We absolutely must fix the federal budget, in a way that will not harm the economy. Here is how to do it:
1) Implement a tiny Universal Exchange Tax of between 0.05% (50 cents per $1000) and 0.1% (1 dollar per $1000) on all automated financial transactions of any kind. With a tax base estimated to be in excess of $5 quadrillion, this tax should raise between $2.5 trillion (more than half the federal budget) and $5 trillion (more than the entire federal budget). The vast majority of revenues will be from this tax alone.
Not only would it eliminate the deficit, it would create a surplus large enough to eliminate or dramatically cut all other forms of taxation at both the federal and state levels.
2) Overhaul and simplify the federal tax code by repealing the regular income tax while retaining and tweaking the AMT to reflect the following:
Set the new income tax to the following: 10% on each dollar above $100,000, 25% on each dollar above 250,000, 50% on each dollar above $1 million, and 70-90% on each dollar above $10 million. No income tax on the first $100,000, period.
With no loopholes and no deductions other than state/local taxes and a limited amount of charitable donations.
All forms of income would be taxed equally at the normal rates, including dividends and capital gains. For capital gains, the basis will be indexed to inflation (which is currently not the case).
Overhaul the corporate tax code to eliminate all loopholes and favoritism of any kind. Then implement the following tax brackets for corporations:
Below $100,000 -- no income tax
$100,000 to $1,000,000 -- 10%
$1,000,000 to $10,000,000 -- 20%
$10,000,000 to $100,000,000 -- 35%
Over $100,000,000 -- 50%
Unlike the current law, only undistributed profits would be taxed. Amounts distributed as dividends would not be taxed at the corporate level, but would be taxed at the normal rate for the individual shareholders.
Tax US corporate foreign income as it is earned, rather than when the income is repatriated.
3) Phase-out the FICA tax for Social Security an Medicare since it will be fully replaced by the UET and/or money creation. But for as long as we still have a FICA tax, remove entirely the wage cap for Social Security portion of FICA tax.
3) Enact a Luxury Tax, similar to a sales tax, 2% on all new items priced at $1000 or more, and only on the amount over $1000. For vehicles of any kind, the exemption amount would be $30,000. For new homes, the exemption amount would be $1 million. Items purchased overseas would be considered "new" and taxable upon entering the country if purchased within the past year or two.
5) Resurrect the estate tax ("death tax"), this time as a progressive one. The exemption amount would be $3.5 million, then 45% up to $50 million, 55% up to $500 million, 65% up to $1 billion, and 75% for $1 billion and above.
6) Make the following changes to the various excise and vice taxes:
Bring back the Superfund taxes that expired in 1995, and expand it to cover ALL harmful and toxic chemicals.
Increase and equalize the federal alcohol excise taxes to $24 per proof-gallon for all alcoholic beverages, equal to the liquor tax in 1991 adjusted for inflation. Microbrewers (those who produce less than 6 million barrels per year) would continue to pay the current rate of $0.58 per gallon ($18 per barrel) on the first 2 million barrels.
Equalize the federal tax for all tobacco products (except snus) by weight to $1.55 per ounce, and tax the tobacco itself at the producer level. Set a national price floor for cigarettes of at least $5.00/pack to encourage low-tax states like Virginia to hike their own tobacco taxes and discourage smuggling.
If and when cannabis and/or any other currently illegal drugs are legalized, tax them as well. For example, cannabis could be taxed at a flat rate of $10-$50 per ounce, or perhaps set proportionally to potency (e.g. $5 per ounce, multiplied by percentage of THC).
Raise the gas tax by 1 cent/gal each week until it is $1.00/gal higher than it is today. "A Penny for Progress."
Enact the following "menu" of new taxes:
- coffee beans or grounds ($0.10/lb)
- pure caffeine ($1.00/lb)
- refined sugars ($0.10/lb)
- salt ($0.10/lb)
- hydrogenated fats ($1.00/lb)
Enact a tax on bullets and other ammunition at a rate of at least $0.50 per round for long guns and at least $1.00 per handgun round.
Enact a financial crisis responsibility fee (leverage tax) of 0.15% of covered liabilities of so-called "too big to fail" banks with more than $50 billion in assets.
Enact a Wall Street Gaming Tax of 0.5% specifically on derivatives and any other exotic financial products designed primarily for the purpose of speculation or gambling.
