Creating Fair Taxation

lol, Sure.


The Truth About Social Security and Privatization
Our Social Security System vs. "Privatization"

Social Security is a successful intergenerational program that has served this country well. Yet some groups want to "privatize" Social Security by taking payroll tax money that now goes into the Social Security trust funds and investing it instead in private investment accounts.

Under Social Security, people earn the right to participate by working and contributing. The program was never intended to be an investment program. With broader policy goals than private retirement plans, its intent is to provide guaranteed income to seniors, disabled citizens, survivors, and their families. Privatization would severely undermine this system.

The arguments for privatization can seem persuasive at first, but they are all hollow and easily disproved. Following are five simple rebuttals to many common and misleading claims being spread by the privatization movement. When you hear any of the pro-privatization claims, refer to the facts provided here.


When They Say , "Privatization Will Fix Social Security for Future Generations," The TRUTH is...

Privatization is not a plan to save Social Security; it is a plan to dismantle Social Security. Privatization means increased retirement risks, severe cuts in Social Security benefits, and a multi-trillion dollar increase in the federal debt.

...One need only be reminded that between 2001 and 2003, the NASDAQ lost 75% of its value. And the market took a major downturn again in 2008. Nest eggs can disappear in an instant - and take months, if not years, to rebuild.

With privatization, some might do well, many might lose - but our society would lose the benefit of the sound, basic income security provided by Social Security retirement, disability and survivor benefits.


http://www.ncpssm.org/PublicPolicy/...Truth-About-Social-Security-and-Privatization




Privatization would transform Social Security from conceptually old-age insurance to a system of forced savings. These are very different things.

In terms of policy, I do not see the point of changing Social Security from insurance which I can’t buy in the private market to a personal savings account which I already have in abundance. The only proxy in the private market for Social Security is an annuity which is generally expensive to buy


The sell-side of this idea will tell you that it is possible to make more money in the stock market than in Social Security. While it is true, the comparison is not honest. Social Security carries legacy costs which cause the poor return. The market does not reflect this financing burden. So the comparison is only valid if the costs of the past go away – they don’t.

What are legacy costs? They are the benefits of existing retirees which are fulfilled with current payroll taxes. If we redirect the payroll taxes of workers from Social Security to private accounts, how will you pay the existing benefits? Privatization in general replaces the money with subsidies from the General Fund. In other words, privatization changes the pocket which pays for Social Security.


When the sell-side of this idea tells you that the SSA has said that privatization will make Social Security solvent, it is not completely honest. Generally they point to studies from 2005. In a different example, JustFacts.Org says, “As evidenced by analyses conducted by the chief actuary of the Social Security Administration and a bipartisan presidential commission, proposals to give Social Security an element of personal ownership are generally structured to strengthen the program’s finances.” The evidence is a proposal scoring completed by the chief actuary in 2008. The proposal contained a 4.1 trillion dollar subsidy from the General Fund. If I hand you 4.1 trillion dollars, yes it will strengthen your financial position.

http://www.fedsmith.com/2014/07/06/the-risks-of-privatizing-social-security/

 

So complicated, it is why the current system is a mess. I prefer the KISS method, install a federal sales tax and dump the IRS, everyone pays their fair share based on the spending, including businesses.

 

I'm going to address these limited issues because they're the predominate concern based upon prior proposals.

The fact that Social Security was created as a social welfare program is the actual problem with it. In the 1930's the Congress identified the "lack of investment to acquire personal wealth to provide income:" by roughly one-half of all Americans but then failed to address that problem. Congress addressed the symptom (a lack of income) as opposed to the problem (a lack of wealth accumulation) so the problem not only remains, it's gotten worse over time. My proposal builds wealth over the working career of the individuals and would also have insurance for disabilities, and survivors in the event of death. It not only retains the safety net it increases it four-fold.

A three year downturn in the NASDAQ does not negatively affect a 45 year investment period. Since 2008 the markets have fully recovered and are actually at record highs. Once again short term downturns don't adversely affect very long term investment portfolios.

My proposal funds the legacy costs by applying the FICA/Payroll/Self-Employment taxes to all income regardless of source and without any caps like those that currently exist for Social Security. The transition is spread out over 45 years and none of the expenditures for the transition come from general tax revenues. I don't propose that all FICA/Payroll/Self-Employment taxes go into private investments but only those taxes on the first $50,000 of gross income. All of the additional tax revenues, including the huge increase generated by taxing all income, go to fund the transition.

Once again my proposal basically increases the social safety net four-fold over the current Social Security benefits (and completely eliminates the need for Medicare at the end of the 45 year transitional period).

Those that look at "privatization" are, unfortunately, looking at Republican proposals that are horrible proposals with all of the negative aspects noted. I took all of that into consideration to ensure that the potential problems will not exist under my proposal.

 

No offense to the OP, but the term "fair taxes" is a term liberals like to use that usually can be translated to mean "more taxes for EVERYONE".
The word "fair" is supposed to make you feel like you should just go along. Hey, it's only "fair", right/?


Here's my idea of "fair"

No American should pay taxes on ANY level - fed or state, until their pay exceeds the affective income level of a welfare person,
and THEN, only the monies beyond that poverty level should be taxed at a FAIR flat rate.

that's FAIR.

