Somehow, virtue in America has become defined as caring. Whole industries
have grown up around caring and compassion. We care for children, the elderly,
victims, criminals, pets, endangered species, the environment, and on and on.
From the time we are born, modern Americans are preached to from the pulpit,
from the school room, from the media, and from our politicians...if you don't
have compassion, you are not a virtuous person. Your duty is to care.
And, truly, having compassion and caring is a virtue. It's just not the only
virtue, or even the main virtue. Other virtues such as fairness, justice, truth,
honesty, open-mindedness, and practicality remain equally or more important,
depending on the specific situation.
Everyone wants to protect their child from making tragic mistakes or falling
into tragic circumstances. That's a worthy goal, but finding the elusive line
between protecting and coddling is much more difficult. Where does
protection interfere with normal, healthy child development?
The truth is, caring, by itself, is not enough. Caring does not relieve you
from the responsibility to make correct decisions. Caring does not make
you more virtuous or intelligent than another person who cares, but who
makes different choices about how to show their compassion.
Caring is easy...choosing correctly is hard. And, good intentions can be
manipulated.
Politicians will use caring to manipulate and control voters for power and
votes. Vote for me! I'm for the poor, the downtrodden, for you...and my
opponent is basically a fascist who doesn't care for anybody.
Educators use compassion as a tool to manipulate minds. Maybe we
can't teach religion in schools, but we can teach the causes that we
believe in...and, if you don't agree, you're probably a fool, anyway.
Religion teaches compassion to manipulate behavior. Nothing wrong
with that, depending on the behavior that's being encouraged. Helping
the poor is good...beheading infidels is not-so-good.
Even the media plays on compassion in it's search for ratings. Am I the only
one that sees a dichotomy between the anchor stating how badly they
feel for the person in the situation, and the field reporter shoving a
microphone in the face of the person stuck under the car and asking them
"How does it feel to have a two-ton car stuck on your chest?".
Even friends and family will attempt to use your compassion as a way to
manipulate you.
So, be as caring and compassionate as you wish. It is a wonderful quality.
But be aware that unscrupulous and crass individuals are out there, who will
try to use your good intentions to their advantage.
Sunday, April 29, 2012
Saturday, April 28, 2012
Why Not Pie-in-the sky?
I know there is a lot to complain about in my pie-in-the-sky plan. Individuals could have
to pay out up to $7,500 dollars a year in medical expenses. Damn, that's a lot!
Of course, most of us will never reach that amount in a year. And the maximum
that almost all of us will have to pay in our lives is only 15% of the cost of our
medical bills...and far lower than that if we ever reach the catastrophic stage where
the state and federal government help kicks in. So, maybe it's not such a bad deal
for the individual.
And doctors and medical services will scream and complain about having to give one
free service for each twenty for-fee services they deliver. Damn, that's positively
un-American!
Of course, they're only giving away less than 5% of their services...and they can
make a lot of money off the twenty for-fee services they deliver. So, maybe
it's not such a bad deal for the doctor and the hospital.
The states will moan that they have to pay hospitals to care for the
uninsured, plus, they have to pay for catastrophic care. My God, how can they
afford it?
Of course, they can collect some of the money back by billing those uninsured
that can afford to pay for some, or all, of their medical bills...and, they will
probably be paying less under this plan than under the existing health services
they are providing. So, who knows, maybe it's not such a bad deal for the
state, either.
The Feds will whine about providing catastrophic coverage, but, hey, whining and
spending money is what the Feds do best.
Besides, if people are signed into such a health insurance program at a very young
age, by the time they reach 65 it might be possible to modify the program to
replace (or supplement) the Medicare program with some coverage from private
insurance companies and states. Maybe there is a financial future for Medicare.
But, there is no free lunch in life. Even though the cost of medical care
is split between the individual, the insurance company, state government, the
Feds, and charities, in the end, the individual is the one who pays the insurance
premiums and taxes that fund the insurance companies and the government.
What all these programs are designed to do is shift the risk of catastrophic medical
care and improve the odds for the individual to survive the cost of unusual
medical emergencies.
Even with this program, there will be situations where the medical co-pay will
place a hardship on an individual. There will be situations where the money for
the catastrophic situation runs out and an individual is left destitute. It is sad,
but it is life.
This program is designed to protect the vast, vast, majority of people from a
medical disaster. It is designed to protect society from contagious diseases borne
by uninsured individuals. It is designed with dollar limits in order to keep the
cost affordable, and is designed to spread the cost between different entities
in order to minimize the risk of financial failure.