Other vices not listed above (e.g. casino gambling) should be taxed at the rate of 10% of the price or gross receipts therefrom.
Adjust all excise taxes for inflation from now on.
7) Citizens Dividend: Tax the use of various natural resources, especially fossil fuels, and give every American citizen an equal cut of the revenue, similar to the Alaska Permanent Fund. Note that this can also be considered a type of carbon tax.
1) Cut defense spending by at least 50% over the next five years. End the war in Afghanistan, with all troops removed within a year. Close at least a third of our overseas military bases within a year, and at least half of them within five years.
Phase-down America's vast arsenal of WMDs, but keep enough to defend ourselves just in case.
Avoid policing the world from now on, and instead adopt a policy of armed neutrality or non-belligerence (but reject full-blown isolationism).
2) Cut government waste by removing truly redundant federal programs.
3) Expand Medicare into a single-payer healthcare system for all, similar to the Canadian model. Since Medicaid would then be redundant and unnecessary, it would subsequently be jettisoned. The Affordable Care Act (aka Obamacare) would also be repealed and simultaneously replaced with HR 676, with the funding coming from some combination of the taxes already listed above in the Revenues section of our budget.
4) Increase spending on infrastructure by $100 billion per year.
5) If (and only if) the Citizens Dividend (and/or any other form of UBI) is implemented and high enough, we will be able to scale back or eliminate most welfare programs for the poor.
6) Reduce unemployment to zero (or close to zero) without increasing inflation by creating a Job Guarantee program. Note this is a complement, not a substitute, for a Universal Basic Income or Citizen's Dividend.
7) Eliminate federal subsidies for Big Oil, Big Agro, Big Pharma, and Big Anything for that matter.
While monetary policy (money supply and interest rates) is typically considered separate from fiscal policy (taxes and spending), there are situations where the two do in fact intersect:
1) Abolish the quasi-private Feral Reserve immediately, and replace it with a fully public national bank modeled after the Bank of North Dakota.
2) Pay off the National Debt entirely via money creation, saving taxpayers over $400 billion per year in interest payments. The Noble Solution.
3) Any new money created should be given directly to the people, not the banks. Interest-free.
4) From then on, all government borrowing should be from its own public bank(s), interest-free.
5) Any failed private banks in the future shall be taken over by the new public banking system, and absorbed into it. Fire the board of directors immediately, with no golden parachutes this time.
BALANCED BUDGET AMENDMENT?
Once the national debt is paid off via the Noble Solution, we had previously argued that we should pass a Balanced Budget Amendment to the Constitution, which first takes effect after two consecutive quarters of unemployment rates below 6%, with the only exceptions going forward being for for legitimate wars or severe recessions, and such exceptions must be renewed every year, and a 3/4 supermajority is required for each exception. Otherwise, no more deficit spending would be allowed, ever again.
But as of 2018, we now feel that even with the aforementioned exceptions, any sort of Balanced Budget Amendment will do more harm than good. It would literally result it a shrinking of the effective money supply (as federal deficit spending is literally a form of new money creation, while federal budget surpluses literally take money out of the economy and destroy it) the exact opposite of what a growing economy (or even a stagnant or shrinking economy) needs. Rather, to make it so we never have to borrow money ever again, our Monetarily Sovereign government ought to follow Rodger Mitchell's advice and do the following instead. The solution, in his exact words:
The best way is to eliminate the federal budget deficit and debt: Ending government borrowing. The government has the unlimited ability to create and spend money without borrowing. The process will be:
1) Congress will create an account called "Money."
2) Congress will determine how much money this account contains. The process will be similar to the way Congress now determines the debt ceiling.
3) Federal agencies will write checks against this account according to budgets decided by Congress. If any federal agency needed additional funds, Congress would decide whether or not to allow this spending, in the same way that Congress votes for additional spending by the military et al.
This would eliminate concerns about "our grandchildren paying for the federal debt." There would be no federal debt.And as long as such money were created without any interest or related fees (as per Ellen Brown) such a solution would actually work. Modern Monetary Theory indeed supports such an idea. But before we can do that, of course, we must first have an independent Treasury and/or a public national bank in place of the privately-owned FERAL Reserve.
And since he (and us) mentioned the debt ceiling, that is another thing we should really get rid of as well in the meantime, since it does far more harm than good.