More Jobs, Fewer and Lower Taxes - Applying the KISS Principle

Over the past 30 years Federal Tax receipts (Corporate, Personal, Estate, Excise, Gift, Social Security, Medicare, Medicaid, et al) have averaged less than 20% of Gross Domestic Product (GDP). Read that again, and don't think for a minute that it's not a large number.

But it's not nearly large enough to pay the bills, reduce the national debt, grow the economy, and come to the aid of all of the people in the world who need us. Why, because nearly half of us (some legally, some not so) pay little or no federal income taxes at all--- and because our elected representatives have no financial management skills.

The only taxes that always get paid are those that reduce the amount of spending money in our pockets and which raise the cost of the goods and services we purchase --- thus retarding economic growth.

There is no doubt that a Federal Sales Tax on consumption by final consumers would produce more revenue than all of the other taxes combined --- but how much, and is it OK to single out things like cigarettes and gas guzzlers for extra taxes?

We need to give it a try, and there would be added benefits: (a) we would be collecting taxes from all of those folk who earn incomes that are just not reported at all, (b) the products we try to sell in world markets would be more competitive, and (c) all of us would have more money to spend on stuff that could actually become lower in price.

There are no purely economic problems with making the shift to a consumption tax --- just political ones. The legislation has been "on the hill", and summarily ignored for decades. We need to apply cool economic sense to the elimination of the Internal Revenue Code and the Social Security Ponzi scheme.

First KISS: Create Jobs Right Now

Create jobs immediately by eliminating the corporate income tax (and all other fees, local taxes, assessments, ad nauseum) for any corporation that adds 10% to its permanent workforce and/or 20% to its total workforce.

Corporations are not the bad guys, it's the over-paid greedy dogs at the top that need to be leashed and disciplined by their employers --- the shareholders, theoretically anyway. How about this for a start: all salaries above $1 million are paid in the form of dividends on common stock; all bonuses are "divvied up" dollar for dollar between all employees, full time or part time; there are no stock option programs.

Offset the Federal tax revenue loss by outlawing all forms of "earmarks" on any legislation ever; limiting all lobbying efforts to legitimate industry, employee, and public interest associations; and by enacting a 2% Federal Sales Tax on everything purchased by final consumers--- no exceptions, period.

Create "Green Energy Bonds", sold to investors with full federal guarantees, and used to help start up a Green Energy Investment Bank chartered only to provide low interest loans for developmental private sector projects. While we're at it, bring back the distinctions between, commercial banks, savings and loans, and investment banks.

Second KISS: Lower and Eliminate Taxes

Lower taxes immediately by phasing in a mandated private SSRIA* program for all workers, private and public, from 1st day mailroom clerk to President of the US of A. Reduce Social Security Taxes to 3% over a five-year period and use that money to create a deferred, fixed-income, life-annuity for every worker.

Seventy percent of SSRIA investments would include US Government Bonds, state and local Municipal Securities, with the balance managed in non-derivative, individual equity investments regarded as Investment Grade Value Stocks*. No investment income of any kind would ever be taxable by any government.

SSRIAs would be created and managed by fixed-annuity experienced private sector companies, and the annuity contracts would "travel" with the employee until retirement. All SSRIAs would have identical provisions, no sales commissions or marketing expenses, and slightly below industry level investment management fees.

Employees would be assigned randomly to providor companies, and each contract would include "return of premium" term life insurance until annuitized. Add an additional 3% to the Federal Sales Tax to replace the reduction in Federal tax revenue.

Third KISS: Produce Sustainable Economic Growth

Now that we've become more competitive in world markets, assured retirement benefits for all workers, and helped to save the planet, it's time to provide equal opportunity for all of us to attain the American Dream without big brother's assistance.

Replace the personal income tax side of the Internal Revenue Code with a 5% flat tax and an additional 10% sales tax --- maybe even a mandated 2% insurance premium for universal basic medical coverage. But at the end of the process, all reported income pays a 5% income tax --- no exclusions, deductions, adjustments, minimums, period, and done!

