Jlknapp505's Blog

We’re really going to have to do something about the overall tax structure. None of the approaches put forward by our political leaders will do enough, so I’ve been considering non-standard approaches.  I think this is what is necessary.

I’ve advocated a gross-receipts tax, which forces companies to absorb all the costs of such things as corporate jets and business lunches rather than charge them off to taxpayers. Current tax policy actually reduces efficiency by reducing competition, something that the capitalist economy claims to love but which capitalist companies do all that they can to reduce. I’ve also allowed for deductions from company tax liabilities for salaries and benefits paid directly to American workers, but only if such were available for ALL employees. Anything paid out in bonuses or stock options to executives would not be shielded from tax. And what’s paid to workers, whether in the form of direct salary or bonus or health insurance or company car, would constitute income that would be taxed to individuals. Equally, if it’s investment income or capital gains, that would constitute income to be taxed, whatever the individual tax rate would eventually be.

So long as all income is considered to be taxable, actual tax rates could indeed be lowered. Our current system taxes only a proportion of income from a narrow range of sources, and this turns out to fall heavily on the middle class and the poor while being a shield for the wealthy.  A shield which allows them to acquire and sequester wealth by selecting whichever source of income will reduce their taxable income.  It’s why there was so much effort by Mr Romney to hide his taxable-income information.  It’s the mechanism that allows certain individuals with multimillion dollar incomes to pay little or even NO tax at all.

Inevitably, our current system leads to more and more inequality and reduces social mobility, a major problem for democracies.

It’s led to a USA which has a few, the new nobility who lack only titles to be considered such, and the many, serfs in effect who are slaves to corporate rule. Who do not even have the traditional rights of serfs who were tied to the land; the new enslaved class can be dismissed through layoffs, ‘turfed out’ if it appears that managerial elites might realize a slight gain in profit by doing so. In such a system, the employee who’s worked faithfully for a corporation for 25 or 30 years has no rights and can now be dismissed, to attempt to make a living when they’re in late middle age, no longer able to start over in a new career.

The Constitution was written to protect citizens from the excesses of government.

There is nothing to protect us from the unrestrained greed that has become the hallmark of the new nobility.

A REAL tax overhaul might the first step in that effort. And along with it, government programs that provide more protection for citizens than is currently available from Social Security or Medicare.

A best approach might be to start with a commission that included not only the members of the new nobility but also representation from the middle and lower classes.  Such a commission would look at what’s fair to those lower classes as well as what benefits those elites who have a system that they can exploit differentially to gain ever-greater wealth.  Such a commission would consider where society should go, and would have the best interests of all American citizens at heart.

It would do what Congress was supposed to do, but what Congress has failed to do.  Our system of laws is in large part a listing of failures by past Congresses.  Failures patched here and there, but with ever more failures tacked on top of past failures and patches.

Perhaps it’s time to consider a real rewrite of the Constitution.

I won’t see any of this in my lifetime. But maybe, if we think about it and force our elected officials to represent VOTERS rather than those who bribe them with ‘campaign contributions’, something like this might be possible in your lifetime.

Written in answer to a friend; political, but not party-political. Instead, it’s economic theory applied to tax structures.
Ruth, I’m not advocating a flat-tax, although that would be much more fair than the system we’ve now got. Cain wasn’t wrong in his overall idea.
But we’ve ended up with a progressive, then regressive, tax system.
I believe that the best system is a corporate tax system that’s lower than what corporations now pay, but based on gross receipts. And I believe that any company doing business in the US should be susceptible to that tax on a proportional basis. If they sell a million dollars worth of goods in the US market, then they should pay the same taxes to the US government that a company doing business in New Mexico pays. I would have one deduction from those gross receipts; money paid directly or indirectly to employees. Any money remaining that goes to building the corporation or increasing its wealth or assets would be taxed as gross receipts. No more jets for executives or 3-martini lunches as ‘deductions’ and ‘business expenses’. Corporations could still DO those things, but not deduct them. These are all ways that corporations/companies reduce competitiveness.
As for what gets paid to individuals: salaries, retirement benefits, health care, perks, all are income. And all income of any kind forms the tax base. Speaking of health care and retirement accounts, they would be paid into a federally-supervised fund. No more of this situation where a corporate raider can come in and take funds that were intended to pay for employee healthcare or retirement because the investor acquired 51% of the company; that’s one of the things that Bain and Romney did. A better approach would be to increase Social Security and Medicare and make them available to all, despite the howls of the wealthy who would have to help pay for it.
Lots of benefits here; no longer would American companies have to support salaries, health care costs, and retirement costs, and then pass all that on to the consumer. Instead, it would be paid into funds that would be protected possibly by Constitutional amendments.
Individuals would be taxed on a progressive basis just as has been the case since our tax system was adopted. Probably at slightly lesser rates for some, more for the wealthiest. They have more to lose, after all, and American society protects their wealth. So it’s appropriate that they pay into society on a commensurate basis. And income is income; no difference from an hourly wage or a dividend from investment. And no more hiding income by calling it ‘health care’ or ‘retirement accounts’.
So how could one accrue wealth in such a system?
No so easily, for sure. But it would be possible. The guaranteed way would be to invest in growing companies. Currently it’s possible for a wealthy person to buy into GE, say, and wind up paying only 10% of dividends. GE has paid NO taxes for several years, despite profits of billions. Apple too hides much of it’s income from taxation by shuffling it around from corporate entity to corporate entity. Bain Capital did that, too, and Romney directed the operation.
But if you invest in a growing company, then the company will pay out taxes on a gross-receipts basis, but the investor won’t pay any taxes at all on this. So that maximum gross receipts tax, say 15 or 20% as a beginning point, is all that would be paid.
One additional point: the neo aristocracy. We’re going to have to tax estates just as Britain found it necessary to do. Otherwise, the Waltons or their equivalent can sequester giant amounts of money and wealth from the system. That money must be returned to circulation if society is to prosper.
Ideas; what do you think of them? You can post replies to jlknapp505@msn.com or find Jack Knapp on Facebook. I welcome dialogue and constructive criticism.