Waiving Work Requirements in the TANF Program

Comments for the Record

United States House of Representatives

Committee on Ways and Means

Subcommittee on Human Resources

Hearing on Waiving Work Requirements in the TANF Program

Thursday, February 28, 2013, 9:00 AM

By Michael G. Bindner

Center for Fiscal Equity

Chairman Reichert and Ranking Member Doggett, thank you for the opportunity to submit comments on these issues. While this subcommittee has addressed this issue before, and will likely continue to do so until we can find a more satisfying solution to the problem of poverty in America, this topic yielded additional national attention in last Fall’s campaign, due to its misuse. Hopefully, this hearing addressed rather than exacerbated the truth deficits on this issue.

As always, the Center for Fiscal Equity is available to brief the Subcommittee, individual Members and staff regarding this issue and our approach to it, which we have provided before. We await your invitation to talk.

Sadly, the Center believes that welfare reform has worked exactly as intended in far too many cases and it is only recent reforms which have mitigated the harm done to marginally skilled families. The current law is in drastic need of reform, although we do not expect the current majority to propose those reforms which would actually improve the lives of our nation’s economically marginal families. Allowing the Secretary to issue waivers to force more people into dead end jobs when they are not even literate is not a step in the right direction.

We note that the Chairman referred to helping able-bodied recipients to find jobs. In this day and age, the challenge is finding able-minded ones.

The goal of using welfare reform to cut case loads and reduce budgets has led some states to cherry pick TANF participants, directing families in more need of assistance to the Social Security Disability program or other forms of assistance. This helps no one escape long term poverty. Further, lifetime benefit limits have pushed poorer women to use abortion services to preserve the economic health of their families. Poor women have been chosen to sacrifice their children for subsistence, just as ancient Israelites sacrificed their children to Baal for a good harvest. We can do better.

The work opportunities available to most TANF participants can easily be described as low wage work and, without significant resources in human development, are likely dead-end jobs. Such jobs often receive tax subsidies, such as the Earned Income Tax Credit and the payroll tax holiday. One must look askance at any programs which transfer the responsibility for providing adequate wages from the employer and the consumer to the taxpayer.

The Making Work Pay tax credit and the payroll tax holiday subsidized low wage labor where the preferred option would be a higher minimum wage, forcing employers and ultimately consumers to pay for the services they receive. Minimum wage laws, such as the one the President proposed in his State of the Union Address are necessary because they level the playing field so that employers cannot initiate a “race to the bottom” by allowing workers to compete against each other to offer ever lower wages, often leaving families in the impossible position of having to bid well below what would otherwise be a reasonable standard of living in order to survive.

Increases to minimum wages and benefits, such as mandatory sick leave are, by far, the best incentive to get people to work. Mandatory sick leave would also help the prospects of health care reform, as parents would no longer be forced to resort to emergency room care because the doctor’s office is closed during working hours, thus decreasing costs for all. I recently had a hospital stay for chest pains. The lobby was full of families with children needing care for the flu who could not get it during the day or from a normal doctor.

Another area that will help make work more attractive is income support for families. Such support addresses real market failure in the employment market. It is entirely appropriate to use tax benefits to assure that all families receive a decent wage.

The United States Department of Agriculture estimates that it costs about $1,000 per month per child to provide a decent level of subsistence. The federal government could easily guarantee half of this amount using tax reform, with states providing the other half with coordinated tax benefits.

This credit would replace the earned income tax credit, the exemption for children, the current child tax credit, the mortgage interest deduction and the property tax deduction. This will lead employers to decrease base wages generally so that the average family with children and at an average income level would see no change in wage, while wages would go up for lower income families with more children and down for high income earners without children.

This shift in tax benefits is entirely paid for and it would not decrease the support provided in the tax code to the housing sector – although it would change the mix of support provided because the need for larger housing is the largest expense faced by growing families. Indeed, this reform will likely increase support for the housing sector, as there is some doubt in the community of tax analysts as to whether the home mortgage deduction impacted the purchase of housing, including second homes, by wealthier taxpayers.

One major obstacle in getting TANF recipients into the working world is the quality of skills they bring to the table. Indeed, a recent survey of the vocabulary of TANF recipients in public housing puts it below the level of the average seven year old. Not seventh grader, seven year old.

State based efforts to move TANF participants to a level of basic – or even advanced literacy – should be applauded. Indeed, provisions to not only provide remedial education to all who require it should be a mandatory part of TANF reform, not just in states that chose to.

