republican caller. caller: good morning. it seems to me like it would be more essential to cut spending rather than raising taxes. host: more sensible to cut the

spending? caller: absolutely. how high can you go on taxes? when will you be satisfied with the taxes? if you cut spending, there would be more money for the people to increase their businesses, everything else. this thing is turned upside down. another thing, this fiscal cliff. all that was was a charade. it is something to watch this hand while we do something on this hand. it is very simple, but i don't know -- you cannot keep raising taxes. that is crazy. host: are you seeing your taxes

increase, and jim? caller: you are going to have to cut spending. just like obama, $40 million for a holiday. host: are you seeing your taxes change? caller: what, now? host: are your own taxes changing, what you are paying? caller: no no, i am too old. horace onlet's go to the democrat's line. caller: i would like to talk budgets and stuff. obama came in, but all that debt came in from bush. i think he did a good job. my main question i wanted to talk about, they talk about cutting, cutting, but they off ae people to live

dollar an hour jobs. that is almost -- to live off a dollar an hour jobs. that is almost impossible. if they cut their pay and bring the wages up to where people can live a decent living, that would bring more jobs allow them to have more money in the government to spend on the people that do not have anything. and not even think about cutting social security and medicare, because they're not getting that much anyway. host: are you seeing your taxes change? caller: no, i am retired. but i'm thinking about other people. i am just keeping my head above

water so i do not brown. host: two perspectives, one from louisiana, one from pennsylvania. guest: for what it is worth, congress, on their own, chose not to increase their own pay. regarding individual tax rates being too high, i have to reflect on france where they raised the individual rates to 75%, declared unconstitutional, and you saw prominent french -- you saw a prominent french citizen repatriate to russia. people here in d.c. and maryland are considering moving to virginia to avoid the estate tax. and other states like florida, where you do not have any income tax. people flocked for generations to florida.

that is transitioning into the nation as a whole, where you see a number of individuals each year expatriate. we have a role -- we have a whole regime of rules regarding that as well. host: vladimir putin welcomes gerard depardieu to russia. after abandoning his homeland to avoid a new tax rate for millionaires. from euclid, ohio, on our independents line. caller: i want to comment on a couple of things. as far as unemployment and welfare benefits, i agree to a certain extent. i do not believe that unemployment -- i do not think it takes two years to find any job. i have worked for 27 years, 15

to 17 different jobs. it never took me longer than three weeks to find a job. i think that is wasting money. same thing with the welfare program. you have millions of people out there who have never worked a day in their lives. they are giving them benefits and everything. there are a whole group of successful people out there, and those people are people like me. i am in the category where i have been off work since july 4 for a traumatic brain injury, ok? i have to keep my fingers crossed and hope that i get approved for social stability -- for social security disability for one to five years, and that is money that i have worked for. where they give people money who are capable of working, but they still have an income coming in. i cannot get money that i worked

for for 28 years. they should take that unemployment money, said it down for six months, and come up with a program that people who are applying for social security disability can at least a partial payment until they make a decision in one to five years. same thing with medical. i applied for medicare and was turned down. so here i am with a brain injury. i cannot even follow up on that because i was turned down for medicare. i worked 20 years to pay money into both of these categories. that is all i wanted to comment about. >> a couple of points there. you are absolutely correct, that the unemployment benefits were extended. there is a great debate about whether that impacts the unemployment rate, whether people continue to stay on unemployment and receive the benefits. that will be debated elsewhere.

as a tax accountant, beginning in 2014, you have a regime of rules beginning payment -- a regime of rules regarding the shared responsibility payment. they can have health care or pay -- and pay a small premium or have credit that goes against that premium. that is coming in 2014. host: "the new york times" shows what type of taxes you can see in 2014. it goes through the hypothetical impacts. don williamson, when somebody is looking at their paycheck, what should they be looking at? what is the bottom line? guest: the bottom line is

adjusted gross income, line 36 on the return, that is before you claim any itemized deduction. the tax is computed on taxable income, which is on page 2 of your 1040. the table of adjustments should take into account that the rates have changed for individuals. what i'm frankly surprised about is that no one has called in to talk about the marriage provision. basically, the tax rate on a 15% taxpayer that filed a joint return is twice that of a 15% tax pair -- taxpayer filing a single return. $300,000 for a married couple, $250,000 for a single person, all these phase-outs do penalize

married people. those phase-outs are twice what they are for a joint return. host: i am sure you stay within the bounds of accounting as a cpa. do you see people making financially motivated decisions because of taxes? guest: not to tell war stories, but i had a couple in a retirement home thinking about getting married, but they decided not to simply because of taxes. i had to explain to their grandchildren why this man would not marry this woman in a retirement home. so they continued to sneak around. that was simply because of taxes. really, the tax code does discourage marriage. host: don williamson, executive director of american university's kogod tax center. next caller on our democrat's

line. caller: how are you all doing? i was hired for 40 hours a week until this mandatory insurance. they have cut everybody to 28 hours a week just because of insurance purposes, because they do not have to pay insurance. i have an eight year-old daughter. the government does not want to do anything for anybody. the middle-class and poor people do not have nothing. host: you are right there. you are alluding to the obamacare rules that kick in again next year, in this case. and all the special rules that apply only to employers that have 50 or more employees.

they're counting toward 50, counting those folks that make -- that work more than 30 hours a week. they are cutting folks back to 28 hours a week where they do not have to comply with the same insurance rules. that all happens next year. host: from twitter -- "what arguments exist for not taxing both active and passive incomes as income?" guest: if your adjusted gross income exceeds $200,000, your -- in defining what is investment income, you invoke a whole regime of rules that have been around dealing with what constitutes passive income vs. active income, which in turn

deals with your material precipitation -- precipitation -- your material participation in an activity. that is being debated in the law, and they just issued regulations on that rule. i had not released at it and yet, but that is a very technical area, the area of what is net investment income, to which the 3.8% attacks -- the 3.8% tax would be imposed. host: the capital gains and dividend taxes go up in 2013 as part of the so-called fiscal cliff law, formally known as the generic -- formerly known as the -- who does that affect? host: if your adjusted gross income on a single return exceeds 400,000, on a joint return exceeds for under $50,000, then you have this tax

imposed on your -- technically, upper income americans receiving dividends in capital gains would have potentially a 23.8% tax imposed upon them. host: we will talk more about the health care taxes later in the show. right now, don williamson from american university's kogod tax center is with us to talk about some of the tax changes in the so-called fiscal cliff wall. let's hear from charles in kings mountain, north carolina, republican. caller: how are you doing? i would just like to know what we can do about our leaders raising all of our taxes and stuff when everybody should give their fair share, when they have got millions of dollars stuck in the cayman islands, off shore.