As I said in the beginning, I'm not sure if I have the correct price points or
not. Maybe the co-pay should be 10% or 20% instead of 15%. Maybe the
feds, or state governments, or the medical establishment should cover more,
or less. I just think that a sweet spot could be found, where all the numbers
work out.
I know it would be tremendously difficult to get coordination between the federal
government, state governments, private insurance companies, doctors, medical
groups, etc, to work this all out. Is it hard? Yes. Is it impossible? I don't think so.
But then, that's the advantage of sitting in the basement in my shorts writing a
blog. I don't have to do it, I can just dream about it. Somehow, somewhere,
someone will have the access and the knowledge to pull it off.
to pay out up to $7,500 dollars a year in medical expenses. Damn, that's a lot!
Of course, most of us will never reach that amount in a year. And the maximum
that almost all of us will have to pay in our lives is only 15% of the cost of our
medical bills...and far lower than that if we ever reach the catastrophic stage where
the state and federal government help kicks in. So, maybe it's not such a bad deal
for the individual.
And doctors and medical services will scream and complain about having to give one
free service for each twenty for-fee services they deliver. Damn, that's positively
un-American!
Of course, they're only giving away less than 5% of their services...and they can
make a lot of money off the twenty for-fee services they deliver. So, maybe
it's not such a bad deal for the doctor and the hospital.
The states will moan that they have to pay hospitals to care for the
uninsured, plus, they have to pay for catastrophic care. My God, how can they
afford it?
Of course, they can collect some of the money back by billing those uninsured
that can afford to pay for some, or all, of their medical bills...and, they will
probably be paying less under this plan than under the existing health services
they are providing. So, who knows, maybe it's not such a bad deal for the
state, either.
The Feds will whine about providing catastrophic coverage, but, hey, whining and
spending money is what the Feds do best.
Besides, if people are signed into such a health insurance program at a very young
age, by the time they reach 65 it might be possible to modify the program to
replace (or supplement) the Medicare program with some coverage from private
insurance companies and states. Maybe there is a financial future for Medicare.
But, there is no free lunch in life. Even though the cost of medical care
is split between the individual, the insurance company, state government, the
Feds, and charities, in the end, the individual is the one who pays the insurance
premiums and taxes that fund the insurance companies and the government.
What all these programs are designed to do is shift the risk of catastrophic medical
care and improve the odds for the individual to survive the cost of unusual
medical emergencies.
Even with this program, there will be situations where the medical co-pay will
place a hardship on an individual. There will be situations where the money for
the catastrophic situation runs out and an individual is left destitute. It is sad,
but it is life.
This program is designed to protect the vast, vast, majority of people from a
medical disaster. It is designed to protect society from contagious diseases borne
by uninsured individuals. It is designed with dollar limits in order to keep the
cost affordable, and is designed to spread the cost between different entities
in order to minimize the risk of financial failure.
As I said in the beginning, I'm not sure if I have the correct price points or
not. Maybe the co-pay should be 10% or 20% instead of 15%. Maybe the
feds, or state governments, or the medical establishment should cover more,
or less. I just think that a sweet spot could be found, where all the numbers
work out.
I know it would be tremendously difficult to get coordination between the federal
government, state governments, private insurance companies, doctors, medical
groups, etc, to work this all out. Is it hard? Yes. Is it impossible? I don't think so.
But then, that's the advantage of sitting in the basement in my shorts writing a
blog. I don't have to do it, I can just dream about it. Somehow, somewhere,
someone will have the access and the knowledge to pull it off.
Friday, April 27, 2012
Pie-in-the-sky Healthcare
Private insurers could offer $50,000 (85% with a 15% co-pay) annual coverage
from age 21 until Medicare takes over at 65. Children under 21 would be covered under
special policies available to their parents, but, upon reaching 21, would need to
purchase their own policies. Their parents (or others) could pay for the
policy, but the newly adult child would own it.
Adult health insurance would be made available only at 5-year increments, at
ages 21, 25, 30, 35, etc., but once purchased, the premium could not be
changed until age 65, unless the premium is not paid or the individual opts
out by written notification.
If the insurance is purchased at age 21, coverage can not be denied for pre-
existing conditions, and the premium rate would be calculated to include all
individuals. If the individual opts out of health insurance and then attempts to
enroll at one of the later enrollment periods, rates could be adjusted for
pre-existing conditions.
So, if an individual buys the insurance policy at age 21, the insurance company
is obligated for up to $42,500 (85% of $50,000) per year until the policy-
holder reaches 65.
