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?

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15 thoughts on “The best tax plan ever?

  1. A brilliant plan, 5etester. It would be fun to watch the congressional debates on the military budget, which would be the largest part of federal cost. How would you handle the monetary system of coining and controlling the money supply? We’d probably have to continue Social Security and Medicare for those already on the programs but as those people died off the cost would diminish to nothing. Where do sign up?

  2. Woo Hoo! My first tax plan subscriber. Going viral! You know, as crazy as it sounds to ever hope to get real change enacted, it will probably end up taking some sort of grass roots, bottom up movement to ever make it happen. A Tea Party type uprising with an actual plan in hand with substantial enough numbers so that our elected officials can’t just ignore it. Can’t see reform with-in the exisiting framework ever happening because it requires the establishment to incur self-inflicted wounds. They have to be faced with a no alternative scenario by the people and I think it can still happen peaceably. The snowball effect of enough people getting engaged, without the riots as our Euro friends prefer, would empower the fence riders eventually. Any other options, including the status quo, are not very appealing at all. Thanks for the kind words.

  3. I am serious, my friend. Not only have you solved the bizarre tax code we have and returned power to the states and the people, you have almost put an end to corporatism and corruption in D.C. We’d still have to keep an eye the corruption in the military industrial complex but think how much easier that is going to be after we implement your plan. I repeat. IT’S BRILLIANT!!!

  4. Thank you again. I was quite serious about the merits. I see it as the ONLY way to cure this, at least so far. However, the fact that we need to get an amendment passed, the Spellchek Amendment if you will, in order to address multiple areas of the Constitution tells you its chances. Hopefully, I’ll get some feedback on it and then you never know…

  5. I think your tax plan has a lot of merits and I wouldn’t have a problem with it’s implementation. However, as you have suggested, it doesn’t stand much of a chance of actually going into effect. There are too many people who would fight it, not because it would be a bad thing for our country, but because it would take away their power. It would also put a lot of people who work for the government out of a job. They will never stand for that.

  6. That’s the stamp of approval I’m looking for. If the most offended will be the establishment ruining this country, then I’m on the right path.

  7. I’m very intrigue by this, but I need clarification on two items – Census based apportioning and that the states would set the dollar amount per person for federal funding.

    Who decides the amount of money the states pay per citizen of their state to the Feds?

    Thanks!

  8. I see census based apportioning as the only feasible way to determine each State’s tax burden. The same thinking as one man, one vote. The amount per person would be a simple calculation of federal budget divided by total population. Say we spent roughly $3.5 trillion federally and have a U.S. population of roughly 308 million. Comes to $11,363.63 per person. My state of Michigan had just over 9.8 million in population in 2010, so the total tax burden would be just north of $112 billion dollars. Clearly, my idea is to get the size and scope of the federal government WAY down, so that number would drop accordingly. Of course, each state tax burden would then jump enormously, but we have to remember that all federal taxes would be eliminated.

    Who decides the amount of money per citizen? I want as much accountability as possible, so I believe making this a state’s issue is the best way. The 50 state legislatures (sorry BHO, your other 7 states don’t count) will be the body to make the determination of the size of the federal budget. Three quarters approval needed to pass a budget number, something like that. That can all be hashed out later. I see state legislators as much more accountable to their constituents. If the people themselves decide they want more federal services or infrastructure or social safety nets, etc., they will empower their state legislators to vote to increase the federal budget. In other words, a complete reversal of what we have now in which the federal government dictates to us what we need. State’s with a high percentage of retirees without income would assess their tax burden differently than other state’s. How businesses are taxed would then become a major competitive battle. Competition is good in my book.

    I also want the state’s to be able to set their tax collection policies any way they wish. This will force state’s with already high state tax burdens to quickly rethink their policies as residents will vote with their feet and move to another state with a more favorable tax climate. The federal tax burden will be uniform across the country so the state’s can only blame themselves if people leave in droves.

    The whole point is to reduce the power of the federal government back to the enumerated powers of the Constitution. To return the power to the state’s and the people. To eliminate the federal printing press and our perpetual debt machine. To make elected officials more accountable to the citizens of this country. What citizen wouldn’t want that? Only those who stand to lose their power would object. Control of the purse strings is the only way possible to check their power.

    I see it as the type of ground roots effort that could catch fire as the vast majority of Americans are fed up with government and want permanent change. This is going to require altering the Constitution. No way will those in power now ever willingly submit to it. However, the people still have the power if they would just realize it. An overwhelming mandate is necessary to force them to realize they have no alternative.

    The biggest obstacle as I see it is simply getting people to realize we don’t have to do as we have always done simply because we’re told it’s the only way. Any revolution throughout history began with a small seed. Should this idea ever get any legs and take off, I’m sure that critical thinkers everywhere would come up with great ideas on how to refine it. But it’s core attribute must remain the same. Contain the single biggest threat to liberty and prosperity this nation faces – our federal government. End of rant. Thanks for listening.

  9. I sincerely think the plan has merit, but I’m working out a few things in my head about it, so please bear with me. I agree the Federal Government needs scaled back, and that becomes the #1 priority. I can see the funding of the Feds being taken away from the Feds and given to the States, but the Feds ability to buy votes needs to be taken care of too. Every time a state stands up to the Feds, the Feds simply say they will cut off funding for roads, or bridges, or schools. The Feds not need be responsible for those things. Almost all the Federal Departments need reduced down to nothing but advisory boards for Congress and the President, even for the states – but these advisory boards need to be stripped of all power.

  10. I know this is old, but by your own numbers this is a terrible tax plan. Only the rich would be able to survive with this. The 308 Million people in the US are not all adults, you are considering everybody including babies and kids in that number. The average household income in the US is right around $50,000 a year. That means that under your plan the average US family of 3 would be responsible for $34,000 a year to pay for the federal government. That leaves the average US family of 3 about $16,000 a year. Then minus about $5,000 a year for local a state government operations and that would leave the average US family of 3 with a whopping $11,000 a year to take care of their family which would be under $1000 a month. Try making mortgage and car payments, plus groceries and other necessities on less than $1000 a month. This in essence is a flat tax and a flat tax can not work when there is such a disproportionate range of income levels. I think a flat tax RATE is a good idea, but not a straight flat tax. The only way that something like this would still work without putting hundreds of thousands of people on the streets is if it was tiered by income levels. But that would kind of defeat the purpose of the plan I think.

  11. Only if you continue to fund the federal government at its current size. I would drastically cut the size and scope of the federal government. Those numbers you quote would be far less and it would be up to the individual states to determine how to raise their portion of revenue for their federal tax burden.

    Please understand this wasn’t meant to be any type of serious proposal with specifics on the budget. It’s meant as a conversation starter to possibly make people realize that we will never, ever see a solution put forth by our politicians with-in the current structure. I know of no other way to limit the federal government machine without taking away the power of the purse.

    Thanks for your comment.

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