Defining work
Is work proportional to prices? No. Is work proportional to the number of transactions inccured? Yes! Is work proportional to earnings? No. Therefore, is work proportional to the payroll? No! Is one's ability to spend proportional to the value of a paycheck after taxes and deductions? Yes! Is savings the same as investment? Not when there is Net Capital Outflow (NCO). Is the purpose of savings to fuel investment? Yes! Is the worth of that investment proportional to the work of that company? Yes! The work is not proportional to the prices, so are the prices proportional the worth of investing in that company? No! So, we know that work is good and is proportional to transactions not prices.
Since rates of saving among income groups only vary by a few percent, it is fair to assume that a tax on earnings, or the paycheck, is a tax on the money which we are able to spend without borrowing, and therefore a indirect tax on consumption. What is good about spending is close to what is good for investment, and investment by the corporation in terms of capital stock and total factor productivity is not the same as taking assets from the lenders and bringing them to other lenders (i.e. their employees). Payroll is not the same as productivity, a fact which one observing our education system can easily appreciate.
In school, work, or success, is proportional to awards, diplomas, and passing grades, not how much their teachers are paid. Therefore they are proportional to good deeeds, or transactions. Subsidize transactions, by giving the hardest working people, businesses with many transactions, a $3 tax credit for each transaction. Decrease taxes for those willing to provide, regardless of their earnings.
Have taxes for those who rather emphasize paychecks in opposition to capital stock and total factor productivity. Tax payroll, which is essentially a tax on ability to spend. The hardest working Americans are simply those who have the hard time gaining an edge on economic status.
A high ratio of transactions per employee, as is the case in the retail and manufacturing industry, is a theoretical reason as to why they paid so little in the first place, since so many transactions easily justifies having a smaller contribution margin per transaction, so that the same amount of physical labor has smaller effect on covering the fixed costs of these low-paying businesses.
And, to keep it simple, encrusted and inefficent means of in order to achieve purposeful use of taxation need to be dismanted and replaces by a system that alters the way government gets revenue and the activities in which it spends it.
Steps to take
- Remove the Alternative Minimum Tax (AMT) (An injustice for the middle class.)
- Remove the Corporate Tax (An injustice for shareholders and pensioners.)
- No Federal Retail Sales Tax (An injustice for the working poor.)
- Every payment transaction becomes eligible for a $3 tax credit (A justice for those who rapidly provide goods and services. A justice for the working poor. A justice for being thrifty, whether rich or poor.)
- No graduated income tax (An injustice for those with variable incomes. An injustice for employers who pay each of their workers more. An injustice for the working poor who need good and services staffed by well paid individuals.)
- A flat company-wide payroll tax (A justice for those with variable incomes. A better justice for employers who pay each of their workers more. A justice for those who do not take advantage itemized tax deductions.)
- Establish a transparent but non-intrusive means of tax collection and government spending.
The non-minimal problems with the Alternative Minimum Tax
- The alternative minimum tax does not automatically adjust to inflation or changes in tax brackets.
- The alternative minimum tax is increasing the tax burden on the middle class.
- The alternative minimum tax is increasing the tax burden on families with dependents as well those living in high-tax states.
- Those who do have not done AMT but are required by the IRS to do so are shocked when they realized that the IRS does require them to do it.
- The alternative minimum tax involves much paperwork and mental labor leading to an uncreative transfer of wealth from the middle class.
The Corporate Tax on corporate profits
- In many cases, shareholder value is reduced as the result of the corporate tax.
- Some pension plans include stakes on stocks, which come as a result of profits, which are reduced when corporate tax is applied.
Why there should be no federal retail sales tax
- A federal retail sales tax, whatever its rate, tax base, or revenue, squeezes the retail industry tight which is already underfunded and calling for welfare reform (e.g. labor unions in the retail industry).
- It is often supported as a means to simplify the tax code, but it requires unilateral changes to how taxes are collected on sales floors everywhere in the United States, a proposal that has met a lot of political resistance.
- The federal retail sales tax does not account for the variation of embedded tax rates among different industries.
- A federal retail sales tax replacing payroll taxes would, in many cases, move the tax outside of payroll costs but do nothing to increase the financial wealth of most employees as it is often implied.