I believe that such an insurance policy would be affordable, since most people
never reach that limit in any year prior to age 65.
Now, where does that leave the individual? If they did have a year where they
had $50,000 in medical bills, they are stuck with a bill for a maximum of $7500.
Call me cruel, but I do NOT believe that supplemental insurance should be
available to help pay this obligation.
One of the best ways to avoid unnecessary medical procedures and keep
medical costs down is see that the person using the procedure is aware of the
cost, and has to deal with the pain of paying at least part of the cost.
To HELP the individual deal with the pain, state government should offer
low-cost loans to help those who need assistance to pay for the co-pay
portion of the medical costs, based on the need of the individual. This
program could be self-supporting, and should aggressively attempt to
collect all loans.
Catastrophic coverage (over $50,000/year) could be covered as follows:
First Then and then
donated Medical
State Govt Fed Govt & Private Charities
Year 1 $200,000 $100,000 above $350,000
Year 2 $100,000 $50,000 above $200,000
Over 2 years -0- -0- above $50,000
Over 2 years could also be covered by catastrophic private insurance.
Catastrophic coverage would be based per incident, not per lifetime. Sales
and/or payroll taxes could be used to fund the state and federal programs, but
the money should be treated and regulated as an insurance program, not
as a honey-pot for general fund spending. If these taxes were combined with
a maximum income tax rate of 10%, as discussed earlier, there
would not be much impact on an individual's take-home pay.
Finally, what happens to those who either choose not to purchase health insurance, or
those unfortunate enough not to be able to afford it? First off, they would go to
the emergency room, just as they do now. Life threatening emergencies would be
treated, just as now. For those who chose not to purchase health insurance, the
state would attempt to collect for the cost of the service. The state would pay
for those who could not afford to pay back.
For non-life threatening conditions, hospitals should be legislatively allowed to staff
low cost medical clinics near their emergency rooms. The non-insured would be
sent to this clinic, staffed as much as possible with physician's assistants, medical
and nursing trainees, and non-union maintenance worker trainees. Generic drugs
would be required in all instances where they are effective.
Doctors could perform their required free service (1 out of 20) for patients for the
low-cost clinic, helping keep expenses down. The state could still bill uninsured
patients for services rendered, if they could afford to pay. They could even be
billed at a lower-than-market rate for donated medical services.
The low-cost medical clinic would in effect create a two-tiered health care system,
as a strong incentive to get individuals to buy health insurance for better care. The
uninsured would still receive medical care, albeit more of a generic nature and they
may have to wait longer for non-emergency operations. If they are financially
able to, the state would require them to pay for all, or part, of the medical services
they use.
I know, it sounds impossible...but think about it until the next post.
from age 21 until Medicare takes over at 65. Children under 21 would be covered under
special policies available to their parents, but, upon reaching 21, would need to
purchase their own policies. Their parents (or others) could pay for the
policy, but the newly adult child would own it.
Adult health insurance would be made available only at 5-year increments, at
ages 21, 25, 30, 35, etc., but once purchased, the premium could not be
changed until age 65, unless the premium is not paid or the individual opts
out by written notification.
If the insurance is purchased at age 21, coverage can not be denied for pre-
existing conditions, and the premium rate would be calculated to include all
individuals. If the individual opts out of health insurance and then attempts to
enroll at one of the later enrollment periods, rates could be adjusted for
pre-existing conditions.
So, if an individual buys the insurance policy at age 21, the insurance company
is obligated for up to $42,500 (85% of $50,000) per year until the policy-
holder reaches 65.
I believe that such an insurance policy would be affordable, since most people
never reach that limit in any year prior to age 65.
Now, where does that leave the individual? If they did have a year where they
had $50,000 in medical bills, they are stuck with a bill for a maximum of $7500.
Call me cruel, but I do NOT believe that supplemental insurance should be
available to help pay this obligation.
One of the best ways to avoid unnecessary medical procedures and keep
medical costs down is see that the person using the procedure is aware of the
cost, and has to deal with the pain of paying at least part of the cost.
To HELP the individual deal with the pain, state government should offer
low-cost loans to help those who need assistance to pay for the co-pay
portion of the medical costs, based on the need of the individual. This
program could be self-supporting, and should aggressively attempt to
collect all loans.
Catastrophic coverage (over $50,000/year) could be covered as follows:
First Then and then
donated Medical
State Govt Fed Govt & Private Charities
Year 1 $200,000 $100,000 above $350,000
Year 2 $100,000 $50,000 above $200,000
Over 2 years -0- -0- above $50,000
Over 2 years could also be covered by catastrophic private insurance.