Literacy training must also be provided to fathers if required. Indeed, to facilitate this, the restriction on benefits to intact families must be abolished. Furthermore, compensation for this training should be as rewarding as work, so participation should be compensated at the minimum wage.

In addition to the wage, participants should also receive the same Child Tax Credit as those who work, as well as the same level of health insurance, which could be offered to them as if they were employees of the education provider – thus ending the second class care they receive through the Medicaid program, as well as the need to pay benefits through large, yet underfunded, social welfare bureaucracies at the state level. Public housing should be replaced with residential training programs for both parents and children.

Program participants must be treated as adults. If they are, they can be expected to behave as such. All too often, the fiscal, welfare and immigration policy of the United States seems designed to provide a pool of low wage workers for the food service industry – from the field to the fast food counter. While these jobs may provide some degree of upward mobility, at times they are akin to slavery.

In the 21st Century, we can do better than that. If some products cannot be produced without what amounts to subsistence wages, than perhaps those products should not be produced at all, either at home or abroad. It should not, indeed it must not, be the policy of the United States Government to shield consumers from paying decent wages to those who feed us.

Establishing a decent level of income through paid remedial training, increased minimum wages and increased family support through an enhanced refundable child tax credit will also reduce the need for poor families to resort to abortion services in the event of an unplanned pregnancy.

Indeed, if state governments were to follow suit in increasing child tax benefits as part of coordinated tax reform, most family planning activities would be to increase, rather than prevent, pregnancy. It is my hope that this fact is not lost on the Pro-Life Community, who should score support for this plan as an essential vote in maintaining a perfect pro-life voter rating.

The Center for Fiscal Equity applauds any state which uses excess MOE credits to provide decent income and training to participants without requiring that they work in substandard jobs. We challenge those who support the current law to produce any success stories of workers who started in low wage jobs through TANF and have now entered the middle class. We expect that there are less such stories than the number of children aborted due to life-time benefit limits under this program.

Thank you again for the opportunity to present our comments. Again, we are always available to members, staff and the general public to discuss these issues.

Examining Traditional Medicare’s Benefit Design

Comments for the Record

U.S. House of Representatives

Committee on Ways and Means

Subcommittee on Health

Hearing on Examining Traditional Medicare’s Benefit Design
Tuesday, February 26, 2013, 10:30 AM

By Michael G. Bindner

Center for Fiscal Equity

Chairman Brady Ranking Member McDermott, thank you for the opportunity to submit these comments for the record to the House Ways and Means Committee. We remain available to brief members and staff on our proposals for retirement and health care reform.

It is always important to note when discussing reform options that the whole purpose of social insurance is to prevent the imposition of unearned costs and payment of unearned benefits by not only the beneficiaries, but also their families. Cuts which cause patients to pick up the slack favor richer patients, richer children and grand children, patients with larger families and families whose parents and grandparents are already deceased, given that the alternative is higher taxes on each working member. Such cuts would be an undue burden on poorer retirees without savings, poor families, small families with fewer children or with surviving parents, grandparents and (to add insult to injury) in-laws.

Recent history shows what happens when benefit levels are cut too drastically. Prior to the passage of Medicare Part D, provider cuts did take place in Medicare Advantage (as they have recently). Utilization went down until the act made providers whole and went a bit too far the other way by adding bonuses (which were reversed in the Affordable Care Act). There is a middle ground and the Subcommittee’s job is to find it.

Resorting to premium support, along with the repeal of the ACA, had been suggested to save costs. It is our hope that the election results took this off the table, however we will reprise our analysis of this option if and when it comes up.

One option is resorting to single-payer catastrophic insurance with health savings accounts. It would not work as advertised, as health care is not a normal good. People will obtain health care upon doctor recommendations, regardless of their ability to pay. Providers will then shoulder the burden of waiting for health savings account balances to accumulate – further encouraging provider consolidation. Existing trends toward provider consolidation will exacerbate these problems, because patients will lack options once they are in a network, giving funders little option other than paying up as demanded

The bigger question is whether private insurance survives the imposition of pre-existing condition reforms. We do not have to wait until implementation to examine this question. Now that the Supreme Court has spoken, the stock market will examine it for us. There may well be a demand for reform before the Act is fully implemented if the prospects for private insurance are found wanting. Conversely, if stock prices are maintained, it is the market expecting mandates to be adequate. This question is by far more important than the design of the traditional system.

If mandates are seen as inadequate, the questions of both premium support and the adequacy of provider payments are moot, since if private insurance fails the only alternatives are single-payer insurance and a pre-emptive repeal of mandates and consumer protections in favor of a subsidized public option. The funding of either single-payer or a public option subsidy will dwarf the requirement to fund adequate provider payments in Medicare and Medicaid.