we should be able to get some of that taxes on that money, too. because, i mean, it is not fair to the american taxpayer. i mean, i think the politicians should take a pay cut, because they are not doing the job that we are supposed to be paying for. it is ridiculous the way that they are treating the taxpayers. question's go to the with donald williamson. guest: you make a good point about the offshore accounts. we have a whole regime of rules that come into play. there are special forms that must be attached to your income tax returns, to report any ownership of foreign bank accounts, at any ownership of foreign assets. it is an information form. as americans, we pay tax on

worldwide income. most countries do not pay taxes on worldwide income. those are our rules. there are concerns about having foreign bank accounts and assets offshore. they are trying to correct that. there are these special forms filed with the treasury department, to report the ownership of these accounts. plus, the united states is entering into a series of treaties with foreign countries -- most notably switzerland -- where we can get information on americans who have accounts in foreign investments. i can attest to that. you are dealing with diplomacy, the diplomatic issues, and that can be cumbersome. they are working on that, i can assure you of that. host: from indiana, ron, an

independent caller. caller: in the declaration of independence, people declared that there was no taxation without representation that would be just. it seems all three branches of the government represent corporate interests rather than public interest. i know individually with holding my taxes would get me arrested, but what about collectively, as the people in the united states? are any laws -- are there any laws that would protect us if we withhold taxes? host: eventually that income that you earned on the w2 would be found by the irs, and they would want their share of it. the tax protester movement in this country has been around as long as i have been in the business. but we have a constitutional amendment that declares the income tax in this country to be legal.

we cannot object to the fact that the income tax is legal in this country. host: from twitter -- "how much is the expiration of the social security holiday as opposed to the tax increase on the rich?" he wants to compare the payroll tax holiday to the money in the coffers that will come in that will be coming in on the $400,000 earners. host: i am sure there are estimates of the taxes collected verse is the taxes collected over the various thresholds that we have referred to today, but i do not have the specific numbers. i do know this tax bill as a whole was deemed to be somewhat revenue neutral. they were very concerned about making sure they raise taxes versus what they gave up.

i do not have specific figures on that, john. tanya, fromgo to new york, republican caller. caller: i have a question regarding the new tax hikes this year. they just taxed on income and not people's assets, and that made a loophole again for the higher earners. guest: as you referred to as far as the income tax, yes, there is a tax on income. there is an estate tax on assets. many people would object to the estate tax as being double taxed, and if you acquired a lot of assets, you would pay tax on the accretion of wealth that you received. that would be two taxes, one on the income earned and a second on the assets purchased with that in come, when it is bequeathed to the next generation. so i do not know if that is a

loophole, it is just a difference in perspective on what you think should be taxed and when it should be taxed. host: don williamson, final thoughts on what americans should think about in terms of paying taxes as they get ready to pay their taxes for 2012 or think about their investments or their future plans for 2013 -- what should they think about it relation to the fiscal cliff? guest: i might hesitate filing right away. the service is not prepared to accept tax returns from taxpayers until the end of this month. most of us will not receive our w2's until the end of this month. i encourage people to hold off filing right away. let the computers at the irs sort of the new rules, cope with the new rules, and then file later on. i do not mean it will 15, i mean the end of january, beginning of

february. so many people in this country use software that they buy at commercial establishments. wait a few weeks on that to make sure that all the software that can be purchased is up and running and ready to go. as far as long-term planning, i would say once you get the upper income ranges, the tax rates increased considerably. that is to be considered. host: don williamson, executive director of american university's kogod tax center. thanks very much. guest: thank you. host: coming up next, we will dig more in to special interests and ad-ons with tom schatz. later, a discussion on the affordable care act. first, this news update from c- span radio. >> president obama is set to nominate chuck hagel as the next secretary of state, and counter-

terrorism adviser john brennan to lead the cia. there is criticism from republicans who say that he is anti-israel and soft on iran. john brennan withdrew from consideration from the agency's tom schaad and in 2008 amid questions about his connection to enhanced terret -- enhanced interrogation techniques during the bush administration. google executive chairman eric schmidt is in north korea to look at the country's economy and social media. he is the highest u.s. executive to visit north korea since kim jong u.n. -- since kim jong un

to power. retired general stanley mcchrystal, speaking earlier on cbs "this morning" said he was shocked that there was so much trouble over comments made in the article in "rolling stone" that were derogatory about the obama administration, saying he never thought he would see his loyalty and respect drawn into question after more than 30 years in the service. his resignation was accepted by president obama, promoting his new book, "my share of the task." those are some of the headlines on c-span radio. >> i enjoy the capitol hill coverage because i started their many decades ago, and your coverage live of the house and senate, and the committee hearings. i think they are informative to the public to see what -- to show them what happens in congress. it presents itself what is really happening, a little bit

of commentary, but not really edited to a certain pre- election. just what they want to present to the american people. >> c-span, created by american's cable companies in 1979. brought to you as a public service by your television provider. >> "washington journal" continues. host: thomas schatz is president of citizens against government waste. we are talking about the fiscal cliff law that was signed recently. what issues were tackled in end broadly, and what was left on the table? guest: broadly, tax rates were the big issue. but folded in, maybe $200 billion of taxes, they have now permanently extended the alternative minimum tax, the medicare tax, medicare costs for doctors.

this time they put a bunch of tax incentives in. host: we are seeing a postponement of the extension -- rather, in agreement to raise the debt ceiling. guest: all the spending, which is one of the reasons why citizens against government waste will be busy in the next months or so. of course, the postponement sequestration, which was part of the last big budget deal. host: what do citizens against government waste want to see come out of the fiscal cliff deal? guest: wish they had dealt with spending first. that is the problem with washington. they talk about getting more revenue, but then they do not talk about why they need more revenue. it is fairness or something else, but they do not talk specifically about which programs they want to fund and why.

host: thomas schatz, with citizens against government waste. when you look at the fiscal cliff deal, what do you consider to be pork? guest: these are really corporate welfare or special interest provisions, money for the tv and film industry, motorsports, motorcycles, three- wheeled vehicles. lots of very specific projects, programs, industries. by doing that, it makes it harder to lower overall tax rates because these cost money. host: here is the headline from "the washington post." it says, "by now we have heard about all the big stuff, but congress also managed to include all sorts of corporate tax breaks, other arcane provisions come into the final bill, everything from electric scooters, nascar racetracks."

