The president, and those of his defect, continue to call for tax rate increases on the job creating investment class as the cure for budget deficits and debt, regardless of our economic condition. Due to my earlier statements regarding income taxes paid, and investments made, its obvious that this should not be perceived as a wise proposal. In fact, it would likely result in further harm to our economy, and to our governments balance sheet.
Leading conservatives believe that, if there is to be any additional money confiscated from our economy, it is best to achieve this through the elimination of special tax breaks, loopholes, deductions, and tax credits. A reaganesque attempt to catch those who have, up till now, used the system... to cheat the system. There are so many items in the tax code that could be eliminated, not simply to raise revenue, but to allow for tax rate reductions that would actually succeed in stimulating the economy, also resulting in increased tax revenue.
With all of the Keynesian economic stimulus attempts repeatedly coming up empty in regards to actually lifting our economy out of the high unemployment, low growth conditions were currently encountering, the call for the reduction of governments size and scope, along with a more liberating, and less manipulative tax policy, appear to be the growing louder. In this past century, we have slowly transitioned into an ever-increasing semi-socialist economy, that has placed our government in far too great a role for the free market to thrive. It only makes sense that, when you get lost, you should back up to the point where things start to become familiar, and then choose a different direction. We not only need to unwind government back to its basic functions, and reduce the costs involved to the taxpayer, we need to stop pussyfooting around and fundamentally change the calculus of how government revenue is withdrawn from our economy.
There have been a multitude of tax plans proposed that would be an improvement over our current tax system. Various plans propose different ways in which to shift the tax burden, stimulate the economy, raise revenue or reduce revenue while also shrinking the size, or slowing the growth of the federal government. Most expand the tax base to the point where tax rates can be dramatically reduced, and flattened. Now, some of these plans also propose a reduction in business taxes to allow American products to become more competitive in the global markets. This seems to address more than just taxation, it repositions our standing in the global market place, and would dramatically modernize our economy. So, yes, this should be the starting point of any tax reform policy.
The problem with most proposed tax plans, is that they are merely adjustments to the existing tax code, rather that a total rethink of the idea of taxation. Former republican presidential candidate Herman Cain had garnered a massive surge in support mainly due to his, "scrap it all, and start from scratch" 9-9-9 tax plan. Cain explains that businesses don't really pay taxes, their customers do. But he did a pretty poor job of explaining what the "Fair Tax" people have been stating for years. While undoubtedly the most radical and exciting plan of recent history, it falls somewhat short of what I believe to be ideal. Mainly because 9-9-9 continues the business tax farce, with a 9% business tax. His plan continues to make businesses add the cost of a 9% business tax to the cost of their products and services, and then imposes a 9% sales tax on top of that. So, when you buy a product, you are paying the business tax, and that tax.. gets taxed.. by the sales tax. While, I agree that his plan would reduce business costs enough, so that the final sale price is somewhat less than what we pay now, I still fail to see the reason for any business tax at all. Why would you bother to expose a secret tax in our system, and then merely reduce its size?
In the spirit of "The Fair Tax" and "9-9-9, I've come to the conclusion that we do need to roll back the consumer price index by reducing business costs. The removal of business taxes and ignorant regulations, effectively causes a market deflation that does not deflate wages, or change the value of the dollar. Removal of these inefficiencies would result in a lower cost of living and a higher quality of life for all Americans. The current "hidden taxes", priced into the products and services we purchase, is estimated at somewhere around 20%(+ or – 10%), depending on the particular product or service. In fact, even the most conservative estimates show retail price reductions would average of between 10-15%. Personally, I think the conservative estimates ignore the cost savings throughout the multiple stages of production. From raw material collections, individual component manufacturing, assembly, shipping, marketing, wholesalers, retailers, supporting businesses, etc. They also likely forgot to consider the cost of tax management, from tax lawyers, tax accountants, tax lobbyists, etc.