Catastrophic coverage would be based per incident, not per lifetime. Sales
and/or payroll taxes could be used to fund the state and federal programs, but
the money should be treated and regulated as an insurance program, not
as a honey-pot for general fund spending. If these taxes were combined with
a maximum income tax rate of 10%, as discussed earlier, there
would not be much impact on an individual's take-home pay.
Finally, what happens to those who either choose not to purchase health insurance, or
those unfortunate enough not to be able to afford it? First off, they would go to
the emergency room, just as they do now. Life threatening emergencies would be
treated, just as now. For those who chose not to purchase health insurance, the
state would attempt to collect for the cost of the service. The state would pay
for those who could not afford to pay back.
For non-life threatening conditions, hospitals should be legislatively allowed to staff
low cost medical clinics near their emergency rooms. The non-insured would be
sent to this clinic, staffed as much as possible with physician's assistants, medical
and nursing trainees, and non-union maintenance worker trainees. Generic drugs
would be required in all instances where they are effective.
Doctors could perform their required free service (1 out of 20) for patients for the
low-cost clinic, helping keep expenses down. The state could still bill uninsured
patients for services rendered, if they could afford to pay. They could even be
billed at a lower-than-market rate for donated medical services.
The low-cost medical clinic would in effect create a two-tiered health care system,
as a strong incentive to get individuals to buy health insurance for better care. The
uninsured would still receive medical care, albeit more of a generic nature and they
may have to wait longer for non-emergency operations. If they are financially
able to, the state would require them to pay for all, or part, of the medical services
they use.
I know, it sounds impossible...but think about it until the next post.
Thursday, April 26, 2012
On Health Insurance and Medical Coverage
The following thoughts are not based on health insurance underwriting statistics. I have no idea where the exact percentages and dollar amounts make sense...I have no access to the medical and insurance facts that would lead to a logical, mathematical solution to the problem.
However, medical and governmental organizations that do have access to appropriate statistics could use the following guidelines to help set dollar amounts and create effective programs. Where I am using dollars and percentages, I am only guessing. Hopefully, it's a pretty good guess.
I am trying to set up a situation where the cost of health coverage could be shared between individuals, private insurance companies, medical organizations, state government, federal government, and private charities.
Since Medicare is already set up as a federal program, I will assume it continues to exist
as is, even though I will mention a potential change in a future post. Right now, the
program I suggest would only cover an individual until age 65, when Medicare takes over.
The basic ideas of the program are...
Everyone should have help available through affordable health insurance.
Everyone should have "skin in the game" for medical expenses, in order to help keep
the cost of the insurance down.
No-one is entitled to an unlimited amount of other people's money to protect them
from all risks in life.
No-one should be forced to purchase health insurance, but the incentive to purchase
it should be extremely persuasive.
Each adult individual owns (and pays for) their health insurance plan, and takes it
with them from job to job, similar to the way an employee takes a 401k plan
from employer to employer. Employers could offer employees an additional
benefit above the normal pay, to help fund health insurance, but the plan
would belong to the employee.
Private charities could be organized to help pay for medical services for those without
To receive their licenses, doctors and medical organizations could be required
to provide one free service for every twenty for-fee services they provide.
So, what would health insurance and coverage look like under these conditions? The following post will give an idea of what might be possible.
However, medical and governmental organizations that do have access to appropriate statistics could use the following guidelines to help set dollar amounts and create effective programs. Where I am using dollars and percentages, I am only guessing. Hopefully, it's a pretty good guess.
I am trying to set up a situation where the cost of health coverage could be shared between individuals, private insurance companies, medical organizations, state government, federal government, and private charities.
Since Medicare is already set up as a federal program, I will assume it continues to exist
as is, even though I will mention a potential change in a future post. Right now, the
program I suggest would only cover an individual until age 65, when Medicare takes over.
The basic ideas of the program are...
Everyone should have help available through affordable health insurance.
Everyone should have "skin in the game" for medical expenses, in order to help keep
the cost of the insurance down.
No-one is entitled to an unlimited amount of other people's money to protect them
from all risks in life.
No-one should be forced to purchase health insurance, but the incentive to purchase
it should be extremely persuasive.
Each adult individual owns (and pays for) their health insurance plan, and takes it
with them from job to job, similar to the way an employee takes a 401k plan
from employer to employer. Employers could offer employees an additional
benefit above the normal pay, to help fund health insurance, but the plan
would belong to the employee.