what did we see that was a carryover? guest: most of them are around for a long time. the american opportunities tax credit, dealing with college tuition. the earned income tax credit was also extended. $134 billion just in those three provisions. host: citizens against government waste, thomas schatz is their president. if you want to get in on the discussion, here are the numbers to call. democrats, 202-585-3880. republicans, 202-585-3881. an independent scholars, 202- 585-3882. guest: something that had been

around for some time affect the overall corporate tax rate. the u.s. has the highest of all the industrial countries in their tax rates. 35%. there is the discussion about lowering its. those kinds of tax rates, and this bill has made it more complicated. host: another is a run tax from puerto rico. guest: that one has a history. it goes back to 1917 for puerto rico, 1934 for the virgin islands. the money goes to the territories for whatever purpose they wish. it is almost a direct check, and it is only paid for by those who drink rum. if we do not, we do not pay for it. host: have said that there is a bit of an explanation that goes with that tax. is that when ok, in your book?

guest: this one has lived up -- this one has really a legal basis. it has something that the other ones do not. the other ones just benefit a particular industry. this is a benefit to the territories themselves. host: another one is tax-exempt financing. guest: the liberty bonds have never been used. there is no tax impact on those. mostly meant for local businesses to redevelop after the world trade center tragedy, but no one has used them. host: let's go to the phones and hear from pete in texas on our independent line. caller: good morning, libby. mr. schatz, i appreciate your efforts to save taxpayer money. how much have you looked into the defense department? i spend more than 20 years in the defense department, and i

can tell you that, for all these politicians falling all over themselves in taking care of soldiers and the facilities, the houses that they live in, the medical care is much better than the average citizen is getting. i think if you really wanted to get some common sense going, if you got into the defense department, you would get a good return on your efforts. host: citizens against government waste was one of the first groups pushing for base closing. we also fought against a lot of specific programs and projects, like the alternate engine for the joint strike fighter. we led efforts to eliminate that. guest: -- host: band, and

republican column. caller: the major problem comes down to two big points. one is the part that is being stolen from the government. medicare and medicaid is roughly at least half of what is being stolen, even though they do not come close to that in their figures. the second problem is this idea of spend the money or lose it. there was a democratic senator from, i believe, colorado, about 20 years ago, that came up with the idea that any money they could save, 10% would be given back to them to spend any way they wanted to. i thought that was a great idea, but it got lost. now i see a government agency after agency, they get a budget, and if they save, they have got to spend somehow or the next

budget will be less. guest: that is the budget process, unfortunately. we are all in favor of reform. the budget it spend whether or not any goals were achieved. medicare, medicaid, yes, there is fraud, waste, and abuse. certainly over payment for people who do not deserve the money. people paying for services that are not really rendered. some of the changes that we have supported have helped save billions of dollars in terms of medicare waste. host: we are also seeing as far as the fiscal cliff deal, tax breaks for nascar race track builders. what is the justification there? guest: i don't know. we do not need other sports coming by and saying we need more tax breaks for the building of another stadium or hockey rink. host: what are your biggest

concerns about that, besides the president-setting nature of it? -- besides the president -- besides the precedent-setting nature of it? guest: it goes to the racetrack itself. host: "the washington post" takes a look at this provision. "supporters claim the break is necessary so nascar can compete on a level playing field with other theme parks. it looks like they got their wish." ray from kentucky on our democrat's line. caller: mr. schatz, i know this is all very confusing, but i contend, and maybe this is an oversimplification, but the three biggest drivers are the

lowest tax rates we have seen in years, and we never seem to hear anyone talk about that. what if we raised everyone's rates, 4%? you will not get any republicans to agree to that. you raise the age of entitlement benefits two years. you will not get democrats to agree to that. and if we cut defense spending by 4%. wouldn't that go a long way to cutting the deficit? those are three main drivers where we find ourselves? guest: let's look at the first one. why do we want to raise anyone's taxes? what will that money be used for? right now we're not bringing in enough money to pay medicare beneficiaries. same thing with social security. general revenue is being used to pay beneficiaries. we need to examine what the government should be doing first.

that is how everyone else in the world lends other than the government. determine the services, how those services should be provided, and then determine the money that is needed. host: thomas schatz, president of citizens against waste. he joined the organization back in 1986, and during his years with them, he has spearheaded a development program that boosted members and supporters from 5000 to more than 1 million. we are talking about some of the provisions in the so-called fiscal cliff law that passed and was signed into law last week. here are a couple of others. subsidizes coal produced on indian lands. guest: at least they have now excluded golf carts. the original tax break was

written in a way that literally allowed golf courses to qualify for this tax break. plug-in motorcycles -- not that many of them. same with three-wheeled vehicles. it just seems to be a waste of money. others we have not mentioned -- $4.6 million, teachers over 10 years, tax credits so they can buy classroom supplies. i thought our property taxes go to that already. host: we also saw subsidies for tv and film productions shot primarily in the united states. guest: a lot of states provide that. the 10-year figure, it is really only a two-year figure. but we will have these, again. when they talk about tax reform, reducing the corporate rate, the tv and film industry says other

countries provide us with low taxes and better breaks, so it does not mean we need to do it as well. host: let's go to glenn in brookfield, missouri, on our independent line. caller: thank you for taking my call. we are their employers. why don't we get together and make congress do something and take their pension away from them, put it all in social security, and let them go on social security like everybody else, and then cut their pay down. i have not heard them talk about anything they will give up. they have just taken more and more, spending money that we can use. host: what do you think about some of the provisions we have outlined this morning? caller: i think they are terrible. host: all of them? caller: yes.

guest: i think he is making a good point. the tax code should be simplified. lower rates should occur for everyone. in terms of what congress is being paid, unfortunately, cutting their pay will not save that much money. that is not the underlying problem. it is not their pay, it is the way approach issues. the solution in washington always seems to be to create a program rather than to solve a problem. if providing certain kinds of services is appropriate for the government, they need to first determine whether a program exists to provide that service, whether or not it operates efficiently, rather than voting to create something new. host: we mentioned the provision for tv and subsidies -- for tv and film subsidies for those shot in the united states. also tax cheats in prison.

guest: they might make some money rather than lose money. host: there is not a way to address this rather than simplify it. that is the only way people will think it's fair. host: another one is providing incentives for commuters to take the train or the bus. shouldn't we reward americans for doing what we want them to do? guest: certainly there is that philosophy on capitol hill. there's more opportunity to slip in provisions that do not benefit the general public. providing a tax rate for commuting benefits anyone who commutes, not a specific state or congressional district. motorsports benefits a certain industry. tv and film, the same thing.

that gets people angry about how much they have to pay in taxes. host: some of our followers tie these cuts to members of congress. debbie stabenow, in bill's opinion, got the next car -- the nascar tax break. guest: unfortunately, with year marks, there is no such list for tax breaks. they do not qualify as earmarks, so they do not provide their names. host: that is how your organization would be able to track them down? guest: in this case somebody did say something because they are probably getting some benefits.