Reasons to come with a simple, easy to administer tax
- If one is to come up with a tax to replace others, it should be mathematically simple and easy to administer.
- Inventing a tax proposal and then having legislation pass it, is very rewarding for the person who creates it.
- Depending on how simple and easy it really is, it can save the country much paperwork and mental labor, which is healthier for the environment.
- Suicide is committed due to the pessimism that surrounds complex tax codes such as the Alternative Minimum Tax.
Reasons to have a tax credit on each payment transaction
- Giving a tax credit for each payment transaction encourages transactions themselves.
- Unlike a subsidy as a percent of sales, it does not necessarily support the act of spending too much for a given product or utility.
- By being a fixed amount for all transactions, it is a higher percent of the value of small-value transactions, such at those associated with the services of the working poor.
- There is an opportunity with $3 tax credits on payment transactions to provide the generally low-paying jobs to advance to the middle class. Stores with more than 20,000 transactions a week (e.g. the average grocery store from a nation-wide chain) and 100 employees will have at least $600 in tax credits per employee weekly, or $30,000 a year per employee.
- If a large enough tax credit is given to each payment transaction, retail services can incorporate an array of services that go beyond retail, such as creating a botanical garden, a mini-mall, a physical training and rehabilitation facility, celebration of birthdays, restaurants that use food from the supermarket itself, hosting of charitable or community-college related organizations, even city orientation sessions.
- Given the $3 tax credits per payment transaction, some people who specialize in health-related services, such as pharmacists, would receive tax credits to an amount more than $100,000 per year, since each may have 100 transactions per day. With tax credits such as these, services could be provided virtually at minimum wage as far as cost to the employer is concerned.
- This kind of tax credit will outperform past welfare reform such as minimum wage, Medicaid, and Medicare. Among the 600 billion to 700 billion payment transactions in the economy, the Consumer Goods and Services industry (28.5% of all transactions and about 17% of GDP) in combination with the Manufacturing industry (25.5% of transactions and about 17% of GDP), would account for over $1.1 trillion in tax credits ($3 / transaction * 54% of 700 billion transactions) for retail and manufacturing.
Reasons not to have a graduated income tax
- It is an injustice to farmers and other people who have variable incomes.
- It makes goods and services by highly paid individuals to become more expensive to everyone, especially the working-class.
- It leads to a complicated income tax bracket system, or some other complex mathematical function, while creating a need to justify them.
- In the context of having a $3 tax credit for each payment transaction, as is proposed in this document, a graduated income tax is not needed in order to achieve progressivity.
Reasons to have a flat company-wide payroll tax
- It is simpler to just tax the entire payroll using one percentage, than many portions of the payroll with a tax bracket system.
- The tax does not have to appear offensively on a person’s paycheck, much like how the other half of Social Security taxes currently do not appear on them.
- It is acceptable for it to be flat, on the grounds that a $3 tax credit per payment transaction allows for progressivity on money spent per transaction.
Establishing a transparent but non-intrusive means of tax collection and government spending
- The system’s transparency lies in its mathematical simplicity which is easy to comprehend. Federal taxes of the proposed system are simply 25% payroll taxes with no deductions. The proposed government spending of $3 tax credit per transaction of a value equal to two-thirds of the FY 2007 Federal budget of $2.8 trillion. A means to provide service to seniors under this system is by assisting the retail industry, whose worth has been underestimated by how much is invested in it. With its extra $30,000 of tax credits per employee annually, the retail industry can provide free goods and services to seniors. Since these tax credits are only a function of the number of payment transactions, it is matter of watching a customer leave the checkout with goods to know that the store or its chain will consequently be eligible for a $3 tax credit.
- It is non-intrusive since the payroll tax does not have to be seen by the employee and the per transaction tax credit does not necessarily appear on a customer’s receipt. It also interferes less with our lives and the lives of accountants since it easy to calculate the net transfer to the government once one knows: 1) the size of the non-tax portion of the payroll, and 2) the number transactions in which the company is involved with a customer.
I hope you or others can enjoy read this proposal as well as I did. If you like this proposal, please send me an email at kmarinas86@sailormoon.com, so I can add you to a mailing list and communicate with you and others about this plan.