Copyright 2012 by John T. Reed
Our income tax is again in the headlines because Romney said his tax rate is probably close to 15% because most of his income is from long-term capital gains. The media, a wholly-owned subsidiary of the cult of Obama, has gone nuts saying Romney pays a lower rate “than you do.” (Actually, Romney and Warren Buffet et al all pay the exact same rate as you on long term capital gains: 15%. That’s the law. Average people pay that rate on sales of stock or homes at a profit. And if and when Romney and Buffet earn pay, they pay the maximum ordinary income tax rate of about 35%, same as you if you are in the top bracket.)
So I come forward with a new and improved head tax proposal.
I have also been inspired by Herman Cain’s 9-9-9 plan to simplify my prior tax reform proposal.
A. Every adult (over 21) resident of America pays $9,999 a year.
B. There also needs to be an annual binding national referendum that sets the amount of government spending for the next year. If you are delinquent on your federal tax, you may not vote in the binding national referendum.
Also, votes within states would be converted into electoral votes just as in presidential elections. That would preserve the relative power of each state wheareas switching to a straight popular vote nationswide would diminish the power of the less populous states.We had to create the electoral college and the equal number of senators for each state to get the colonies to ratify the Constitution. It is not the source of our problems, so I would not complicate the effort to pass the head tax by trying to change the relative power of each state in the process.
Politicians simply cannot be trusted to spend taxpayers’ money. Shame on the Founding Fathers for screwing that part of the Constitution up. (My niece is a bit of a genealogist and says James Madison is our distant cousin—sharing an ancestor named Nathan Underwood, Jr. James Madison was the 4th president, husband of Dolly, and is known as the Father of the Constitution and the Father of the Bill of Rights. So I apologize for Cousin Jim’s screw up.)
C. If you do not like the $9,999 amount, feel free to persuade a majority of referendum voters to lower it.
I suggest that voters be allowed to choose from three amounts: last year’s tax revenue, 5% more than that, and 5% less than that. If, for example, most voters wanted to lower taxes and government spending, they would vote for the 5% lower than last year about. If they did that over a succession of years, they could gradually lower the amount of tax revenue and federal spending. I expet at some point the reduction in goernment services, namely federal courts, FBI, defense, and so on, would persuade the public that they had lowered it enough.
Liberals could try to persuade the entire populace to raise it 5% per year. Good luck with that. I expect they would find actual taxpayer/voters a hard sell compared to politicians who are playing games like accepting campaign contributions from lobbyists wanting more deficit spending and those wanting tax breaks.
As now, you can always pay more than required as a donation to the federal bureaucracy. Personally, I would like to see Government spending fall to about $1 trillion a year, down from the current $3.6 trillion. If total federal spending were $1 trillion a year, the head tax would be about $5,000 a year per U.S. resident adult. Still not low enough? Perhaps you should move to Somalia.
D. New, additional borrowing by the federal government will be prohibited by a Constitutional Amendment. In other words, the federal government would have to actually live within its means starting right now, now just pay lip service to that principle. Refinancing of existing federal debt must be self-amortizing. That means it will be paid down a little with each payment like a home mortgage or credit-card balance. The longest term U.S. bonds are 30-year so the national debt would be paid off in about 60 years by this plan. (The most recently issued, interest-only, balloon-payment-at-the-end 30-year bonds would mature in 30 years then be replaced by self-amortizing, new 30-year bonds totalling 6 years) At present, only interest is paid on U.S. government bonds and the principal is 100% rolled over into a new loan at maturity.
This plan will :
• bring in about the same tax revenue as now: $2.3 trillion.
• reduce the current national debt of $16 trillion to zero gradually like pay off of a home mortgage over its life
• reduce the U.S. national-debt-to-Gross-Domestic-Product ratio, the primary indicator of national financial soundness, gradually over time
• attract the best entrepreneurs from all over the world to the U.S. and unleash the ones who are already here
• encourage slackers and welfare queens to emigrate out of the U.S. They should not let the door hit them in the ass on the way out. Their departures would result in the government collecting less than it hoped and that, in turn, would result in the American people increasing the amount of the annual payment, a virtuous circle that would result in America returning to be a nation of self-reliant independent people. If you feel bad about those who cannot pay their taxes, YOU are welcome to reach YOUR hand into YOUR pocket and take out some of YOUR money to give them so they can pay their taxes and stay. What would be over is your reaching YOUR hand into the pockets of the minority party and giving THEIR money to YOUR favorite charity by using armed federal officers to actually seize the assets of your fellow Americans in the process of collecting the current “progressive” income tax.
