Creating Fair Taxation

Discussion in 'Budget & Taxes' started by Shiva_TD, Mar 4, 2015.

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  1. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    In June, 2013, I created a thread addressing fair taxation at the federal level and there was much discussion on that thread. Because that thread became long with "amendments" adopted I've decided to summarize it again here PLUS include a proposal for fair taxation at the state/local level.

    FEDERAL TAXATION

    Personal Income Taxes:
    First and foremost repeal the Capital Gains tax loophole and treat all personal income identically. Eliminate all personal deductions/tax credits and replace them with a flat exemption of $50,000/yr per household (based upon a family of four and adjusted for inflation and actual family size). All income below that exemption threshold would be tax free and all above it would be taxed. The $50,000 threshold was established because it is slightly less than the median household income in the United States. The tax rate would be a single flat tax rate determined by government spending authorizations each year (including the financial obligation to pay off existing government debt).

    Inheritence Tax:
    No person has a right of property to what someone else owns and that applies to inheritance. An inheritance is always "income" to the person but it is more accurately defined as a one-time "windfall" income to the individual and I would propose addressing it as such. A large inheritance is fundamentally no different than a large signing bonus (e.g. is sports or for an executive of a corporation) or the winning of a large lottery and all should be treated the same under our tax codes.

    My proposal is for a one-time individual voluntary exemption from taxation for "windfall income" of up to $8 million (adjusted for inflation) and all income above that would be subject to the personal income tax rate. The $8 million dollar exemption is based upon the fact that at 5% interest the individual would have $400,000/yr in income which is equal to the minimum income required to be in the top 1% of all income earners.

    FICA/Payroll Taxes for Social Security/Medicare
    (The FICA/Payroll/Self-employment tax rate is currently 15.3%)
    .

    The FICA/Payroll taxes on first $50,000 in personal income (regardless of source) would be dedicted to personal (vested) private investment portfolios that are highly diversified and age-adjusted. Based upon historic investment data we can expect a minimum return on investment of 8% and this would result in a portfolio valued at roughly $3.6 million after a 45 year working career for maximum mandatory contributions. A minimum wage worker would have a portfolio valued at about $1.3 million. In all cases this "wealth" accumulation would provide more income than Social Security at retirement age eliminating the need Social Security and would actually provide enough income for the individual to afford private health insurance eliminating the need for Medicare. A person could invest more in these accounts if they choose to do so increasing their personal wealth at retirement. These investment accounts could not be borrowed against and could only be withdrawn from for retirement purposes. If the person dies before retirement age these funds go to the heirs of the deceased to provide supplemental funding their retirement portfolios.

    The cap would be lifted on the FICA/Payroll taxes and the revenues from incomes above $50,000 per year would be used to fund the transitional phase from the current Social Security/Medicare welfare programs. There is a 45 year transitional period to "privatize" Social Security and Medicare that I estimate will cost about $40-$45 trillion overall. At the end of this transitional period the "taxation" imposed above $50,000 (adjusted for inflation) would cease to exist. Social Security/Medicare would disappear completely and the American People would be far better off financially in retirement.

    This would also vastly increase the amount of personal wealth for low and middle income individuals where today the average personal assets are retirement age are only $100,000 and where a significant percentage have nothing at retirement age. Instead of "nothing" even a person that worked at minimum wage would have over $1 million is personal wealth at age 65. We need to note a single fact and that is that 40% of Americans that pay into Social Security/Medicare today die before ever collecting any retirement benefits. Every dollar in taxation they paid is lost in taxation. Under privatization this money belongs to them, plus the return on investment, and that wealth is transferred to their heirs as opposed to being lost tax dollars sent to the US government. Virtually all of this "money" comes from low and middle income workers in America today.

    A "safety net" could still exist but because of "privatization" there would be little if any need for it. I would advocate increasing the safety net to ensure a minimum income of at least $30,000/yr/household (adjusted for inflation), as opposed to about $7500/yr now, to eliminate all other forms of welfare currently provide to retirees. Because of the high incomes derived from personal investment retirement accounts, even for the lifetime minimum wage worker, few would require the safety net allowing the significant increase in minimum benefits. The current projections of insolveny for Social Security/Medicare are solved without reducing benefits or significantly increasing the tax rates. Because all personal income would be subjected to the "FICA/Payroll" taxes it would greatly expand the revenues to pay benefits during the next 45 years.