Private charities could be organized to help pay for medical services for those without
health insurance or those who have exhausted all private, state, and federal
benefits.
Hospitals should offer less expensive clinics to care for those without health
insurance, who don't have life threatening emergencies. Life threatening
emergencies would still be taken care of in emergency rooms.
To receive their licenses, doctors and medical organizations could be required
to provide one free service for every twenty for-fee services they provide.
So, what would health insurance and coverage look like under these conditions? The following post will give an idea of what might be possible.
Tuesday, February 21, 2012
Five Ten Begin Again
So far, we've maxed out individual income tax rates at 10.0% of gross income. Now, let's compare some of our corporate giants, and the income tax they paid in 2010.
Microsoft 10.0% of gross revenue
Morgan-Chase 7.3% "
Exxon 5.6% "
G E 0.7% "
Gen Motors 0.5% "
Ford 0.5% "
As you can see, some of our corporate citizens have learned how to game the system and avoid tax liability to the federal government. I'm sure that some of the credits and exemptions that helped them avoid liability for federal taxes were put into the tax code for some lofty, worthy, goal.
I'm equally sure that some of those lofty, worthy, goals are no longer necessary...and I'm also sure that some of those tax breaks were put into the system for selfish, partisan, and greedy reasons, not in the least bit concerned with the public good.
It's time to re-think the business income tax. First off, the business tax is not based on the income of the business...it's a tax based on the remaining PROFITS of the business, AFTER the business has written off all of its expenses and taken its credits and exemptions.
The name of the game for the business is to write off as much as it can, so it doesn't show too much profit to pay tax on...and, even if the business tax rate sounds high, it's a small amount because it is only based on the profits of a business, not on the gross income of the business.
Plus, few, if any, businesses really PAY a business tax, no matter what the tax rate is. Whatever the cost of the tax, or regulation, or mandate is, the business really has only two choices. Choice number one is to charge the customer for that cost (to make a profit and stay in business), or, choice number two, eat the cost out of profits (and go out of business, if there aren't enough profits to cover the costs).
The taxes (and regulations) on business are really hidden costs that government covertly forces businesses to pass on to customers. Tinkering with the business tax rate is a convenient way for politicians to favor some industries and companies, without taking responsibility for rising consumer costs. It raises bodacious campaign contributions while leaving very few fingerprints leading back to the politician.
So, let's create a federal business tax similar to the individual income tax, or the state sales tax. Let's make the business tax a flat 5% tax on every sale. It can be handled just like a sales tax, added on to every transaction so that the consumer can see it every time they purchase goods or services.
It should require a 60% majority congressional vote to increase the business tax, and the increase should only be for a specific purpose, and for a maximum of two years, without an additional 60% majority vote every two years to continue the tax.
You could hide this tax from the consumer and make the business pay it, but the net effect would be the same: the business would have to add it to the price of the goods to make a profit anyway. By showing it to the consumer, you would make it more difficult for politicians to hide the cost from consumers.
This tax would not have to be indexed for inflation, since the dollars it raises will automatically rise with inflation and fall with deflation. The tax would apply to all products and/or services sold by licensed businesses. It would be very similar to the "value-added" tax system that is common in Europe, but would be nowhere near as expensive.
The 10% maximum income tax rate and the 5% business tax rate would be much easier to forecast than the current impenetrable fog our current tax system has become, making this "Five Ten Begin Again" format much easier to predict and budget from. It would be a key building block leading toward balancing the budget. It could lead to an awareness of the finite dollars the federal government has, and to setting the priorities on which those finite dollars are spent.
Combine a 10% maximum income tax rate with a 5% business tax rate, and we would be very competitive throughout the world.
I know it would take a miracle to get our current politicians to pass "Five Ten Begin Again". There is no way they will vote to change the system that benefits them so much. But, if you don't have a target to aim for, you will never hit a goal.
We can elect new politicians who accept "Five Ten" as a goal. We can try to change the tax code through constitutional initiatives voted on at the state level. We can shine light on politicians who hide in the shadows and use the tax code to extort campaign contributions, or to hide the true cost of the programs they advocate.
"Five Ten" is not locked in stone. It could turn out to be "Eight Ten", or "Ten Ten". I am not the Congressional Budget Office. I cannot cost out this proposal, but its purpose is to eliminate political tinkering with the tax rate and to come up with enough money to come somewhat near the money the government is currently receiving. From that point on, spending should be limited to the revenue coming in.
