If Our Nation Was Run Correctly, We Wouldn't Pay Taxes, We'd Earn Dividends
The solutions in The Economist's Tale would transform our lives, whether rich or poor. We'd be freed from income taxes, and receive benefits at no cost that we pay dearly for today. The technology is available. We just need an upgrade to our financial system.
Taxing income is our way of collecting revenue to pay for the $4 trillion our government spends annually. Under our current system we are unable to balance our budget, falling short by 1/2 trillion dollars each year. The shortfall is borrowed, adding to our skyrocketing national debt.
In this day of electronic money that would be easy.
We tax the $16 trillion in income we earn, the small blue sphere in the diagram. We don't tax the whopping $5,000 trillion in payments that occur each year, the large green sphere. Our government's budget is $4 trillion, the tiny red sphere.
The red sphere takes a big bite out of the blue sphere - which is why income tax rates are so high. But the red sphere takes a tiny bite out of the green sphere.
If we taxed payments at the miniscule rate of 1/10th of 1% we'd have a trillion dollar surplus.
There's been a lot of talk about providing everyone with a guaranteed basic income, but as long as we tax income it's an impossibility. With a Payments Tax, however, a National Income of $12,000 per year for every adult citizen, regardless of financial status, could be a reality.
A Payments Tax could fund free college for every citizen. Today's student loan program is leaving millions of students with crippling debt. The easy credit of student loans has made the price of college skyrocket. The Challenge Program is the best way to bring the cost of college under control.
A Payments Tax would permit everyone in the US to receive basic healthcare for free. Under the AMA program, you control your own destiny. You use your medical benefits to pay for the healthcare you want, without interference from the government or an insurance company.
Social Security is sliding into bankruptcy. If we stay with the current system, we'll either have to cut benefits or increase FICA taxes in just ten years. A Payments Tax could fund higher benefits than the current Social Security system does, and at a lower cost to you than our current FICA tax system.
Charging interest is unavoidable under our current banking system. The concept of a cost of funds is a vestige of the days in which we used gold as money. Now that money is created by the Federal Reserve, it is possible to restructure our banking system so banks no longer charge interest. They'd still earn servicing fees, but the cost of a home mortgage would be cut nearly in half.
Compare how the above solutions benefit the families below - everyone does better, both rich and poor. Keep in mind this is not possible when taxing income. A taxpayer earning $100,000 would have to pay over $57,000 if we were to implement these programs when taxing income. With a Payments Tax, however, the same taxpayer would pay a tax of $137 - and we'd have a balanced budget.
Today an unemployed couple receives benefits from welfare. Depending on the state they live in, they may receive around $10,000 in annual benefits, plus Medicaid.
Under the proposed solutions, the same couple would receive $36,000 in annual income, which would be comprised of $24,000 in National Income and $12,000 in supplemental income, plus free healthcare.
Today a senior couple receives around $15,000 per year in Social Security benefits, depending on their work history, plus Medicare.
The same couple would receive $48,000 in National Income, plus free basic healthcare under the proposed system.
Today a couple earning $10,000 per year nets about $14,000 between their salary, earned income credits and welfare.
The same couple would receive $45,000 per year under the proposed system, which would be comprised of $24,000 in National Income, $10,000 from their salaries, $5,000 in earned income credits, and $6,000 in supplemental income.
Today a couple earning $30,000 per year nets about $25,000 after paying $1,000 in taxes and $4,000 in healthcare costs.
The same couple would receive $60,000 under the proposed system, which would be comprised of $30,000 from their salaries, $6,000 in earned income credits, and $24,000 in National Income.
Today a family earning $100,000 with a $300,000 mortgage pays about $17,000 in income and payroll taxes, $20,000 in mortgage payments, and $12,000 in healthcare costs, leaving them with net disposable income of about $51,000.
The same family would net $114,000 under the proposed system, which would be comprised of $100,000 from their salaries, paying only $10,000 in mortgage payments, having no healthcare costs, and earning $24,000 in National Income.
Today a family earning $250,000 with a $500,000 mortgage pays about $58,000 in income and payroll taxes, $32,000 in mortgage payments, and $14,000 in healthcare costs, leaving them with net disposable income of about $145,000.
The same family would net $257,000 under the proposed system, which would be comprised of $250,000 from their salaries, paying only $17,000 in mortgage payments, having no healthcare costs, and earning $24,000 in National Income.