The Center for Fiscal Equity: October 2009

Thursday, October 29, 2009

The Roots of the Iowa Center for Fiscal Equity

Please indulge me in an autobiographical moment. It says as much about the development of analytical technology tools as it does my intellectual journey to this point.

In 1973, when I was in fifth grade, our next door neighbors, the Culps, invited us to go with them to a costume party at the Enon Town Library. While we were there, we got library cards. I picked up a book about the structure of the American government. The next week, I was leafing through the book and saw a chart with the organization of the United States Government. I was shocked at the number of independent agencies, many of which duplicated the general functions of the various Executive Departments. At the time, I listed the departments and agencies, numbered the departments and assigned each agency the number of the department which most closely fit. That was my first reorganization plan and my first foray into government reform.

Over the years, I built on this plan, further consolidating the government into a smaller number of departments. In 1978, after we moved to Iowa, I ordered an OPM booklet about government jobs (which was free) and later sent away for the U.S. Government Organization Manuel. I then put each agency on an index card to sort them into larger departments and put the final result on cards, which I turned into a poster by taping them to a large sheet of paper.

In 1980, during summer break, I came up with the Interindependence, which was a fusion between capitalism and socialism (which I studied in World History junior year). I later developed the concept as a student at Loras College in my All College Honors class junior year, using Crevecour's Letters from an American Farmer and More's Utopia to further illustrate the concepts. This is the genesis of my papers on corporate governance, pay equity, 21st century homes and the 21st century career.

In 1983, when I was taking a computer class, I used my computer account to create a document outlining how the Executive Branch should be reorganized. I then printed this out and sent it to members of the Senate Government Affairs Committee and the House Government Operations Committee, as well as the White House and my local Congressman (Tom Tauke) and Senators Charles Grassley and Roger Jepsen. It looked official enough that people responded to it. Senator Grassley hand wrote a personal note in addition to the usual canned response. Vice President Bush sent me a brochure on Reform'88, which I later used the following fall term to write a paper for a class on the Presidency. During that class, In Re Chada came out, and I began to study the legislative veto and regulatory reform. During winter break, I wrote tracts on abortion, the national debt and the targeting of nuclear weapons that I sent these off to the usual suspects. The next term, I served an internship with Senator Jepsen in his Washington office. During my tenure there, I further studied reorganization, Reform'88, legislative veto and the Deficit Reduction Act, about which I constructed a table which made it into a decision memo for the Senator. It was during this period that I met Bruce Bartlett, who was the staff director of the Joint Economic Committee, which the Senator chaired.

The next fall, I started a Master of Public Administration degree at The American University. During this time, I studied the management of federal agencies, the budget process, regulatory reform, the possibility of a bottom line in government (answering V.O. Key's famous question) and the relationship between fiscal policy and growth. I began turning this into a manuscript called Systems of Accountability for Political Appointees and Government Officials. I applied for a Presidential Management Internship and stated in the first draft of my application that I wanted to reform government. I was told by the school to rewrite it with a better essay, which I did, adapting a paper I wrote on Artificial Intelligence for my fellowship. They nominated me and I survived the process to selection.

I served my internship at the Department of the Air Force as a Cost Analyst. My prior work on nuclear targeting came in handy when I was assigned to the Strategic Team of the Weapons Systems Cost Branch. In the Operations and Support Branch of the Air Force Cost Center and as a program control officer in the Flight Dynamics Laboratory, I learned about the Air Force budget codes, which helped me further developed my proposals on finding a bottom line in government. I also further researched the relationship between fiscal policy and growth. During this time, I also developed the concepts on allied government and international trade.

After my internship in 1989, I went back to American to pursue a Ph.D. , with a focus on the budget process and relations between the executive and Congress. I did not finish my degree, but I did use the PCs in the computer lab to create documents on regulatory reform, the budget process, government efficiency and the creation of a Senior Political Service and how it should interface with the career civil service. These I provided to DC's Shadow Sentaor, Jesse Jackson. On a vacation to Austin, Texas, I put pen to paper in a bohemian restaurant downtown on the religious concepts which became my Christian Humanism essays which evolved into my Christian Left blog, as well as additional narrative on world government and Interindependence. During this period, I also got involved in D.C. politics, working on John Ray's 1990 mayoral campaign.