This business tax would not eliminate the need for generally accepted accounting practices for business. While there would no longer be any need for the tax code to regulate business profits, there would still be a need for enforced accepted accounting practices to assure that businesses are competing fairly with each other and are providing proper information to investors.
Whether these regulations are best provided by government or by private accounting or business organizations is another discussion for another day.
Microsoft 10.0% of gross revenue
Morgan-Chase 7.3% "
Exxon 5.6% "
G E 0.7% "
Gen Motors 0.5% "
Ford 0.5% "
As you can see, some of our corporate citizens have learned how to game the system and avoid tax liability to the federal government. I'm sure that some of the credits and exemptions that helped them avoid liability for federal taxes were put into the tax code for some lofty, worthy, goal.
I'm equally sure that some of those lofty, worthy, goals are no longer necessary...and I'm also sure that some of those tax breaks were put into the system for selfish, partisan, and greedy reasons, not in the least bit concerned with the public good.
It's time to re-think the business income tax. First off, the business tax is not based on the income of the business...it's a tax based on the remaining PROFITS of the business, AFTER the business has written off all of its expenses and taken its credits and exemptions.
The name of the game for the business is to write off as much as it can, so it doesn't show too much profit to pay tax on...and, even if the business tax rate sounds high, it's a small amount because it is only based on the profits of a business, not on the gross income of the business.
Plus, few, if any, businesses really PAY a business tax, no matter what the tax rate is. Whatever the cost of the tax, or regulation, or mandate is, the business really has only two choices. Choice number one is to charge the customer for that cost (to make a profit and stay in business), or, choice number two, eat the cost out of profits (and go out of business, if there aren't enough profits to cover the costs).
The taxes (and regulations) on business are really hidden costs that government covertly forces businesses to pass on to customers. Tinkering with the business tax rate is a convenient way for politicians to favor some industries and companies, without taking responsibility for rising consumer costs. It raises bodacious campaign contributions while leaving very few fingerprints leading back to the politician.
So, let's create a federal business tax similar to the individual income tax, or the state sales tax. Let's make the business tax a flat 5% tax on every sale. It can be handled just like a sales tax, added on to every transaction so that the consumer can see it every time they purchase goods or services.
It should require a 60% majority congressional vote to increase the business tax, and the increase should only be for a specific purpose, and for a maximum of two years, without an additional 60% majority vote every two years to continue the tax.
You could hide this tax from the consumer and make the business pay it, but the net effect would be the same: the business would have to add it to the price of the goods to make a profit anyway. By showing it to the consumer, you would make it more difficult for politicians to hide the cost from consumers.
This tax would not have to be indexed for inflation, since the dollars it raises will automatically rise with inflation and fall with deflation. The tax would apply to all products and/or services sold by licensed businesses. It would be very similar to the "value-added" tax system that is common in Europe, but would be nowhere near as expensive.
The 10% maximum income tax rate and the 5% business tax rate would be much easier to forecast than the current impenetrable fog our current tax system has become, making this "Five Ten Begin Again" format much easier to predict and budget from. It would be a key building block leading toward balancing the budget. It could lead to an awareness of the finite dollars the federal government has, and to setting the priorities on which those finite dollars are spent.
Combine a 10% maximum income tax rate with a 5% business tax rate, and we would be very competitive throughout the world.
I know it would take a miracle to get our current politicians to pass "Five Ten Begin Again". There is no way they will vote to change the system that benefits them so much. But, if you don't have a target to aim for, you will never hit a goal.
We can elect new politicians who accept "Five Ten" as a goal. We can try to change the tax code through constitutional initiatives voted on at the state level. We can shine light on politicians who hide in the shadows and use the tax code to extort campaign contributions, or to hide the true cost of the programs they advocate.
"Five Ten" is not locked in stone. It could turn out to be "Eight Ten", or "Ten Ten". I am not the Congressional Budget Office. I cannot cost out this proposal, but its purpose is to eliminate political tinkering with the tax rate and to come up with enough money to come somewhat near the money the government is currently receiving. From that point on, spending should be limited to the revenue coming in.
This business tax would not eliminate the need for generally accepted accounting practices for business. While there would no longer be any need for the tax code to regulate business profits, there would still be a need for enforced accepted accounting practices to assure that businesses are competing fairly with each other and are providing proper information to investors.
Whether these regulations are best provided by government or by private accounting or business organizations is another discussion for another day.
