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Help Save the USA
by finding practical solutions to complex problems
To take back our country, we need to build more factories in the United States instead of more court houses, jails and prisions. We need to downsize government at all levels - period!
Politicians collect two bucks in taxes, borrow two more, spend six and call the difference a surplus instead of a deficit. Further complicating the abysmal US economic state of affairs is the Credit Card mentality of Congress and the Executive branches of government. But, it is not all their fault. An apathetic, indifferent public allowed these conditions to occur.
For any strategy for tax and welfare reforms to succeed; the country must first recognize the fact that defects in current policies are bankrupting the United States. The product of change must be transparent and accounting practices simplified so a taxpayer knows how his taxes are being spent and welfare recipients may understand where the money is coming from. The complexity of overlapping laws and the fuzzy federal accounting schemes now in practice make it practically impossible for policy makers to legislate equal justice under law. How can sensible policy develop when current law is almost incomprehensible or misinformation and disinformation saturates mass media?
The giant gorilla that is driving chronic federal deficits and unsustainable levels of explicit and implicit debt and social obligations is the business/corporate deduction of individual FIT and FICA taxes as business wage expenses. Approximately one-third of all the FIT and FICA taxes removed from workers paychecks does not reach intended destinations because of the "Business Wage Expense Deduction". Middle class workers struggle to make ends meet while their employers make double-digit profits and the government is going broke. These insane laws that have created these conditions must be changed.
Restructuring Tax and Welfare Laws and Policies
A number of proposals or options may be considered that fundamentally change the tax and welfare structure that now exists. The over-riding objective is to put equity, justice, and fairness into redesigned federal retirement and social welfare programs that accrue investment grade assets and are financially sustainable. The compounding of debt obligations in phony trust funds to fund federal retirement, Social Security and Medicare has to STOP!
1. Discontinue the Business wage expense deduction of individual FICA and FIT taxes withheld from paychecks. FIT and FICA taxes are not wages. They are taxes. This single change will immediately produce Social Security Old-Age and Survivors Insurance (OASI) surpluses.
2. Replace the Corporate Income Tax (CIT) with a 1 or 2 percent tax on gross business receipts. This would eliminate the business practice of deducting from profits all individual FIT & FICA taxes. It would also eliminate double taxation of dividends. The simplification will produce more revenues to the Treasury and will reduce tax compliance costs to business. A win, win situation.
3. Discontinue the interest expense deduction on all tax returns (Corporate and Individual). This single action will result in significant increases in government revenues. Incentives to "borrow" because of the tax code and paying back debt with cheaper money will be removed. This action must be a transitional change over a reasonable period of time so that business and household budgets can adjust to a new reality that government cannot afford to subsidize debtors at the expense of savers. Incentives to save instead of borrow will be a positive by-product of this change.
4. Establish uniform federal individual income tax rates on all sources of income. Eliminate the current construct of tax exemptions, deductions and credits. Establish a tax base line relative to the national minimum wage that would become the standard exemption for all workers regardless of marital status. Because of the staggered increases in minimum wages in 2007 to 2009, the base lines may be rounded to $11,500 - 2007 $13,000 – 2008 and -$14,500 - 2009 . An amount equal to one-half the base-line would be allowed for each documented dependent. No other exemptions, deductions, or credits would be allowed. I.e. Child Tax Credit and Earned Income Tax Credits (EITC) would be eliminated as well as special deductions for disabled and aged. Income below the base line would not be taxed. Tax Income between the base line and pay 50% above the base at a 10% rate. Each succeeding level of income 50% above the previous tax bracket would be progressively taxed an additional 5%, with a 30% maximum tax on the last dollar earned regardless of source.