After resigning my fellowship in 1991, while temping at IBM, I developed an economic transition plan for the former Soviet Union, which I sent to one of Boris Yeltsen's Washington advisers. I don't know whether it was used in the privatization effort, however if it was, it was used badly, allowing the oligarchs to buy out workers rather than putting shares in trust for retirement. During this period, I did contract work for the D.C. Community Prevention Partnership to do a needs assessment survey. I then joined the Partnership strategic planning process, where I developed my education proposals. I also penned the essay on progressive income taxation, which I later submitted (unsuccessfully) to the Post in 1997. I posted this on this blog earlier today. In 1992, I submitted some of my collected essays to the Clinton Transition Team.

In 1993, I got a job with a beltway bandit. In my spare time, I developed proposals to privatize the space transportation system, which I submitted with the budget essays, to the Vice President's Task Force on Reinventing Government. I also got involved in the Statehood movement that year. In 1994, I developed health care reform proposals, which I shared with members of Congress and with John Ray.

In 1994, I also petitioned the State of Maryland for senatorial representation for the District as an enclave within the state. A friend of mine, who had been Mayor Kelly's Ward 3 Constituent Services Representative, introduced me to George LaRoche in 1996, who agreed to turn this into a lawsuit, which was eventually turned into an Amicus brief to Howard v. Maryland (although this was done without me, since I had taken a job with Mayor Barry in 1997 and could not do such things independently. At this time, I developed the essay on local government finance. When the D.C. Control Board seized power from the Mayor later that year, I joined the Stand Up for Democracy in Washington, DC Coalition as the Mayor's representative. This resulted in my involvement with the DC Statehood Party, which I joined after Kevin Chavous lost the Democratic Primary to Tony Williams. The party was later merged with the DC Green Party to form the DC Statehood Green Party. The party was asked to write an Amicus Brief for the Adams v. Bush lawsuit, I co-wrote with John Gloster. This later evolved into my essay on getting Congress out of District affairs. I also developed a reorganization plan for the DC Government, which I submitted to the new Mayor and published in the Northwest Current.

After the election, I created the Generation X Committee on Social Security, Tax Reform and Economic Justice and submitted comments to the House Ways and Means Committee and the participants of President Clinton's Social Security Summit. I posted these submission today on this blog in entries corresponding to the dates that they were submitted. This organization evolved into the Iowa Center for Fiscal Equity, which was designed to submit proposals on Social Security and Tax Reform to Senator Grassley. It also submitted proposals to President Bush's Commission to Strengthen Social Security and the Task Force on Tax Reform, which are also on this blog.

In 1995, I assembled my collected essays into the first complete draft of my book, with the working title Essays on Justice. The book was later retitled Musings from the Christian Left as a companion book to a talk radio show I began developing after visiting a friend's show in 1998. Sadly, the station I was developing it for failed. After getting married and moving to Virginia, I worked on the show for Radio Del Ray, an Internet radio station, which also folded. Years later, after submitting an entry to the Air America next radio star competition, I found Blog Talk Radio, where I did a season of shows which are still available online. I finished the first edition of the book just before my daughter was born in 2003. I also posted the essays from the book on Geocities. In 2004, I did a rewrite of the book, sold and gave a way about 20 copies. I also found Blogger that spring and founded the Christian Left blog. In 2005, I started the Christian Libertarian Party Geocities and Blogger pages, which were targeted to red state readers. I also formed sites on Geocities and Blogger for the International Space Consortium and for my DC reform essays. You can read these entries here and on the blogs that link here. Geocities closed earlier this week, so I migrated all of that content to Blogger. Some of these entries are now located on the June 2004 page.

In 2007 I was recruited by the Center for Liberty and Community, who had seen my Christian Libertarian Party page. I now also blog on the http://www.freeliberal.com/. Last year I posted an analysis of the Fair Tax on both sites, as well as an endorsement of Mike Huckabee - not because I believe in the Fair Tax, but because it would have likely evolved in negotiations with the House Democrats into a Value Added Tax and Business Income Tax. I also developed grant proposals on tax reform, which fell through when the Center for Liberty and Community voted to fold. In searching for partners for this proposal, I found the TaxVox blog on the Brookings/Urban Tax Policy Center web page and the tax reform proposals of Professor Michael Graetz. I have recently reconnected with Bruce Bartlett and often comment on his online postings. There is now a group of us who actively work for the establishment of a VAT as part of comprehensive tax reform, which is now being considered by the President's Economic Recovery Advisory Board. My submission to the PERAB can be found below.