The reason for the wide range in potential savings has to do with what the particular product is, the amount of supporting businesses in production, and the number of middle-men between the production and the eventual final sale. The cost of services is mainly a payroll and overhead calculation, and therefore will not have as many cost reductions as products would. Also, products built outside the U.S., or with parts not made in the U.S., will not benefit as much from the reduced cost structure. Their cost saving will only occur in the distribution and sales of the product. But, that’s actually a positive aspect, not a negative one. Because American made parts and products benefit more, American products will become less costly as compared to their overseas competitors. American products sold overseas would not be sales-taxed, and along with the business cost reductions, would be considerably less expensive to our foreign customers. Making the American companies more competitive, both there and here, means increased sales, creating more jobs, which means more economic growth, and more government revenue.
Implementing a sales tax, in place of the current, more complicated tax system, removes the inefficiencies of government from the market place. Cost reductions could be shared by both businesses and consumers, without causing damage to government revenue collection. This could allow for increased wages, decreased prices, or both.
For instance, if you were to purchase a $21,250 new car, and you had to pay a 15% sales tax of $3187.50. That would make your total sale price $24,437.50. But remember, were it not for the regulation reductions, business tax elimination, and all of the other cost reductions associated, they would have priced that same car for $25,000. Sure, it may not be a huge savings, but when paying a 15% sales tax can actually save you money, help our economy grow, produce more revenue to the government than the current business tax structure, and reduce unemployment, you have very little to complain about.
Now, I'm sure some may not be very trusting of the business world, and believe they may not choose to lower product and service prices as their business costs are reduced. Well, even in the worst case scenario, if you found a business adding that 15% sales tax to the old, inflated price, you probably wouldn’t have to look too far to find one of his competitors has chosen to pass on some share of their reduced business costs to undercut him. It is this price war competition that will eventually work prices down to the lowest possible margins the free market will support. It is this competition that lowers the price of goods and services as the cost of doing business in America is reduced. Due to the free market forces of competition, the cost of the products and services we buy are reduced to the lowest level allowable, while still making the sale of the product worth the time and energy involved. The company that offers the product and/or service to the market place at the best value, usually wins the larger market share and the profits that result.
While American ingenuity and innovation make us a leader in world, in terms of productivity. Where we loose-out to our foreign competitors, other than the massive regulatory compliance costs, is our cost of labor. Between 1999 and 2008 U.S. multinationals slashed their domestic workforce by 1.9 million, while increasing overseas employment by 2.4 million. Now, we can't reduce our pay to match those of less developed counties, or force them to increase their payroll to match ours, but there are other ways to reduce business costs, that result in the narrowing of the sales price difference.
Simply reducing the price of American goods and services to that of our foreign competitors would result in most American businesses drowning in debt and closing their doors. Up till now, this has forced many businesses to either outsource a portion of their operations to other countries, or relocate the entire business overseas. This has resulted in a major reduction in the size of the American manufacturing sector, causing our transition to a mainly service-oriented economy. Haven't you noticed that nothing we buy is made in America anymore?
The American government has been slow to action. It did not adapt with the changes of the ever-expanding global market place. There were steps that could have been made to address the shrinking manufacturing sector. There were actions that could have been taken to prevent the outsourcing of many American jobs, and the relocating of many American businesses. Would they have to be bold?..Yes. Would they be politically difficult?..Yes. But they were necessary, and they are still necessary today.
Steps need to be taken that would reduce the cost of doing business in America. Steps that would reduce or eliminate entire segments of the business model equation, used in determining the cost of American products and/or services. These steps require the federal government tread more lightly on the businesses that are responsible for employing the majority of the American workforce. It is, after all, this workforce that provides the funding required for all government functions. It is government that has reduced the efficiency of our economy, and it is only government that can release the drag it imposes on our economy. Government, at all levels, must remove itself from the private sector economy as much as possible. Over-regulation, taxes, license and permit fees... everything must go!
