US Tax and Welfare Reform
The world economy is led by American consumers buying things they don’t need with money that he don’t have. There are growing signs the American consumer is about tapped out and foreign lenders are diversifying their central reserves. Additionally, dominance of the US$ dollar in world trade, enjoyed by Americans since WWII, is losing steam against the Euro and bilateral trade agreements between other nations are increasingly being denominated in currencies and commodities other than US$.
As consumption slows and competition brings prices down, led by housing and autos, a US recession is already within radar range. There are increasing signals this has already beginning to occur. As consumers become aware of threats posed by a deflationary recession, they will spend less on unnecessary goods thus accelerating the decline.
The US government and the Federal Reserve have already used up most of their arsenals of fiscal and monetary stimulants (e.g. wars, tax cuts, easy/cheap money), to avoid economic deflation during the 2001 recession.
debtism.com
The coming recession will be unlike anything experienced since the Great Depression. Do not expect government solutions to the forthcoming economic catastrophe. If government had the answers, these conditions would not have been allowed to develop in the first place.
What may be expected are massive infusions (at unimaginable accelerated levels) of fiat money, continuing the process of redistribution of money confiscated from lenders and given to debtors. Over the past two or three decades, defective government and banking policies have virtually destroyed incentives to save. It is not naive to assume that decades of false prosperity will disappear during the oncoming debacle.
It is at such times as these that strategies for survival need to be developed and put into place. From a national perspective, immediate, simple, transparent tax and welfare reform is critical. Such reforms, to be successful, must be seen to be fair to all taxpayers and compassionate to those in real need.
The greatest dangers are: (1) partisan politics will provide formidable barriers to effective solutions. And, (2) government will act too hastily and will repeat failed policies that have led to the quagmire, thus postponing the inevitable. It has taken decades to get into this mess and it will take years to get back on a positive track.
Reformists should consider these fundamental recommendations:
1. Repeal deductibility of interest and tax expense on all corporate and individual tax returns. Elimination of these deductions will increase federal revenues and significantly reduce federal (explicit and implicit) fiscal exposures, thus improving the credit rating of the US Government. Such action may also have profound effect on national savings and preservation of resources by altering the behavior of government, business, and workers.
2. Level the federal income tax rates on all individual income tax returns, regardless of source. A flat 10% rate on wages, interest, dividends, capital gains, and retirement benefits (including Social Security) may be a good place to start. A test-base of $10,000 for head of household, beneath which no tax can be extracted, should also be considered. Each additional member of a household would add $5,000 to the base. A single person with $10k income or a family of 4 with $25k income would pay no federal income tax. No other exemptions, credits, or government gifts would be allowed. The base would be indexed to an appropriate measure of inflation.
3. Replace the Corporate Income Tax with a 2 percent excise tax on total business receipts. Collectively, in 2002, the Internal Revenue Service reported U.S. business posted $ 20.74 trillion in total business receipts (that may be currently estimated at $22 trillion). This simple measure, without alteration, would produce estimated revenues over $400 billion, an increase of at least $100 billion above the (2005) gross $307 billion or net $273 produced by the current inefficient, convoluted system. irs.gov Reduced cost of tax compliance and government intrusion provides the business incentive to accept change.
4. Consolidate Social Security benefits with Supplemental Security Income (SSI). SSI benefits for a retired couple already exceed Social Security benefits for a low-wage worker. Establish a minimum benefit for the combined programs linked to minimum wage with modest amounts above that level to those who have paid in higher total amounts. This will connect those receiving benefits with those required to pay for them. It may also provide incentives for lawmakers and business to provide a living wage instead of a minimum wage, thus reducing government subsidies to business and workers.
5. Provide a single amount Cost of Living Allowance (COLA) representing an average of annual increases. This will result in high-income beneficiaries getting less and low beneficiaries getting more. Currently, beneficiaries with the least need get annual COLAs that are a multiple of those of low-wage recipients and widen the gap between rich and poor.
6. Develop a national health plan by consolidating Medicare and Medicaid. Complexity of overlapping laws and insurance policies often causes the cost of processing medical claims to exceed cost of treatment. The focus should be on health care for all Americans, not the financial bottom line of drug companies, and other health related conglomerates.
7.Establish real Trust Funds, with real alternative appreciating assets to replace US government Trust Funds (and to prevent the US government from loaning money to itself). The governors of the 50 States could appoint representatives to serve on a unified Board of Trustees (outside of federal government control) to manage funds and administer investments. The Employees Retirement System of Texas (ERTS) could serve as a model. Initial funding may begin with the US government redeeming IOUs within the Trust Funds by selling debt equivalents on the open market. This one action will force federal government to practice fiscal discipline since the interest expense will be real money (competing against other spending priorities) not phony IOUs.
debtism.com
good luck,
SargeK |
