Fixing Everything: Government Spending, Taxes, Entitlements, Healthcare, Pensions, Immigration, Tort Reform, Crime...
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Fixing Everything: Government Spending, Taxes, Entitlements, Healthcare, Pensions, Immigration, Tort Reform, Crime...
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Product Details
| ISBN-13: | 9781452051796 |
|---|---|
| Publisher: | AuthorHouse |
| Publication date: | 10/15/2010 |
| Pages: | 648 |
| Product dimensions: | 6.00(w) x 9.00(h) x 1.43(d) |
Read an Excerpt
Fixing Everything
Government Spending, Taxes, Entitlements, Healthcare, Pensions, Immigration, Tort Reform, Crime ...By Nedland P Williams
AuthorHouse
Copyright © 2010 Nedland P WilliamsAll right reserved.
ISBN: 978-1-4520-5179-6
Chapter One
10-25 Tax Plan 10-25 Tax Plan — Overview
The obvious starting place for improvement is our tax code. Taxes should be collected in a fair and transparent manner, as efficiently as possible. The current code flunks, on all three counts.
Anything less than a total overhaul will be perverted by the current system's prime beneficiaries. While individual deductions may have legitimate purpose (many do not), the accumulation of "exceptions" and "special cases" makes for an unworkable code. The new code must not be allowed to revert back to its present state, by allowing even a single exception.
Severing the tax collection function from tax adjustments
Separating the tax collection process from any form of tax credit, deduction, entitlement, etc., allows for such tremendous efficiencies in collection that we will be able to abolish the requirement that employees file tax returns.
Employers will deduct 25% from gross wages, beginning with the first dollar paid. Since "benefits" will no longer be deductible, unless included as wages, they will quickly fold into increased salaries. This simplification makes withholding tremendously easy to implement and audit, and removes huge accounting and overhead burdens from businesses. For the employer, it will be simple to file income tax forms on behalf of the employee, in conjunction with withholding payments.
Combine tax deductions and entitlements
U-Care incorporates several functions: tax deduction, healthcare, retirement, other entitlements, and income redistribution. No adjustments will be made to reflect differences in income, so monthly payments will be exactly the same for every citizen, making the process efficient, transparent, and fair.
Combination of U-Care plus Flat Tax equates to an infinitely progressive tax code, with no disincentives for adding incremental income. It is progressive, since the marginal utility of $10,000 is far greater to someone who has little or no income, than it would be to someone who is wealthy. A couple effectively pays negative tax on income below $80,000.
Doesn't it make sense for the federal government to provide a core support system that works fairly and efficiently, and let charities and state and local governments deal with exceptional cases?
The federal government is a lumbering giant that does not do well handling exceptions, whereas those closer to the problem have more specific knowledge and flexibility, especially once they have been relieved of the bulk of the financial burden and federal grant paperwork. Those seeking help will have more control over their own destiny, since they will not be totally beholden to a single support service, but will have their own funds.
The 10-25 Plan will be both expense and revenue neutral (after adjustments).
Expenses, in the form of U-Care payments, seem to present an increase over current entitlement payments by approximately $600 billion. However, revenues will no longer be reduced by tax deductions, worth $900+ billion; so after adjusting both sides of the equation, net expense and revenue will stay neutral. [The remaining $300 billion in expense saving will be applied against annual interest cost for the Entitlement Buyout, intended to make current retirees whole.]
There will be major one-time expenses resulting from the conversion and recognition of our entitlement liability; however, we have made provision to pay all conversion expenses and a portion of the entitlement liability with a "painless" one-time tax.
While some elements of the Plan are extremely progressive, all elements are pro-growth, with the result being a BALANCED PLAN that should satisfy almost everyone.
The "10" (of the 10-25 Plan)
Every year, the government redistributes more than a trillion dollars ... to provide for retirement, health care, and the alleviation of poverty. We still have millions of people without comfortable retirements, without adequate health care, and living in poverty. Only a government can spend money so ineffectually. The solution is to give the money to the people. Charles Murray, In Our Hands
Despite government spending of more than $9 trillion over the past 40 years on welfare programs, nearly 37 million Americans are still living in poverty. They include nearly 13 million children. That's 12.7% of the population, a decline of barely 2% since the start of the War on Poverty in 1965. That's a pretty poor return on a $9 trillion investment. - Michael Tanner, Leviathan on the Right
$10,000 in Guaranteed Annual Income — The 10-25 Plan provides for U-Care payments, totaling $10,000 annually, for every citizen over 21. These payments will provide basic support with neither stigma nor disincentives.
These payments replace all current federal redistribution programs and tax deductions going forward.