 

Actually, my numbers come straight from the IRS link I posted - they're the analysis of tax returns for the year. I used 2012 because they're the latest numbers available - it takes 2 years to crunch all the data. I haven't even gotten to the budget yet (but I will).... buuuut, since you brought it up, you rightly point out that Social Security and Medicare are trust funds... but I'm curious how you pay for current beneficiaries when all the new money is being directed toward your privatization plan.

 

its already that way.

 

Addressed by a previous post.

Once again people need to be careful because when the federal government addresses the problems with privatization it always refers to prior "conservative" proposals that don't provide the revenue source for legacy Social Security benefits nor are the "conservative" proposals based upon a 45 year transitional plan that covers the entire working career of the minimum wage worker that requires Social Security the most in society.

I've estimated the actual cost of the transition at between $40-45 trillion over the 45 years, and provided the funding source for it, but that's actually less than what it will cost without privatization.

 

Do you write syllabus's for Fidelity because your claim that over the long haul everyone wins in the stock market is a wonderful story that likely will sell. However, the rest of us who lived through the last 30 years of investing know differently. Your out though is the term "diversified" which of course means that if you did not get the returns you stated, you must have not been diversified or did something wrong. The sad truth is that even a sophisticated investor cannot survive the boom and bust cycles without taking major hits on the down side. In addition, management fees and commissions take their toll on any investment vehicle which is why Wall Street loves these instruments of Hamptons estate creation. I have been investing in my IRA, 401k and in stocks since 1983. I did everything Barrons, WSJ, Money Magazine and others told me to do. Guess what? I got wiped out at least three or four times in that span. So did millions upon millions of people and if the timing of these massacres was just right, my retirement options would have been keep working until you drop. Basically, for my generation, all the advice from the pundits resulted in one or two truths. One, we will work until we drop. Two, SS and Medicare are the only safe bets any of us ever made.

Oh sure, one can point to a person who ended up in a better spot, they are out there. But that does not scale well. It is like trying to convince your 21 year old not to go to the casino after she just won 500 bucks in the slot machine. She is so sure that she figured it out or got lucky, she knows she is going to win and nothing you can say will change her mind. Until she loses and loses big.

 

I wouldn't brag about a plan that results in only 50% of retirees being above the "official" poverty level. Remember that those just above the official poverty level are still receiving additional welfare such as SNAP benefits because they can't live on $15K-$20K per year. No one that has worked for their entire career at creating the weath of America should have to depend on supplemental welfare programs at retirement.

My proposal is NOT based upon the Chile model and as the article noted the Chile model failed for numerous reasons that don't exist in the United States.

As I've also noted there would be regulations to prevent exploitive charges associated with the investment accounts. All would be "low-load" accounts and the amount of charges to the individual account would be highly limited. For example the total annual charges could be limited to as low as 0.25% of contributions for the year and no charges against existing investment capital. If that was the case then the minimum wage worker contributing $2,300 would pay less than $6 in fees to the investment company for the year. A fee could be also imposed when a person changes their investment option such as the $5 transaction fee that some investment firms currently charge. A reasonable fee could also be charged for disbursements from the account at retirement as that would be a cost to the investment firm. In all cases the fees charged would be very small to the individual and the investment firms earn their income by providing services to millions of investors. Additionally we could offer an incentive plan for the investment firms where they receive a small percentage bonus for high performing investment accounts (e.g. perhaps 0.1% of all ROI's over 10%).

Remember that I retain a safety net that ensures that no one will live in poverty in their old age. It will provide a minimum income of $30,000 compared to a minimum income of only about $7,500 for Social Security today. It can accomplish this because it uses both the personal investments accounts plus government subsidies to ensure this much higher income. As noted though even a minimum wage worker will have enough private wealth to provide them with over $50,000/yr in income so the number of individuals that don't have enough private assets to fully fund $30,000/yr will be very small and the government subsidy would be very small in most cases to reach this $30,000 minimum income level.

Additionally, over time, because the individual is fully vested from day one if they die early their retirement account reverts to their heirs. If, let's say, someone dies when they only have $500,000 in their account and they have two heirs then each would have $250,000 deposited to their private retirement account.

There would be no "minimum age" for retirement but there would be a minimum income amount based upon assets for retirement. Individuals would be encouraged to invest more than the mandatory minimum (that would be matched with employer contributions like a typical 401K) so that they could either retire earlier or retire with more income.

The maximum age for retirement, barring disability, would be 70 years of age. At that point the investment assets of the individual would be the primary source of retirement income but if it doesn't provide at least $30,000/yr in income then Social Security would make up for the shortfall.

You scoff at my projected 8% ROI even though I've provided sources showing that preferred diversified investment accounts earn much more than that. But let's say that the history of long term investment accounts is wrong and that a person can only earn a 5% ROI over their working career. A minimum wage worker would still have over $40,000/yr in retirement income at age 70 based upon their mandatory investment portfolio!!!!

 

Got it, you have reading comprehension issues. I'm shocked

Without SS those 50% of seniors WOULD be below the poverty line Bubs

YOUR entire premise is BS that Banksters are going to charge ,025% lol

Your premise is based on the stock market returning yields that are not realistic, and taking the feet out of what was an insurance policy and turning into an investment account, which everyone already has access too!


I'll note you didn't address the existing hole in existing liabilities however, from the current pay as you go system!!