    Corporate Taxation
    The corporate tax rates would be the same rates as the personal income tax rates and applied to net gross income (i.e. income above the actual cost of production and/or providing the service) of the corporation. The corporation would also receive the same $50,000 from taxation as the individual household encouraging new corporation formation and expansion. Eliminate all "special" deductions for corporations except for the "cost of production" in providing of the goods and/or services. Dividend payments to the stockholders would be deductable for the corporation and the income taxes would be paid by the investor on the income to eliminate any "double taxation" of the same income.

    ****************************** ****************************** **

    This is a general proposal but it accomplished many things.

    1. It eliminates "favoritism" in our tax policies.
    2. It funds the government by the upper 50% of income households that can actually afford to fund government.
    3. It resolves the problem identified by Congress in the 1930's (and then again in the 1960's) where 1/2 of the people (i.e. those with average or below average incomes) were not investing enough to accumulate wealth during their working career to provide income during their retirement years.
    4. It is absolutely fair because every tax entity (i.e. personal household and corportation) has the identical exemption from taxation (i.e. incomes of $50K or below) and every tax entity pays a Flat Tax Rate above that exemption on all personal income above the exemption.
    5. It is Constitutional unlike the calls for Congress to impose a consumption tax with prebates as proposed by FairTax.org currently. The Contitution does not allow a Federal Sale Tax but the 16th Amendment does authorize the income tax.
    6. It doesn't play "favoritism" with corporations, which are merely enterprises owned by a lot of people, because corporations will receive the same exemption and pay the same tax rates as individuals on gross income. Corporations and sole-proprietorships are taxed identically.
    7. It directly addresses government spending because the tax rate every year would be based upon authorized spending by Congress. If Congress increases spending then the tax rates will go up and if Congress reduces spending then the tax rates will go down.
    8. The $50,000 exemption from personal income taxes removes any income tax withholding below that amount and will reduce the need for welfare to mitigate the effects of poverty albeit only slightly. It has never made sense to take money from someone in taxation and then give it back to them as welfare money. It makes far more sense to not take the money in the first place.
    9. Similar to the proposals for a "consumption tax with prebates" it is actually "progressive" based upon applying the same "exemption" from taxation and the same "rates" above the exemption for all households in America based upon gross personal income of the household.
    10. Using the above tax proposal to fully fund the federal government (i.e. no deficit spending) for 2013 would have resulted in an income tax rate of 29% which is a tax cut of 25% from our current tax rate of 39.6%!!! This is accomplished because the taxation is fair across the board where all tax entities (i.e. individual households and enterprises) are subjected to the same tax rates and entitled to the same tax exemption.

    STATE TAXATION

    While each state is slightly different, and each state would need to address the specifics for that state, the following proposal is based upon national information that could vary by state.

    First and foremost is that every state would need to repeal all taxation (excluding excise taxes) except for a state sales (consumption) tax and adopt "prebates" similar to the proposal by FairTax.org. All spending on goods and services would be subject to the sales (consumption) tax without exemptions. The sales (consumption) tax rate is based upon the revenue required by the state, including the costs of prebates. The "prebate" is based upon applying the (exclusive) tax rate to the prebate level. The prebate level is established by the "average consumption" for basic expenditures in the state.

    All annual property (real estate) taxes, one of the most regressive forms of taxation, would be eliminated as the sales (consumption) tax would be imposed when the property changed ownership. That tax would simply be included in the mortgage or final cash sale price of the real estate like other fees imposed at closing.

    The following, from US Bureau of Labor Statistics, provides the average expenditures for 2013 that would be the basis for determining the average "prebate level" thoughout the United States. All of these categories would be subject to the "comsumption tax" and therefore would require a prebate to offset the regressive nature of sales (consumption) taxes imposed by the state.

    Average annual expenditures:
    Food $6,602
    Housing $17,148
    Apparel and services $1,604
    Transportation $9,004
    Healthcare $3,631
    Entertainment $2,482
    Cash contributions $1,834
    Personal insurance and pensions $5,528
    Total $47,883

    http://www.bls.gov/news.release/cesan.nr0.htm

    As noted the sale (comsumption) tax rate is based upon the revenue requirements for the state which would also include the funding of the prebates. If, for example, the tax rate required was 25% then the "prebate" per household (family of four) would be:
    $47,883 x .25 = $11,971

    As FairTax.org commented this prebate would eliminate many necessities for "welfare assistance" provided for by both the state and federal government as it eliminates the negative effects of regressive taxation. Because much of the "welfare" assistance is eliminated the cost of government goes down resulting in a lower tax rate. Similar to the federal proposal for taxation it relies on the upper 50% of all income earners, that can actually afford to pay taxes, to fund government expenditures.

