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Americans' 'fiscal cliff' fix? Cut government spending – but not Medicare.

A new Monitor/TIPP poll finds Americans favor cutting government spending to solve the fiscal cliff, but few want to cut entitlements such as Medicare, which make up most of the budget.

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Here are the ideas tested in the poll, ranked by popularity:

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  • Increase federal income taxes on households earning $250,000 or more (54 percent). 
  • Reduce corporate tax rates to a level comparable to other developed nations, but offset the change by eliminating many corporate subsidies and tax breaks (47 percent).
  • Increase corporate taxes (47 percent).
  • Limit the tax deduction for homeowners with mortgages over $500,000 (42 percent).
  • Increase capital gains taxes (39 percent).
  • Increase the Social Security payroll tax cap from the present $110,000 to 170,000 dollars (36 percent).
  • Cut defense spending (34 percent).
  • Introduce a tax on carbon-based fuels (31 percent).
  • Increase the top rate of the estate tax to 45 percent from the present 35 percent (24 percent).
  • Cut Social Security spending by increasing the retirement age (23 percent).
  • Introduce a value-added tax on consumption, on top of sales taxes currently imposed by many states (19 percent).
  • Cut Medicare spending (19 percent).

Although this poll doesn't reveal a public stamp of approval for many ideas, it does indicate some guidelines for Congress and President Obama as they negotiate.

First, Americans generally favor having the rich pay a bit more in income taxes. This was the one idea among the dozen that respondents tended to support regardless of their age, income, or gender. (Only 29 percent of Republicans supported the idea, however.) Yet this support goes only so far. Hikes in the estate tax and in Social Security taxes for high earners didn't fare too well. Boosting the capital gains tax also wasn't widely popular. But interestingly, that idea was a bit more popular among investors (41 percent support) than non-investors (37 percent support).

Second, the public appears open to the idea of corporate tax reform – although the poll doesn't give a clear signal on whether the reform should emphasize raising new revenue or making the US a more attractive place to do business, relative to other nations.
 
Third, although defense cuts aren't popular, the public may prefer such spending cuts to new broad-based taxes, such as a tax on carbon emissions or a value-added tax.

Finally, changes to entitlements will probably need to be sold as bipartisan plans to make the programs sustainable and healthy – not just as "cuts." The idea of cutting Medicare spending was deeply unpopular among all age and income groups, and among Republicans as well as Democrats.

Other recent polls have found similar results on several fronts, including the willingness to raise taxes on the rich, the reluctance to see entitlement benefits cut, and the desire to resolve fiscal problems with a balance of changes that emphasizes spending cuts more than tax hikes.

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