My rule of thumb when it comes from you right wingers (yes libertarians are FARRR right on economics), is that you are almost never on the correct side of history on any policy!


The sell-side of this idea will tell you that it is possible to make more money in the stock market than in Social Security. While it is true, the comparison is not honest. Social Security carries legacy costs which cause the poor return. The market does not reflect this financing burden. So the comparison is only valid if the costs of the past go away – they don’t.


http://www.fedsmith.com/2014/07/06/the-risks-of-privatizing-social-security/


YOUR IDEA:

" I don't propose that all FICA/Payroll/Self-Employment taxes go into private investments but only those taxes on the first $50,000 of gross income. All of the additional tax revenues, including the huge increase generated by taxing all income, go to fund the transition."


TODAY THE US CAN'T FUND SS WITH 100% OF FICA TAXES, BUT IN YOUR DREAM WORLD IT COULD DO IT WITH THE WAY LESS THAN THE CURRENT FUNDING? No taking the cap off will NOT make up for the loss of the bottom $50,000 a year which is the bottom 90%+ entire contributions?? LOL







The empirical results indicate that aggregate dollar-weighted returns are systematically lower than buy-and hold returns. The annual difference is 1.3 percent for the NYSE/AMEX market over 1926-2002, 5.3 percent for Nasdaq over 1973-2002, and averages 1.5 percent for 19 major stock markets around the world over 1973-2004. Thus, this study provides comprehensive evidence that stock investors' actual returns are considerably lower than those from passive holdings and from those documented in the existing literature on historical stock returns. These results have implications for the debate on the equity premium, for the literature on long-run returns following capital flows, for building successful investment strategies, and others.


http://papers.ssrn.com/sol3/papers.cfm?abstract_id=544142



Average Stock Market Returns Aren’t Average

http://marginalrevolution.com/margi...erage-stock-market-returns-arent-average.html


As of 2015-03-05 (updates daily):

The Stock Market is Significantly Overvalued. Based on historical ratio of total market cap over GDP (currently at 126.1%), it is likely to return 0.8% a year from this level of valuation, including dividends.


As of today, the Total Market Index is at $ 22192.8 billion, which is about 126.1% of the last reported GDP. The US stock market is positioned for an average annualized return of 0.8%, estimated from the historical valuations of the stock market. This includes the returns from the dividends, currently yielding at 2%.

As pointed by Warren Buffett, the percentage of total market cap (TMC) relative to the US GNP is “probably the best single measure of where valuations stand at any given moment.”


We can see that, during the past four decades, the TMC/GNP ratio has varied within a very wide range. The lowest point was about 35% in the previous deep recession of 1982, while the highest point was 148% during the tech bubble in 2000. The market went from extremely undervalued in 1982 to extremely overvalued in 2000.


http://www.gurufocus.com/stock-market-valuations.php

 

"AARP strongly opposes these proposals [to divert Social Security payroll taxes to private accounts]. Private accounts in place of Social Security are risky, expensive to administer, and require huge increases in the federal debt. AARP believes there are better and more responsible ways to strengthen the system.

To compensate for the loss of Social Security revenue sent into private accounts, the federal government would have to borrow significant sums for the next several decades in order to continue to pay promised benefits to currently retiring beneficiaries. One prominent proposal would require $1 trillion in the first 10 years the private accounts were in place. Then, $3.5 trillion would be needed in the following decade. Younger workers would have to bear much of the burden for paying this debt. That's not right, and it's not fair to them.

Social Security is an insurance program, not an investment program. The essence of Social Security is that it has always been risk-free for all of us. It's also inflation-proof - something neither investments, nor even many pensions, can guarantee. Private accounts within Social Security would add a large measure of personal risk. AARP has publicly stated many times that there are places in retirement planning that are appropriate for taking risks, such as 401(k) plans, Individual Retirement Accounts, and mutual funds, but they should be in addition to the guarantee of Social Security."

Apr. 28, 2010 - AARP (American Association of Retired Persons)

 

There are lots of reason why a person can lose money or not make much ROI on their private investment accounts. Perhaps the single greatest reason is panic when there's a downturn because they pull out of their investments.

In many cases people are counting "paper gains and losses" that don't really reflect anything at all. If I have 1000 share of stock worth $10,000 in stocks and the stock price plunges to $8/share I haven't lost a dime if I don't sell at that time. It's a "paper loss" but not an actual loss. That stock will probably go back up (as stock prices have since the recession) and it can go to $15/share but that's a "paper profit" because I don't sell then either.

I would refer you to a report from Fidelity Investments in 2010 that addressed 401K earnings between 2000-2009 when we were at the height of the recession.

As accurately noted while the investors were increasing their investment portfolio most of that was from adding more money to the account while only about 25% was from ROI but the low ROI was because the markets tanked between 2008-9. Since 2009, over the last 5-years, the S&P 500 has averaged over 15% ROI annually and this is based upon all 500 corporations and not the top 100 corporations in the S&P 500 that had increases of over 20% annually. In short if a person was invested in the top 100 S&P corporations they've over doubled the (paper) value of investment portfolio in the last 5-years alone.

That isn't to say that everyone has benefited from the huge gains in the S&P 500 since 2009. Many bailed out of the stock market in 2009 as opposed to just ignoring the temporary downturn. If they moved their money to other investments then they didn't profit from the huge increases in the S&P 500 since 2009.