    Purchases of commodities for "resale" by enterprise would still be exempt from taxation.

    SUMMARY

    Combined the federal and state taxation would increase the wealth of the lower and middle class based upon their labor, earnings and spending of the individual where regressive taxation is eliminated through the tax codes. There isn't "redistribution of wealth" (a cuss word for Republicans) as both proposals are based upon who pays the taxes to fund government as opposed to redistribution of wealth from those with the money to those without the money.

    Is it perfect? Not from my "libertarian" perspective because it forces people to invest in their future when they should be doing this voluntarily. The problem is that we know that they won't and when they don't they become a burden on others in society. We can't let "granny" starve because "grandpa" didn't invest for retirement. From my "libertarian" perspective the only reason I can justify the mandatory investments is that the money still belongs to the person as they're 100% vested in their accounts. It is a compromise based upon a pragmatic necessity to ensure that people don't become a burden on society when they get old.
     
  2. Merwen

    Merwen Well-Known Member

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    I've gone through about half of this; some interesting ideas--will return to it again later.

    Have you been able to do any calculations yet to see about how much money these taxes would actually generate, and how that compares with the US's current income?

    The 8% income on investments is looking overly optimistic to me right now.
     
  3. Unifier

    Unifier New Member

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    So working your ass off to provide a better life for your children than the one you had doesn't mean anything to you then? You want to tell me again how you're the compassionate one here? Because I'm not seeing it. All I'm seeing is envy masquerading as charity.
     
  4. Ronstar

    Ronstar Well-Known Member Past Donor

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    Adam Smith, the Father of Capitalism, invented the concept of "from each according to their ability".
     
  5. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    Did you miss the $10 million one-time exemption that could be applied to a large inheritance or to other single large income source? Additionally the majority of the balance would also be payable to the heir as only the standand income tax would be withheld from it. A large family, let's say with four first generation heirs and six second generation heirs, could receive $100 million in inheritance without any taxes if the estate is divided equally between all ten heirs. Let's assume the same $100 million estate with just one heir. They would have a $10 million exemption leaving $90 million to be taxed and, based upon my calculations for 2013 of a 29% income tax rate, they would pay $26.1 million in taxes leaving them with a net estate of $73.9 million!!!

    OMG - An average family of four could live on $73.9 million, not including any interest on the principle, for 1,478 years but apparently that isn't enough for some people to live on.
     
  6. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    Federal Taxes: The income tax rate is based upon the authorized expenditures of Congress so it always "pays the bills" and there are never any deficits. The possible exception would be a state of war where emergency spending could be authorized by Congress. As I noted when I calculated the rate required based upon the 2013 budget the tax rate (above the exemption level) would have been 29% which is substantially less than the current 39.6% income tax rate.

    The historical return on investment (ROI) for the S&P 500 is 9.8% and that included all of the good and bad companies listed on the S&P 500. If only the top companies are targeted for investment that historical ROI would be much, much higher.

    With investment experts addressing the best potential investments, such as is currently done with many top mutual funds, the ROI can be substantially higher over the working career of 45 years. Age-adjusted accounts invest in higher potential earning investments early to build initial capital in the account. Because they're highly diversified there is virtually no risk involved and the diversification mitigates the risk factors. A good diversified mutual fund can easily earn a 12% ROI over the long term. Unlike some investment programs for Social Security (e.g. the Galveston Plan) there would not be restrictions on the investments. Foreign investments (that can have an ROI of over 20%/yr) and domestic investments would be available for the individual mutual funds. The investment experts of the different private firms involved would be competing to created the best possible ROI for the investors to attract a larger market share.

    Below are some current investment funds showing ROI potential.

    http://money.usnews.com/funds/mutual-funds

    There are many more on the list all earning well over 10% ROI so you get the picture. Remember that short term bear markets, such as the 2008-9 Recession, don't adversely affect long term investments over a 45 year working career. Even the Great Depression didn't adversely affect long term investments and, in fact, those that stayed invested made massive profits over the long term.
     
