We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are

Life, Liberty and the pursuit of Happiness.

That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed,

Friday, January 12, 2007

It’s Time to Really Tax the Wealthy

Never in my life would I have thought that I would be advocating a new federal tax. But it is now apparent that for the last 30 years we have entrusted our constitution to the very people who seek to destroy the notion of self governance and it is time to put an end to their tyranny.

Last week while watching a rally for the minimum wage, the honorable Ted Kennedy (D-Mass) was asked about income taxes for those people making more than $75,000 per year. His response was a very emphatic “we’re gonna raise em and raise em and raise em and raise em!”

In other words, Ted Kennedy considers anyone making over $75,000 as “wealthy”.

While I would love to be wealthy, I sincerely doubt that most people making $75,000 per year have a net worth (real wealth) that is anywhere near Senator Kennedy’s $93 million. In fact I doubt that most people making double that amount have a net worth close to our Senator John Kerry’s $235 million or Senator Herb Kohl’s $234 million.

I say “most people” making $150,000 per year is because that is about the amount that these wealthy senators collect as income for “serving” the tax payers of their states.

This low income trick is not just reserved for our elected officials, America’s second wealthiest person Warren Buffet, with a net worth of $46 billion, reports an annual income of only $100,000. Ironically, during most tax debates, those in favor of raising taxes will often present the grandfatherly, Mr. Buffet to state how he actually wouldn’t mind an “income tax” increase. Of course not, you could raise his income tax to 99% and you wouldn’t make a dent in his wealth. Who needs income when you’re already wealthy?

What is even more disturbing is that even though we have heard “tax the wealthy” as the justification for all the tax increases that have occurred over the last 30 years, these people have seemed to increase their wealth year after year.

When Bill Clinton lived in the White House, he claimed that he signed his income tax forms “with a big smile on his face.” This was supposed to let people know just how much he loved contributing his fair share to the big U.S. Treasury pie, who’d then use his tax dollars to fund government cheese and Midnight basketball leagues. But if he was really contributing his fair share, how would it be possible to attain the wealth he and Senator Hillary Clinton often wave in our faces after only a few short years since leaving the White House? Certainly not from the stock market, perhaps they’re back to trading pork bellies?

So despite all the good intentions of our elected representatives to redistribute wealth among the various income groups, all they have managed to do is keep average hard working Americans from becoming wealthy or even saving enough to provide for a comfortable retirement, while doing nothing about the ever-increasing concentration of wealth among a very small group.

This is not quite without intention, I guess. By keeping people from building an adequate nest egg, they make them more dependent on government-backed programs such as social security and Medicare. The more people depend on government monies, the more will vote for people who promise them government monies.

What’s even worse, many of the wealthiest people are now becoming more and more influential about who will control our government.

In the 2004 election, George Soro’s ($8.5 Billion in wealth) spent an estimated $23 million dollars trying to get “his” candidates elected. That’s more money in 1 year than the average American will make in their lifetime. Soro’s lives in New York, however this money did not go just to Hillary Clinton, Chuck Schumer and Soro’s congressional representative, it was used to influence elections far beyond the state of New York. Who can discuss campaign finance reform with a straight face when it would take 11,500 average Americans contributing $2000 each just to match Soro’s influence?

The wealthy have actually gotten into Washington as well. As of the 2006 mid-term election, 40 of the nations 100 elected Senators were millionaires based on their own financial disclosure forms. In the 435-member House of Representatives, 123 elected officials earned at least one million dollars last year according to recently released financial records made public each year. Many of them became millionaires while in office.

So I am writing to you today my fellow American, to join me in using our constitutional right to petition government before that too is taken away by the apparent Monarchy that has crept into power. I am asking you to join me in demanding that before our Congress and President raise income taxes one more penny, that they really start taxing the wealthy by instituting the wealth tax, based on the net worth of the most privileged Americans.

You see my friends while it is easy to hide income (and the wealthier you are, the easier it is to hide), you cannot hide wealth. In order to control wealth, it must be visible at some level. You can reduce your wealth by transferring it to others, but it will only show up on their balance sheets instead of yours.

By taxing wealth, instead of income, we will finally ensure that the wealthy do pay their fair share.

Here is what I propose: all people with a net worth as determined by the IRS of $10 million or more will pay 50% of every dollar of net worth over $10 million every year.

In the case of Warren Buffet, he would pay a total of $23 Billion in 2007, based on his net worth as of $46 billion in 2006. If his net worth did not change in 2007, he would pay $11.5 billion in 2008. Of course, given the large amount of money, these tax payments would be made in 4 quarterly payments over the course of the year.

Based on a quick look at the Forbes 400 richest Americans, wealth tax revenues in 2007 would exceed $1.3 Trillion or more than 50% of the US budget. In addition to this wealth tax, anyone reaching the $10 million level of net worth would lose their claim to all Social Security, Medicare and Medicaid entitlements. As House Speaker Nancy Pelosi has stated recently, the wealthy just don’t need it.