Wednesday, October 28, 2009

Comment's for Presidents Economic Revitalization Advisory Board Tax Reform Subcommittee

Comprehensive tax reform must be considered as an option to finance comprehensive health care reform. The TEA Party movement underscores public aversion toward the annual ritual where citizens disclose every financial detail to the government. Any health insurance reform which increases this annual invasion of privacy will likely be considered unacceptable as well.
The most obvious reform simply shifts the annual reporting obligation from the individual taxpayer to the employer, who already provides limited information and the majority of collection. The easiest way to do this is to broaden the Corporate Income Tax to include the taxation of wages and expanding payment to all forms of business ownership - with separate forms and filings for personal and business income taxation. All payroll taxes could be included, with the exception of Old Age Insurance and the portion of Survivors Insurance which go to retirees. For both employees and employers, this amount is roughly equal to 5.2% of payroll under the income cap and 2.9% of payroll over the cap. The resulting Business Income Tax would include the funds currently collected under Corporate Income Taxes, non-retirement payroll taxes and all personal income taxes collected at or below the 25% rate, including the first 25% of the higher 28% (permanent 31%) and higher rates, leaving tax rates of 6%, 11% and 14.6% (assuming use of the rates in permanent law) for high income individuals.

This plan is similar to the Value Added Tax (VAT) proposals of Professor Michael Graetz of Yale and Len Burman of the Tax Policy Center of Brookings/Urban, except that expansion of the Business Income Tax will require no new infrastructure to implement. Inclusion of a VAT component, where the VAT tax is listed in the purchase price and the BIT is left undisclosed, allows collection of a lower BIT, allows exporters to avoid paying taxes for services which benefit domestic consumers and assuring that all citizens are aware of a tax obligation (which serves as a disincentive to demand further spending. I recommend that the VAT be set in the 5%-15% range and be dedicated to CONUS, Alaska and Hawaii military expenses, veterans affairs and non-entitlement domestic discretionary spending.

Business Income Taxes would cover the financing of comprehensive health coverage, non-retirement/retired survivors entitlement spending from payroll taxes (Medicare, Unemployment Insurance, non-retiree Survivors Insurance, Disability Insurance), the general fund (Medicaid, TANF, Food Stamps, Energy Assistance, Housing Assistance), and the majority of tax subsidies directed at families (employee sponsored insurance, the Child Tax Credit, tax exemptions, the standard deduction and itemized deductions such as mortgage insurance) and businesses (although industry specific tax breaks would only be distributed after those subsidies directed at families were exhausted). Tax subsidies for families could be distributed as an addition to wages under this tax, rather than as an offset to payroll taxes as Michael Graetz proposes. Additionally, such entitlement subsidies as Food Stamps, Section (8) and Energy Assistance could be eliminated by assuring a large enough family income subsidy. Certain tax subsidies would naturally be done away with. Efforts at harmonizing tax structures with state income and sales tax systems would eliminate the need for a separate deduction for state taxes. The tax exemption for personal income tax would be raised to $75,000 for individuals and $150,000 (correction) for families to assure that only high income individuals pay these levies.

The Child Tax Credit could be expanded and retained to more effectively supplement the income of families, replacing deductions for dependents, the Earned Income Tax Credit, and any VAT rebate. If the Administration, the pro-life movement and Catholic Democrats are really serious about reducing abortion, the Child Tax Credit could be greatly expanded to $500 per month per child or dependent spouse/parent. This would lead to an increase in pay for poorer families and a shifting of how wages are distributed between tax benefits and base pay for higher income individuals, with a slight income loss for childless workers. This income loss removes the perverse incentive to terminate workers with families and other older workers who, even though they are more productive, are much more expensive than more recently trained entry level personnel. The expanded Child Tax Credit might also a replacement for mortgage subsidies in the tax code, provided the credit is set to a high enough level to allow more people to qualify for a mortgage in this uncertain market. Finally, paid and unpaid participants in workforce development programs, university education and adult literacy programs would receive the Child Tax Credit if they have dependents – rather than having to apply for a variety of income supplement programs for food, energy and housing.

Unlike Len Burman’s proposal, funding comprehensive health care reform with a business income tax retains the deductibility of employee sponsored health insurance and health insurance purchased by individual tax filers (both sole proprietors and partners). Provided the pre-existing condition reforms above are enacted, no separate voucher system will be required to prevent the cherry picking of insurance subscribers. Also unlike Mr. Burman’s proposal, Medicaid and Medicare would continued, although employers could be given an additional tax credit to fully cover all retired former employees rather than pay a portion of the B.I.T.. Such a proposal would assist manufacturers with large legacy health care costs as well.