  7. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    John Locke, the most cited person when it comes to the "Natural Right of Property" stated in the Second Treatise of Civil Government, Chapter 5, that a person has a right to their survival and comfort based upon their physical labor. He also put forward the proposition that no one could own property that didn't leave "enough, and as good as" for everyone else in society.

    http://www.constitution.org/jl/2ndtr05.htm

    Be careful when you quote Adam Smith because capitalism, as we know it in the United States, is based upon theft, cronyism, and corruption.
     
  8. Merwen

    Merwen Well-Known Member

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    Actually, in this version I believe you said that $8 million is exempt.

    What entity would actually be responsible for calculating and sending out the prebates?

    Regarding ending welfare, etc., I'm not seeing that, though. There are some that are too incapable to do much more than self maintenance, and some handicapped and elderly can't even manage that. Increased, easily available long term contraception (eg the IUD and the implantables) would help some of the dependent child of incapable parent situations, especially if legislation was passed to legally hold harmless medical staff that did this for mental incompetents who lack responsible legal guardians to sign for it.

    A return to boarding houses, as opposed to individual rented apartments for everyone, no matter how alone or incapable, would also be a big cost saver. Not everyone needs or wants a nursing home.
     
  9. Cordelier

    Cordelier New Member

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    I ran your numbers using the 2012 SOI Tax Stats, and if you exempted the first $50,000 of income, you'd have to put in a Flat Tax of about 55% on everything else just to remain revenue-neutral. If you wanted to balance the budget you'd have to go even higher.

    Admittedly, in the short-term, your plan would give the economy a boost in consumption-led growth... but I don't think it'd take long for the tax increases on the higher-end to choke off investment and result in massive inflation which will steadily eat into the gains for the middle class.
     
  10. Steady Pie

    Steady Pie Well-Known Member Past Donor

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    I have a much simpler plan: don't do any of that.
     
  11. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    Oops, my bad, I did state $8 million because that could ensure that the heir would have an income of $400,000/yr (@ 5% ROI) putting them in the top 1% of all Americans as a basic minimum. It's still one hell of a lot of money for the inheritance even with taxation above that amount.

    My proposal doesn't end "all welfare" but substanially reduces it because middle and low income working households are fundamentally exempted from a tax burder at both the federal and state level. The vast majority of federal and state welfare goes to working households and not to individuals incapable or unwilling to work today. Elimination of the tax burden for low income households provides the household with additional financial resources to provide for themselves based upon their labor without wealth redistribution through welfare programs.

    In addition the "privatization" of Social Security creates generational wealth as the individual is fully vested in all of their private account. Today, under Social Security, if a person dies before retirement age they leave no estate to their heirs. The dependents might receive meager survivor benefits but that's about all. Recently I read that the average "white" household has about $140,000 is assets while blacks only have about $11,000 in assets. With privatization even a minimum wage earner would have hundreds of thousands of dollars, and perhaps over $1 milllion, in assets by the time they're in their late 50's. Middle income households would easily be in the million dollar range in personal assets. All of this results in greater generational wealth that would dramatically reduce poverty and welfare assistance over time.
     
  12. perdidochas

    perdidochas Well-Known Member

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    Basically means that the truly rich won't be paying for this. The people that will be paying these taxes are the wealthy, but not uber wealthy--in other words, normal type people. Rockefellers and Hilton's won't be paying a dime of it....
     
  13. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    I didn't run 2012 numbers but this is how the 2013 budget broke down. Remember that we're only addressing general expenditures and general tax revenues and not Social Security, Medicare/Medicaid that have a dedicated revenue source (FICA/Payroll/Self-Employment taxes) and that have generated a surplus of several trillion dollars to draw upon to fund expenditures.

    $3.45 trillion (actual spending)
    Less Social Security and Medicare/Medicaid (funded by FICA/Payroll/Self-Employment taxes) of $882.7 billion (Social Security), $265 billion (CBO estimated), and Medicare $580 billion (estimated) for a total of almost $1.73 trillion dollars.

    Net general expenditures relying on general tax revenues was about $1.72 trillion for 2013.

    While the gross income of the United States was over $16 trillion in 2013 only about $13 trillion was personal gross income that would be taxed. One-half of that income is not taxed under my proposal that's based upon exempting the bottom half of all income from taxation so only about $6.5 trillion would be subjected to the income tax above the exemption level. $1.72 in authorized actual expenditures only equals 27% of $6.5 trillion in personal taxable income and the 29% tax rate I cited includes not just paying for all general expenditures but also included taxation to pay down the national debt.