What I believe summarizes the entire investment situation best is the following statement.

Remember that these words were expressed at the very height of the Recession and the words were prophetic as those that just hung in their have benefited substantially since 2009 from their stock investments. When we look at 40+ year investment time spans the results are even better.

http://www.seattletimes.com/business/fidelity-reports-10-year-401k-account-performance/

 

I've actually addressed your issues but will reinterate them again on a line by line basis.

My proposal leaves no one at poverty level as it guarantees a minimum income of $30,000/yr under the proposed safety net that is fully funded with the assets of the private investment accounts plus government subsidies funded by the FICA/Payroll/Self-Employment taxes on all income above $50,000/yr.

I've already provided sources for investment corporations only charging 0.25% on 401K plans. Several investment companies only charge $5 for all stock transactions today as well. All of my investment fee proposals are based upon existing low-load charges currently offered.

Last statement first. The bottom 50% of Americans don't have the additional capital to invest today. This can best be documented where 47% of Americans have a zero or negative federal income tax liability because they're living at some level of "poverty" according to US government criteria. The real proverty level is much higher than the "official poverty level" which is why many government welfare programs often refer to "2-times" to "4-times" the "official poverty level" in determining benefits. A household earning less that the median income in America (i.e. $50,000/household) generally doesn't have enough income to invest today. My plan addresses this because it creates private investments without increasing any expenditures to the household. It focuses on investments for those that don't have the additional income to invest.

One of the greatest problems I see with your analysis is that you use "average market" returns and numbers subsequently in your post but fail to address "preferred" as opposed to "average" market data. For example below it refers to an "average" annual corporate dividend of about 2% but high performing corporations often average over 6% in annual dividend payments to the stockholders. When we look at "averages" it include many corporations that go for years without any dividend payments to the stockholders that highly reduces the "average" dividend payment.

Premium diversified investments focus on the "preferred" investments over the "average" investments and the results are significantly greater when that is done.

As previously noted I provided full funding for the transitional period of 45 years as well as subsequent financial liabilities to ensure the safety net although the tax rate above $50K/yr is anticipated to decline significantly from the current 15.3% by the end of the 45 year transition. The actual rate would be determined by the cost of the safety net. In all cases full funding is provided for with the necessary tax revenue.

A good rule of thumb that I contradict with my proposal.

Every dollar earned through the private investment accounts reduces the financial obligation of government to support the current Social Security welfare program. Of course I'd be bringing in far more revenue because well over half of all personal income does not contribute anything to the Social Security Trust Fund. I'm imposing the FICA/Payroll/Self-Employment tax on all income because the "Capital Gains Tax" is abolished and currently that income does not pay into the Trust Fund. I've also removed the cap for Social Security. Simple run the numbers. If we have $13 trillion in personal income that is taxed at 15.3% then the revenue is roughly $2 trillion. Yes, between $500 billion to $800 billion of that is dedicated to investments but most of it isn't.

Additionally there are hundreds of billions (actually trillions) of dollars in income that isn't taxed today because it's in off shore tax havens but that income will be taxed when the Capital Gains Tax is abolished.

Simply taking the cap off would not fully fund my proposal because the current tax only applies to "earned" income. With the Capital Gains Tax (loophole) being aboloshed it increases the tax base substantially. Using an example I know, because of the 2012 presidential race, Mitt Romney had over $22 million in gross income for 2011 and paid ZERO FICA/Payroll/Self-Employment taxes because all of his income was from investments and was "unearned" income under our tax codes. All income will be "earned" income under my proposal so he would have paid almost $3.4 million into the Trust Fund. While I don't know how much Bill Gates, the world's wealthiest person, had in personal income for 2014 we do know he sold off 1/3rd of his Microsoft holdings in 2014 and that amounted to billions of dollars in income all of which would have been taxed at 15.3% as income under my proposal.

Currently there is a huge amount of income that is not subjected to the FICA/Payroll/Self-employment tax that funds Social Security and Medicare and that is where the revenue source is for funding the legacy Social Security as well as the future safety net I've proposed.

Please note that I contradict your "rule of thumb" when you think about Republicans and Libertarians because I'm the only one I know of advocating that the Capital Gains Tax (loophole) be abolished and that all income should be subjected to the same taxes regardless of source or the entity receiving the income.

The balance of your post deals with "averages" and as I've already noted we're not concerned with averages per se. We're concerned with "preferred" very long term investment portfolios and not "average" investments.

 

I'm 100% with the AARP as it addresses historical Republican proposals for privatization that were inadequately unfunded and only benefited the higher income middle class at the expense of the poor. When you cite the AARP you're preaching to the choir which is why my proposal is nothing like anything that Republicans or Libertarians would propose. I focus on the poor low income workers as they're the one's that need Social Security the most.

My proposal not only retains the safety net, it increases the safety net, while also increasing the wealth of the low income workers of America.

 

It is wonderful to read a post by someone who not only understands the complexity of tax policy but has a heart, thank you. I cannot really tell you what fair means either. I notice you did not really define it, that was a smart move. I agree with your goals but I am unsure whether your suggestions will get us there. One of the key issues facing anyone talking about tax policy is trying to define goals. What is the goal of a tax policy? I am a supporter of MMT, you might find it interesting to take a look at what they are saying about tax policy and the misconceptions about money that seem to follow us around. At the heart of the matter is a proper understanding of how fiat money is created and how our economic models understand the true nature of money in relation to the state. Another key point is effective demand and how to measure an economy in relation to the capacity of the economy. We are incredibly inefficient today, a large proportion of our potential workforce is under utilized or sitting on the sidelines. This will continue as long as we rely solely upon the private sector to get to maximum effectiveness. If you are interested in this topic, I suggest going over to www.neweconomicperspectives.com and watch some of their lectures. It makes the issue a completely different animal once you fully grasp fiat money.