The final BIT. Rate will be high, even with an offset for a V.A.T. However, most of the tax rate would be offset by payments to or for employees, so the amount reaching the United States Treasury would be relatively small, which provides a rationale to use a B.I.T. rather than a V.A.T. Having a separate V.A.T. also finesses the question of an alternative minimum tax (existing AMTs on both Corporate and Personal Income Taxes should be repealed). Note that this change should also include a dramatic increase in the minimum wage, so that no worker is employed simply to collect tax benefits and not a separate income. Should the tax benefits accruing to families for health insurance and the expanded Child Tax Credit exceed obligations under the B.I.T., V.A.T. receipts collected by the firm could be used to offset the difference.

Most employees would no longer file taxes under this scheme. Rather, employers would send notices to each employee informing them of the credits taken in their names for verification. The Internal Revenue Service (either federal or state) would generate a companion notice based on the employers filing, which would also be sent to the employee so that the two may be compared. Employees will be advised to contact the I.R.S. if the amounts do not match, particularly if the employer claims more to the I.R.S. than is actually paid. The Government will then make up the difference and bill the employer, with penalties. This also provides a partial check against systematic fraud, as returned notices would be investigated, as would multiple notices going to the same address.

The BIT and VAT would raise almost all of the income required for government operations. The simplified high income personal income and inheritance tax would cover net interest, debt repayment (including to the OASDI Trust Fund), foreign aid and overseas military and naval sea operations. The only deductions would be for charitable contributions and income from assets sales to a qualified employee stock ownership program.

Inheritances could no longer be separately taxed. Rather, withdrawals from inheritances, with the exception of sales to a qualified broad based employee ownership plan (either ESOPs or Stock Grants), would be taxed as normal income. Assets which are not sold and non-cash personal use assets over a certain value (clothing, cars, jewelry) would be exempt from tax unless they are sold (to be exempt they must be registered at probate).

This tax would only be levied while there is debt outstanding and the need for the projection of American military power. Should those needs ever cease, the tax would be suspended. The possibility that this might occur will encourage both a restrained military posture and higher tax rates to more quickly exhaust the national debt.

Monday, October 26, 2009

Christian Libertarian Party Manifesto

Geocities has gone away, so I have transferred everything I posted on my Christian Libertarian Manifesto page on Geocities to this blog. Here are links to the essays transferred that have a libertarian bent.

What is Christian Libertarianism

Christian Liberarian Summary

Liberation Morality

Rebuilding the Body of Christ

The Limits of State Power

Education, Welfare and Religion

Drugs, Mental Health and Crime

Racial Justice

Gay Rights

Birth Control and Stem Cell Research

Roe v. Wade and Reproductive Freedom

Abortion and the Christian Left

Limiting Congressional Meddling in District Affairs

The Budget Process and Regulatory Reform

Improving Budget Execution

Health Care for Seniors

Medical Lines of Credit

Medical Malpractice Reform

The True Nature of the Social Security Crisis

Comprehensive Tax Reform

State and Local Finance

Transportation Systems

Social Security and Ownership

Corporate Governance

Pay Equity

21st Century Homes: Interindependence

The 21st Century Career

Professional Sports Teams and the Entertainment Industry

Employee and Union-owned Multinationals and Trade

Converting Socialist Enterprise to Employee Ownership

Fighting for Justice

An International Bill of Rights

Elections and Campaign Finance

How to Pick Better Bureaucrats

Reform of the Civil Service

Reorganizing the US Government

Regional Government

Bringing Peace to Israel

Lessons from the War in Iraq

Toward Allied Government

A Private Space Transportation System

Going to Mars

Aerospace Firm Management

Ending Government as We Know It

Taking Action

Thursday, October 22, 2009

Leadership Conferences

The Iowa Center for Fiscal Equity will hold a series of leadership conferences on the issues of the day.Opinion leaders for the various perspectives, government officials, congressional staff and the media will be invited to examine several issues from a fresh perspective, with the goal of seeking a viable solution. The following issues will be discussed:

- Creation of Personal Retirement Accounts in Social Security and their impact on the workplace,

- The economic impact of regulation, governmental spending and fiscal policy on the various federal regions,

- Election and campaign finance reform,

- The impact of various tax reform proposals on abortion, the aging crisis and the funding of state and local government programs,

- Organizing faith-based organizations to provide vocational education, TANF casework, mental health, drug and alcohol treatment, corrections, and retiree health care and annuities.