Every purchase for final consumption generates a 15% contribution to support what we hope will become a smaller, less corrupt, more creative group of term-limited politicians. And, once the budget becomes balanced, further tax reductions will ensue.

Hey, write your congressperson, make some noise, Tweet, Digg, whatever. Now this is capital "c" change we can deal with --- or at least dream about.

Steve Selengut

[http://www.kiawahgolfinvestmentseminars.com/]

http://www.sancoservices.com

Professional Portfolio Management since 1979

Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read"

Coming - Lower Living Standards and Lower Wages - Leading to a Modest and Equitable Way of Life

There is no doubt that globalization will benefit more people than it will hurt in the United States and abroad. It is certain that it will also create new challenges, oftentimes quite painful though temporary. Today's harsh economic situation seems to be an example. It has caused a deep economic slowdown already affecting tens of millions Americans with no recovery in sight. Capitalistic globalization has a lot to do with this situation.

Consider the housing bubble which was fueled by extraordinarily cheap money provided by lenders. It caused the prices paid free of any connection to real value of the property in relation to rent or market supply and demand. The abundance of cheap money didn't come from Americans since they haven't been saving for years. It came from other countries known as the "global saving glut," amounting to hundreds of billions of dollars made available in the U.S. market. With money available to borrow, people bought overpriced houses far beyond their financial capability to pay monthly mortgage payments or sell for the price paid for. It is quite clear that without the global saving glut, America couldn't have a housing bubble or the resulting housing collapse.

Employment and jobs have taken also a very important global dimension. The most significant effect seems to be the opening of a huge global labor market. Along with thousands of Americans looking for work, millions of job seekers around the world are able now to compete for tens of thousand jobs offered by the American firms within the country as well as abroad. What is devastating for American workers is the presence of millions of substantially lower-priced foreign workers with the same skills. Even if they are not hired, they hold down the wages of high-priced American workers. Yet worse, instead of creating jobs at home, this immense pool of cheap labor relentlessly induces employers to create new jobs wherever workers with required skills are available for substantially lower wages. In reality, the main problem is not so much the outsourcing of jobs, which is relatively small, but creating them abroad rather than at home.[1]

Under the global free trade agreements, globalization has been causing an enormous societal upheaval- economic, political and social- approaching an inevitable global peaceful revolution tending to substantially upset the status quo in both developed and developing countries. It is causing downward slide in living standards in the advanced countries and upward moves of the same in developing ones. No one country or group of states can control or stop this phenomenal transformation which is taking shape and strength. At the most, any contrary effort by a state may only cause some minor delays in progress which would actually be detrimental to its economy rather than beneficial. The reality is that the world market needs cheap and abundant goods and services and to provide these, producers need cheap labor and favorable environment to maximize profits under a keen and unavoidable competition in global environment.

How is this transformation affecting the United States? Let's see first how much of America is owned by foreigners. The following few examples well illustrates the situation: Mining, 27%; information, 24%; manufacturing, 20%; professional, scientific, and technical services, 20%; and finance, 11%. But these statistics include all production firms large and small, if we look at the major and key firms, the foreign ownership picture is quite alarming. For example, foreign capital controls sound recording industries by 97%; commodity contracts dealing and brokerage by 79%; motion picture and sound recording industries by 75%; metal ore mining by 65%; database directory, and other publications by 63%; cement, concrete, lime, and gypsum products by 62%; engine turbine and power transmission equipment by 57%; rubber product by 53%; nonmetallic mineral products manufacturing by 53%, plastic and rubber products manufacturing by 52%; boiler, tank, and shipping container by 50%; coal mining by 48%, nonmetallic mineral mining and quarrying by 47%.

