George Washington Taxpayer owns 10 acres of land, four miles from the South Carolina coast, just a driver or two from the renowned Kiawah Golf Resort. Recent assessments (even in this dismal housing market) are solid seven figures, and the 25% or so of value mortgage has been overpaid every month for around ten years.

George and Martha have a totally clean credit rating, more than enough visible reported income, plenty of liquid, unencumbered assets, and a second building on their property that is used as an office for their very own, very private, very small business corporation.

The business has been “in the family” for more than thirty years, directly and indirectly employs about twenty other individuals and small businesses, and produces substantial, taxable income. It also pays rent and salaries to the Taxpayers.

George called Notquitesoquick Mortgage, LLC to re-finance his still barely “jumbo” loan — thinking, with a solid credit score, pretty impressive total documented income from all sources, a history of over paying, what could possibly go wrong?

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Franklie Impressed listened with interest as George explained both his finances and objectives — Notquiteso Quick stood to make thousands in fees and her commission would be substantial. She just couldn’t wait for this “no brainer” to be consummated — finally, a qualified borrower.

Franklie would be able to reduce citizen George’s mortgage payment by nearly 26% which she knew he would put back into the economy to the benefit of all the more potential homebuyers. She, in turn could think of two or three purchases she would be making over the weekend in anticipation of a bigger payday.

She hurried off to process the information George had provided…

George could not believe his ears as Franklie sobbed about the underwriter’s decision. His situation didn’t fit the regulatory guidelines because he ran a business from a building that he owned on his own property. Since he collected rent from (his) corporation that occupied the building, the property became ineligible for a mortgage from Notquitesoquick or, apparently, anyone else.

In frustration, George tried some logic — Franklie interrupted. That’s right Mr. Washington, as plainly stupid as it sounds, the regulations are clear. We cannot allow you to reduce your payments on this mortgage which you clearly have had no difficulty over paying regularly for the past ten years.

Our hands are tied, but if you lose your business and become less qualified in the future, please come back to speak with us — we’d just love to turn you down for some other ridiculous reason.

Sadly, this is too true a story. If you agree that we will eventually regulate ourselves into economic oblivion, please send me your stories for publication in a similar manner. Additionally, isn’t time that we all actually did something proactive to alter this scary trend?

Steve Selengut

Over the past 30 years Federal Tax receipts (Corporate, Personal, Estate, Excise, Gift, Social Security, Medicare, Medicaid, et al) have averaged less than 20% of Gross Domestic Product (GDP). Read that again, and don’t think for a minute that it’s not a large number.

But it’s not nearly large enough to pay the bills, reduce the national debt, grow the economy, and come to the aid of all of the people in the world who need us. Why, because nearly half of us (some legally, some not so) pay little or no federal income taxes at all— and because our elected representatives have no financial management skills.

The only taxes that always get paid are those that reduce the amount of spending money in our pockets and which raise the cost of the goods and services we purchase — thus retarding economic growth.

There is no doubt that a Federal Sales Tax on consumption by final consumers would produce more revenue than all of the other taxes combined — but how much, and is it OK to single out things like cigarettes and gas guzzlers for extra taxes?

We need to give it a try, and there would be added benefits: (a) we would be collecting taxes from all of those folk who earn incomes that are just not reported at all, (b) the products we try to sell in world markets would be more competitive, and (c) all of us would have more money to spend on stuff that could actually become lower in price.

There are no purely economic problems with making the shift to a consumption tax — just political ones. The legislation has been “on the hill”, and summarily ignored for decades. We need to apply cool economic sense to the elimination of the Internal Revenue Code and the Social Security Ponzi scheme.

First KISS: Create Jobs Right Now
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Create jobs immediately by eliminating the corporate income tax (and all other fees, local taxes, assessments, ad nauseum) for any corporation that adds 10% to its permanent workforce and/or 20% to its total workforce.

Corporations are not the bad guys, it’s the over-paid greedy dogs at the top that need to be leashed and disciplined by their employers — the shareholders, theoretically anyway. How about this for a start: all salaries above $1 million are paid in the form of dividends on common stock; all bonuses are “divvied up” dollar for dollar between all employees, full time or part time; there are no stock option programs.

Offset the Federal tax revenue loss by outlawing all forms of “earmarks” on any legislation ever; limiting all lobbying efforts to legitimate industry, employee, and public interest associations; and by enacting a 2% Federal Sales Tax on everything purchased by final consumers— no exceptions, period.

Create “Green Energy Bonds”, sold to investors with full federal guarantees, and used to help start up a Green Energy Investment Bank chartered only to provide low interest loans for developmental private sector projects. While we’re at it, bring back the distinctions between, commercial banks, savings and loans, and investment banks.

Second KISS: Lower and Eliminate Taxes

Lower taxes immediately by phasing in a mandated private SSRIA* program for all workers, private and public, from 1st day mailroom clerk to President of the US of A. Reduce Social Security Taxes to 3% over a five-year period and use that money to create a deferred, fixed-income, life-annuity for every worker.

Seventy percent of SSRIA investments would include US Government Bonds, state and local Municipal Securities, with the balance managed in non-derivative, individual equity investments regarded as Investment Grade Value Stocks*. No investment income of any kind would ever be taxable by any government.

SSRIAs would be created and managed by fixed-annuity experienced private sector companies, and the annuity contracts would “travel” with the employee until retirement. All SSRIAs would have identical provisions, no sales commissions or marketing expenses, and slightly below industry level investment management fees.

Employees would be assigned randomly to providor companies, and each contract would include “return of premium” term life insurance until annuitized. Add an additional 3% to the Federal Sales Tax to replace the reduction in Federal tax revenue.