Thursday, February 16, 2012
Proposed Federal Income Tax Brackets
PROJECTED TAX BRACKETS 2011
(To be adjusted for inflation every year)
% of
Income Rate $ Tax in Bracket Total Tax $ Total Income
Up to $20,000 0% $0 $0 0%
$20,001-$50,000 2.5% $750 $750 1.50%
$50,001-$75,000 5.0% $1250 $2000 2.67%
$75,001-$100,000 7.5% $1875 $3875 3.88%
$100,000-and up 10.0%
$100,001-$1,000,000 10.0% $90,000 $93,875 9.39%
This is a progressive tax rate, with higher incomes taxed at a higher rate than lower incomes, but it does max out at 10%. I believe the total tax burden to an individual (including federal income, state income, local, and property taxes) should not be more than 20%, in order to act as an incentive to achievement.
This 20% (derived from 80/20 Land of Plenty) does not include business taxes, FICA taxes, and Medicare taxes, which will be discussed later on.
As stated in the overview, politicians should only be allowed to increase the tax rates only in an emergency for stated, specific purposes. The increase would require a 60% majority and would automatically expire in a maximum of two years, if it is not re-approved with the 60% majority.
These tax rates would apply to ALL sources of income, including such controversial ones as proceeds from the sale of a house, social security income, and inheritance proceeds.
Tax withholding should be done from all sources of income, including interest, dividends, capital gains, etc., as well as from salaries. Individuals could request what percentage to withhold (similar to exemptions claimed in the current tax system) from 1% to 10%. On unusually large, infrequent transactions such as the proceeds of a sale of a house, individuals could choose to withhold up to 15%, to avoid getting hit with a large tax bill on their normal income at the end of the year.
One may wonder where the money needed to run the federal government will come from if the maximum individual tax rate is 10%. First off, nobody pays the maximum rate on all of their income under the current system. You cannot compare a rate that is not being paid to a rate that will be paid, although I concede that individuals will pay less under my tax proposal. The difference will be made up (1) by eliminating tax exemptions and deductions and (2) with a business (or sales?) tax discussed in the next post.
Under these tax brackets, a family where the primary wage earner earns $50,000 and the spouse earns $20,000 will have a total federal income tax burden of $750.00 ($750 for the primary and $0 for the secondary).
Under the 2010 tax brackets, the couple mentioned above, filing jointly with 2 exemptions and using the standard deduction, would have a tax burden of $6,651.00. The savings to this couple would be huge.
But, there will be additional money coming in to the federal government from the proposed business (sales?) tax discussed in the next post. Some of the savings this couple received will be affected by the business tax.
(To be adjusted for inflation every year)
% of
Income Rate $ Tax in Bracket Total Tax $ Total Income
Up to $20,000 0% $0 $0 0%
$20,001-$50,000 2.5% $750 $750 1.50%
$50,001-$75,000 5.0% $1250 $2000 2.67%
$75,001-$100,000 7.5% $1875 $3875 3.88%
$100,000-and up 10.0%
$100,001-$1,000,000 10.0% $90,000 $93,875 9.39%
This is a progressive tax rate, with higher incomes taxed at a higher rate than lower incomes, but it does max out at 10%. I believe the total tax burden to an individual (including federal income, state income, local, and property taxes) should not be more than 20%, in order to act as an incentive to achievement.
This 20% (derived from 80/20 Land of Plenty) does not include business taxes, FICA taxes, and Medicare taxes, which will be discussed later on.
As stated in the overview, politicians should only be allowed to increase the tax rates only in an emergency for stated, specific purposes. The increase would require a 60% majority and would automatically expire in a maximum of two years, if it is not re-approved with the 60% majority.
These tax rates would apply to ALL sources of income, including such controversial ones as proceeds from the sale of a house, social security income, and inheritance proceeds.
Tax withholding should be done from all sources of income, including interest, dividends, capital gains, etc., as well as from salaries. Individuals could request what percentage to withhold (similar to exemptions claimed in the current tax system) from 1% to 10%. On unusually large, infrequent transactions such as the proceeds of a sale of a house, individuals could choose to withhold up to 15%, to avoid getting hit with a large tax bill on their normal income at the end of the year.
One may wonder where the money needed to run the federal government will come from if the maximum individual tax rate is 10%. First off, nobody pays the maximum rate on all of their income under the current system. You cannot compare a rate that is not being paid to a rate that will be paid, although I concede that individuals will pay less under my tax proposal. The difference will be made up (1) by eliminating tax exemptions and deductions and (2) with a business (or sales?) tax discussed in the next post.
