Time For Real Fiscal Leadership

After yesterday's downgrade of the US government's credit rating by Standard & Poor's, an immediate and already tedious blame game has begun over who caused what and when. There's no surprise that Democrats are blaming Republicans and Republicans are blaming Democrats. The White House is even blaming Standard & Poor's. But regardless of where the fingers are pointing on the cause of the problem, the country needs strong leadership to find the solution and, like it or not, for the next 17 months that responsibility lies with President Barack Obama.

The Democrats have already telegraphed their next punch in the wake of the Downgrade by S&P - raise taxes.

They will never cut spending (specifically on Social Security, Medicare, Medicaid, and Welfare).

They will try and gut the Defense Budget, military salaries, and veterans benefits instead, but even if they succeeded, that would only be a drop in the bucket towards solving the problem.

Moreover, everyone is missing the real danger here: the downgrade means the interest on our soon to be $15 Trillion Dollar debt is going up. By how much, we don't yet know, but that is going to eat up even more the Federal Budget. It gets even more worse: the downgrade is going to trickle down to states and locality very, very quickly. They depend on grants and loans guaranteed by the Federal Govt, which will not be able to provide them as before.

The only glimmer of hope in all of this is that the Democrats will finally find themselves boxed into a corner. Our coming financial panic will be a coffin of their own making. The terrifying part is they intend to drag as many Americans into it before the lid gets shut.

Let me run this by all of you. I am former Morgan Stanley and I know all about the S&P Rating. And don't think there are not influences and crap going on in the background relative to our credit. Nobody is going to care about that and the credit will come back, IF WE MAKE A CHANGE.

There is a solution to all of this. Cutting spending is nice, but guess what, its never happened in the history of our government. This plan does not rely on cutting, its just a better way to finance government. And yes slow down government growth should be a goal too.

All our debt problems corrected and do away with taxes as we know it.

Here are the taxes that will be gone: Income Tax Gone, Captital Gains Gone, Death Tax Gone, Gas Tax Gone, State Sales Tax Gone, State Income Tax Gone, and Real Estate Taxes Gone.

Its called a Transaction tax, it is not add on, some countries tried it as an extra tax. That is a mistake and a typical socialist country will add it on.

It is not a VAT or Retail Sales Tax.

It is a tiny fee attached to transactions, every transaction.

Example: You earn $100,000 per year, and you transact say $300,000 in transactions a year (money churn, stocks etc), you would pay only a little less than $3000 for your total tax per year based on movement of $300,000 in money transactions. That's a fee automatically paid when you transact money. The genious of this is everybody pays a little, and nobody gets away without paying. Now, 50% of the populations pays NOTHING.

The Forex market would more than pay for the federal budget.

Stocks and Bonds would pay for the State and local

Individual transactions would probably make Social Security solvent.

This is better than a 23% National Retail Sales Tax (which is my distant 2nd choice), because the impact to individual tax payers is very small on this transaction fee. The whole thing would bring our economy back to life. Our economy essentially becomes TAX FREE!

We suck back money form overseas, investment in business, more hiring, everything you can imagine will turn us around.

No compliance, no IRS, no audits, and business has a free hand again. Go to APTTAX.com and read. The guy that did this web site, gives the facts, but its not a graphic illustration like it should be.

Comments?

Vladamir Putin, Queen Elizabeth and President Bush all died and, due to a clerical error, went to hell.

Putin was outraged and demanded to phone back to Russia. He talked for one hour and the devil billed him $100,000.

Queen Elizabeth was likewise offended and was allowed to call back to the UK. She spoke for five hours and the devil charged her $500,000.

President Bush - equally annoyed called back to the USA and talked for 6 hours. The devil charged him 10p.

Putin and The Queen demanded an explanation.

"Simple" said the devil. "Since Obama was elected America has gone to hell...it was a local call."

I think the whole debt ceiling debate, the equities market nosedive, and now the Standard & Poor's downgrade has finally made the world aware that President Obama's ideas for the economy has never really worked in the first place.

It is time for some true out of the box ideas to come to fruition. Besides passing the One Percent Spending Reduction Act of 2011 (H.R. 1848/S. 1316) to really cut spending by cutting baseline spending 1% per year from 2012 to 2018, we also need a RADICAL rethink of income taxation to reduce yearly compliance costs and to encourage American residents and businesses to keep their savings and investments in the USA.

The least desirable, but still vastly better than now, is the Forbes flat-rate income tax plan. At least you free up over US$200 BILLION per year for more productive uses and by ending taxation on savings and investment, will result in a most of that circa US$14 TRILLION in "offshored" liquid assets to return to the USA. However, the compliance costs per year is about US$75 billion, and you still need the IRS to manage the plan.

A more desirable plan is FairTax (H.R. 25/S. 13). We just about completely eliminate year tax form filings (except for the yearly W-4 like form filing stating how many people in the household to determine the level of prebate payments per year), and it would be really cheap to administer--about US$15 billion per year. However, the problem here is that it would require an automatic payment forwarding system for the 23% consumption tax that has to be updated at least once a day, and that will require an update investment in data infrastructure that could be quite expensive.

A even more radical idea is the Automated Payment Transaction Tax, where every monetary transaction is subject to a 0.3% tax. By taxing every transaction at that very tiny rate, we can generate enough revenue per year to get rid of the ALL income taxes and state/local sales taxes! If the idea works, it could make the yearly cost of FairTax look expensive in comparison! We're talking the possibility of saving Americans something like (in my estimation) US$600 BILLION per year in Federal and state tax compliance costs! Of course, the only problem is setting up the mechanism to collect those taxes--it could be pretty expensive for a one-time installation of equipment to handle what could be a huge amount of data transactions per day collection that 0.3% tax.

But yet, in the end, the current income tax system is overly complex with its high attendant compliance costs and the high maximum tax rate discourages savings and investment in the USA. It's time chuck that tax system out the door like yesterday's bath water and start over with something way better.

Back during the Reagan years some commentator “discovered”, and if not really discovered, then articulated for the first time, that the tax system is what feeds the political system, Congress and state legislatures. It is thanks to its complexity and the small favors selectively granted that the legislators are able to collect the huge sums required for elections and re-elections, or what we would call if the subject of discussion were another country that’s not as perfect ours: bribes.

Already then there were ideas for reform no worse than the ideas above, and no chance in hell to have them passed, for the very reasons stated above

In my humble opinion, we should RIGHT NOW announce that starting for the 2012 tax year, we will implement the Forbes income tax plan. The result: you would see so much money pouring into our financial institutions on January 2012 from local credit unions to the largest investment banks that we could possibly quickly write off a lot of the home mortgage losses in no time flat. Once the flat tax is in place, then we can start a three to four year process to transition away from income taxation and go to either FairTax or the APT Tax.

But I still think we need to right now dial back all spending back to 2007 levels, then do an aggressive audit of every Federal, state, and local government agency for bureaucratic overlap, agency bloat and excessive/obsolete regulations and use the audit results to reduce the size of government 30% now, with an eventual goal of over 50% in four to five years.

Anyway, I can now confidently say that Obama is officially "toast" in terms of winning a second term as President. I would not be surprised that we could see a challenge from another Democratic candidate, one that could announce as early as late September 2011.

It would be nice to have 5 minutes with Herman Cain, Michelle Bachman, and Rick Perry to explain this.

I would not "transition" with a flat tax or the NRST.

Those are poor second choices. Go for the gusto, and use the Presidents Power (newly elected President) to implement the APT TAX, and sunset enforcement of the Income Tax.

By Executive Order, stop enforcement of the IRS powers to collect.

And get the congress to approve a test of the system.

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