Make the Wealthy Tax Exempt

[ShutDown24]

Now, before you guys get all up in arms about the topic title, let me explain. This piece is a theory. Today in my Social Studies class we were given the responsibility of fixing the recession. I'm going to major in Education: History/Social Studies next fall so this kind of thing is very important to me. I gave this a lot of thought and I believe I have come up with a tedious but plausible solution to our economic struggles. Give it a chance and tell me what you think. I'd like to hear some of your opinions! (Please, constructive criticism only. I'm only a student so don't unleash your political wrath on me if you don't like the idea. I've seen it and it is scary! )

Tyler Dunn

Welcome to taxing and spending.

Americans do not have quite the best attitude toward taxes – “Take from the rich and give to the poor!” some say. But that is not the answer. In fact, it is entirely the opposite.

We are getting ahead of ourselves though. First, the basics.

If you want the government to provide high quality public services, you have to cough up the dough. Operating the US government is very expensive, and almost all of it must be paid for by taxes. That is simple enough. Now we’re going to get just a little more complicated. There is the problem, in any form of governing a nation, of unintended consequences. In other words, when the government takes any form of action, that action creates an entire slew of reactions. Often times unintended reactions. High tax rates tend to slow economic growth. Every dollar that goes to the government in taxes is a dollar that cannot be used to stimulate the economy. For example, imagine that I am a very wealthy man. I have to fork over close to 70% of my income to the government.

That is a lot of money. My money that I earned. So it’s a pretty painful experience already, even in good economic times. But few would take pity on me. "Take from the rich and give to the poor!" However, those cheers would fall quiet if all could see where that money would have gone had it not gone to the government. I would have invested it in the stock market. There, it would grow businesses, several of which were hoping to expand. That expansion would have meant new jobs - maybe even jobs for some of those in the cheering crowd.

To further understand what we’re talking about here, let's take a closer look at what happens when taxes are raised. If the government decides to raise taxes by 5%, that means that all taxpayers will have that much less money to spend. They will need to cut back on luxury items such as electronic goods and going out to dinner. That means that businesses which provide those kinds of goods and services will see a drop in sales. The drop in sales will force them to cancel plans for expansion, cut back orders, lay off workers, etc... These decisions will hurt other areas of the economy as well. If Walmart orders fewer tractors, for example, that means that fewer tractors need to be transported from location to location, which means a loss of business for trucking companies. You can see how a slow down of the economy in one area hurts another. That, in turn, affects another area, and so on and so on. If the trend continues, the entire economy will slow down. When that happens it is called a "recession". People lose their jobs, businesses close and the public gets very angry at the politicians.

So what is the answer to stopping recession? Temporarily make wealthy Americans tax exempt.

That is not to say you let them do what they want with their money, oh no – where would be the good in that? Many of the non-conscious citizens would simply and selfishly stow away their cash knowing that we’re in such troubling financial times.

No, what would be done is something entirely different. It is not a ‘stimulus’ plan by the government per say – more of an ‘encouragement’. An almost laissez-faire like proposal.

That 70% I paid in taxes would be cut down to 60%. And that 60% would no longer be tax money, it would become “National Investment Funds”. I would be required, by law, to invest that 60% into the stock market. The other 10% would be cut to encourage me to spend money more extravagantly – another way to push economic growth. Although the second would be impossible to enforce, what would you do if your funds happened to rise by 10%? I think it is safe to say some extra spending would occur.

There are a couple of setbacks.

First, as mentioned before, the government needs tax money to operate. This obstacle would have to be worked out by someone with a more expansive knowledge of United States spending than I personally have. If suggesting though, deficit spending might not be a bad idea in this case. Say the program ran for a few years, until the economy was once again steady (Possibly better than ever). That would be the time to pay back all debt. Second, what is the government to do once the program ends? It would cause an economic catastrophe to just start taxing the wealthy again cold turkey. The answer, though, is a simple one. You would ease the tax money back into the government by taking small steps. This would allow the stock market and monetary world as an entirety to slowly correct itself over a short period of the few years it would take to get back up to that 70%.

Overall it is a plan that would require a lot of work, intelligence and commitment. That being said, any plan that gets the economy out of its current hole is going to have to be filled with those traits. This plan, though, is a simple one that would produce quick results.

As crazy as it sounds - the answer to our economic troubles might just be to turn the wealthy into tax exempt US citizens.

Feedback?

[revefsreleets]

That's too much. The VAST VAST majority of taxes are already paid for by the wealthy. We'd have HUGE shortfalls and we'd spiral into bankruptcy.

However I like the idea of reducing or eliminating all the government social programs and encouraging the uber wealthy to contribute more to faith-based programs and the like that would specialize in replacing the current government programs..sort of how it used to be. They are much more efficiently run by foundations and private entities than they are by the government.