Now, let's look at the percentage of Americans annual consumption of foreign imports. These are goods that come from abroad instead of being produced at home. Here is just a few examples from 2005 showing the percentage and value in billions of dollars: Footwear, 92% [$17.590]; audio and video equipment, 90% [$40.967]; computer equipment, 70% [$78.404]; Apparel, 75% [$68.576]; miscellaneous manufactured commodities, 57% [$63.467]; communication equipment, 53% [$47.137]; semiconductors and other electronic components, 51% [$68,349]; motor vehicles, 39% [$142,842]; pharmaceuticals and medicines, 32% [$5.613]; motor vehicle parts, 32% [$71.066]; iron and steel and ferro alloy, 29% [$27.443]; basic chemicals, 24% [$35.011]; medical equipment and supplies, 23% [$16.290], a total of $733.8 billion.[2]

Then there is no wonder that according to a senior administration official, the federal budget deficit for 2008 will set a record high close to $490 billion [3] which the government has to borrow from certain sources abroad more likely from the so called "global saving glut." by issuing government treasury bonds. Considering the past behavior of the lending countries, a good part of this huge amount will be spent to buy more of the American production and communication means, increasing foreign influence over extraction of the natural resources, production of goods and services. According to Fortune Magazine ( February 18, 2008, p. 58) foreign buyers set a record in 2007 by purchasing $414 billion of American assets. Many of the biggest deals were made by Asian or Middle Eastern buyers. Our annual trade deficit remains massive amounting to hundreds of billion dollars each year. It is this enormous amount of money spent abroad that comes back to acquire our means of production, transportation and communication. This trend is troublesome more so now than ever before. 'According to the Bureau of Economic Analysis, the rest of the world currently owns way more of America (stocks, bonds, real estate, etc.) than America owns of the rest of the world, by margin of $2.6 trillion.... Where it leads is grim: As a nation we eventually cease to be capitalists and become simply wage earners.... a country that goes too far down this road can be 'colonized by purchase rather than conquest.'"[4]

One would expect "Americans, in a period of falling home prices, a wobbly stock market and an ongoing war, to be less than satisfied with the direction of the country. It's natural. But Americans are not simply dissatisfied. They are very unhappy. O.K., deeply, pessimistically unhappy. Un-American Dreamy: 85% of respondents in an exclusive TIME/Rockefeller Foundation poll believe that the country is on the wrong truck." [5]

Americans are increasingly feeling that they have become the losers. A majority of 68% of the respondents in a Fortune Magazine survey indicate that free trade benefits the most the U.S. partners rather than the Americans. They fear about jobs lost overseas and wages reduced by global competition and now worsened by the failure of giant financial institutions, housing crisis and credit crunch. It is felt that globalization so far is undermining the middle class and enriching only the economic elite. As opinion polls demonstrate, this disparity seems to be a reason for unprecedented concerns about inequality in income distribution as well as upward economic mobility. According to a Gallup poll nearly 70% of Americans think that there should be a more even distribution of wealth. The earning gap between the highly skilled workers and the rest of the labor force has been widening since 1980s. Particularly, in the last few years the top few percent has seen an accelerating gain while the rest have stood still or fallen back. A huge number of Americans, 80% of them, think it is harder to maintain a middle-class lifestyle now compared to five years ago.[6]

Putting aside the housing crisis, let's see why is this happening to the working class in the United States? The basic reason is globalization of capital, production as well as marketing during the last decade. Availability of cheaper labor abroad, and far favorable production environment such as minimum or no requirements for health care or retirement benefits, minimum or no regulation regarding the work environment, and harshly competitive global market, all together have been causes for strong inducement for American firms to move their production of goods and services abroad. This process is still going on with an increasing pressure to be enlarged further. The first effect of this surge is imposing a cap or reducing wages. This is being seen all over the country from the airline pilots all the way down in nearly all firms involved in global trade. As demonstrated by the studies mentioned above, wages as well as middle class family income has remained nearly the same during the last five years.

Based on the character of the globalized trade and keen competition it creates in global market, the production firms have been pushed to resort to any means which would bring down the cost of production. Unavoidably, when the cost of production at home, despite of all possible reductions, cannot compete in international market, the firms are obliged to move their operation where the cost of labor, health care, retirement benefits put all together leaves some ground for competition and expectation of profits. The outcome has been an accelerating outsourcing the production.