This $10,000 will fund three monthly U-Care electronic payments, into individual accounts: U-Care Basic Income, U-Care Healthcare, and U-Care Retirement. In any single month, each payment type will be exactly the same dollar amount for every citizen, making it easy to administer and audit. If Bank of America in Marblehead has 10,000 citizen clients and Basic Income payments were $512.75 ($500*) for a particular month, an auditor could easily check whether total payments for the month to that bank were $5,127,500. You can be certain that each recipient would be well aware of whether they had received their monthly payment. The $2.1 trillion annual cost will replace the current $1.5 trillion in Entitlement spending plus $0.6 trillion in savings from cancelled tax deductions. Going forward, this annual burden will increase based on inflation and the growth in number of citizens, which together should be less than average GDP growth.
Compare this against our current Entitlement arrangement, which is expected to grow at an unacceptably higher rate than GDP.
Legal immigrants will receive up to $10,000 in tax credits against earned income, while citizens under 21 with taxable earnings will receive up to $9,000 in credits plus the $1,000* per year, that is already being deposited in every family's Medical Savings Account for each child.
Direct payment will allow us to close the bureaucracies and agencies that monitor and control entitlements, bringing overhead cost on this portion of federal spending from above 15% to below 1%, significantly reducing the overall size of Washington's bureaucracy. More importantly, it gets Washington's fingers out of the redistribution pie; at minimum brings everyone out of financial poverty; and provides a cushion against adversity from job, health, or retirement problems, without creating disincentives against earning additional income.
Think how comforting U-Care payments would be in the current financial crisis, and how much they might stabilize the economic situation, as opposed to ad hoc "stimulus" payments.
Washington will provide funding, which it does (way too) well; but will cease related management functions, which it handles so abysmally, resulting in a significant decrease in the size and complexity of the operations portion of government. Government employees will depart with a "golden handshake" severance package.
The "25"
True Flat Tax of 25% - Our primary funding source will be a 25% first-dollar Flat Tax on all personal income and business profits, with personal income redefined to include employee benefits.
Combining U-Care payments with the 25% Flat Tax results in an infinitely progressive effective tax rate on individuals that is efficient, and which addresses "fairness" and "regressive" complaints, directed at prior Flat Tax proposals.
Together, U-Care payments and the Flat Tax constitute a bundled tax code, which encompasses all entitlement payments, in order to make sure that every citizen is covered for basic income, healthcare, and retirement. By treating everyone equally, regardless of income, no one falls through the cracks, and the system is transparent and fair. The decision on how this money is spent is left to each individual, allowing them to maximize personal benefit.
No employee tax filing — Because the tax rate for all employees is a flat 25%, with no deductions, employee withholding will accurately reflect taxes due, so employees will no longer have to file tax returns. Since U-Care payments (and tax credits for legal immigrants and those under 21) will be wire transferred directly into individual accounts, that aspect will not concern the employer. Any non-employment, non-investment income will have to be declared as "business" income, for which separate filing will be required.
Business Tax Accounting
Non-investment business assets will be expensed, when purchased. Pre-conversion undepreciated assets and unexpensed inventory will also be expensed in the Plan's first year (for taxes only, not GAAP). Business tax losses can be carried forward indefinitely, but cannot be used to reduce taxes on salaried income.
In keeping with the theory that business income should be taxed once, dividends or distributions from profitable (tax paying) businesses will not be taxed. However, businesses will be required to withhold 25% on all distributions to stockholders, which exceed after-tax profits for the current year. This taxed distribution amount can later be deducted against future profits. This will avoid situations where owners distribute perpetually untaxed income, and assures that all income will be taxed only once.
Businesses will also be taxed at the income source, which avoids difficulties that arise with non-reporting of partnership, REIT, and royalty trust income.
Existing Entitlements
U-Care payments are designed to replace the current system of entitlements; however, to satisfy commitments already made to seniors, those approaching retirement, and many with "special needs", there must be an additional adjustment. When we commence with the new system, we will overlay U-Care with Buyout payments.
This Buyout is a legal commitment by the US Government to make a series of inflation adjusted payments to every entitlement eligible citizen, based on their age and retirement status. The government will be required to track this "contingent liability" on its books. Each year the "generational accounting" effects of inflation, changing lifespan, and payouts will need to be reflected on government's books, as well as any benefit adjustments made by our legislators.
The amount of the Buyout will be calculated from the bottom up, to match individually projected payouts under the current system, after deducting future U-Care. Buyout payments will be received into personal accounts that allow for a wide range of investment options and more flexibility. After age 62, you'll be able to start drawing on retirement funds, regardless of your employment status. By taking control out of Washington's hands and putting financial assets in yours, your retirement will be shielded from the multiple benefit reductions that have plagued similar European plans.
Who do you trust more, yourself or some Entitlement bureaucrat?