Governmental regulations are a necessity, sure, but they need to be limited to the health and safety of the products and the workplaces. You will never eliminate all risk, nor should you try, but there are obvious regulations supported by all. The low-percentage hazards need to be ignored. Any company found to be lacking in product or workplace safety, though not in violation of governmental regulations, will either be fined by the courts, or judged harshly in the court of public opinion. No, I'm not talking about returning to dirty water and polluted air, but there does need to be a rational cost-benefit analysis done before you go chasing every low risk to every small segment of our society. There comes a point where sacrificing economic development for the many, due to a possible risk to a few, hurts more people than it helps.
If businesses were immune to tax policy, there would be little need for the government-corrupting tax lobbyists. Subsidies, tax incentives, and government loan guarantees come from government corruption and politics that distort and confuse governments function and the free market. Anything that could even be perceived as favoring one business, or business sector, over another; corporate welfare, subsidies, etc., need to be ended. I’m in favor of making American products more globally competitive, but through regulation reduction and tax elimination for all, not cash handouts to the few. In a truly free country, with a truly free market, government should never be allowed to choose winners and losers.
Businesses don’t really pay taxes now. They treat taxes like any other cost of doing business, and pass the costs down to their customers, worked into the price of their product or service. Rather than us secretly paying their taxes through the inflated price of goods and services, we should instead be paying a national sales tax. Even if it made no difference in the final cost of the goods and services, it would at least be up front and honest. And, it could be implemented in such a way that it helps the disadvantaged person with the costs of necessities. A certain level of spending could be made sales-tax-free, through a sales tax credit, allowing the purchaser to enjoy the full benefit of the lowered price that business cost reductions would bring.
The most important advantage of a sales tax system, over the current mess we struggle with today, is that it makes American business more globally competitive. The implementation of a consumption tax, that is placed upon all goods and services, including imports, but is immune to exports, would allow American businesses to become more competitive in the world. It would result in American products becoming more price-competitive overseas, while at the same time, making foreign-made products slightly less affordable here. This would then allow our economy to become more able to provide employment to the unskilled manufacturing workers that our economy has been increasingly unable to accommodate.
Prices of products and services will go down with the reduced business costs, because the forces of free-market competition are strong. Costs of support businesses, from the wholesale suppliers, shippers, packaging, just about every line of the current business spreadsheet is reduced. This will allow businesses to streamline costs and reduce prices, without any risk to their bottom line. Accounting will be simplified, tax compliance will be easier, and the time and money spent attempting tax avoidance will be eliminated. All these increased business efficiencies and reduced business costs, will reduce the costs that, up to now, were simply passed on to you in the inflated prices of all the products and services you purchase. Add the savings of having less red tape regulations imposed, plus the savings of not needing an army of lobbyists, lawyers and accountants. All this money not spent by businesses, would be money not added into the cost of every product and service that you buy. Remember, if they pay it, you pay it, plus the acceptable profit margin that free-market competition allows.
A shout out to the 99%
Now, many are appalled that I am calling for zero taxes on "big business". They claim more tax breaks for the rich is what got us into this mess. They are, of course, out of their minds, and have no idea how the economy works, but that is a topic another time. It is businesses, both large and small, that provide what economy we have remaining. They have not taken income from you, but rather, have created the means for you to have employment income in the first place. Nearly every employed person in the private sector is employed by someone of greater means. Knowone likes having to rely on another for their livelihood, but it is a fact of life, so get over yourself and accept it. Much like the actions of the labor movement, if we choose to bite the hand that feeds us, there will be less fed.
Believe me, I hate sounding as if I am the defender of "big business". Truth be told, I am a major critic of business and its involvement with, and its corruption of, the American government. It is the practice of using influence-peddling lobbyists, who push and bribe for what is essentially anti-competitive tax and regulatory legislation(corporate welfare, tax breaks, subsidies), that distort free and effective competition in the marketplace. Business influence(money) is the source of the great majority of corruption in our political system, and most of its influence over individual members of our government is completely legal. It is for this reason, above all others, that I have found the need to separate the two as much as possible. The need for them both is clear, but the relationship between them should be indirect and coincidental. Governments purpose should be to respond to the needs of the people, and nothing more. I don't want business to have any direct need of the government, and I don't want the government to have any direct need of business. It is equally critical to get business out of government, as it is to get government out of business.
