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America's Economic Future: Nightmare or Vision?

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The 2008 race for president is up for grabs, making it impossible to predict who will become the 44th president of the United States. Irrespective of whether it’s John McCain or Barack Obama, he will preside over the greatest economic disaster ever faced by the American people, and it is increasingly clear, based on the polices being proposed by the candidates, that neither of them has a clue about what to do.

The platforms of the two major parties attempt to address the dozens, if not hundreds of issues comprising the related economic problems facing the next administration and both propose similar band-aid solutions offering little likelihood of success. What’s missing are any large ideas that will lift the overall economy and all of its components.

The risk of economic collapse is so great, and the consequences to ordinary American voters are so devastating, that we must take a hard look at where we are and to think about where we want to go and how to there.

We cannot look to the past for solutions because that’s how we came to be on the crumbling edge of the economic abyss. Rather, we have to imagine a dynamic shared vision of the future, one in which we undertake bold new initiatives and demonstrate the greatness of our heritage. Otherwise, our 44th president will go down in history as having presided over the implosion of our uniquely American society – those of us who have gathered from all over the Earth to offer hope for all humanity.

In
A Vision for Change: An American Energy Policy we dreamed about an America that solved its energy crisis by generating the energy to power its national highways from outer space. Successful implementation of this vision within a democratic free enterprise system requires that we also solve the interrelated issues of taxation, social security, retirement, health care and economic stimulus.

 

Taxation

When Eisenhower was president, corporations paid a quarter of all federal taxes – now they only pay about 10 percent. The Government Accountability Office just reported that almost two-thirds of all companies in the U.S. pay no income taxes, including one in four of the largest corporations earning billions of dollars a year. These corporations avoid having any taxable income by deducting "expenses" such as the highest executive salaries in the world and massive overpayments to foreign subsidiaries for products and services.

The Congressional Budget Office recently concluded that, while income tax rates for middle-income earners are going up, the rates for those at the very top continue to come down. The tax rates of those with an average income of $1.25 million dropped 5 percent between 2000 and 2004, saving them an average of almost $58,000. Individuals earning more than $10 million saved an average of $500,000 in taxes on their investment income.

Wouldn’t it be more sensible and much fairer to simply tax the movement of money, rather than "income," in our economy? Not a sales tax, not a value-added tax, not a flat income tax, but rather by a simple toll on every financial transaction that occurs within our economic system. Not just every time you fill up your tank with gasoline, but every time stocks and bonds are bought and sold, every time currencies are traded, and every time money moves to an offshore subsidiary.

Since the working-, middle- and small-business-classes have far fewer and much smaller financial transactions, the wealthy and the multinational corporations, who spend a ton of money every year to avoid having any "taxable income," would have to share proportionally in paying the toll for their traffic on our economic highway and their use of our courts and institutions to enforce their contracts and to facilitate their profits. Why should so many of our largest corporations completely escape the payment of any taxes?

Based upon our $13.8 trillion annual economy, it is likely that the federal government could operate on the revenues produced by a simple transaction tax of much less than 10 percent on the movement of money. In addition, the payment of taxes would largely shift from individuals to the corporations that most benefit from the services of our government.

Envision the effect of a slight touch every time money moves, a tiny ka-ching in the U.S. Treasury’s cash register, which in the aggregate would add up to billions of dollars each year. Imagine the debate in Congress as to whether the tax rate should be 6.25 or 6.27 percent for the next year. The difference could be significant.

Most of us would only have to pay an annual tax rate of as little as 5 percent on our spending (income). The transaction tax would result in a slight increase in the overall cost of the goods and services we purchase; however, the toll would apply to all financial transactions, including the purchase of limousines and spas by the wealthy, who rely on every imaginable scheme to avoid having any "income" upon which to pay taxes. Those who enjoy luxuries would pay more for them, and those who gamble in the money markets would have to pay for their visit to our economic casino.

Let’s say a married couple earns $100,000 of joint income and receives no government support. Employers would still be required to file 1099 and W2 reporting forms, and the couple would file a return setting forth their "income." The "income" would be reduced by standard deductions for providing their own housing and medical insurance and by the amounts paid into social security, IRAs, 401k plans, and into federally insured savings accounts. They could also claim a standard deduction if they sent their children to private schools, and they could further deduct the amount they gave away (to be taxed when spent by the recipient). When all the authorized deductions are added up and offset against their "income," the difference would be what they had actually "spent" for the year. That small difference would be the amount taxed – at a very low rate!

There would also be great benefits to businesses and corporations. To the extent they are owned by Americans and that salaries are paid to American citizens, businesses, corporations and other organizations should not have to pay a transaction tax on their payroll, as salaries would be directly passed through to their American employees to spend – and to be individually taxed.

If the stock of a corporation is owned 100 percent by American citizens, the corporation should not have to pay any taxes on the salaries paid to its American workers; however, an American corporation that moves its work to other countries should have to pay the transaction tax on its foreign payroll. Wouldn’t this policy slow down the current trend of outsourcing American jobs offshore to other countries?

Benjamin Franklin said that following birth, the only certainties are death and taxes. Nonetheless, we do not have to willingly endure government corruption and unfair taxation. We, the ones who pay the taxes, must make the essential decisions about the methods of taxation and the level of payment. Otherwise, we live in slavery and our freedoms are illusionary.

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http://www.votersevolt.com

William John Cox authored the Policy Manual of the Los Angeles Police Department and the Role of the Police in America for a National Advisory Commission during the Nixon administration. As a public interest, pro bono, attorney, he filed a class action lawsuit in 1979 petitioning the Supreme Court to order a National Policy Referendum; he investigated and successfully sued a group of radical (more...)
 

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