[lamberts-lost-tooth]

There are countries that actually have a "social security system" similar to what yo are talking about here....Money that in OUR country would be taxed as a SS tax is instead issued in a check only cashed by goverment approved investement firms.

Your money is sent to these firms which invest money into the stock market...putting money into infrastructure through a different means altogether.

There are regualtions in regards to how much can go into "high risk stocks"..and as you get older a smaller percentage is allowed in those investments and must be placed in "safer" stocks.

More or less it is a program to keep the politicians hands OFF your money as much as possible.
***********************

I can see that you have put a lot of thought into this and I congratulate you on an articulate presentation.

I for one would like to see a flat rate tax, but have no hope that the american populace will be ever to see past the social envy that has been planted by politicians.

[ShutDown24]

Originally Posted by revefsreleets

That's too much. The VAST VAST majority of taxes are already paid for by the wealthy. We'd have HUGE shortfalls and we'd spiral into bankruptcy.

However I like the idea of reducing or eliminating all the government social programs and encouraging the uber wealthy to contribute more to faith-based programs and the like that would specialize in replacing the current government programs..sort of how it used to be. They are much more efficiently run by foundations and private entities than they are by the government.

I would agree that the specific plan I posted is too extreme. But it is meant to be extreme, it gets the message across. I knew going in that there would have be work done on the percentages. It can't be flat 60% to stock market investment as I said, but it is a start. The idea is to get the ball rolling for other uses of the money that we bring in from our wealthiest citizens. That tax bracket racks in a lot as you mentioned. If we were able to cut back on some of the social programs and projects, the theory instantly becomes much more do-able.

I was at the Capitol building (Harrisburg) last week talking to some State Representatives about HB995 and one started to go on and on about the economy. Since then I've had this in the back of my head.

[ShutDown24]

Originally Posted by lamberts-lost-tooth

There are countries that actually have a "social security system" similar to what yo are talking about here....Money that in OUR country would be taxed as a SS tax is instead issued in a check only cashed by goverment approved investement firms.

Your money is sent to these firms which invest money into the stock market...putting money into infrastructure through a different means altogether.

There are regualtions in regards to how much can go into "high risk stocks"..and as you get older a smaller percentage is allowed in those investments and must be placed in "safer" stocks.

More or less it is a program to keep the politicians hands OFF your money as much as possible.
***********************

I can see that you have put a lot of thought into this and I congratulate you on an articulate presentation.

I for one would like to see a flat rate tax, but have no hope that the american populace will be ever to see past the social envy that has been planted by politicians.

Thanks for the information. I did think a lot about it. The basic idea I had here was to try and eliminate as much of that formality and back and forth as possible. In my opinion, we need to get closer to a free market than we currently are for this recession to be turned around. The Mixed Economy hasn't been working too well. Then again, a requirement to invest your money isn't very free-market-like at all.

It's fun for me to discuss and try to get a grip on economics. I'm much more versed on the history aspect of social studies as opposed to modern so I'm trying to make some progress in that area before I hit campus next year.

[lamberts-lost-tooth]

Originally Posted by revefsreleets

That's too much. The VAST VAST majority of taxes are already paid for by the wealthy. We'd have HUGE shortfalls and we'd spiral into bankruptcy.

However I like the idea of reducing or eliminating all the government social programs and encouraging the uber wealthy to contribute more to faith-based programs and the like that would specialize in replacing the current government programs..sort of how it used to be. They are much more efficiently run by foundations and private entities than they are by the government.

As a friend of mine says...the next time you think that government "Medical Reform" is a good idea...go to the DMV or Post Office and stand in line.

[SteelersinCA]

I like the idea of tax breaks for companies that invest in the community. For instance, say Qualcomm here in SD wanted to reduce their tax liability, they could sponsor some local schools. I'd even go so far as to say let's get rid of welfare and have companies build and maintain residences where families could live for free. In these communities your kids would be taken care of while you work/go to school. You cap how long they stay there and put rules in place like no drugs or crime. One strike, you're out.

[ShutDown24]

Well, thanks for the feedback guys. It brought some interesting ideas and information to the surface from all of you which ultimately is better than any other responses I could have asked for.

[Godfather]

I see another major problem with this. The author mentions requiring most of the tax cut to be invested.

If that's the best use, the beneficiaries will do it without a mandate. If it's not the best use, forcing that kind of money into the stock market will artificially inflate prices and cause a bubble which will eventually burst and cause even more economic pain than we have now.

[theplatypus]

Originally Posted by lamberts-lost-tooth

As a friend of mine says...the next time you think that government "Medical Reform" is a good idea...go to the DMV or Post Office and stand in line.

I've never tried to go to either of those places in Pa, but in Md and Ga both of those places are a piece of cake. I'll admit it has become harder to renew your license since 911, but it isn't a huge undertaking by any means. Before 9/11 you could walk into the Grocery store and renew your license. In the 15 years I've been in Georgia it's never taken more than 10 minutes to renew my tags.