• make how much you earn and the legal way you earned it none of the federal government’s or anyone else’s business
• create a new form of charity: making grants to needy, deserving persons who cannot pay their federal taxes
• reduce the Internal Revenue Code to the single sentence A. shown above. The current IRC (Title 26 of the U.S Code) is over 10 million words. Furthermore, the Code itself is incomplete without the accompanying regulations, which have more words than the Code itself. And you must also consult the various Internal Revenue Code-related court decisions, revenue and letter rulings which fill aisles of book shelves in law libraries. My tax plan would render the current code, regulations, and various decisions since 1913 irrelevant.
• reduce the activities and staff of the IRS down to that required to identify living, adult, U.S. residents, process their tax payments, record and publish IRS liens (which have long been public information) against those who have not paid, and sell federal tax delinquent receivables to private collection agencies; those will only use common-sense, cost-effective collection methods as are now used to correct from dead-beat dads and such only with the added force of the unique federal laws that apply to tax delinquents; the fact that one was a federal tax delinquent would be known to any who cared including prospective creditors, employers, romantic partners, landlords, business partners, and so on; as now, it would be very difficult to use bankruptcy to wipe out the federal tax debt
• increase the disposable income of taxpayers who currently pay more than $9,999 in federal taxes per year, which is generally all of the top half of Americans; the bottom half hasn’t paid taxes in years; this would cause the top half to pay their own share but stop paying the bottom half’s share, too
• bring those who currently pay less than $9,999 into the ranks of taxpaying citizens and out of the ranks of parasites
• eliminate the tax-return-preparation industry
• eliminate federal tax law as a legal specialty
• eliminate the federal tax compliance portion of the accounting profession
• eliminate tax-free exchanges under Section 1031 of the IRC and the related exchange facilitator industry
• eliminate the tax book industry including the book I have sold the most copies of—over 100,000—since its first edition in 1981: Aggressive Tax Avoidance for Real Estate Investors, now in its 19th edition
• increase the size of the private debt-collection agency industry—an energetic, non-bureaucratic, non-government pension and health care burden on U.S. taxpayers
• save the American people the estimated $431 billion annual cost of complying with the IRC (Laffer, Winegarden and & Childs; The Economic Burden Caused by Tax Code Complexity; April 2011; 3.)
• eliminate complaints that taxes are unfair (except among Marxists who believe in “from each according to his ability”)
• end all tax “loopholes” (When new tax laws are passed, Congress calls them “incentives.” But if you take advantage of the new law incentive, its name changes to “loophole.”)
• comply with the equal protection clause of the Constitution
• eliminate tax-free “municipal” bonds (actually bonds of all non-federal government entities in America)
• give most current taxpayers more after-tax income, some of which they will likely choose to give to charity
• remove artificial tax reasons to give to charity
• eliminate IRS audits and fear of audits (except for proving your dates of birth and death and U.S. residence)
• encourage earning income (The new ordinary income tax bracket of everyone would be zero. What we tax, we get less of. What we subsidize, we get more of. We currently tax wages, salaries, and profits and we subsidize sickness, disability, unemployment, injury, retirement, etc.)
• encourage selling assets, typically homes and stocks, that have built up capital gains (the new tax rate on capital gains would be zero)
• encourage investment
• eliminate tax withholding, and information tax forms like W-2s and 1099s
• eliminate S corporations
• increase use of C corporations
• eliminate reason for all tax-favored pension accounts like 401(k)s, IRAs, SEPs, Roth IRAs as well as eliminating their penalties for early withdrawal
• eliminate end-of-year tax tactics
• eliminate need to keep receipts and acquisition and sale of asset records
• further discourage losing money, which is now a tax deduction
• end the federal government encouraging or discouraging activities or products that are popular or unpopular with the majority party like ethanol or SUVs
• eliminate people voting for politicians who say, “Elect me and I promise to lower your taxes and raise the taxes paid by the other party’s supporters and increase the amount of federal government freebies you get.” The binding national referendum lets you raise or lower taxes, but you will be one of the ones paying the amount that wins. No longer will voters be able to vote to raise the taxes of other people, but not themselves, while also voting themselves more federal freebies.
• future wars will all be “paid for” Since the federal government will not be allowed to borrow new debt, any future wars will require the American people to vote for higher taxes in the annual national referendum to pay for the war right now. This will almost certainly result in fewer and shorter wars.
• encourage repatriation of overseas profits of U.S. companies
• encourage new construction
• eliminate artificial tax reasons to buy a home
• eliminate artificial tax reasons to do installment sales
• eliminate all artificial tax reasons to make business decisions
• eliminate all federal-tax-law-related lobbying and lobbyists
• eliminate almost all tax cheating (What are you going to do? Claim you’re under 22 when you’re not? Claim you’re dead when you’re not?)
• eliminate earned income tax credits to working poor people who pay little or no income taxes and therefore get the tax credit in the form of a cash grant
• the head tax is flat—$9,999—in contrast to “The Flat Tax” which applies a single tax bracket rate to all income but causes those with higher incomes to pay more. The so-called “Flat Tax” is not flat. The head tax is.