 

So much work, why? Why so complicated? By keeping it complicated you perpetuate the problems we have today.

On personal income tax, as soon as you set a threshold ($50,000 in your plan), you open the door to abuse. Your reason for it being $50k is subjective, politicians will immediately argue its too low and will raise it. Once 50% or more of voters are exempt from paying into the system (they are voting themselves "free" benefits), your plan faces the tyranny of the majority problem.

One rate, no deductions, credits, nothing, is the only way to go.

Inheritance tax is theft, its nothing more than jealous people wanting to take other peoples money. Its my money, which I earned honestly and paid taxes on, and I can spend it however I want to spend it. If I want to give it to a stranger or my kids or both, flush it down the toilet, throw it in the air in the mall for whoever wants it, then I can do that.

And my money is my property, just like my house, land, car. Are you going to tell me what to do with that property? And why take it after I'm dead, why not when I'm too old to drive, or when I don't "need" a big house, why not take it from me then? That's no different than inheritance tax.

Payroll taxes - I agree, just phase them out completely, but don't tell people how much to save. Let people handle their own retirement, the few that cannot get welfare (the safety net) when they retire.

Corporate taxation - get rid of it. Corporate tax just flows down into the cost to the consumer, its just a semi-hidden sales tax on the customer.

State taxes - leave it alone, let the states deal with it, stop trying to tell everyone what to do.

The bottom line for me - KISS. The bare minimum, just a simple income tax so everyone has skin in the game, and minimize room for corruption. There will be corruption just like we have seen since the nation was founded, but the simpler you start the more time until the system is broken.

 

The goal of every fiscally responsible tax policy is to fully fund the authorized expenditures of government.

How that goal is accomplished is subjective but from my perspective it's that the taxation should be imposed on those that can afford the taxation and not imposed upon those that can't. I've drawn the line at the middle where the upper 50% of Americans can afford to pay taxes while bottom 50%, in striving to become "average" in America cannot afford to pay the taxes.

This is pretty much established by our current federal income tax laws where 47% do not have an income tax obligation currently and some even have a "negative" tax where they receive more in welfare considerations than any tax obligation they might otherwise have.

This isn't even very controversial as even Sen Rand Paul proposed an income tax similar to mine where he replaced deductions and tax credits with a single exemption that was close to my proposal. In his proposal it would have been a $48,000 exemption for a family of four and mine is for a $50,000 exemption for a family of four. The signficant difference is that he retained "favortism" (i.e. crony capitialism) for investors with the Capital Gains Tax loophole while I've eliminated any favoritism in my tax proposal. I oppose crony capitalism that benefits some at the expense of others in our society.

I've also tackled state taxation because the tax burden of the individual/household is based upon all taxation and not just federal taxation. It made sense to me to address state and federal government as two different levels of government with different responsibilities and logical that their means of obtaining revenue should also be different. For the federal government the income tax, authorized by the 16th Amendment, made sense while for the states the sales (consumption) tax made sense. In short the federal government taxes at the front end (income) and the state at the tail end (consumption). Two different spending priorities and two different means of funding those expenditures.

Will my proposal reach a different goal for the people is a question that depends upon the goal we seek for the people. My proposition is that Americans (both citizens and non-citizens living in America) should be able to provide for their "support and comfort" based upon their labor, a proposition put forward by John Locke. My proposition for the privatization of Social Security does result in the accumulation of wealth for individuals and families based upon the labor of the workers. It does not depend upon redistribution of wealth but instead is based upon the wealth created by the workers of America. At the sametime I understood that not every plan works out and that people can still require a safety net when they become too old to work. I looked at the safety net for Social Security and found it to be a (*)(*)(*)(*)-poor safety net overall. No one should have to live in poverty when they've spent their entire working career creating the wealth of America. That's why I proposed increasing the safety net from a minimum annual income of less than $10,000/yr for some to at least $30,000/yr for everyone. It's doable because it doesn't rely solely on taxation but instead is based upon individual wealth accumulation over the working lifetime of the person plus any supplemental funding from taxation costing far less overall than our current Social Security program.

No, it doesn't address every inequity nor could a simple tax proposal for income taxes and Social Security do that. It does what it can though and that is the best that such a limited proposal can do.

There are numerous considerations when we address overall inequities and monetary policy is certainly one. It's actually quite simple to address because all that's really required is the forced compliance with one law that the federal government refuses to enforce.

https://www.law.cornell.edu/uscode/text/12/411

One must understand the two words, "lawful" and "money" used in this statutory law. The "money" is the gold, silver, and other metals used in our monetary system and "lawful" refers to the statutory manufacturing by the "coining" process that creates certified tokens of "money" by our government. It's the metal that's the "money" and it's the "coins" manufactured from the metal by government that makes it "lawful money" as used in the above law. Our government cannot create "money" because it cannot create gold and silver but it can make "coins" out of the money which is what Article I Section 8 delegates it to do.