Consequently, based on all the facts presented above, This process of stagnation in domestic production, reduced wages, health care and retirement benefits with increased unemployment, will impose unavoidable pressures on the middle and lower income families to cut down in their spending. As the process continues, these families will end up spending only in basic necessities, trying at the same time to save some for their health care and old age, if at all possible. Purchasing luxury or multiple items such as cars, television sets, cameras, many shirts, pants, shoes and dresses will be gradually reduced to basic needs. As the domestic production of goods and services along with consumer spending declines, so do the government revenues while its expenditures particularly in welfare programs, such as unemployment compensation, food stamp, antipoverty, medicaid etc., increases. There will be no other way but substantial tax increase to balance the budget. Because, we won't be able to borrow money to do so, as we have been doing for years, since presently we are borrowing $2 billion a day to balance our budget and paying over $700 million interest daily on the accumulated national debt of nearly $10 trillion. Since our projection of lover living standards as presented above is about a decade or two away, and if the level of budget deficit stays around $3 to $5 hundred billions per year, the nation will approach to the brink of bankruptcy by then and the United States will lose credibility to borrow particularly that our creditors will be foreign financial institutions as they are now. The imposition of any tax increase, specially a substantial one, would be a great but inevitable burden on the impoverished taxpayers.

The huge unemployment in addition to the new young workers entering the tied job market, will push the nation for substantial transformation in the workplace. One possible and democratic way would be to guaranty equality of opportunity at work place. The concept would require the production firms to hire anyone looking for job in their area of competence. If there is no open positions then those who are employed must let go an hour or two per week of their weekly work to the extent that it will provide employment for everyone. It will cut a little from the weekly or monthly pay of those already employed but will provide work and income for those who were unemployed. This process will guarantee full employment all the time.This concept is not easy to implement but well possible. For details of the process see Technodemocratic Economic Theory: From Capitalism and Socialism to Democracy by the author

Under this system, more likely, most people will work some hours less per week. Accordingly, they will have more time for leisure, enjoyment of life and self-fulfilment. Individual attention to exercise, art, music, poetry and literature will flourish, and necessarily results in creation of thousands of new and meaningful positions.

While this process of lower living standards taking place in advanced countries, developing countries also go through a quite different transformation. This process has already started in many developing countries where wages are extremely low and requirement for a healthy work environment, health care and retirement benefits are minimal. It has already caused outsourcing the production and marketing from the advanced societies and an urge from the part of the global corporations to establish production firms in these countries rather than in their own. China and India are two major examples. Such development of production of goods and services in these countries will gradually cause increase in wages and workers demand for a better working environment, health care and retirement benefits. It will eventually result in a higher living standards in these societies. Ultimately, the income level will be modified in both developed and developing societies and the living standards reach a comparable level under a global standards tending toward an equitable living ways. I estimate this end to be attained within five decades.

References:

1. Geoff Calvin, "A Recession of Global Dimension?" Fortune, February 4, 2008, p18. 2. http://www.economyincrisis.org, July 28, 2008. 3. Andrew Taylor, "Budget Deficit Nearing $490 Billion," Time, JULY 28, 2008. 4. Geoff Calvin, "America for Sale," Fortune, February 18, 200 8, p.58. 5. Bill Sporito, "85% of US Unhappy With Economy," http://www.time.com/ 6. "Workman's Blues," The Economist, July 26, 2008, pp.33-36.

Dr. Reza Rezazadeh
Professor Emeritus
1080 Eastman Street
Platteville, WI 53818

Professor Emeritus at the University of Wisconsin System,and a Fulbright scholar, a multi-disciplinary, multi-cultural, and multi-lingual scholar with background in Mechanical Engineering (B.S.M.E.), Continental and Islamic Law (Licenciate), J.D. in American Jurisprudenxce, LL.M. in International Law and International Economics, Ph.D. in Political Science, Economics and Administration, and Doctor of the Science of Law (S.J.D.) the highest law degree offered in U.S. Fluent in five languages: English, French, Spanish, Persian, Azeri-Turkish. Elementary knowledge of Arabic, Urdu, Russian and Italian. Patented inventions; an artist, a poet (oil and pastel), a musician (violin), with over 35 years of academic background in teaching, reseasrch and administration, research and cultural studies in many countries in Europe including USSR, Middle East, Central Asia, Northe africa, Central and South America. Author of 8 books and many scholarly articles listed in his website http://www.democracywhere.com

Let's Lower Taxes to Get National Health Care, Social Security and Free College!