Under these tax brackets, a family where the primary wage earner earns $50,000 and the spouse earns $20,000 will have a total federal income tax burden of $750.00 ($750 for the primary and $0 for the secondary).
Under the 2010 tax brackets, the couple mentioned above, filing jointly with 2 exemptions and using the standard deduction, would have a tax burden of $6,651.00. The savings to this couple would be huge.
But, there will be additional money coming in to the federal government from the proposed business (sales?) tax discussed in the next post. Some of the savings this couple received will be affected by the business tax.
Tax Overview
The following few posts will all refer to the Federal Tax Code. I do not claim to be a tax expert, but common sense and logic could make our tax system a lot simpler and fairer, and in this and the following posts, I will make my case to rethink the income tax, business taxes, social security and medicare taxes.
Before getting into tax specifics in following posts, I want to cover the broad strokes with this overview. First, politicians must not be allowed to tinker with the tax code to incentivize behavior. Every tax break in the code got there because some politician got votes or money for it. Our tax code has become a monstrous conglomerate of tax breaks, incentives, loopholes, and political favors brokered by lobbyists and granted by politicians.
Everyone wants a favor or a tax break...and, if politicians can grant favors for votes, they will.
Rule #1 NO TAX BREAKS, NO EXEMPTIONS, NO DEDUCTIONS, NOTHING!!!
Rule #2 Lower incomes pay lower income tax rates. Maximum income tax rate for
individuals is 10%.
Rule #3 All income tax brackets adjusted for inflation every year.
Rule #4 Income tax rate applies to all income, salaries, interest, capital gains,
social security, proceeds from home sales, company car allowances, etc.
No exceptions!
Rule #5 Income tax rates appy to each individual that earns income,
no joint incomes.
Rule #6 Save 10% of all taxes collected the first 5 years to fund a 50% rainy day
reserve fund, to cover emergencies such as paying off debt, financing a
war, or disaster relief. Unused funds in the reserve could be loaned to
banks at a low interest rate to fund safe, well-qualified, home and
business loans. Once the rainy day reserve is fully funded, politicians
can spend all of the income tax collected (less replenishment of any
rainy day funds spent the prior year).
One purpose of this tax program is to prevent politicians from abusing the tax system to reward benefactors and punish opponents. Another purpose to to provide a simple, predictable, and direct method of taxation that is easy to understand and to forecast, and which would require politicians to budget their expenditures to their available income.
In case of emergency, politicians could raise tax rates only for stated, specific purposes, and only if the rainy day fund did not cover the emergency. All increases in tax rates would have to be voted in by a 60% majority and re-approved every two years.
Now that the overview is done, let's go on to more specific details.
Before getting into tax specifics in following posts, I want to cover the broad strokes with this overview. First, politicians must not be allowed to tinker with the tax code to incentivize behavior. Every tax break in the code got there because some politician got votes or money for it. Our tax code has become a monstrous conglomerate of tax breaks, incentives, loopholes, and political favors brokered by lobbyists and granted by politicians.
Everyone wants a favor or a tax break...and, if politicians can grant favors for votes, they will.
Rule #1 NO TAX BREAKS, NO EXEMPTIONS, NO DEDUCTIONS, NOTHING!!!
Rule #2 Lower incomes pay lower income tax rates. Maximum income tax rate for
individuals is 10%.
Rule #3 All income tax brackets adjusted for inflation every year.
Rule #4 Income tax rate applies to all income, salaries, interest, capital gains,
social security, proceeds from home sales, company car allowances, etc.
No exceptions!
Rule #5 Income tax rates appy to each individual that earns income,
no joint incomes.
Rule #6 Save 10% of all taxes collected the first 5 years to fund a 50% rainy day
reserve fund, to cover emergencies such as paying off debt, financing a
war, or disaster relief. Unused funds in the reserve could be loaned to
banks at a low interest rate to fund safe, well-qualified, home and
business loans. Once the rainy day reserve is fully funded, politicians
can spend all of the income tax collected (less replenishment of any
rainy day funds spent the prior year).
One purpose of this tax program is to prevent politicians from abusing the tax system to reward benefactors and punish opponents. Another purpose to to provide a simple, predictable, and direct method of taxation that is easy to understand and to forecast, and which would require politicians to budget their expenditures to their available income.
In case of emergency, politicians could raise tax rates only for stated, specific purposes, and only if the rainy day fund did not cover the emergency. All increases in tax rates would have to be voted in by a 60% majority and re-approved every two years.
Now that the overview is done, let's go on to more specific details.
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