host: president for citizens against government waste thomas schatz is next. next, a republican line. caller: i know a lot of people have this on their mind for a while and they get on the radio and they want to get it off. everything that was put in the bill, most of it is what i would consider unnecessary and benefits very few people. with regard to the teachers sang, if anybody has kids or if you have ever just shop at wal- mart, you know when you walk in the door, in school, they have a list of all this applies your child would need. the government, unless you're talking about copy paper, i do not believe that they really fund schools tremendously.

you do end up needing a little extra money to go to a classroom, and even if -- regardless of whether the government funds anything or not, the fact of the matter is, anything that you can put in a classroom that will increase the possibility of a child learning anything is money well spent, as opposed to a lot of the other things that government spends money on. the only other thing i see being good money spent would be having to do with real road tax breaks as -- railroad tax breaks. the average person in this country does not realize how much this country relies on transportation of goods. say every 18 wheeler, every semi trucker, you would not have fresh produce in 90% of the

market because we rely on trains and riggs to bring us our goods for consumption. i think in both of those scenarios, money is well spent. i agree absolutely, earlier, though, where he spoke about the increased taxes on what we are spending it on. i would not mind if you double by taxes, i am not going to lie. but i do mind knowing that it could go to something that is completely useless and benefits no one, and i think there are a lot of people who agree with that. raising taxes, honestly, on the 2% -- i do not understand where they think that will benefit anything since, if you consider most people in the 2% either own a business or are high up in the business they are in. if you are taking money out of their pocket, they have the power to instead -- nobody wants to lose money. all they will do is raise the

prices on their goods and services and pass that on to the little man, the average joe. all they have done, instead of turning the tax base from being income based, it is consumption based. host: this tweet from becky -- "teachers always pay their money for extra supplies. property taxes do not pay altered its $250 really that much?" guest: not all that money goes to the classroom. there is a debate on that, whether it goes to administration, or too much bureaucracy, or does it literally go to the classroom. yes, people are -- it is

certainly not the answer to our educational problem. a lot of parents provide help for those classes. they do not get a tax break. host: "sir, please tell us what a simplified tax code looks like." guest: there would be a long argument over the mortgage deduction. other tax breaks that people get, research and development. with a lower tax rate, people would have more money to do with what they wish. it does work without these tax breaks. people are so invested and they think they are almost entitled to them, but they do not like the idea of getting rid of them, especially -- except for things that do not benefit them. host: thomas schatz, president of citizens against government waste. our next call is dale from misery -- from missouri. caller: the federal government

-- i don't know, 500 people in congress -- and then the cia and the secret service. to all of them have a bottomless pit where they can throw a $600,000 or $800,000 party? how can they even do a budget? guest: the bottomless pit is whatever the taxpayers send to washington. whatever money that has been borrowed, future generations will have to pay. right now the national debt is $16 trillion. some say it is higher. it is an awful lot of money that if that payment would have to be made today, every man, woman, and child in this country would of tens of thousands of dollars. there is pressure on our elected

officials, mostly congress -- until there is pressure on our elected officials, mostly converts, cut spending, they will not do so. host: has there been any discussion about getting rid of some of these ways to include provisions in tax law? guest: there have been some discussions. the discussion before the fiscal cliff was to have a comprehensive tax reform plan, which in turn would produce more revenue. that was the argument that house republicans were making, to say let's not raise taxes, let's reform the tax code. in most cases, that would be true. they are still willing to look at the tax reform process that would require getting rid of the tax standards that they just approved a couple of weeks ago. host: let's go to our next call. it is mike in ohio. welcome, mike.

caller: good morning and thank you for c-span. mr. schwartz, is it? guest: schatz. caller: i follow you on the internet. i have one question -- the general fund paying social security. during a public hearing, mr. basara from california said there is a surplus in the social security fund. when they passed the payroll tax cut, that 2% had to be made up, and that money came from the general fund. that is not because social security was broke, it is because they tried to trick the american people into thinking they were getting more money. you know, that is a little disconcertingnumber two, what ct

all of this? the election has already been held. now they're giving money to nascar, who really need it. and if anyone should wear and nascar -- a nascar suit, congress should. it is my understanding that the senator feinstein will hold a hearing on a movie, "half past dark zero" or something like that. a movie? unbelievable. it is a movie. guest: well, the movie issue is about whether or not the cia revealed secret information. no idea if that is the case or not. and whether the producers had access to information they should not have obtained.

tax code, a tax break, members of congress are happy to give it to them. if people would like a simplified tax code, everyone would really benefit, because then there would be more choices about how the tax payers could spend the money. if they wanted to donate, they could. it would be more of an individual choice. host: this is a story from "the times" -- this is something our last calller just brought up. going to jimmy in san antonio, texas. calling on the democrats' line. caller: good morning. have a new years. i have been looking at c-span since the early 1980's when the militias were caught in the news. there were popping up everywhere. -- when the militias were hot in

the news. money flowed from the middle class to upper class, we should stop having these class's. money should be based on your income in tax on your income -- and taxed on your income period. that brings me to my question. since the supreme court has ruled corporations or people can give to candidates for president, widely still in the corporate walls if they will be taxed as people? guest: taxation's and regulations affecting corporations are different things. corporations need to be organized. they need to be provided with a certain place to pay taxes. i think it is a little bit of a different issue. host: said he would like to see

income tax. what is your ideal scheme? guest: the way to achieve that really is based upon how much you have in terms of deductions. if all were eliminated, we were have a very low rate. consumption tax is a national sales tax. and unless the 19th amendment -- 16th amendment that created the income tax is eliminated, but there will be two forms of taxation. and host: follow were on twitter says i am no big earner, but i liked my deductions. -- caller: follower on twitter says i am no big earner, but i like my deductions. guest: if you would have more per year, maybe that is a good enough incentive to giving up the tax rate.

mike freeman says i am not a big proponent of nascar, but we got a lot of improvements in our road racing tracks. going to our next calller. mike in georgia, republican. caller: how are you doing? i have worked for ibm for 30 years. back in 1981 when reagan was into office around that time, there was a corporate tax put in place. corporations that were doing upgrades to their environment, office furniture, software needed -- which nevwhenever thy to support the core for environment. at that time i was hired with the company. i was working seven days a week nonstop as all over corporations were installing $15 million

systems like you would go out and buy a pack of gum. i think taxation against large corporations is what is part of our problem in this country right now. i believe if we would give them an incentive to be able to do that got onhighere and penalizing them for being successful, i think we would have a lot better environment economically. basically this all ties to the tax deductions that everyone is looking at, and i heard rumblings of a simple tax. well, we're not in a position right now to offer that. it sounds like a great idea, but something that would have to evolve over time. my point i am trying to make on the obama care thing, and i did not mention that, but i feel it they had a corporate tax, not a

loophole, but basically a did nation tax, corporations could do a fund that would support a medical plan and the country, we would not have the confusion. if you do not for somebody to do something, in most cases they will just do it. if the corporate incentive is to put into a medical fund to pay for the whole country, they would get an incentive on the attack -- on the profits, they would be more likely to do it. i just believe that is what the whole problem is right now. everyone is forcing people to do things as opposed to a voluntary process where we do not have that.