    There are some forms of federal revenue I've ignored like the excise tax on fuel that generates about $30 billion/yr for our highway system and postage for the USPS but those are minor exceptions that wouldn't significantly reduce the tax rate. I'd use the additional revenue to expedite paying down the huge national debt.

    I have a feeling that you might have included Social Security and Medicare/Medicaid that are not funded by general taxation. That would seem to reflect your higher tax rate.
     
  14. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    One thing I'd like others to understand is that I needed to address this from a "bi-partisan" perspective where the taxation was as fair as possible and fully funded the government at the same time. As a libertarian I wanted to eliminate as many government programs as possible based upon the "labor of the person" to reduce the redistribution of wealth through tax and spending.

    I've tried to address the "problem" such as dealing with Social Security where, in the 1930's, Congress identified the problem that about 1/2 of Americans didn't invest during their working career to build the personal assets necessary to generate income for expenditures when they became too old to work. For whatever reason Congress then ignored the problem and created a welfare program (Social Security) to provide the income as opposed to a program to create personal wealth that would have provided the income. Because Congress didn't address the problem in the 1930's by the 1960's Congress identified the identical problem because 1/2 of the people didn't invest and accumulate enough assets to fund medical insurance when they retired so Congress created Medicare, another government welfare program. Congress addressed the symptom (a lack of income) in both cases as opposed to addressing the problem (a lack of wealth accumulation during the person's working career to provide income when they're too old to work). While still keeping a safety net (a necessity for the left) I've addressed the problem through privatization which will end Medicare completely and substantially reduce any necessity for a Social Security safety net. It literally reduces the size of the US government by about 1/3rd at the end of the 45 year transition period.

    The problem with Republican proposals to privatize Social Security is that they're based upon the upper middle class and not the minimum wage worker that really needs "Social Security" and currently receives the least benefits under our current system. I focused on the minimum wage worker in developing my proposal.
     
  15. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    How do you figure that. Even Paris Hilton would have to pay the full income tax rate on all personal income above the exemption level. Remember, no personal deductions.

    I would also note that with the elimination of a special tax category for "capital gains" it also eliminates the ability of the super-wealthy to evade taxation with paper corporations in tax havens that all depend upon the capital gains law. A person living in the US is subject to taxation on all of their gross personal income regardess of source under my proposal and all income derived from US sources is also subject to taxation (i.e. they can't avoid the tax by living somewhere else).
     
  16. Woolley

    Woolley Well-Known Member

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    That is a lot to digest and I commend you for putting so much thought into the matter. I have one question for you.

    What does fair mean?

    Your proposal seems to dwell on fairness as the sole goal of a tax policy. Why should tax policy be fair? A nation or state creates a tax policy to do more than just dispense fairness. There are other goals of a state than just taxing people fairly. What if I considered fairness in terms of outcomes. Say I believed that it is never fair for any person to control more than 1 billion in assets. What if I believed that fairness meant total confiscation of wealth beyond 1 billion to be redistributed fairly (my version of fairness) amongst the losers in an economic activity. How does your version of fairness deal with inequality of outcomes and the need to promote the well being of every single individual regardless of the circumstances of birth? These types of questions have been debated for decades and the pendulum has gone back and forth depending upon the desires of the nation. As a capitalist economy matures, money flows to the few as Pinketty proved. Is that fair?
     
  17. dad2three

    dad2three New Member

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    His $8+ million idea isn't good?

    $10+ million exemption that is currently there isn't enough?

    If there was one thing the Revolutionary generation agreed on — and those guys who dress up like them at Tea Party conventions most definitely do not — it was the incompatibility of democracy and inherited wealth.


    http://budiansky.blogspot.com/2010/10/adam-smith-thomas-jefferson-and-other.html


    The causes which destroyed the ancient republics were numerous; but in Rome, one principal cause was the vast inequality of fortunes. Noah Webster


    A power to dispose of estates for ever is manifestly absurd. The earth and the fulness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of property is quite unnatural. Thomas Jefferson

    There is no point more difficult to account for than the right we conceive men to have to dispose of their goods after death. Adam Smith
     
  18. dad2three

    dad2three New Member

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    Adam Smith, Thomas Jefferson, and other fellow travelers


    If there was one thing the Revolutionary generation agreed on — and those guys who dress up like them at Tea Party conventions most definitely do not — it was the incompatibility of democracy and inherited wealth.


