A Ten Part Series on How We Can Fix America
For the last 5 months I have had more time on my hands than
ever in my entire career and I have used that time to think about this great
country of ours. As I have pondered where it has been but more importantly
where I think it is going, I was saddened. Rather than wallow in sadness I
decided to explore how we might Fix America.
While I was not born here I adopted America as my home at
the ripe age of 17 (due to dual citizenship) and became a citizen. I saw
America provide a home for my family when they had to flee our country with
many others in 1977. I have watched with awe how so many from around the world
have made America their home and have fulfilled the American Dream.
I think we are seeing a sharp decline in this great country
and I hope that through my opinions, thoughts and research we can spark a
national debate that will lead to a recovery of this great land that I love. I
recognize that there is no easy solution to the myriad of problems America
faces nor do I profess to have even half the answers to those problems. But I
do know that doing nothing is unacceptable and not the American way.
I know that people in general do not like to read long and
complex documents in this digital age of sound bites and Twitter messages but I
cannot offer any solutions in 140 characters. So I have decided to release 10
sections of Fix America, one at a time. Keep in mind that they do all interface
and to really understand my entire Fix you must read them all. I hope I have
kept them short and at a high level with splashes of humor to keep you
attentive.
Remember that these are my opinions. They will anger some
folks, motivate a few and confuse others. They are not by any means meant as a
comprehensive manifesto on every detail needed to Fix America but I hope they
are enough to make each reader think and even better discuss how we might go
about Fixing this Great Country.
Finally, please remember that opinions are like noses, we
all have one, they are all different and we do not necessarily all like the
same types. But noses like opinions are essentially for life and I humbly offer
mine for your review and comment. Enjoy
Section One - Fixing America
We are in an election year and everyone is debating who
should be our next President. Should Obama get another four years or do we give
Romney a chance to see if he can fix our economy. All the polls agree on one
thing – Americans want the economy fixed now! It does not matter which side of
the isle you are from our economic woes are the top priority. Sadly, I don’t
think that is the case for many of our politicians.
Many seem more worried about their re-election than fixing
our great country. I include the President in this group. Recently he is very
focused on his re-election and not enough on the task at hand. We are paying
these folks to do a job and I just don’t think they are doing it. But let’s be
fair and say that Romney does not have a clear path either. I am not happy with
his plan as it seems thin and weak. Perhaps Paul Ryan can add some meat to the bones.
So I decided to help these leaders. I don’t profess to have
all the answers and my plan does not claim to fix all that ails our country.
Rather it is aimed at the big problems and getting our economy back on track
and competing global again. I don’t have departments of analysts to look at
reams of data and no press secretaries to spin my plan. So take it for what it
is – a blue print of ideas that could help our country. I therefore offer these
10 suggestions on how we might accomplish this goal. I will attempt to detail
each so that you can see the policy is sound and the plan will work. Again I am
not an economist (although I do have a degree in it) and I am certainly not a
politician so keep that in mind as you peruse this plan.
I know that reading is
not a favorite pass time so I will deliver the
10 segments on this blog one at a time. This will also give the readers time to
digest each but remember several are integrated so read all 10 before passing
judgment.
Here are the 10 points of attack in order of priority:
·
Implement
a tax system,
·
Fix our
health care system
·
Shrink
the federal government and its regulation
·
Encourage
small business development and growth
·
Develop a
sensible energy strategy
·
Develop a
strong foreign policy
·
Improve
education at the state level
·
Implement
a strong and fair immigration policy
·
Improve
our infrastructure
·
Improve
& Promote personal responsibility
A New Tax System
The solution is not as simple as just a flat tax although
that needs to be part of the solution. We must first address business taxes as
we build this new system. Our corporate tax rate in the US is the highest in
the world. Our next highest competing nation is 8% lower in their top corporate
rate than we are. This puts us at a distinct disadvantage on the global stage.
Image you were going to race another person and you knew going in that to beat him you would have to be 10%
faster because you were starting with that penalty. Do you think we would win
any Olympic medals if this were our competitive environment?
For large businesses that are multinational they have simply
moved their headquarters off shore and are now enjoying lower tax rates and
their tax revenue is no longer helping our economy but that of a competing
nation. Can we blame them? No, we can’t because they have to be competitive to
stay in business on the global stage. Patriotism does not have a large role
with stockholders looking for ROI on their investments.
Small business is even worse off as they cannot take their
headquarters off shore and are stuck with these mammoth tax rates. Some
Liberals would argue that since all US small businesses are facing the same
high tax the playing field is level. Wrong again. Small businesses have to
compete on the global stage just as much as large ones thanks to the Internet.
You don’t think that there are widget makers in India and China who sell to the
US online? Actually, I bet there is very little that you can find that is
indigenous to US anymore. Add to the tax burden the growing regulations from
both the state and Feds, the new healthcare taxes in Obamacare, a very weak
economy, depressed prices for nearly all goods and services, tight money (no
easy loans) and is it any surprise that small businesses are hurting and not
hiring?
Unemployment is the single biggest issue in our economy
today. Hiring has to come from the private sector not the government. Why?
Simply government hiring is paramount to moving money from one pocket to the
other – it does very little to stimulate GDP. Small businesses accounts for
nearly 80% of all employment in the US so we have to get this segment going or
we will never drop the unemployment rates. There will be more on unemployment later
in this series.