provide anrp. incentive right now. simplifying the tax code. everyone around the world has done that in the united states. ironically one of the arguments democrats make is they go overseas to put their headquarters in different places. they are doing it for business purposes because the tax rates are lower, and yet they refuse to lower the rates here. pretty hard to make the argument is the rate is going to be so high that it forces these people to make a business decision to place their headquarters in another country. host: manchester, new hampshire. democratic calller. caller: how are you this morning? host: we are good. you are on the air with thomas schatz. caller: i am 90-years-old.

i lived through the depression. i have been hungry in my lifetime. i am a registered nurse and a geriatric specialist. i have been through all of this. i have seven children, all educated in the state college system. i have worked hard all my life. of course right now i am on medicare and social security. do you realize i am still paying for medicare? they are taking $133 out of my social security. so when people tell me that i am getting something -- entitlement, i work for it all my life. i am still paying for it. why? grant you, i am luckier than a lot of other people.

i have an excellent family who also will support me. my problem is obama care. all i can think of, everyone is saying we should do something different. we have a system in place. why don't we use the medicare program and somehow involved insurance companies? -- involve assurance companies? host: we will talk more in just a minute about some of the new taxes that will be phased in as part of the federal law, but as you look at the provisions and the federal gridlock -- guest: i have a granddaughter who is a teacher -- caller: i have a granddaughter who is a teacher. and i am in the position to get pieces of -- pads of paper for

nothing, because i have a son in law was in that industry. she has been taking all of that into the schools. she has been buying a lot of her own supplies. she has been taking the $250, because i would say she spends more than $500. if people would really look at what is happening -- we talk about fraud. i think obama has tried to put more money into the fraud program under medicare from what i understand. host: we will leave it there and get a response from thomas schatz. guest: is hard to argue what teachers are doing because everyone either as a teacher in the family or has been through the educational system, but that is something that needs to be provided through the taxes and

other fees that are paid into the system. the fact that this has to be done and teachers has to buy supplies means there's something wrong with the system. they should not have to spend their own money. if they want to make the class room look better, that is a different story. basic supplies, there is no reason that money should not be made available through the educational system in payments that are already being made. host: a story from "free be acon" -- thomas schatz, you mentioned

there is not an easy way to track who gets what into a bill when we talk about tax extenders. what does your group, citizens against texas and others, notice -- citizens against government waste, get into the bill? we saw this past the house. how much you learn about it? guest: unfortunately all of the transparency does not happen, particularly with these kinds of bills. the text extender bill was passed by the senate in august. the only way to get it through was to take it as the senate passed it and stick it on to the fiscal cliff issue in terms of tax rates. the house never voted one way or another. maybe they would have had different ones. this is just spoke on to the bill, insisted upon by the senate, and we also believe the

white house was involved, particularly for the tax credit for tuition. so it is not a great process. when people hear there is more transparency, not necessarily true. host: and then the calller from florida. good morning. -- independent calller from florida. caller: september 10, 2011, the day before 9/11, donald rumsfeld comes on national television and says the military has misplaced 2.3 trillion dollars. does he know of any other money, including that money that has been misplaced? guest: i would not say it was really misplaced. the problem with the pentagon is they have never had a full and clean -- full and clear of it. all the other agencies have produced books that show where the money is being spent and how. this is something more people should examine, by the way.

speaking of education and upcoming spending debate, there are more than 200 science technology, engineering, and math programs in the federal government. 13 agencies spent 3.1 billion per year, and a third of those were added between 2005-2010. to us, that is real waste. maybe the objective is appropriate. the problem for the pentagon is they do a pretty good job defending the country. they did not do a good job of keeping track of where the money has been spent. to say they lost 2.3 trillion means they did not have an audit to show exactly where all of the money is spent. host: to finish up with the fiscal cliff. "washington times" has two headlines -- what are you watching for the next couple of months? guest: i think taxes are off the

table. certainly the house will not both more taxes to deal with the sequester, which is all about spending cuts or its deal with the continuing resolution, which is also spending. the last time they held it up in order to get spending cuts, and now we find them delayed. i think they have this -- they have a pretty strong position, and people around the country understand the government is still too big and spends too much. host: thomas schatz, president of citizens against government waste. he has been with the agency more than 20 years. that web site is cagw.org. coming up next, our regular your money segment looks at taxes and the federal health-care law. jay hancock with kaiser health news is our guest.

first, this news update. >> an update on the ship grounded near alaska. salvagers are checking the seaworthiness of shell oil drilling ship that has been refloated. once they are satisfied it is seaworthy, there will tow it 30 miles to shelter. bank of america has reached a settlement with fannie mae. this stems from residential mortgage loans sold by the bank in the countrywide unit to the agency, ahead of the nation 2008 i need crisis. the settlement includes almost $3.5 billion payment to be made. the bank also bogging back some of the loans sold to fannie mae. secretary of state hillary clinton returns to work today. she's been sidelined for four weeks since taking bill on her return from a trip to europe. the secretary schedule includes talks with the white house tomorrow with the defense secretary and national security adviser. later in the week she welcomes

the afghan president for working dinner. the secretary also says she plans to testify about the results of the probe into the been got the -- benghazi attack. president obama set to make announcements today on two cabinet positions. check hagle -- chuck agel as secretary of defense and john brunneenner. -- chuck hagel. >> i think cyber security remains the top priority because of the national-security implications. we saw congress failed to reach an agreement on legislation in 2012, as perhaps many would have predicted. they remain very far apart in the post in the cyber security standards. >> i think another big issue

will be to create more spectrum so the sec has its sleeves rolled up and is in the midst of working on that. some of the hot-button issues on that are and license spectrum, that powers wifi and other amazing things the tech sector is coming up with all the time. >> that neutrality could be a big thing in the next year. -- net neutrality could be a big thing in the next year. unclear how the court is corn to roll, but indications that the d.c. circuit has been skeptical of the authority. >> a look at major technology issues in 2013 with the reporters who cover them tonight on c-span2 at 8:00 eastern. host: on mondays at this time

