UNCERTAINTIES ABOUT OUR WEATHERVANE TAX POLICIES…
(are what keeps the RPM level of our economic machinery barely turning above…idle)

Aside from all the usual campaign blather and noise being made in an election year like this one, the most striking thing is the absolute lack of serious mention about the fundamental cause for the existing anemic condition of our economy. An economy which should have not only recovered from the 2008 financial debacle but should have by now reached a point of taking off at full throttle.

It’s those uncertainties about our weathervane tax policies which keep the RPM level of our economic machinery barely turning above…idle. Until those uncertainties are put to rest we should not expect things to get much better, and our GDP growth will remain at a paltry 2% or less per year…when it should be purring along at least at 4% per year, or even higher. The sad thing is that no one…not any of those candidates vying for the Oval Office…not any of our economic experts or any of those financial gurus and pundits…and certainly not any of our members of Congress…seem able to focus on this most fundamental of factors impacting on economic activity. Without a clear, well defined, relatively simple, and equitable tax structure, business and enterprise have little incentive to perform, or, those that do, simply focus on how to maneuver through such uncertainties rather than on anything else.

Here in America we have achieved the epitome of incoherent and inequitable taxation policies. It’s the result of decades, and decades, and more decades of tinkering, tweaking, and otherwise applying band-aid solutions rather than seeking a long term rational tax policy structure. It’s the equivalent of practicing symptomatic medicine instead of looking for a cure, and our existing tax code is a prime example of that. Until we make a serious effort to replace it, no amount of raving about…socking it to the rich…or lowering the rates on big business…or providing more subsidies for lower income individuals…will change anything.

We believe that the only true way to not only jump start our economic machinery, but also provide us with a sustainable level for it over an extended period of time, is to replace the existing tax code in its entirety with the following:

• A flat tax on gross income from all sources for both individuals and businesses, indexed perhaps with five bracket levels for each. For individuals…ranging from 5-17%. For business entities…ranging from 8-24%, with very few personal or other exemptions and deductions.
• Synchronize the tax year with the fiscal year, with everyone paying their taxes quarter by quarter, rather than annually. That would reduce the government’s need to borrow and further adding to our debt load.
• Congress would only be allowed to adjust the tax rates up or down every ten years, depending on existing conditions and requirements.

Tax avoidance and evasion would largely become a thing of the past, and many of those business entities which currently hesitate to repatriate offshore capital resources would have a stronger incentive to keep and invest their capital here rather than offshore, thereby helping to sustain long term GDP activity and growth.

A collateral reform measure to further reduce our uncertainties relates to the way Congress would be required to control its spending of these tax revenues, as follows:

• Mandate that the first item of annual appropriations would be a 5% set aside of those tax revenues. The remainder would then be the annual budget cap for all other expenditures. This would inhibit deficit spending, but, since this would also be tied directly to our GDP growth rate, there would generally be an increase in annual funding levels available.
• The 5% set aside would be applied as follows: 80% of it to pay down on the National Debt, and 20% applied to the acquisition of gold and silver bullion from domestic producers to rebuild our bullion reserves as collateral against that debt. The important thing here is not the specific amounts applied but that there is a regular ongoing process for that purpose. That is, that we have a continuing system in place progressively reducing our National Debt combined with a progressive accumulation of bullion reserves as collateral for it. To that end the Treasury would be authorized to require all domestic producers of gold and silver to sell half of their annual production to it, at a 50% discount from market prices. For producers who did so their income from those sales to it would be tax exempt. Meanwhile, the Treasury would benefit from full market valuation of those bullion reserves. A win-win proposition.
• Any deficits which did occur, despite these measures, would be proportionately shared by the three branches of the government more or less as follows…80% to the Executive, 12% to the Legislative, and 8% to the Judiciary. Each branch would be allowed to amortize their deficit share over four years, but, as long as any of it remained no increases in budget allocations would be allowed. Such an approach would spread the deficit load across the entire government structure, minimizing any negative impacts on any programs. Politically this would also be a win-win proposition for all.
• Mandate that both the Social Security funds and the Medicare funds be totally sequestered from the general revenue funds. Since these are funded from separate taxes, Congress should not be allowed to co-mingle those trust funds with the general revenues, and misuse these to fund other program needs, as they do now. That is, Congress has consistently “borrowed” those funds, replacing them with Treasury IOU’s instead. If we did the same as business entities…we’d all be residing in Leavenworth.

If we, the tax-paying voters of this country, ever have the guts to loudly demand such action from our so-called people’s representatives, then perhaps our economic condition might yet be what it should be, and we would all be the better for it. Unfortunately, we seem to just meekly be prepared to continue with what we have, with little or no will to do more than to gullibly listen to the blandishments of career politicos whose only interest seems to be to feed at the public trough for as long as possible.

It’s time to wake up and face reality, folks.

CENTURION