5. Terminate the current construct of the Federal Insurance Compensation Act (FICA) income tax and abandon the OASDI trust funds that currently have no real assets. Replace the latter with new "Federal Insurance and Endowment Trust" funds that place a fiduciary, contractually binding, government responsibility to invest FICA revenues in marketable investment alternatives. Binding contracts between the government and participants would insure participants get a positive return on their investments to use or leave to heirs. The "Federal Insurance and Endowment Trust" would be funded by equal rates of 5% of wages between employers and employees.
The insurance and annuity premiums would be separate from all other tax and welfare accounts. Current beneficiaries of the programs would continue to receive their checks from the US Treasury general fund. Current free or subsidized benefits above certain levels may be progressively reduced or eliminated by “means testing” over a period of years and by the reduction of annual COLA increases.
6. Merge Medicare and Medicaid into a “means tested” program that includes extended nursing home and assisted living care.
7. Restructure Cost of Living Adjustments (COLAs) by discontinuing the present practice of percentage increases in benefits that heavily favor higher income recipients. Replace with a uniform COLA pay raise relative to the median or average amount.
EXAMPLE: Consider replacing the COLA formulation with a flat annual COLA amount for each beneficiary. Example: the latest COLA increase of 2.3% on the maximum benefit of $2116 (2007) is $48.67. The 2.3% on low-wage recipients of $850 is only $19.55. By computing the 2.3% of the average retired benefit of $1500, the new COLA would be $34.51, to be paid equally to all retired worker Social Security beneficiaries. This would reduce increases for wealth pensioners and increase the amounts needed by low income retirees.
8. Establish uniform Federal tax rates on wages, interest, capital gains, dividends, estates, royalty, and welfare benefits all other sources of income. A uniform tax rate may lead to a balanced budget because the "uniform rate of tax" can be set a level that produces sufficient revenues to pay total costs. The imperative to reduce the size of government to match a reasonable and publically acceptable tax base may be a side benefit.
SUMMARY Implementation of the above policy alternatives will result in positive cash-flow to the US Treasury in a short period of time. The new revenue produced by change would reduce the national debt if politicians can be restrained from spending the surpluses in the pretense of "caring". The US will become increasingly less reliant on foreign capital to finance American consumption. A sound US economy rebuilt on equity instead of debt will produce positive results for the populace and the businesses that employ them. What's good for America is also good for business. None of this is likely to happen unless there is a ground swell of grass-roots support for these changes to occur. If citizens will unite and provide the resources of time, energy and money to these efforts instead of wasting it supporting politicians that say they want change; but continue with the same old flawed tax and welfare policies, this movement may have a chance of success.
Do not despair! A nation’s wealth cannot be accurately measured by volatile, highly leveraged markets or by trillions of binary electronic impulses that merely represent deposits and withdrawals to and from accounts. The true value of a country and its citizens is determined by the qualities of human capital, infrastructure, currency, law, moral fiber, character, and “can do!” spirit.
Middle Class workers might consider forming Class Action Lawsuits against the Federal Government to force them to invest money intended for Old Age retirement and health care into real assets instead of spending it on less worthy programs. It may accomplish little, but focus attention on government, social obligation- funding problems- and cause Congress, the Executive Branch, and the Supreme Court to act under the pressure of public scrutiny.
TELL Congress and the Administration to STOP compromising designated Social Security retirement earnings with pyramids of government debt. Tell them to put your OASI FICA taxes into a real trust fund with compounding assets to fund your future retirement. TELL them to put the national interest as priority NUMBER ONE! See Social Security Reform OR Perpetual Debt
Aside from the discriminate and I think Unconstitutional, practice of extracting two income taxes on wages, defective law, accounting and policies have resulted in a plethora of “Mac-Mansions” for the wealthy, while workers struggle to make mortgage and automobile payments, or save to make a down payment on an affordable home.
NOTE: This article is a work in progress. As constructive comments are received, all sides, of all issues will be incorporated into a final product. That could take awhile!
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Doing Your Part to Improve America
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“The object of war is not to die for your country but to make the other bastard die for his.” General Patton
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