Entitlements will no longer be handled as "defined benefit" plans. Retirement and Medical Savings Accounts will instead receive "defined contributions" monthly; allowing Washington to bring costs under control and avoid the political manipulation that has created the current situation. Because the cost of "defined benefit" medical programs is so difficult to project, such plans have created an accounting fog that has hidden the true cost of political give-aways. In addition, fixing a Buyout value for medical benefits now will go a long way toward using market forces to keep future medical cost increases in check.
Instituting these cost control measures will improve everyone's peace-of-mind regarding retirement coverage. No more horror stories about Social Security and Medicare going bankrupt or government spending growing to 50% of GDP.
Unless we fix Entitlements now, future benefits must be scaled back. Raising taxes enough to pay the entire amount is not an option:
As the size of the work force declines relative to non-workers, demand for work force services will increase. Competitive pressures will cause after-tax salaries to rise, pushing up wage-indexed entitlement benefits and future medical costs beyond what can be supported by taxes alone. Raising tax rates will only increase gross salary demands, since workers in short supply will demand increased after-tax compensation. To avoid a hyper-inflationary wage spiral, future cuts in Entitlement benefits will be the only recourse.
Since inflation will be included in benefit adjustments, inflating the currency will not be an option for meeting future benefits. There is the possibility of under reporting real inflation through CPI numbers, but this "sleaze" option would only be tolerated at the margin.
This Buyout must be generous enough to enlist seniors and other recipients as active political supporters, when packaged with monthly U-Care payments, which represent the future form of entitlement payments. Having satisfied existing obligations, by replacing the current system's inter-generational transfer payments (aka: Ponzi scheme) with U-Care payments and Buyout payments; everyone can be converted to personal Retirement and Medical Savings Accounts.
For example, if a current retiree expects $30,000 annually in combined benefits for Social Security and Medicare; under the 10-25 Plan they will receive the $10,000 U-Care payments, plus $20,000 guaranteed annually by the Buyout.
Capital Gains, Estate Taxes, and Pension Funds
One-time tax, as Capital Gains, Dividend, Gift, and Estate Taxes Abolished - Capital gains, dividend, gift, and estate taxes will be eliminated. This should substantially raise the value of equities and avoid substantial misallocation of wealth that results from tax avoidance. However, to compensate for the disappearance of these future revenue sources, there will be a one-time tax on all accumulated capital gains. This one-time tax will also be applied to assets held in non-Roth pension funds.
Otherwise, under the new rules, future pension fund distributions would have to be taxed as income, at the 25% flat rate. Better to pay a 15% tax on current value, and allow investment returns and future taxed contributions to accumulate tax free.
Even with the one-time tax, those holding assets come out well ahead, since reductions in both corporate and capital gains tax rates should increase stock values around 50%. This one-time tax will also hit previously untaxed holdings of the very rich, which should please those promoting "progressive" taxes. Not only will these measures maximize the size of the accumulated-gain tax base, but the after-tax effect on those owning equities will be extremely positive, creating a WIN-WIN-WIN-WIN situation:
1. Win(1) — Significant after-tax gains for stockholders 2. Win(2) — Significant new foreign investment, strengthening the dollar 3. Win(3) — Reduced cost of capital for expanding companies 4. Win(4) — One-time tax revenue approaching $1 Trillion to pay conversion costs and reduce Buyout liabilities.
While this one-time tax should raise multiple times the normal annual tax revenues from capital gains, dividends, and estate taxes; equity owners will experience offsetting asset appreciation that far exceeds the tax cost. The net wealth gain will significantly increase the capital base available to support future growth, and will replace much of the wealth lost in the recent credit crisis.
Accumulated corporate capital gains will also be taxed once at 15%, rather than the current corporate capital gains rate of 39.5%.
(Continues...)
Excerpted from Fixing Everything by Nedland P Williams Copyright © 2010 by Nedland P Williams. Excerpted by permission of AuthorHouse. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Contents
Author's Opening Statement....................viiThe 10-25 Plan Overview....................xiii
Delayed Introduction....................lx 10-25 Tax Plan — Overview....................1
Universal Free-Market Care Payments (U-Care)....................22
Flat Tax....................98
Flat Tax - Details....................103
Capital Gain, Dividend, Interest, Gift, and Estate Taxes....................136
Pension and Medical Plan Conversions....................194
The 10-25 Plan - Summary....................206
Taxes - General....................214
Tax Theory....................221
State Taxes....................307
Entitlements....................310
Federal Spending, Deficits, and National Debt....................363
Conversion Procedure and Costs....................436
Overview of Other Solutions....................455
Healthcare - Group Self-Insurance....................457
Tort and Other Reforms....................497
Closing Chapter....................507
Bibliography....................514
Acknowledgements....................538