    Jefferson cited Adam Smith, the hero of free market capitalists everywhere, as the source of his conviction that (as Smith wrote, and Jefferson closely echoed in his own words), "A power to dispose of estates for ever is manifestly absurd. The earth and the fulness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of property is quite unnatural." Smith said: "There is no point more difficult to account for than the right we conceive men to have to dispose of their goods after death."

    http://budiansky.blogspot.com/2010/10/adam-smith-thomas-jefferson-and-other.html




    "The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state." Adam Smith
     
  19. dad2three

    dad2three New Member

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    SS keeps 50% of ewniors out of poverty



    Only 18 percent of U.S. workers say they are very confident of having enough money to live comfortably during their retirement years, according to the Employee Benefit Research Institute.


    One in five people who are near retirement age have zero money saved.

    Yes, you read that correctly.

    The sobering statistic was one of many released by the Federal Reserve on Thursday as part of its report on the economic well-being of U.S. households, which surveyed more than 4,100 people online last year between mid-September and early October.

    The study offered a stark reminder that as more Americans are made responsible for their own retirement, most are not saving nearly enough. Overall, 31 percent of people said they have zero money saved for retirement and do not have a pension. That included 19 percent of people between the ages of 55 and 64, or those closest to retirement age


    http://www.washingtonpost.com/blogs...ar-retirement-age-have-no-retirement-savings/
     
  20. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    What does the word "Fair" (taxation) mean is an excellent question.

    In addressing the word "fair" I sought to create a tax policy without favoritism by government (i.e. crony capitalism) which has been the primary source of wealth distribution inequity historically. Today the highest income (investors) have to lowest tax burden relative to income when all taxation is accounted for and that was simply "unfair" in my opinion. I have read that the top 0.1% of income earners (i.e. 1/1000) have an average federal tax burden of only 17% on gross personal income over $10 million/yr and that isn't right. As Warren Buffett accurately stated he had a lower tax burden relative to income than his secretary and it was true.

    I've also pondered the fact that some Americans simply can't afford to pay taxes. It "takes food off the table" (which is why we have $80 billion in SNAP assistance) and that isn't right. Let them keep their money as opposed to paying (state and federal) taxation and then having to depend on government welfare assistance just to take care of their family. Based upon the teachings of John Locke I truly believe that a person should be able to provide for the "support and comfort" of their household based upon their physical labor.

    Not only must the individual be able to support their family on a day-to-day basis but they must also be able to invest in their future because the day will come when they can't work.

    Unlike others I'm not going to propose wealth redistribution as a means to correct the current inequities that are extreme. I'd rather take the slower method of allowing people to keep what they earn. My proposals are about increasing the wealth of the lower 50% as opposed to redistribution of the wealth of the upper 50%.

    The tax proposal doesn't address all of the issues related to the inequities of wealth distribution as that is a much larger problem. This proposal only addresses taxation (state and federal) that represents a serious financial barrier preventing the bottom 50% from accumulating wealth. I have developed other proposals to address other issues related to the inequities of wealth distribution based upon the "Natural Right of Property" as addressed by John Locke in his Second Treatise of Civil Government, Chapter 5 but those are for a different thread.
     
  21. Woolley

    Woolley Well-Known Member

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    Exactly. And even if they had saved and invested, they would still be vulnerable to the vagaries of the market, skimming by managers and events completely out of their control. SS is a safety net because so many try so hard for so long yet still grow old. Sh_t happens. Remember folks, the government makes money for free. It costs them nothing. Not one single dime. All they need to do is hit a key on a computer and presto, it appears.
     
  22. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    The first statistic is the most important. Almost 50% of those collecting Social Security retirement benefits live in poverty and they're the same people that have lived in poverty their entire lives. Worse still is that among those subjected to poverty in old age some are those that never lived in poverty during their working careers. Old age, when a person becomes incapable of working, should not subject a person to living in poverty. They deserve more than that after their working lifetime of creating wealth for the nation.

    The above is exactly why, even as a libertarian, I support the privatization plan I've proposed that creates mandatory investments that will raise even the minimum wage worker out of poverty when they reach retirement age.