Since 1985 "lawful money" is currently the American Eagle "legal tender" coins being produced by the US Mint. The current problem, excluding the fact that our government doesn't enforce this law of redemption on demand of Federal Reserve (promissory) notes in lawful money, is that there isn't enough "money" (gold and silver) to redeem the promissory notes. This isn't really a problem though because Congress has the Constitutional authority to "establish the value thereof" of our coinage and can simply revalue the gold and silver so that enough coins can be produced to redeem the national debt (all that the federal government is responsible for). I've estimated that we'd have to create a $5,000 one-gold ounce coin (and lower demonination gold and silver coins) for the US government to enforce this law.

Enforcement of this one law would basically stop the inflationary monetary policies that effectively steal the labor of people stored as "money" in our economy but that's only one problem to be addressed.

We have an additional problem in that Artificial Intelligence and Technology are slowing making human labor and thought obsolete. As human labor and thought become obsolete the ability of the person to "sell their labor for goods and services" (i.e. earn a living) is becoming obsolete as well. We face a point in the not-to-distant future where there will be virtually no jobs because computers and machines will be able to do virtually everything.

This is a problem related to the"natural right of property" that, as addressed by John Locke, is established by the labor of the person (i.e. sweat equity) but a machine does not "sweat" and cannot establish a "natural right of property" to anything it produces. We have a fundamental flaw in our understanding of the "right of property" that is an issue that will have to be addressed as artificial intelligence and technology make human labor obsolete.

Both of these issues, money and the natural right of property, are far beyond the scope of our tax system and codes but they are certainly problems related to the wealth inequities we see today that are going to get far worse in the future. At some point these will have to be addressed but I don't believe we've been driven to the despiration necessary to force us, as a society, to address them.

 

I break this down into little bites so that it doesn't become one run-on sentence.

My proposal is far less complex than the tens of thousands of pages in our current tax codes.

The Congress cannot manipulate the median income of households in American which is the foundation of the $50,000/yr exemption. The wording of the tax code would need to reflect that the "median income" defines the "exemption level" from taxation which makes it non-manipulative by Congress.

The "public" does not vote on federal laws and cannot vote any benefits for themselves except at the state level by the referendum process. Rarely do we see problems with the state referendum process where people actually can vote benefits for themselves.

The problem with the one tax rate, no deductions, no "nothing" is that it doesn't account for the fact that all households have a minimum financial requirement to provide for the necessities of life. We could impose such a tax model but it would drive one of two things, or a combination of both, for it to work. One option it to increase the federal minimum wage to the point that every household would have enough income to meet it's financial obligations for the basic necessities and comforts of life. This would require a federal minimum wage in the $20-$30 per hour range because that's how much it really costs for a family to survive in the United States. The other is to greatly expand our welfare programs so that those necessities, such as food, shelter, clothing, transportation, energy, and health care, are ensured by the government.

I'm opposed to these two government options that, individually or in conjunction with each other, would be mandatory necessity with a "flat tax" without any deductions or credits of any kind. I'm trying to reduce government interventionism as opposed to expand it which is what the "flat tax - no deductions/tax credits" proposal mandates.

No, I'm not going to tell you what you can do with your property either when you're alive or when you die but if it goes to someone else then it's income to them as they had no "right of property" related to it so long as it is in your possession. The problem is the belief that one person's right of property can be freely given to another person and that is a false belief. The very definition of an "inalienable right" such as the Right of Property establishes that an "Inalienable Right is non-transferrable" but few seem to understand that fact.

Payroll taxes are nothing more than unreported compensation for the labor of the person paid as a tax on behalf of the worker to the federal government. Roughly one-half of all workers do not have income great enough to fund retirement after they're too old to work which is why Social Security was created in the first place. Social Security is the "safety net" because about 1/2 of ALL Americans can't afford to fund their expenditures when they become too old to work. I disagree with how it was created as a welfare program and to replace it I've proposed a mandatory investment program focused on those that are basically incapable of saving and investing for retirement. I'd love to see it voluntary as opposed to mandatory but if it's not mandator then it requires the huge expenditures we see today based upon the redistribution of wealth from workers to those no longer capable of working anymore.

There is another alternative of course. Simply have all employers contribute enough money to a pool so that all workers can retire comfortably when they become too old to work. It would be a "national penson plan" based upon funding from the enterprises that profit from the wealth created by the labor of their employees. I'm not keen on that idea at all but it would work to ensure that all workers have an income when they become too old to work and it would be based upon the wealth they created while working.

This merely reflects crony capitalism because the self-employed are required to pay the income tax and a corporation is nothing more than an enterprise with a lot of owners. It's also false to state that the taxation is flowed down to the consumers. Taxation is only imposed on "profits" and not the cost of providing the goods or services of the corporation. The corporation does not have to flow down costs related to pure profit that is used to pay for taxation. Only the actual costs must be flowed down to the consumer.

Sales taxes and property taxes are the most regressive form of taxation in American that impose a much higher tax burden relative to income on the poor when compared to the wealthy. I live in WA that has the most regressive taxation in the United States where the tax burden relative to income is 14-times greater for the low income workers in our state when compared to the top income earners. That is illogical taxation where the poor are carrying the highest tax burden in the state.