It may be of some interest to you "Eat the Rich" morons, that this plan does not really untax business profits.
The tax plan eliminates the corporate and business taxes, but still taxes business owners and shareholders profits the same as any other income, after exemption and deductions have been removed. It simply looks at business as a non-person, and recognizes the reality that only people actually pay taxes. Any business profit, not paid out to the owner/shareholder, is invested by the business into our economy. Any proceeds from that investment, if and when it is paid out to the owner/shareholder, will then be taxed, right along with all other sources of profit, if and when it is finally paid out. So, bottom line, all business money remaining after expenses, is eventually taxed. Either by income, capital gains, or as dividends. My plan taxes them all equally, so that there is no advantage to any particular tax avoidance strategy.
Yes.. I know, imports are not persons either, but other countries add taxes to the price of our goods, and we need to reciprocate to level the global playing field.
The plan eliminates all types of federal corporate and business taxes completely, and imposes a sales tax on most products and services, set at 10% initially, but after the economy settles in to its new environment, the sales tax rate is made adjustable, on a year-by-year sliding scale between 10% and 15%, based on the economic growth rate of the prior year. In a 2.0% growth economy, people need help, so only a 10% sales tax would be imposed. In a 4.5% growth economy, people need less help, so a 15% sales tax would be imposed. It is at this time, when the economy is doing the best, when more attention can be focused on paying down the national debt. No matter the sales tax rate, only 10% is government revenue for spending, all additional sales tax revenue between 11-15% is solely devoted to debt. This variable sales tax also provides the added benefit of helping hold down inflation during the higher growth periods, without the federal reserve getting involved and raising interest rates that creates undeserved hardship on American businesses and markets.
All exported goods and services, and used goods, are sales-tax-free.
The sales tax is applied to the sale of every product and service not exported, but the plan allows for a 10-15% of poverty level income tax credit(basically a sales tax refund of below poverty level income) on your income tax form.
Most businesses will charge the 10-15% sales tax, which essentially works out to between 9.09% and 13.04% of their gross receipts. Each month, those businesses send sales taxes in, and file a sales tax report stating all taxes collected, and any sales taxes they have paid-out for business-supporting products and services.
Even though untaxing business and imposing a sales tax should work out as a net savings at your local department store, I still see the need for income tax reform as well. Not a plan that aims for a certain revenue amount. Not a set of numbers that sound cute! But an income tax based on principles regarding which of your dollars the government should be taxing. Should all income be taxed at the same rate? Is that even practical? Could we shield low-income families from the heavy burden of taxation, while still collecting sufficient revenue from the upper income families? If we shield too many, would that overburden the upper income earners to the point where less investment and reduced economic growth set us on a path to ruin?
The plan sets a 25% flat tax across the board, but incorporates a poverty level exemption to shield the lower-income earners. It also provides incentives for getting health insurance and a college education by allowing health and education costs to be tax-deductible. These tax deductions not only protect your dollars from a 25% income tax, it also reimburses you the cost of health and education sales taxes. In total, it works out to be a 40% health and education subsidy!
The plan provides for a poverty level income tax exemption(personal/or/family exemption of income below poverty level), based on the poverty guidelines issued each year in the federal register by the Department of Health and Human Services. This is a huge exemption, and it is based on a principle that government should keep its hands-off at least that amount of your income. Yes, I know, using H.H.S. guidelines reinstates the marriage tax penalty. I searched high and low to correct this, but finally decided to leave it as is. If your going to forgo marriage for cohabitation, in order to save thirty bucks a week, you probably see very little value in marriage, and should't bother getting married.