Why would they only pay after reaching a net worth over $10 Million? Because, unlike so many others, I do not seek to punish wealth. In fact it is my hope that Congress would actually enact a flat tax of 20% or less to allow more Americans to reach the $10 million mark faster.

Once they reach a net worth of $10 million though, they should be in a position to live very comfortably the rest of their lives. All I’m saying is that once you have reached that point of financial independence, it is time to give a portion of your excess to those less fortunate. And therein is the second and most important part of my proposal.

To just give the money to the government to fund the same failed social programs would be insane. Senator Kennedy just a couple weeks ago admitted that we are losing the war on poverty, unfortunately he also recommended that we “stay the course” and just throw more money into the quagmire of despair.

So instead of pouring that windfall into the general fund, I would like to see the money go directly to the poor. How? Through the creation of Life Savings Accounts (LSA) for every legal US citizen with a net worth under $50,000 and who’s income is in the bottom 25% of the population. Based on an estimated population of 300 million people, Life Savings accounts in the amount of $20,000 would be opened for the 75 million poorest Americans.

The way this would work is different than other programs. For example, instead of a qualifying family of 5 getting one account to work with, each legal social security number associated with that family would get its own corresponding account.

At its basic level, the Life Savings Accounts would work essentially the same way as the Health Savings Accounts being used by many Americans. Each account would pay for a high deductible (typically $1500 for individual accounts) health insurance policy and the account would pay for all deductibles until the policy kicked in.

The balance of the money in the account would be invested in a portfolio of mutual funds based on a formula created by Nobel Prize winning economist Dr Harold Markowitz and rebalanced annually. This model has been shown to not only be capable of providing the funds to maintain the health insurance policy for each individual, but over the long term grow the fund into a great nest egg.

Where the LSA differs from Health Savings Accounts, is in 2 key areas.

First, young children who receive these accounts at an early age could realistically accumulate a sizable sum of money by the time they reach college age. Therefore, these kids would be allowed to use money in the account to pay for tuition toward a college education or training in a skilled trade. The sum allowed would be limited to a draw down to the original $20,000 as this would be required to maintain their health care.

Second, once the owner of the account reaches the age of social security entitlement, would be able to begin to withdraw money from the account based on actuarial life expectancy, after setting aside an adequate reserve for maintaining the health care provision.

However, like HSA’s, each owner would be able to contribute more his or her own money on an annual basis as they become more affluent. When the owner dies, the LSA is distributed to his/her direct beneficiaries, which may affect their net worth.

Since these LSA’s would be owned by each individual, there would be no need for the creation of another government bureaucracy. Pre-approved Investment Banks and Mutual Fund companies would manage the accounts and the investments. Insurance companies that already participate in HSA’s have the infrastructure in place to handle LSA clients and the IRS already has the ability to determine the Net Worth of every American. Additionally, the simplification of the tax code would free up more IRS employees to handle any shift in work load. In other words, this tax would result in no additional government costs to implement.

So in summary, I’m asking you to join me in petitioning for a true tax on the wealthy:

Everyone with a net worth over $10 million will annually pay a 50% wealth tax for every dollar of net worth over $10 million.

Everyone with a net worth over $10 million will give up their right to Social Security, Medicare and Medicaid entitlement.

The money collected from the wealth tax will be used to open up Life Savings Accounts for every person in the bottom 25% of wage earners with a net worth under $50,000, including children. Any left over money will go towards lowering the national debt.

Life Savings Account owners would be required to maintain a high deductible health insurance policy and use the fund to pay for all qualified medical deductibles.

Life Savings Account owners would be able to use qualified funds from the account to pay for college or trade school tuition.

Life Savings Account owners who reach the age of Social Security entitlement would be allowed to make annual withdrawals of qualified funds based on actuarial life expectancy.

Finally, upon death, all assets from the owners LSA will be transferred to his/her beneficiaries and will be included in the calculation of their net worth.

Please note that I personally will never qualify to receive a Life Savings Account, although I do aspire to someday be wealthy enough to pay my own wealth tax.

I am doing this because I am sick and tired of the taxation shell game that has been played on the citizens of this country. Helping to bring our fellow citizens out of poverty and ensure that they have access to good health care is the right thing to do and not a political stunt.

We’ve had 40 years of the Great Society and no one I know is happy with its result. It’s time for real action that can produce real results. Please join me in this quest.

I need people like you to help me champion this cause. Please talk to your family and friends, your church leaders and most of all you State Senators and Representatives.

Alone I will never succeed, together; we can finally push this country in the right direction and remind our elected officials that it is a government of all the people, not just the wealthy.

No comments: