Most of those who say that they have a tax plan don't give very many details or explain why and how their tax plan will help the USA. That is where my plan is different. Read on and you will see.
We need a couple of ground rules first. Today, we do not collect enough tax money to pay for all of the governments programs. We have been borrowing about 20% of the money that our government spends. I think that we should not be borrowing to pay our government's bills, but my tax plan does not deal with this point. If our government would just spend less, that would end borrowing and the future taxes that would need to be collected "beyond" what we will spend in the future. How would like to live in a place that collected more in taxes than were being spent on our government's programs? It would not be a nice place to live and work. That's our future.
The collection of taxes hurts or punishes the ones that are being taxed. Didn't we have a revolution about paying taxes too the King who was spending our money for his benefits and those of his friends? I will point out where my tax plan "helps" some sectors and "punishes" other sectors. This is a key point that needs to be remembered. My tax plan will be neutral in that it will collect the same amount of tax as we now collect. We all can agree that over the past 50 years, the USA makes fewer and fewer products that we use or export. I will also keep separate the two key areas of the economy so that you can more clearly see and understand the impact. Those are wealth produced from the exploitation of natural resources and the wealth produced by human value added. Many people feel that countries like China, Japan, Mexico and many others have taken advantage of our liberal importation policy. We have agreements not to impose punitive taxes on imports. The idea was that it would help our exports, but it has caused the lower skilled Americans to either lose their jobs or prevent them from getting paid more.
Now, what part of the economy do we need to "reward" and which do we need to "punish"?
(1) Reward those who "manufacture" things that have to compete with the rest of the world.
(2) Punish those who provide only services that do not have to compete with the rest of the world.
(3) Reward those who exploit our natural resources.
(4) Punish those who work for government and other public agencies.
I think this a good list to work from. I will show how the powerful tax code can be used to do the above and first will be manufacturing. Because of the efficiency of world trade and the over supply of unskilled workers around the world many traditional low skilled manufacturing jobs have left the USA and we import the products that our workers used to make. To help turn that around, I propose that we remove as many taxes from the manufacturing segment of our economy as we can and transfer more tax to the imported goods. To do this in a way that is legal and in agreement with trade deals that we have made, I propose a "value added" tax to "all" goods and services. This would mean the removeal of the social security payroll tax from both the employee and the employer for manufacturing jobs and companies. I would also lower the income tax on these two groups too. By my simple calculations, it would lower the prices of our manufactured goods by about 15% and raise the price of imported goods by about 10% for a swing of 25%. Since many make or buy decisions turn on a few percentage points, this should have a very big impact on manufacturing jobs here in the USA for many of our low skilled workers.
Now for services that don't have to compete. My first group would be lawyers, college professors, stock brokers, real estate salesmen, home builders and doctors. I know that the cost of medical service has been going up and much of that is because we keep throwing more money at it. I propose we take some of that money away. I would put a value added tax on all these services but still require them to pay into social security and keep their higher tax rates.
In prior blogs, I have pointed out that the exploitation of our natural resources like farming, coal and oil are a big source of our wealth. We need to encourage more of this, not less and that is the reason that I would treat them much the same as manufacturing jobs. What is the logic in a tax policy that hurts our farmers, miners and oil people as we have it now?
We all know that the public sector has grown faster than any other and it needs to stop. I propose that we "punish" those in this segment of the economy by making it against the law for public agencies to provide retirement programs other than social security. If you knew how much us tax payers owe for work that has already been done, you would be sick. This type of "hidden" future cost has to stop. I would keep these groups paying into social security and not get any tax breaks. We want less government and my way is to use the tax code to punish those who chose this type of profession.
As you can see, I am using the tax code to "help" those segment that need help and level the playing field and "punishing" those who are gaming the system without any real competition. I think that the net result will be a "fairer" USA.
PS---Look at the current government policy related to home ownership. Homes do not have any foreign competition, so any tax favoritism only pushes more of our wealth and energy into houses that do not produce anything.. Two of the results are much higher home prices and people buying homes much larger than they need or can afford. Higher home prices and home ownership is putting our "productive" net worth into nonproductive assets. Since much of the reason that people buy homes that are too big and too expensive is get into "good" neighborhoods and "good" schools, we should think about cheaper new types of zoning rules that keep socially irresponsible people out and home prices down! We are doing this now with high home prices which are killing our economy.
We need a couple of ground rules first. Today, we do not collect enough tax money to pay for all of the governments programs. We have been borrowing about 20% of the money that our government spends. I think that we should not be borrowing to pay our government's bills, but my tax plan does not deal with this point. If our government would just spend less, that would end borrowing and the future taxes that would need to be collected "beyond" what we will spend in the future. How would like to live in a place that collected more in taxes than were being spent on our government's programs? It would not be a nice place to live and work. That's our future.
The collection of taxes hurts or punishes the ones that are being taxed. Didn't we have a revolution about paying taxes too the King who was spending our money for his benefits and those of his friends? I will point out where my tax plan "helps" some sectors and "punishes" other sectors. This is a key point that needs to be remembered. My tax plan will be neutral in that it will collect the same amount of tax as we now collect. We all can agree that over the past 50 years, the USA makes fewer and fewer products that we use or export. I will also keep separate the two key areas of the economy so that you can more clearly see and understand the impact. Those are wealth produced from the exploitation of natural resources and the wealth produced by human value added. Many people feel that countries like China, Japan, Mexico and many others have taken advantage of our liberal importation policy. We have agreements not to impose punitive taxes on imports. The idea was that it would help our exports, but it has caused the lower skilled Americans to either lose their jobs or prevent them from getting paid more.
Now, what part of the economy do we need to "reward" and which do we need to "punish"?
(1) Reward those who "manufacture" things that have to compete with the rest of the world.
(2) Punish those who provide only services that do not have to compete with the rest of the world.
(3) Reward those who exploit our natural resources.
(4) Punish those who work for government and other public agencies.
I think this a good list to work from. I will show how the powerful tax code can be used to do the above and first will be manufacturing. Because of the efficiency of world trade and the over supply of unskilled workers around the world many traditional low skilled manufacturing jobs have left the USA and we import the products that our workers used to make. To help turn that around, I propose that we remove as many taxes from the manufacturing segment of our economy as we can and transfer more tax to the imported goods. To do this in a way that is legal and in agreement with trade deals that we have made, I propose a "value added" tax to "all" goods and services. This would mean the removeal of the social security payroll tax from both the employee and the employer for manufacturing jobs and companies. I would also lower the income tax on these two groups too. By my simple calculations, it would lower the prices of our manufactured goods by about 15% and raise the price of imported goods by about 10% for a swing of 25%. Since many make or buy decisions turn on a few percentage points, this should have a very big impact on manufacturing jobs here in the USA for many of our low skilled workers.
Now for services that don't have to compete. My first group would be lawyers, college professors, stock brokers, real estate salesmen, home builders and doctors. I know that the cost of medical service has been going up and much of that is because we keep throwing more money at it. I propose we take some of that money away. I would put a value added tax on all these services but still require them to pay into social security and keep their higher tax rates.
In prior blogs, I have pointed out that the exploitation of our natural resources like farming, coal and oil are a big source of our wealth. We need to encourage more of this, not less and that is the reason that I would treat them much the same as manufacturing jobs. What is the logic in a tax policy that hurts our farmers, miners and oil people as we have it now?
We all know that the public sector has grown faster than any other and it needs to stop. I propose that we "punish" those in this segment of the economy by making it against the law for public agencies to provide retirement programs other than social security. If you knew how much us tax payers owe for work that has already been done, you would be sick. This type of "hidden" future cost has to stop. I would keep these groups paying into social security and not get any tax breaks. We want less government and my way is to use the tax code to punish those who chose this type of profession.
As you can see, I am using the tax code to "help" those segment that need help and level the playing field and "punishing" those who are gaming the system without any real competition. I think that the net result will be a "fairer" USA.
PS---Look at the current government policy related to home ownership. Homes do not have any foreign competition, so any tax favoritism only pushes more of our wealth and energy into houses that do not produce anything.. Two of the results are much higher home prices and people buying homes much larger than they need or can afford. Higher home prices and home ownership is putting our "productive" net worth into nonproductive assets. Since much of the reason that people buy homes that are too big and too expensive is get into "good" neighborhoods and "good" schools, we should think about cheaper new types of zoning rules that keep socially irresponsible people out and home prices down! We are doing this now with high home prices which are killing our economy.