The key to financing National Health Care, solving Social Security's long term funding problem, and going to college free of charge is to lower taxes. As incredible as this sounds, it's true. This can be accomplished by eliminating tax deductions and a simple restructuring of the tax code.

Eliminating tax deductions is the key to tax reform. This is because tax deductions are the main cause of tax fraud and the inequities associated with our current tax system. It is the tax deduction that allows the tax code to favor some segments of society over others, decrease the amount of revenue the government needs to properly fund the programs our society deems important, and leads directly to waste, fraud and corruption.

No serious attempt at tax reform can take place without addressing this problem. Therefore, abolishing the tax deduction is the first and most important reform that must take place. When combined with a simple restructuring of the tax code, these simple reforms create a tax system that treats everyone equally. And, when everyone is treated equally three things happen: First, the current codes ability to favor some segments of society over others is eliminated. Second, tax fraud will decrease. And third, government revenue will increase.

For example, in order to increase tax revenue from corporations we must first change the tax structure that allows businesses to reduce, delay or eliminate the taxes owed. Currently, corporations subtract from their gross sales those deductions found in the tax code and labels the resulting number the net profit. This figure is then used as the basis for determining the taxes owed. The first $50,000.00 of net profit is taxed at 15% and above $50,000.00 of net profit the tax increases up to 35%. This creates a very strong incentive to add as many deductions to the tax code as possible in order to reduce the net profit so that the corresponding tax liability is lowered.

The solution is to replace the tax on net profits with a small tax on the gross sales. By definition, the tax on gross sales means that there are no deductions. This reform eliminates the ability of corporations to use the deductions found in the tax code to reduce, delay or eliminate the taxes owed, eliminates the corruption associated with the current tax code, and creates the level playing field that requires all corporations to pay their fair share of taxes. And, when all corporations pay their fair share of taxes, government revenue increases.

The small tax on gross sales also produces a very small corporate tax liability. In fact, the business tax corporations will now be required to pay is so small that employer payroll taxes can be expanded to include National Health Care and still produce an overall tax liability lower than what corporations are currently required to pay. This overall lower tax liability will be the basis for corporate acceptance of their expanded payroll obligation.

These same principles apply to individual taxes. When deductions are eliminated, the ability of individuals to reduce, delay or eliminate the taxes owed comes to an end. This means that the scenario that now occurs, where wealthy individuals end up paying less in taxes than poorer individuals, is no longer possible. This translates into increased revenue for the government.

The elimination of personal tax deductions also heralds the end of personal income taxes. The elimination of income taxes presents as a tax reduction and this tax reduction allows for the expansion of payroll taxes to include National Health Care and Public Education. These new payroll taxes will be readily accepted because individuals will still be paying less in overall taxes and yet will receive more in benefits. Most people will simply wonder why these reforms had not been implemented earlier.

The elimination of tax deductions and a simple restructuring of the tax code needs to be implemented as soon as possible. This is because government revenue raised under the current system is inadequate. For example, in fiscal 2007 the government collected $2.4 trillion dollar, however, it spent $2.8 trillion dollars. This created a deficit of $400 billion dollars and this $400 billion dollars was added to the national debt (which is rapidly approaching $10 trillion dollars). Contrast these amounts with the revenue generated by the reforms set forth in my proposal. Based on very conservative numbers, my tax reform plan will increase government revenue from $2.4 trillion dollars to a staggering $3.31 trillion dollars. This means that rather than running a budget deficit we will be running a budget surplus.

This budget surplus allows us to fund all current programs, create and fully fund National Health Care, resolve Social Security's long term funding problem and expand public education to include college, free of charge. And, as incredible as all this sounds, it was accomplished by lowering taxes!

Fishman's Framework for Tax Reform is available to read free of charge at:
http://www.serioustaxreform.com

Contact: mark@serioustaxreform.com