The plan permits the costs of education, health care, and charitable contributions to be deducted from gross income. The maximum amount you may claim as a deduction is based on the nationwide average of the prior year. If the average four-year college education is $24,000. You may claim a maximum deduction equal to 115% of the annual average, or $6900 per year, per student. If the average for health insurance coverage is $5000 for an individual, and $15,000 for a family. You may claim a maximum deduction 115% of that average. $5750 per year for yourself, $11,500 for a couple, or $17,250 for a family. Why 115% of the average, you ask? Because education and health care will be sales taxed, and this plan allows you to claim sales taxes paid in addition to the health insurance premium or college tuition costs. The average charitable donations made per year is 3-5% of gross income. Feeling charitable, I doubled that to 10% of gross income.
Don't forget the sales tax credit equal to 10-15% of your families poverty level income. This is a full reimbursement of all money you paid out in sales taxes up to the poverty level.
Capital gains, interest from bank accounts, and dividends are income, and are to be treated no differently. But capital gains and interest are only taxed as they are withdrawn. A statement will be provided at the time of a withdrawal, that indicates what percentage of your account is not from your deposits. That same percentage of your withdrawal is new income. When the income amount of your withdrawals are in excess of $200 in any given year, it must be included on your gross income statement portion of your tax return.
Social Security is a mess, and for those under fifty, it will not be available in its present form. Retirement assistance will be part of an "assistance to the poverty level" benefit program that no longer mandates payroll tax contributions, but is instead funded by general revenues. Government will keep your head above water, but it is your responsibility to invest and save for a comfortable retirement. Once you have reached the retirement age(70), you will be entitled to an income tax exemption equal to twice your poverty level status.
The plan eliminates the alternative minimum tax(AMT). the estate tax, the payroll taxes, and all federal excise taxes. (gas, energy, communications, cigs, booze,etc.)
That's it....no if's, and's, or but's! I leave very little for tax lawyers and accountants. The point is, once put in place, filing your taxes will be simple! There is no hidden tricks or procedures. My plan is meant to be so simple, that even a grade school student could do your taxes, calculate the sales tax, or report total sales tax collection of a large business.
You'll simply need to gather a few numbers; your gross income earned, including capital gains, interest and dividends collected, your health and education expenditures, and your contributions to charity. From there it is simple addition, subtraction, and multiplication. There would be a single page worksheet, with the top half being step-by-step instructions, and the bottom half being a the tear-off tax return slip. The most current poverty level income figures for various sized families will be provided, along with the 10-15% of poverty tax credit allowed for each situation. All you will need to provide is the few numbers that are particular to you and your families financial situation.
Your tax deduction claims will require a vender number and a client account number, provided by each tax-deductible servicer(charity, health insurance company, doctor, college, etc.). Each account, kept in record by the servicer, and provided to the I.R.S. annually, will be cross-referenced to check the validity of your deduction claim.
The upper-middle and upper income people who have not been taking advantage of the current labyrinth of tax avoidance schemes will notice a tax cut. Those who have had tax lawyers and accountants help them game the system, will finally be paying taxes for once. Even though they really do not need the poverty rate exemption and tax credits, plus whatever deductions apply, in the interest of equal rights under the tax code, they are entitled to it.
Again, you "eat the rich" morons should not worry about the size of the tax cut the wealthy receive. First, it is their money... Mind your own. Second, when they spend it, it is tax revenue for the government, which is good for everyone. Third, if they don't spend it, it is saved in banks and/or invested in our economy, which is also good for everyone. All of us, not self-employed, owe a debt of gratitude to those who provide the jobs, whether it be directly(your boss) or indirectly(an investor).
Middle income people, who currently pay a 7.6% payroll tax and a couple levels of the progressive income tax, will essentially be asked to pay the equivalent of twice their current payroll taxes.. They too get a poverty rate exemption and a sales tax credit, plus whatever deductions apply. Don't let the sales tax scare you. The final price of the goods and services, that you are used to purchasing, should work out be the same...or less.
