The 2011 federal tax revenues were $2,302.5 billion dollars. Sounds like a lot of money, right? Unfortunately, that was $1,298.6 billion dollars less than your U.S. Congress spent. In fact, the deficit spending exceeded the entire $1,272.6 billion collected from individual income taxes. Spending problem or tax problem?
The so-called debt super committee is taking over the headlines as the Thanksgiving Eve deadline approaches. Drama queens. No deal and the $1.1 trillion in automatic spending cuts don’t even kick in until Jan. 2,2013. Obama has already made it clear he won’t even consider any of his symbolic committees recommendations. This whole debacle is just a dog and pony show without any merit IMO.
So are all the tax reform plans making the rounds. FAIR, flat, VAT, 9-9-9, whatever. They all have a common defect. They leave the power in the hands of the federal government who can alter any good intentioned plan however they wish in the future. This is the key point to any tax discussion. No real tax reform can occur unless the power structure is also changed. Ron Paul is pushing for a return to excise taxes and tariffs to fund the federal government. Never going to happen. No level of government will support this and the establishment reigns supreme.
I give you the Spellchek tax reform plan. It has a core principle. Strip the federal government of its ability to tax and spend us into oblivion. Don’t make this a primary objective and you are wasting your time.
My plan is quite simple, yet virtually impossible due to its complexity. My intent is to focus on the enumerated powers and restore the power to the states and the people. We need to repeal the 16th Amendment and eliminate the IRS. We need a balanced budget amendment. Told you it was virtually impossible.
The idea is eliminate direct taxation on the American people to fund the federal government. Why? Because it is a direct assault on our liberty. It also has created the out of control behemoth we now have in place that is spending us into oblivion.
But wait, the detractors will say the reason the 16th Amendment was passed was to save us from insolvency. Yes, even back then federal deficit spending was doing us in. The inability to tax us directly left the federal government to rely upon excise taxes, corporate taxes, tariffs and other duties to operate. The Congress implemented a 2% flat tax on income which led a revolt and eventually the 16th Amendment. There are few events in our history more destructive than this.
I don’t wish for a return to insolvency. How to avoid it? A two-pronged approach. The balanced budget amendment is one part. The other is what the federal government would fight to the death to avoid. All federal funding must come from the states themselves. No more federal income tax. No federal corporate tax. No capital gains tax. All gone. Where I differ from Ron Paul is that I choose a more practical option on federal funding. I don’t eliminate the people funding it. Rather, I eliminate the direct tax on income and move to an indirect tax through the states that is weighed in a completely unbiased manner that is not regressive or progressive. Why is this a good idea?
- The enumerated powers would be restored by shifting the power to the states and the people
- The federal government would be restricted by a balanced budget requirement just like the states
- The federal government funding would be determined by the census
- Census based apportioning is unbiased, fair and equal
- The states would set the dollar amount per person for federal funding
- No more $3.6 trillion dollar out of control Obama spending free for all
- The states could raise their portion of the federal funding burden in any manner they choose
- If a state has a tax structure that is too high, residents will vote with their feet
Completely eliminating all forms of taxation on our income sounds great and would be nirvana. Reality intervenes, however. To exist in our modern, civil society is going to require taxation. Income taxes can be avoided by the Warren Buffets of the world who live off of investments. Consumption taxes are restricted in that not everyone buys every product or service and quantities vary widely. Another goal is to diminish the dependency nation and the redistribution of wealth. The Spellchek plan won’t eliminate it entirely, but it will make it more transparent and minimize it. I think the idea of weighing each individual the same regardless of circumstances is the fairest way to assess the federal tax burden. The states would still be free to accentuate social safety net programs if they choose and the dependency nation will migrate to them temporarily, for they will also eventually see it as not sustainable.
The idea is to encourage competition amongst the states for residents and implement transparency. The federal funding rate per person will be equal across the nation. You will be able to weigh the individual states overall tax burden much easier. There will still be accountability at the ballot box at all levels of government. Congress will still have to legislate and be accountable, just on a much smaller scale as it should be.
Our war policy will change. The President will still be the Commander-in-Chief, but he won’t be able to access the government printing press any longer to fund unauthorized wars. He will need Congress to approve and fund it as it should be. Better yet, Congress will likely have to go to the states for the increase in funding as they will be on a much smaller, balanced budget. The states will have to approve the increase in funding and pass it on directly to us. Again, accountability. Elected state representatives will be held to account for funding a war rather than Chinese deficit bond money that we utilize now.
Imagine the competitive aspects globally if we completely eliminate the federal corporate income tax. Also, the double tap that companies now face for bringing back overseas profits to our shores will be gone and free up all of the corporate capital not being utilized. Companies can shop around and choose the individual states with the best tax deal as the states would surely increase corporate taxes. Now we’re talking. Real economic growth will come booming to the states that recognize the opportunity and implement true capitalist policies of a broad tax base and low rates.
States that have traditionally relied upon the federal trough and crony-capitalism policies will quickly die. They will be forced to radically change policy just to compete with their neighbor states. You can go and on with the positives. All of this is possible at the expense of stripping the power of the U.S. Federal Government. Eliminating the establishment debt machine. Eliminating the war machine. The feds will be subservient to the states and the people as it should be. Of course, the Founders warned us of an over-bearing central government way back when, but didn’t legislate the tools to stop it. The power of the purse is the key. The theoretical balance of power between the branches will still exist, it’s just that the aggregate of all three branches will be greatly diminished.
Is any of this even possible? Certainly not likely. The Tenth Amendment movement is attempting to gain traction and move in this direction, but they are lacking the Spellchek key component. Sourcing federal funding from the states themselves. The states, and ultimately the people, decide upon the size and scope of the federal government. The balanced budget checks their power. Insolvency issues go away. It will take the will of the power to grow massive infrastructure projects or entitlement programs. States with sound pro-growth policies would set an irrestitible example for neighbor states to follow for if they don’t, their population will flee in droves. Best of all, the next session of Congress or another ideologue POTUS won’t be able to just step in and create havoc without the consent of the people.
As always, I’m open to critiques and those that wish to tell me why this is a bad idea or can never work. As my buddy Jim at CoF would say, that’s what I’m thinking. What are your thoughts?