• the head tax is fair—every American adult pays the same—in contrast to the so-called “Fair Tax” which, being a federal sales tax, makes those who spend more pay more tax; By taxing sales, the “Fair Tax” discourages sales and reduces the amount of money available to buy things and grow the economy and places a un-paid tax-collector burden on business when we want absolutely no impediments to more hiring.
One reader said those who “have more at stake” should pay more for national defense. Uh, I am not sure what that means. It sounds a little extortionate—like a protection money goon walking into the new candy store just opened in Manhattan and saying, “Nice little store you got here. I’d hate to see anything happen to it.”
But let’s accept the idea for a moment. Okay, require all the local property tax assessors in the U.S. to collect a national defense surtax and send it to the feds. That’s because local property taxes are ad valorem, that is, based on the value of the property. Once again, the federal defense budget would be set by an annual binding national referendum. Non-property owners would not be allowed to vote in that defense referendum.
A portion of the head tax would also pay for defense because the military protects both property and people. All taxpayers would vote in that one.
But let’s make it crystal clear that while the rich may arguably owe more tax for defense because they have more to protect, they sure as hell do not owe more tax for universal entitlements like Social Security and Medicare and ObamaCare or any other cabinet department just because they are rich.
I would rely more on user fees for the cabinet departments of State (passport fees, Embassy and Consulate services) and Justice (civil litigation). I would eliminate all other cabinet departments except Treasury (to collect taxes and pay federal bills) and a new cabinet department to deal with things that cross state or international borders like air, water, germs, and wildlife.
Folks, I am depicting a better America here. More efficient, smaller government, more honest, more affluent, more opportunity, less fear, less lobbying, less lying by politicians, more common sense.
What’s not to like?
The only objections are
1. the Marxist notion that diligent, talented, or lucky people should be punished for their talent, hard work, or good fortune and that the less talented, less hard working, and unfortunate should be subsidized because of their lack of talent, laziness and bad luck that is no fault of the affluent
2. pure selfishness and responsibility shirking on the part of those who currently get away with paying less than $9,999 and want to continue to leech off America’s better half
The main gas I get about this is young people can’t afford to pay $9,999. So make it $5,000 by reducing the size of government so that the annual spending is about $1 trillion. I don’t care what the amount is, as long as everyone pays the same.
The fact is the government spends too much but no one cares because they figure the guy who’s paying for it is someone else, their children and grandchildren, or the Chinese.
With my plan, everyone would instantly figure out that they are the ones paying for it and they are paying for it right now! And they would instantly howl that federal spending must be reduced.
Ya think?
The American people finally realizing they are the ones paying for all this federal government nonsense from wars to entitlements to studying the sex lives of fruit flies would be a good thing. It is the main benefit of this plan.
When I graduated from West Point in 1968 I was 21 years old and a second lieutenant in the Army. My pay was no great shakes at the time. Today, a 2nd Lt. gets $33,941. $5,000 of federal taxes would be $5,000 ÷ $33,941 = 15%.
So what’s the problem here, folks?
Your young person doesn’t want to get a job at age 22?
Tough shit.
Let me tell you what I don’t want—to pay your young person’s federal taxes for him.
Exactly when did twenty-somethings conclude they were entitled to a prolonged adolescence? They’re not. They can turn off the TV or video game and go get a damned job. And who the hell were the dumb grown-ups who said it was okay. It’s not. Our ancestors went to work full time starting as teenagers. I’ll let them off the hook until their 22nd birthday, but that’s it.
My wife and I and two of our three sons completed college in four years. The other son had a full-tuition scholarship and took six years. He is the only one of the three with no college debt and the only one for whom my wife and I did not have to borrow.
But, you say, what if I want to go to grad school?
Get a loan. Grad school will enable you to earn more after you graduate, or it better, so you can qualify for the loan and pay it off.
“But I want to study medieval French lit.”
Ah, well, then your parents are probably dumb enough to pay your taxes while you do that—and after you graduate with that no-market-for-it degree.
A little history lesson. After World War II, a zillion vets went to college using the GI bill. Many if not most went to night school because they had a job and a wife and kids. The professors said they were the best students they ever had.
This all comes down to the fact that Americans today think they can prolong childhood at someone else’s expense. The someone else is me. Screw that! I don’t want to pay for it. I should not have to pay for it. When you’re a child, you don’t have to pay federal taxes. When you are a grown-up, you do. You are a grown-up at age 22. You can look it up.
As the great economists known as the Silhouettes put it:
Yip, yip, yip, yip, yip, yip, yip, yip.
Mum-mum-mum-mum-mum-mum.
Get a job.
John T. Reed