we talk about your money. how programs are used and what they're spent on. this morning we're focusing on new taxes that are part of the federal health-care law. they are getting put into place right now in 2013. jay hancock, senior correspondent at kaiser health news. why are these taxes and fees kicking in? guest: of the health-care law, a very expensive health care law. congress needs some way to pay for at least part of it. -- it is part of the health care law. these taxes are part of that. the health-care law in total, about one trillion dollars and change, with the affordable care act will cost over 10 years. congress likes to pass legislation sometimes as your previous guest pointed out, that is not paid for. this is one of them. substantial parts of it are paid

for. there is a lot of different taxes, probably more than one dozen different measures in total, significant aspects of these taxes will come into play in 2013, and in fact are the law today. host: here is a headline in " politico" -- will the people paying the taxes directly benefit down the line? guest: the general answer is no. this is generally about bringing coverage to people who do not have coverage now. the reason they do not have coverage is they do not have the wherewithal to pay for it. to a large degree the health act was about finding money elsewhere to expand coverage, to have health care insurance to -- to add health care insurance to the 30 million people that are estimated to get it.

the large portion of the revenue that is coming in this year's taxes in particular are coming from upper income workers. particularly the very top of the scale that have earned a lot in the past couple of years. about the 1% of top income earners. rhetoric during the campaign and prior to that. to a large degree, the 2013 health care taxis will be levied on the 1%. host: let's talks more about that. employees now pay 1.45%. that is going to go up if you make a certain amount of money. guest: if you were over $250,000, you will pay an added medicare surtax through your payroll tax on top of that of 0.9%. add that to the 1.45% everyone

else pays. that, in combination with a number of medicare taxes, will be tied to the investment income so to speak. those are both going to raise very large amount of money, probably $300 billion over 10 years. again, going to all be levied on folks with $250,000 or over. the under income surcharge is 3.8% and will be on things like dividends, capital gains, royalties, interest income. pretty much anything that is non-wage income in that bracket. people will pay an extra 3.8% on top of what they would ordinarily pay. as many have pointed out, this will not going to the medicare trust fund.

may roll -- medicare payroll tax does go into the medicare trust fund. 0.9% surtax does not. >> looking at the details that jay hancock just outlined. in addition to the capital gains tax rate, we will see a 3.8% tax for couples earning over $250,000. you outline for us what happened was some of the higher-earning americans, but what about what were earners, the general populace? guest: air are a couple of limits on deductions that will start this year. if anything will hit middle income americans, it will be those. right now, for many years, health care costs that are out of pocket that you spend have been deductible against your income in terms of determining your tax, but only to the extent that they exceed 7.5% of your

adjusted gross income. congress raised that. it will now go up to 10% of your adjusted gross income. you can still deduct out-of- pocket expenses come only after it goes 10%. the rationale is with more coverage, there will be fewer people with abnormal out of pocket expenses. this will raise revenue as well. the other thing that will affect possibly the ordinary american is of a new cast on your flexible spending accounts that your employers have. a lot of us are able to put aside pre-tax money to use to pay for out of pocket expenses. this is something you have to use up at the end of every year. if you need extra glasses, you go by glasses or contacts. there used to be no limits on what you could put aside,

although employers typically did set a limit. now, the cap will be $2,500 per year of your money you can put aside to pay for pre-tex health- care expenses. that also -- on pre-tax health- care expenses. host: jay hancock with kaiser health news. if you would like to join the conversation, here are the numbers to call -- we are looking at your money and new health-care law taxes that are kicking in and take effect on january 1. we're running through some of the ones that he just mentioned. he talked about the cap on flexible spending accounts, now capped at $2,500. we are also seeing a tighter

medical expense deduction and a medical device tax at 2.3%. ron in new york. caller: i just have a couple of comments to make. most subtle the last increase some because of the health reform bill will basically go to insurance companies to cover people that do not have insurance. i do not think anybody needs help insurance. what they need as health care. that is how every other industrialized country works. the health-care -- the health insurance industry takes $800 billion per year of the health care spending in this country. other countries pay lip -- pay less than half of what we do for health care and health outcomes are significantly better. of course, everyone is covered. the problem with health care is

the health insurance industry. the problem with health care is the pharmaceutical industry that pushed through a bill. medicare d that says the government cannot negotiate prices, again, like every other country does. guest: that is true. a lot of this money will be erected through insurance companies. that is the method that congress chose. what ron is arguing for is a single-payer system were basically the governor runs a national health system, as it does in canada and the united kingdom. politics is part of the possible. what was possible in this case for those who wanted to expand health-care coverage in this country, was to include the present infrastructure of what delivers health insurance, that is the insurance companies. a lot of it is true what he

said. a lot of the revenue being raised here, not to mention the tax credits that will be falling in people who are beneficiaries, is directed through the insurance companies. the thinking was there are ready in the business of providing coverage, we will expand them and use them as the vehicle. that is what we have got. host: terry from pennsylvania on the republicans line. caller: let me just ramble hear a tiny bit. the gentleman said we will spend around 300 billion over the next 10 years to pay for this insurance, and that this insurance was basically for, i believe, the number that was being thrown around in obama's first campaign was that there were 30 million people without insurance.

and i believe that those are the people that this is pointed at. it is none of the rest of us that are paying the taxes, the people who do not pay taxes that are getting this money. at any rate, it seems to be that for a $30 million, those people could be injured. over the next 10 years, i want to know where the difference of 30,300 million is going? guest: 30 million was the number of people that were estimated to gain coverage that did not have it before under the affordable care act. 300 billion that i mentioned is the money that will be raised by the medicare payroll tax and medicare income tax on upper income folks. that is only part of the taxes

that are going to be raised through the affordable care act. in general, about $600 billion in new revenue is raised through the affordable care act. i am not sure where your mouth is going --- math is going, but this will be paid for new coverage. it is actually not paying for all the health insurance. 600 billion will not finance the full expansion of coverage under the affordable care act. however, in the latest analysis, the congressional -- congressional budget office has judged the portable care act as reduce the deficit over time because of cost-cutting measures that are built into it, along with the revenue increase. host: the headline in a recent "wall street journal" --

jay hancock, james on twitter says singling out medical device makers is unfair and unwise. dig into the medical device tax. who pays it? the consumer? guest: it is the one we did not mention. it does kick in this year. medical device manufacturers are quite unhappy. 3.6 excise tax on artificial ent meshes and things

like that. the industry will be levied directly. the industry is the one that has to pay. of course like everything else in economics, the costs get passed on. the industry argues this old mill the bill -- be built into the premiums that health insurance customers pay and will be built into the tax rates that american tax payers pay to the extent that medicare pays for this. so it remains to be seen how all of that works out in the grand scheme of things. it is a lot of money for the device manufacturers, 20-$30 billion over 10 years. it is not a huge funding source for the affordable care act. it is one of several industry taxes that we can expect to hear more about this year in terms of

the industry trying to get them repealed. 2014 will be a premium tax that goes into effect on health insurance premiums. we can certainly hear from the help insurance industries this year trying to get that repealed or somehow changed. host: from "the wall street journal" -- unfortunately we will not see the positive affects of the affordable care at preventative care for a long time. what will we see in terms of what the law will provide this year versus next year? as maverick says, preventative care, are there metrics to measure how successful it is? guest: there are metrics. we will not see them for a long time. it really will be the proof will be in the pudding. but as the you were pointing out, 2013 -- viewer point out,