My proposals for both state and federal taxation, summarized in a single post, are the simpliest proposition possible. If you want the KISS principle then I've presented exactly that.

 

Are you advocating gold back or commodity backed currency? If so, you are sadly mistaken. We have a fiat currency system worldwide. We will never return to the pre-1971 days, it would destroy wealth on a massive scale and completely wreck every economy on earth. You are under the mistaken impression that a government must match taxes with revenues. That idea never even worked under the old gold standard, we have always ran a deficit with the exception of only a few short periods in time. There is no requirement whatsoever for a government to have a balanced budget when you have fiat currency. Fiat currency is the most useful monetary system ever created because it gives the issuer of the currency maximum flexibility to manage the economy for maximum benefit of the people and business interests. Private sector demand will never provide enough demand for a country of our size. The government must use fiscal policy to make up the delta between current demand and desired demand. This has been proven recently in the Euro zone where austerity advocates whose group think is mired in pre-1971 economic theory has been disastrous. Effective demand is the key measure any economist must address. The government is the only player who can guarantee full employment, there is no other public entity responsible or capable of insuring this goal. Output of a nation equals input meaning that sales match production. All companies produce goods and services to match demand. Without adequate demand, they stop producing, people lose jobs, incomes fall and money is destroyed or hoarded. The goal of an economy is not to generate taxes to meet government expenditures, it is to insure a quality of life for its people that allows it to survive and prosper. My spending is your income. If I do not spend money because I do not have it or save it, demand falls and you lose money too. It is a circle that must grow in proportion to population and the desired quality of life.

 

Yes, what you have is less than the zillions of rules of the IRS, that doesn't make it good. Its still far too complicated and prone to abuse.

For example, you peg your threshold to median income. So what? Congress will just change it the 60% level, or make additional tax rates, or create credits. It will be incremental, but it will happen.

Actually, it might not even be incremental, king barry will just do it with his pen.

You already throw in a loophole so big you can drive the current IRS and tax law through it - you consider "minimum financial requirement to provide for the necessities of life". Just abandon your plan, in 20 years we will be right back were we are today with that methodology.

You start so far down the road of a corrupt system that there is no point in doing your plan. The only way to change the tax program is to push it way back to the beginning - simple, one tax rate, everyone in.

*******

LOL, yea, how about reading that again, thinking about it, and then tell me again how its my property and you aren't going to tell me what I can do with it.

 

The great mistake that many make is in believing that the gold standard for the US implies that it addresses international trade but that is not the case. Promissory notes (e.g. fiat currency) can still be used for international trade. They also mistakenly believe that Nixon removed the US from the gold standard but that is also false. Nixon withdrew the United States from the Bretton Woods international trade treaty that required redemption of US promissory notes at a fixed rate in gold. The US was still under the Emergency Banking Act from the FDR admistration that had confiscated gold and issued promissory notes for it's future redemption. Nixon was never concerned with the US gold standard as it was effectively suspended due to the banking crisis of the 1930's but the Emergency Banking Act was repealed after Ford took office.

It's actually unconstitutional to remove the US from the gold standard which is why it's never actually been done. US minted gold and silver coins are still legal tender in the United States and since 1977 contracts can be written were only gold/silver US minted coins can be used.

What the "gold standard" provides for the US (and US alone) is a stable monetary system that is not achieved with fiat currency that isn't backed by gold/silver. Federal Reserve notes have lost over 97% of their value since being introduced and that is not a stable monetary system by any definition.

No, a stable monetary system does not result in unemployment. That is a myth. An unstable monetary system results in peaks and valleys in employment as we've just recently experienced.

The US had a projected surplus budget when Clinton left office and there was no reason to abandon that surplus with the Bush era tax cuts. In 2001, when Bush proposed the tax cuts in his State of the Union Address, he also stated that we would still have a surplus albeit smaller. Of course he lied but what president doesn't lie to the people.

My proposal offers a guarenteed balanced budget at a much lower tax rate than we have now by taxing all income regardless of source or entity that receives the income identically. The privatization of Social Security also provides a huge influx of capital investment that some would argue might be lost because multi-millionaire investors would have to pay the same tax rate as everyone else above the exemption level that applies to every household.

 

Yes, the current system is extremely corrupt and that corruption is hidden deep inside it's complexity. As noted mine is relatively simply and not prone to corruption because any attempted changes would be very evident. For example it would be very hard to put forward a compelling argument that those in the upper half of income deserve an exemption from all federal income taxes. Why do the "better off" in society need more money?

Of course increasing the exemption level to cover the top 40% as opposed to the median 50% also raises the tax rate for the super-wealthy that fund political campaigns so they would oppose it.

Because the proposal is straightforward and objective without hidden tax provisions any proposed change would be front page financial news. Even increases in spending authorizations that increased the tax rate would be front page financial news. Nothing would escape public scrutiny and that's the only way to prevent the corruption from returning.

As for the "basic necessities" one need only read John Locke's Second Treatise of Civil Government, Chapter 5, that addresses the natural right of property. Based upon one's physical labor all individuals are entitled to the "support and comfort" provided for by nature and all property (wealth) is a measure of natural wealth. Even very conservative Republicans, like Sen Rand Paul, understand this fundamental fact related to personal wealth and property. As noted my proposal and Sen Paul's proposal are not all that different in concept except I remove the crony capitalism while he failed to do that.