    In my proposal a minimum wage worker with $2307/yr in contributions to their private account (based upon 15.3% of gross income in FICA/Payroll taxes) at 8% ROI (a reasonable ROI on investments) would accumulate over $1.2 million by the time they reached age 70 (where the safety net would kick in if they didn't have enough wealth to support themselves). That "minimum wage worker" would receive over $50,000/yr in retirement benefits based upon "interest only" on that amount without ever touching the actual principle, leaving $1.2 million for their heirs, compared to probably $9,000/yr that Social Security pays today, that leaves literally nothing for their heirs.

    I don't like the fact that it's a forced retirement plan but given the fact that one-half of the people will not or cannot invest in their future I have to bend my principles a bit to address reality.
     
  23. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    This is a false argument as diversified and age-adjusted investments consistantly make money over the long term. People use the ups and downs of the market over the short term to make long term assumptions and that is wrong. Even with the Great Depression that started in 1929 and ended in 1933 the long term investors made a substantial profit on their investments. In 2008-9 we had a major market recession but today investment values are at record levels far above what we had before the start of the recession.

    By 2012 all 401K's were showining a 10-yr postive ROI and that was only 3 years after the market collapse. Those of us, based upon age-adjusted investments, that were heavily invested on gold and silver have seen over a 30% increase in the value of our gold investments since 2007. It was even higher while the market was down but declined somewhat stabilizing over about the last year but will be going up again soon.

    When we look at diversified and age-adjusted investments over a 45-year period of time they've all been highly successful.

    Yes, without any protections there could be abuse by the financial investment companies but the program can mandate low-load investment plans and impose protections for the private investor. Because of the huge financial investment market created many protections can be imposed to prevent the financial abuse of the investor. Remember that my proposal is going to create about $1 trillion in additional investment capital every year and private firms are going to be fighting to get a share of that investment capital.

    On a final note I've also retained a "safety net" that would provide at least four-times the minimum retirement income when compared to Social Security today. There are no "losers" under my proposal.
     
  24. Shiva_TD

    Shiva_TD Progressive Libertarian Past Donor

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    I'm always open to positive suggestions to improve these proposals.
     
  25. dad2three

    dad2three New Member

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    Actually my correct posit was that SS KEEPS 50% OF SENIORS OUT OF POVERTY.

    Chile followed the "privatization" model you want, guess what REALLY happens?

    Chile's Retirees Find Shortfall in Private Plan

    Nearly 25 years ago, Chile embarked on a sweeping experiment that has since been emulated, in one way or another, in a score of other countries. Rather than finance pensions through a system to which workers, employers and the government all contributed, millions of people began to pay 10 percent of their salaries to private investment accounts that they controlled


    But now that the first generation of workers to depend on the new system is beginning to retire, Chileans are finding that it is falling far short of what was originally advertised under the authoritarian government of Gen. Augusto Pinochet.

    For all the program's success in economic terms, the government continues to direct billions of dollars to a safety net for those whose contributions were not large enough to ensure even a minimum pension approaching $140 a month. Many others - because they earned much of their income in the underground economy, are self-employed, or work only seasonally - remain outside the system altogether. Combined, those groups constitute roughly half the Chilean labor force. Only half of workers are captured by the system.

    Even many middle-class workers who contributed regularly are finding that their private accounts - burdened with hidden fees that may have soaked up as much as a third of their original investment - are failing to deliver as much in benefits as they would have received if they had stayed in the old system.





    Dagoberto Sáez, for example, is a 66-year-old laboratory technician here who plans, because of a recent heart attack, to retire in March. He earns just under $950 a month; his pension fund has told him that his nearly 24 years of contributions will finance a 20-year annuity paying only $315 a month.

    "Colleagues and friends with the same pay grade who stayed in the old system, people who work right alongside me," he said, "are retiring with pensions of almost $700 a month - good until they die. I have a salary that allows me to live with dignity, and all of a sudden I am going to be plunged into poverty, all because I made the mistake of believing the promises they made to us back in 1981."


    With many Chileans finding themselves in a situation much like that of Mr. Sáez, people are still looking to the government, not private pension funds, to ensure a secure retirement.

    http://www.nytimes.com/2005/01/27/business/worldbusiness/27pension.html




    GERMANY HAS HAD SS SINCE LATE 1800'S, NO PROBLEMS. Weird it is actually understood as a safety net-insurance program, unlike what right wingers want in the US


    8% ROI? lol
     
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