Low income people, who currently pay no income taxes, but are hit heavily by the payroll tax will not be taxed anything on their "sub-poverty" level income, and they get all "sub-poverty" sales taxes returned in the form of a tax credit. The only money the government charges them is 25% of all income earned above their poverty level, after health care and education dollars have been deducted, and 10-15% of dollars spent on products and services above their poverty level. The sales tax should not be of any actual increased cost, since it is merely a substitute for what used to be business costs. All of this, of course, is true for all taxpayers, but it is most important to those who have little to contribute.
THE GRAND BARGAIN
An optional proposal, but one that I believe is critical to reducing the size, scope, and cost of government, is the grand bargain provision. Essentially it is a negative taxation provision, which is income redistribution in its purest form, but is done in trade with closing down the federal governments socialist safety net programs. The plan is generous in that it provides income assistance, up to the poverty level, for the working poor. In return, food stamps, welfare, and all other financial assistance programs administered by the national government, are gone forever.
This negative income tax provision is intended to ensure a minimum level of income for all those who actually work. With this N.I.T., all need for nationalized government assistance programs is eliminated. Those who do not work, or who are unable to work, would remain in the current safety net programs, but those systems would be administered by the states, who would have the independence to decide the best way to provide for their citizens. The states are then left with the responsibility to provide for the "non-working" segments of our society with welfare, health and education programs. This type of assistance was always intended to be provided by the states, and other than this tax policy, any and all future domestic programs should be reserved to the States.
The grand bargain provision removes the socialist programs and departments that the national government never had constitutional authority to begin in the first place. While the income assistance provision in this plan was also not envisioned by our founding fathers, pandora's box has been open far too long for us to return everything that socialism has taken. Strict conservatives and libertarians who wish to completely dismantle the socioeconomic safety net, are only fooling themselves to think that it could ever really happen.
At the federal level, this would reduce government administrative costs to a fraction of the current system, as well as eliminate the inefficiencies and disincentives created by multiple overlapping aid programs designed for the working poor. Currently, when minimum wage workers earn a little more, they "net out" with less income because they become ineligible for the aid. They become ensnared in a socialist trap, with little incentive to seek a higher wage.
In this income assistance provision, the amount of assistance is primarily limited to the poverty level, and is not to exceed the gross income actually earned by the filer. In this plan, if they work, and make at least 1/2 of their poverty level status, they are income-assisted up to the poverty level, without imposing any additional burden on the bloated federal bureaucracy. If they happen to earn $5,000 more over the previous year, but still qualify for assistance, their income assistance is reduced, but only by 50% of that $5000. So, they would actually have income $2500 over their poverty level status. It is this split, of the savings to government, that provides the incentive to seek a higher wage, and eventually climb out of the need for income assistance. Truth is, these people are going to get assistance one way or the other, and being able to deliver assistance based on a tax return filing, rather than through a bloated bureaucracy, seems much more efficient.
This same income assistance provision is available to the retired poor over the age of 70. These are the only people who qualify for federal assistance without meeting the work requirement.
The poverty level tax exemption, income assistance provision, and the health and education deductions, all work in conjunction with each other to replace all of the current assistance programs of the federal government. Health insurance and education is made more affordable without a government regulated take-over of those systems. It is my belief that providing income assistance to the poverty level, eliminating taxation below the poverty level, plus providing what is essentially a 40% subsidy of health insurance and educational costs, should be all that you can realistically expect from the federal government. Any additional welfare programs, educational grants, or financial loans still needed, can be provided by the states and privately run charitable organizations.
The simplicity of this plan saves you money, saves businesses money, saves the economy from a great deal of inefficiently spent money. It will improve your ability to purchase health care, pay for college, save and/or invest money, which will add to your personal wealth, and improve our nations economic health. The business sector will be unleashed in a way never seen before. New businesses will sprout. Hell... foreign businesses will want to move here. The manufacturing sector would be rejuvenated. Unemployment would not be a problem. ... trade deficits would vanish ... and government revenues will increase at a record pace.
It's finally time to tell the world,