In summary we must drop the business tax rates. I therefore
advocate the following:
A flat tax of 20% for all US businesses doing under 10 M in revenue
annually and a rate of 25% for all US businesses doing over 10 M in revenue
annually. That’s it – clean and simple. I would not initially change
any of the deductions but they should be studied over time.
I would offer all large multi-national US companies an
opportunity to bring their funds back to our country. Simply we have not taxed
that revenue to date so we should offer full tax amnesty for all funds returned
to US in a set period of time. Then going forward those companies would be
taxed at the new lower tax rate, allowing them to be globally competitive and
keep their funds in the US.
Personal Income tax is next and actually accounts for the
largest amount of money that the government collects annually. For years we
have been bantering about a flat tax in the US. Well I think it is time we just
do it! I am not sure what the exact number should be because I have not drilled
deep enough to ascertain all the ramifications but I can average the various
plans that have been proposed and I think 17% should do it.
So we implement a flat tax of 17%, we drop most major
deductions, make it 20% for capital gains and
keep state sales taxes as is. The only folks exempt from the income tax
will be those below the poverty level and on government assistance. If we do
this a few important changes will take place. First and foremost everyone
(except those below the poverty level) will pay some tax. Today, nearly 43% of
all Americans pay no taxes! I believe a 3rd grader could tell you
that you cannot expect to maintain an economy if 43% of the people are not in
the tax base. The second thing that must happen is a drastic decrease in the
size of the IRS. I know that many of you are getting choked up as you read this
because I am recommending that your favorite government agency be shrunk. Take solace
in knowing that with my new flat tax you can file your own taxes easily and
online. Since figuring out what 17% of your annual income will be is very
simple, not much auditing will be needed (be strong –I know this is painful).
Since most deductions will be gone the process will be simple and cheating will
all but disappear. Finally, States and the Fed will not have to chase taxes as
much as they do today, as no one can avoid their fair share – this will improve
cash flow for these government entties.
The tax base will increase significantly and everyone will
be paying the same percentage so we can do away with any class warfare – rich
vs. poor. And yes, the rich will still be paying the lion’s share of all the tax
revenue for the country so the Democrats should be content. We will also have
re-established the motive for the American dream and what made this country
great to begin with. No rich folks will be on TV hiding their faces because
they made millions and paid little or no taxes and the hard working American
family can hold their heads high knowing they are doing their part. Who knows
the Canadians may even start looking at migrating to the US again!
State taxes are also in need of an overhaul. While I believe
each state has the right to decide whether it wants to have an income tax or
not, I think some guardrails need to be put around them so that we don’t just
have them replacing the Federal rate with high state rates. To that end I
believe no State should be allowed to have a tax rate above 5%. I know
New York and California will be screaming but I point you back some of my
opening comments about having an economy that is competitive in a global
market. We can’t do this with Moon Beam in California trying to hit folks up
for over 10% in State income taxes.
There has been a lot of discussion about consumption taxes
as well. I don’t think we need to use that system. Actually in many states we
already have it. Most of California for instance has an 8% or higher sales tax.
But a full on consumption tax is too much. Many in Europe are struggling with
it and I am not sure how fair it is. Sure one can argue that it is the best way
to tax because those who are rich pay more since they consume more. While that
is true, we must also look at the other end of the spectrum. If we had a GCT
tax like Britain, we would be driving the price of basics like milk, bread and
veggies up for the poor.
What I do think we need to look at is sin taxes, gasoline taxes,
heating oil taxes and few others. I don’t think that States should get to
arbitrarily decide what gasoline tax they want to charge. This is not
equitable. I understand that some states produce oil and therefore have easier
access and lower crude oil prices for their gas supply. I propose that again we
leave them flexibility but cap he max they can add to a gallon of gas. I think 40
cents is very reasonable. I think we need the same sort of guardrail for
heating oil taxes as well. Keep in mind they are free to charge less. There
will be more on this in my Energy Policy section.
So let’s take a look at sin taxes. Many states tax
cigarettes and alcohol – all at varying rates. While I don’t see the harm in
this I think we need to be very careful as this could mushroom to other things
rapidly. For example should we tax high fat foods? Why not they cause more
health costs than alcohol? What about a tax on folks who are healthy/able and
do not exercise? How about those who do harmful drugs?
My Dad always told me “you cannot legislate morality” and
I think if we let sin taxes run rampant we may just start to do that. The
Supreme Court’s recent ruling on the PPACA law opens the door a bit for this
and shows that we can circumvent the Commerce Laws. I think these things are
better handled in other ways – see the Personal Responsibility section below.
In Summary we should create a new Tax System that does the
following:
A corporate tax for US businesses of 20-25% depending annual revenue
and with some tough guardrails on how this is measured.
Have a flat personal income tax of 17% for all working Americans expect
those that fall below the federal poverty level. Remove most personal
deductions and make filing easy and online. Eliminate most of the IRS and make
Capital Gains tax 20%.
States could still have personal income tax but never more than 5%.
They can continue sales taxes if they wish with a cap at no more than 8% and
cannot increase gas and heating oil taxes to more than 45 cents per gallon. Sin
taxes could continue on cigarettes and alcohol but nothing else (unless of
course marijuana is made legal).