Once again your "money" is your own to do with as you please. If you choose to give that money to someone else (e.g. an heir) does that money still belong to you? No. While you possibly paid taxes on it did they pay taxes on it? No. Each person that receives income is going to pay the taxes on that income (above the exemption levels). No loopholes, no exceptions.

Look at it this way. If you use your money to purchase goods or services you will pay the consumption tax (and the receiver is subject to potential income taxes) and if you give it to someone else they will pay the income tax but in both cases the money transfer is taxed under my proposal (above the exemption or prebate level); The transfer of "money" based upon income received or the purchase of goods and services is alway subject to taxation under my proposal. No loopholes and no exceptions.

Also note that I don't just cover inheritance, that in most cases isn't all that much, but instead cover all "windfail income" with a substantial exemption of $8 million and only the income tax rate imposed above that amount. I seriously doubt that anyone on Political Forum has $8 million to leave to each of their heirs considering the average wealth of white households is only $140,000 and only $11,000 for black households in the US today. The vast majority of Americans have more likelihood of winning Powerball than they do of inheriting more than $8 million and taxation should be about all Americans and not just the super-weathy in America.

That's the problem with our current tax codes. They're all about benefiting the super-wealthy investors (i.e. crony capitalism) as opposed to being about everyone carrying the financial burden to the best of their ability. I abolish that corruption in my tax proposal by eliminating crony capitalism.

The only way to prevent corruption from returning is "no loopholes and no exceptions" and that is exactly what I propose. You want a "loophole" and an "exception" related to inheritance but I will not compromise as that loophole and exception is pure corruption of the tax code.

 

A good life for children is loving parents, adequate food and shelter, and an opportunity for a good education. All other is probably not necessary unless the children have retardation issues. Your definition of compassion seems centered around providing a surplus of goods or insuring your own legacy.

 

So every time money changes hands, its taxed. That will never work, that's why states forced internet sellers such as Amazon to collect taxes - the buyer was supposed to pay the tax but never did. Unless you are going to somehow track every transaction, people will never pay those undocumented taxes.

That's why there is an inheritance tax, capital gains tax, income tax - they all involve entities (banks, corporations, employer) that report to the government.

Are you going to only allow electronic money? Outlaw gold, silver, bartering? Are you going to have the govt monitor every single transaction of money? Talk about opening the door to corruption.

You are playing a populist and very subjective game, setting thresholds based on who you consider to be "rich".

Why set the threshold at $8M when the avg wealth is $140,000? Earlier you used median income to set thresholds, why not now with inheritance?

Here's what politicians and the "grievance class" will say immediately after your proposal is implemented - "Its benefiting the super-wealthy investors (i.e. crony capitalism) as opposed to being about everyone carrying the financial burden to the best of their ability!" Sound familiar?

Your approach is all about fairness and social engineering and populism, it reeks of it. The tax code should be about funding the necessities of govt - yet you don't mention anything about that side.

 

It's not at all complicated. In fact, it's way less complicated that EITC aka the "how many kids do you have?" program.

If 50% of your "households" earn under $50k then your tax system is already broken. This could be a single person or a family of 8. Or do you believe that the single person should be subsidizing the 8 person household?

Depends on what is being taxes. While I agree with "no deductions" I also can sympathize with the idea that a government can use it to create incentives in the economy. But I think those deductions would be better spent on educating it's population it's ideas about what makes for a wealthy society, on a local level.

No it's not "your" money, you are dead. And it's not a tax on "you" it's a tax on a "transaction" you want to make with your money...and by the way, your money is not "you".

If you spend all that money on consumption, it will be subject, most likely, to a sales tax. If you want to give it away, it a essentially a transaction where money is being transacted for association. Either/Or it is still a "transaction" ethically subject to taxation. You could of course just give your wealth to your heirs long before you die, and then they would have control of what transaction they would like to do with it. Butas it is described, the hypothetical "you", chose to keep this money to control as he sees fit all the way until his death.

Bull (*)(*)(*)(*). Money is not property and you are not your money. Money is a contract. Money is a contract for goods or services that you agree to, and by the contractor you are promised that the money your received can be exchanged for goods and services. Like many non-guaranteed contracts, like health insurance, they can be adjusted on the fly. If you want to make a moral argument about money, you start with the contract, not the money itself.

I agree with the sentiment, but I don't think it's feasible to remove it entirely. At least remove the employer match.

Bull (*)(*)(*)(*). Corporate profits will only go into capital if there is consumer growth. To not tax it just gives a non-transactional free lunch to speculate with. That speculation would not necessarily be a price brake from the consumer, it may be a matter of institutions limiting competition, but that would be a compound problem akin to addressing the symptoms and not the illness.Capital growth may get the investment but it would only happen if the consumer base is strong.

I agree. State taxes are subject to a lot more local forces than federal taxes. In Alaska, it always looks like the state is in a century of bankruptcy. Except for the fact that the state government subsidizes it's citizens with a tax refund from it's oil profits. And in contrast, we have California, which looks like Greece on the bankroll. But if it were a nation, it would basically be Germany because it offers goods and services that the whole world wants.

I don't completely, completely, agree with the "skin in the game" comment. Only because it is an appeal to an individual to be rational, and while most people are capable of looking out for their self interests not all people are. But it would also be a mistake to treat completely rational citizens as irrational, due to an underdevelopment of their circumstance.