Third KISS: Produce Sustainable Economic Growth

Now that we’ve become more competitive in world markets, assured retirement benefits for all workers, and helped to save the planet, it’s time to provide equal opportunity for all of us to attain the American Dream without big brother’s assistance.

Replace the personal income tax side of the Internal Revenue Code with a 5% flat tax and an additional 10% sales tax — maybe even a mandated 2% insurance premium for universal basic medical coverage. But at the end of the process, all reported income pays a 5% income tax — no exclusions, deductions, adjustments, minimums, period, and done!

Every purchase for final consumption generates a 15% contribution to support what we hope will become a smaller, less corrupt, more creative group of term-limited politicians. And, once the budget becomes balanced, further tax reductions will ensue.

Hey, write your congressperson, make some noise, Tweet, Digg, whatever. Now this is capital “c” change we can deal with — or at least dream about.

Author
Steve Selengut

Can be contacted on steves AT sancoservices DOT com

My survey produced an interesting anomaly— several respondents felt that excessive consumer spending was the primary cause of the economic problems we face today, and that spending is not to be encouraged.

But the root problem they were correctly speaking to is the source of the spending money, not the spending itself. Spending is essential for demand creation, and increasing demand is what produces jobs.

So why we ask, does government remove the dollars from the economy before they accomplish the demand stimulus “thingie” (highly technical economics jargon)? Nearly half the survey responses observed that consumption taxes (The Fair Tax) are far more productive/creative than income taxes.

The other half wants to replace the IRC (Internal Revenue Code) with a Flat Tax on all forms of income. Both suggestions are simple, and quantum leaps better than anything being seriously considered by congress— “seriously” being the operative word.

A combination of the two— priceless, but later!
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The single, easiest, fastest, biggest, consumer-spending instant winner bonanza is not even a twinkle in an old politician’s eye— there are far too few new politicians. Replace the Social Security Retirement Program with a plain vanilla pension plan, pre-funded by smaller, mandated employee contributions.

The current methodology is simple: it takes money out of our pockets (and our employers) puts it though governmental blenders, and spits out IOUs for a meager benefit at retirement. Why not let the private sector provide pension benefits to all employees under the direction of a trimmed down Social Security bureaucracy?

How? By purchasing Social Security Retirement Income Annuities (SSRIAs). Google “A Capitalist’s Social Security Reform” for the nitty-gritty details, but here’s what we accomplish:

We stimulate spending immediately by only withdrawing 3% of income from 300 million pockets and pocketbooks, and nothing from employer treasuries. We provide demand-push spending money and reduce demand for consumer credit.

And, looking forward an article or two, we collect a tax on every dollar spent in the economy— except those for food, healthcare, and higher education; even from our friends and neighbors in the Underground and Internet economies.

Some SSRIA details include: (1) No sales commission, no more than 10% in an approved list of equities, no multilevel derivatives or open end Mutual Funds, and no speculations; (2) Limited voluntary contributions and unemployed dependent eligibility; (3) Phased in transfer of existing Social Security and government employee pensions (including congress).

Using life annuities + a 50% of cash value, pre-retirement, term-life insurance benefit could prepay retiree Medicare benefits as well!

There are several other ideas on the more-spending-money-in-consumer-pockets agenda, and some thoughts about consumer confidence. It’s tough to be confident, for example, when you click the links between congress and business lobbyists.

It’s tough to be confident when we see Wall Street control its regulators, constantly produce the same speculative garbage, and reward its senior employees and sales persons from the carcasses of mutilated shareholder-owners and “hostaged” taxpayers.

These confidence destroyers can be dealt with, but first the rest of the story, on increasing consumer spending without credit abuse:

One: Reduce the interest rate on all mortgages at least twenty-five basis points, and adjust monthly payments accordingly. The banks owe us, and will make-up the difference from increased business activity.

Two: Bring the credit card mafia to its knees by enforcing reasonable usury laws (a 15% APR cap, for example) and include all fees, late charges and other debris in the calculation. Make minimum payments include a percentage of principal, and treat credit abuse like drug abuse.

Three: Eliminate all nuisance fees, taxes, surcharges, etc, forced on businesses and passed through to consumer statements. A $65 motel room should be a $65 motel room.

Four: Reduce state and local property taxes 10% per year for all persons over age 65, and devise a way to prorate this into rents paid by seniors— i.e., require landlords to pass through their savings.

Five: Eliminate all toll collections on highways, bridges, tunnels, subways etc.— everyone benefits from our transportation resources, the green impact is obvious, and demand for gasoline would be reduced significantly.

Six: Establish a combined federal/state/local $1,000 per month tax-free program for all workers. (The first $12,000 of each person’s income is untaxed). Workers earning less than $12K annually receive the difference in bank account debit cards. Usage could be restricted to essentials (no alcohol, gambling, tobacco, guns, jet skis, etc.)

Seven: Establish a $750 per month workfare program for the unemployed actually seeking work, but requiring no less than twenty hours of community service per week. Offset would be reduced numbers of government workers, shorter unemployment lines, and lower employer overhead expenses.

Thank you again for participating. I hope you all appreciate how important it is for you to help get simple ideas like these into the legislative arena. Find the time to address some of them aggressively in blogs, networks, and communications with elected officials.

Wall Street’s “Emperors New Clothes” game plan has infiltrated the federal government. The financial community has no interest in protecting investors from speculation and our elected representatives seem interested only in expanding their power by catering to the most generous special interests.

Do I hear congressional term limits as a “write-in” candidate for number eight?

Author
Steve Selengut
sanserve (at) aol (dot) com
Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”