2013 is the big bang for the affordable care act. this is when the state health care exchange will go into a business here debate this year you will hear a lot of publicity with the exchanges and the help of 40's -- health authorities in the states are advertising be availability of the help the exchanges and the heavily-subsidized coverage available through the exchange's for those lacking health coverage. 2013 will bring in the new insurance laws, which require insurance companies to take anyone who approaches them seeking health coverage and will have expansion of medicaid as well that will be factored into the health insurance exchanges. that is when everything gets laid out.

again, some of the aspects based in after 2014. -- get phased in after 2014. there are some variables going on. the supreme court threw in a new wrinkle when it allowed states to opt out of medicaid expansion. that is just one of many variables that will fold out over the next five years. host: our recent headline from -- a recent headline from "the associated press" -- the story says -- looking at some more details of what is going to happen next year. in three years the will be a decrease -- decrease annually

and then go to cover people with pre-existing conditions. guest: correct. in 2014 the health-care law requires insurance companies to take on anyone as a customer at non-discriminatory rates even if they have pre-existing conditions. the $63 feet is intended to eliminate any shop crossed that some insurance companies might experience by taking on some folks by having an underwriting pool, an insurance pool that might be overburdened with people with expensive pre- existing conditions. the idea of the $63 fee per head of insured person is basically going to be redistributed within the insurance industry. so if i am that acme insurance company and find myself with a

really high burden of folks with diabetes or heart problems that are going to raise my cost, i can theoretically tap some of the pool of money, i believe it is $12 million in the first year. that will be used -- i might recording and under -- and my record an underwriting loss of that happened or tap the $63 pool and will ease my finances. as libby points out, that it's phased out and only a temporary measure as we start to see where the new types of patients will end up. host: you really think it will get phased out? guest: i do. it is a legitimate question about a lot of these revenues in taxes, but one of the wild cards about the affordable care

act is these new population, 30 million americans, these are folks who do not have insurance now, and by definition they are sort of a black box for the insurance company. insurance companies are very good at underwriting risks for people they already have as members, people who are not members it will be a big question mark. the insurance companies are a little worried about that. i think it would be difficult to have. there was a lot of bad publicity that the $63 feet got when it was first disclosed. it was buried in their. host: jay hancock senior correspondent with kaiser health news.

previously he was at the baltimore sun. he was a business and finance columnist for a decade and a reporter covering the state department and economics for many years before that. he has also covered health care and other issues and the daily press of newport news. it is our your money segment. we're looking at the taxes and health-care law taking in this year. tom from alexandria, virginia. caller: good morning. i would like to make the case or state why the affordable care at is making health care unaffordable for my family here in alexandria. we are self-employed. we are contractors. and three children. we make $100,000 per year. this year i got my note the premiums are going up 4 p p.o. health care almost $5,000 starting february 1. -- going up for ppo health care

almost $5,000 starting february 1. so my premiums are going up five grand in one year on top of the increase from last year. the total health care costs are 25-30,000 per year. so not only are the premium skyrocketing, i can deduct less because of 7.5 percent change to 10% of adjusted gross income limit. further, i have a child with respiratory issues that needs medical devices that i believe are categorized under the tax of nebulize sirs, machines to help him out. machines to rs and help him out. bottom line, my family will get worse health care and pay a lot more. we're just sick over this whole thing. when the law was passed, the

estimated 1500 would pass on to the people with individual plants. that is ridiculous. any time the politician tells you it is one thing, look for it to be so much more. what does my family do that does not qualify for any subsidy and pay over 25 percent over net income on health care costs. guest: do you have any employees? caller: i have one employee and the rest are independent contractors. i cannot afford to offer them health care. guest: i think you just give a really good microcosmic look at what may be some of the weakest links in the affordable care all are. i would take issue with your implication that the affordable care act is directly responsible for the premium increases that you are seeing.

it may be responsible for part of it, but again, there are so many variables here. the small group and individual market has been at dysfunctional for a long time and has been the subject of sticker shock price increases of the kind you are talking about. i should mention the affordable care act contains a measure and was intended to limit those sorts of increases. "the new york times" had a terrific article, mr. de about how that may not be playing out in the way that many hoped, in the way the administration suggested was going to happen. plants in several states, california included, are raising premiums for individual plans for members like the calller by

very large amounts, certainly double digit percentage rates going up. that act was supposed to limit that, but there is bates ability to make, to regulate and to actually decrease the premium increases in these plans very -- varies.w yor new york for example, the governor stepped in and limited the increases the calller was talking about. other states do not have that ability. the calller's point makes a good point, which is the individual market will continue to be problematic. the affordable care at ames lots and lots of subsidies that make that happen. small groups will be a big question mark as well. it is really going to be unclear

to see how many small businesses step in and choose to insure their employees or pay the penalty instead. to the extent that they do not include employees of their company policy that will raise costs for taxpayers in the health-care industry. host: going to sherry in clearwater, fla. on the democrats' line. you are on with jay hancock. caller: thank you. this is a near topic for me because i been pushing for health care for over 20 years. if we do not have real competition, and by that, i mean -- [inaudible] herbalist that have been around for centuries. there is no competition from the insurance company and a pharmacy companies and even the

afa. as a former nurse and now as a patient's, i can see that provides a lot of interruption. we rely too heavily on expensive technology. the drugs we're forced to take up side effects and unforeseen crisis. this seems to be more of a gimmick for the insurance company and pharmaceutical company. we need competition. we're going to need more primary doctors. i am hearing more success by a natural holistic health care. like dr. oz. he warns are doctors do not have all the answers. host: let's get an answer from jay hancock. guest: a lot of people talk about health -- competition in the health-care industry. unfortunately the health-care industry is unique. it is unlike any other sector in

the economy. competition works many different parts of the economy. competition is a mixed bag and to say the least in health care. the problem in the health-care business is that the customers do not have a whole lot of knowledge about the product. they are relying on an expert to help make the buying decisions, and the customers are not using their own money in most cases. when you make a point of sale decision to get a medical procedure, part or all of it is paid by the insurance company or by medicare or somebody. so add those characteristics together, and you get a system that is prone to spend money and not save money. so when people talk about competition, they say let's

foster innovation and new procedures and allow people to set up their own hospitals. what tends to happen in health care is when people put in capacity, when people invent new devices, they tend to get used because there is not a lot of control on how the money is spent. competition does foster wonderful, new types of surgery, wonderful new drugs, but it tends to be very expensive in the health-care industry. sherri mentioned alternative medical forms, which is also relevant in the health-care law, because you may have heard about essential health benefits that the states are having to come up with. when insurance companies offer plants into the exchanges that will start in 2014, there will be a minimum number of benefits they have to offer. and every single state what is on the matter if it -- the list

of benefits is a very large political fight. any provider of any benefit that sounds at all like health care wants to be on the list called a mandate pierhead homeopathy and other alternative methods of part of this debate because they would love to be of the mandate, but what does it do when you start expanding the menu of health care options in each state? it also expands the cost. that is part of the tension between expanding coverage, but also keeping it affordable. host: a story in "the new york times" --

guest: like the calller,,, from virginia. -- tom from virginia. host: one of viewers said it was a part to growing call from virginia and wondering how many people will fall through the cracks in the next few years. another person says administrative cost for health care has been insurance company claim for raising cost. will be affordable care at hope that out? guest: one of the many measures was eliminating -- levitating -- limiting administrative cost. the idea was these companies are taking in all this money from customers. how much are they spending it on accounts, marketing and advertising and how much is

spent on taking care of people? the affordable care act limits administrative costs in some cases to 15% of total premiums taken in. in other cases 20 percent. if they do in fact spend more than that, or if they do not spend at least 80-85% of premiums on health care, they have to issue rebates. this year, this provision kicked in last year. in fact, many beneficiaries that rebate checks in the mail last year. this was intended to address the administrative cost. people like the earlier calller who was basically arguing for a national health system would probably respond that the administrative cost of the u.s. will probably still be much more than companies with a single system. host: jay hancock, a senior

correspondent with kaiser health news. keith from texas joins us. please turn down your tv. we will have to move on to steve in northampton, pa., on the independent line. caller: i have been working since i was 18, and i am now 50. every year since then everything with the health insurance has been pretty good for me and my family. but what i do not understand is what the health-care mandates and insurance companies receiving, which is essentially a tax from each individual in the country, to offset other cost for insurance companies, and i know the insurance companies to a lot of experimentation and stuff like that for future cures, and they do spend the money in those areas, but what i am concerned about is our government has not

shown the bill to the people in fall of what exactly the expenses are going into the future. up in canada i know for a fact that if i was in an accident some more or had a fishing accident, and i was from out of the country, they would treat me first. i know for a fact that through the government health care of their, their tax system is believe each family's budget dry. they have a waiting period sometimes where you could be in the hospital and be no. 18 or 20 and will not be able to get any care until a bureaucrat decides it is ok for you to get an aspirin. for me being out of the country, the doctors will move me to the head of the line because they know i have private insurance or can pay in cash. a lot of people do not

understand that the health-care mandates will essentially believe the public dry who was working like myself all my life, and we have to rearrange the family budget, which will go into the national economy and the recession will not be a recession, it will just snowballed. i feel that with the politicians, every time they do something, you have to read before you know what is it, just like the last passing of legislation before christmas at 2:00 in the morning is really putting the end to the american public. six months down the road everyone will throw their hands of an air and say what are we doing? -- hand in the air and say what are we doing? host: do you have a sense if your taxes will go up? guest: the taxes have already increased. the health-care law itself is

unaffordable to most american people. it could put our country in danger in the future. host: have you looked at your money, the money you make, as well as investments, whether that will be affected? guest: i see the net income being impacted. let's say with taxes in the cost coming into this. now, say i take two weeks' vacation per year. and i have to make up my mind whether i will save up $1,500 for a trip to go fishing with my family and grandson's, or am i go -- or am i going to go to the outer banks in north carolina? i it to cut off one week of vacation that will impact the economy across the board in this country. guest: i am glad you mentioned the individual mandate, because the topic here is affordable health care act taxes. as justice roberts educated us

last year, the penalty of the individual mandate, the feet that you have to pay if you are not insured, is in fact a tax. the court ruled it is constitutional under the taxing power of the congress and the if -- individual mandate penalty is a tax. it will start out as something of the kicked it -- will kick in 2014. $95 starting out. it rises sharply are the first few years in goes up to $695, i believe, by 2016. and one of the big questions in the act is how many people, are protected we how many young, uninsured people, the young and dunstable's will choose to pay the penalty, rather than seeking held insurance? -- young invincibles, will

choose to pay the penalty, rather than seeking health insurance? that means it will be less financed than it otherwise would have been. imaging canada, and i think your position of the canadian system and u.s. system is a great illustration of the fundamental tension that is going on between cost and access to the system. in canada they spend much less per capita in taking care of people than we do in the united states. they tend to have better results, but as you pointed out, taxes to the system is difficult. you have to wait to get in for certain procedures. the access in the united states is, all things considered, very good for the majority of the

population. however, the cost for the access is moving in a direction that almost any expert agrees is unsustainable in terms of cost. host: david now in pennsylvania on the democrat line. caller: i had a question. i am a member of the carpenter'' union, and i have heard somewhere that the unions are exempt from these new insurance laws. our union is self-insured. we are administered by blue cross and blue shield. but we in fact as a union are self-insured. are these kinds of organizations unions that are self insured or in the company that is self insured, exempt from these new laws that are

going into effect? guest: that answer, which you can safely use for any aspect of the affordable care act is it depends. in general self-insured companies are subject to the requirements of the affordable care act. they are not subject to the medical loss ratio provisions we just talked about, because they're not in fact an insurance company. they are taking in costs and paying them. but for example the very popular aspect of the act that required insurers to cover young adults, members of households where their parents have health care coverage, that applies to show -- self-insured companies. they have to cover young adults up to age 26 if their parents are covered under the plan.

i think it is safe to say that in general self-insured entities are subject to most of the requirements under the act, and unions certainly will be subject to that. the one thing that might be worthwhile to mention here is that many unions have very good health packages, thanks to the negotiating savvy of the union staff, and there is expectation and fear on the union behalf they will be subject to another affordable care act tax that we have not mentioned yet, which is the cadillac tax. that is shorthand for a tax that will be levied on very generous health insurance plans after 2018. the idea was