Shifting to more public funding of health care in response to future events is neither good nor bad. Rather, the success of such funding depends upon its adequacy and its impact on the quality of care – with inadequate funding and quality being related.

Recent reforms have essentially turned the Medicare Part A Payroll Tax into a virtual consumption tax by taxing non-wage income above $250,000 a year. It would be as easy to shift from a payroll tax to a value added or VAT-like net business receipts tax (which allows for offsets for employer provided care or insurance) and would likely raise essentially the same amount of money, as most non-wage income actually goes to individuals now liable for increased taxes. If a VAT system is used, tax rates can be made lower because overseas labor will essentially be taxed, leaving more income for American workers while raising adequate revenue.

One form of increased funding could very well be higher Part B and Part D premiums. This has been suggested by both the Fiscal Commission and the Bipartisan Policy Center. In order to accomplish this, however, a higher base premium in Social Security would be necessary. Our proposal is that to do this, the employee income cap on contributions should actually be lowered to decrease the entitlement for richer retirees while the employer income cap is eliminated, the employer and employee payroll taxes are decoupled and the employer contribution credited equally to each employee at some average which takes in all income. If a payroll tax is abandoned in favor of some kind of consumption tax, all income, both wage and non-wage, would be taxed and the tax rate may actually be lowered.

Ultimately, fixing health care reform will require more funding, probably some kind of employer payroll or net business receipts tax – which would also fund the shortfall in Medicare and Medicaid (and take over most of their public revenue funding), regardless of whether Part B and D premiums are adjusted. If the same consumption tax pays both retirement income and government health plans, the impact on the taxpayer is exactly nil in the long term.

We will now move to an analysis of funding options and their impact on patient care and cost control. The committee well understands the ins and outs of increasing the payroll tax, so we will confine our remarks to a fuller explanation of Net Business Receipts Taxes (NBRT). Its base is similar to a Value Added Tax (VAT), but not identical.

Unlike a VAT, an NBRT would not be visible on receipts and should not be zero rated at the border – nor should it be applied to imports. While both collect from consumers, the unit of analysis for the NBRT should be the business rather than the transaction. As such, its application should be universal – covering both public companies who currently file business income taxes and private companies who currently file their business expenses on individual returns.

The key difference between the two taxes is that the NBRT should be the vehicle for distributing tax benefits for families, particularly the Child Tax Credit, the Dependent Care Credit and the Health Insurance Exclusion, as well as any recently enacted credits or subsidies under the ACA. In the event the ACA is reformed, any additional subsidies or taxes should be taken against this tax (to pay for a public option or provide for catastrophic care and Health Savings Accounts and/or Flexible Spending Accounts).

The NBRT can provide an incentive for cost savings if we allow employers to offer services privately to both employees and retirees in exchange for a substantial tax benefit, either by providing insurance or hiring health care workers directly and building their own facilities. Employers who fund catastrophic care or operate nursing care facilities would get an even higher benefit, with the proviso that any care so provided be superior to the care available through Medicaid. Making employers responsible for most costs and for all cost savings allows them to use some market power to get lower rates, but no so much that the free market is destroyed.

This proposal is probably the most promising way to arrest health care costs from their current upward spiral – as employers who would be financially responsible for this care through taxes would have a real incentive to limit spending in a way that individual taxpayers simply do not have the means or incentive to exercise. While not all employers would participate, those who do would dramatically alter the market. In addition, a kind of beneficiary exchange could be established so that participating employers might trade credits for the funding of former employees who retired elsewhere, so that no one must pay unduly for the medical costs of workers who spent the majority of their careers in the service of other employers.

The NBRT would replace disability insurance, hospital insurance, the corporate income tax, business income taxation through the personal income tax and the mid range of personal income tax collection, effectively lowering personal income taxes by 25% in most brackets.
Note that collection of this tax would lead to a reduction of gross wages, but not necessarily net wages – although larger families would receive a large wage bump, while wealthier families and childless families would likely receive a somewhat lower net wage due to loss of some tax subsidies and because reductions in income to make up for an increased tax benefit for families will likely be skewed to higher incomes. For this reason, a higher minimum wage is necessary so that lower wage workers are compensated with more than just their child tax benefits.

Thank you for the opportunity to address the committee. We are, of course, available for direct testimony or to answer questions by members and staff.

The Budget and Economic Outlook: Fiscal Years 2013 to 2023

Comments for the Record

to the

United States Senate

Committee on Finance

The Budget and Economic Outlook: Fiscal Years 2013 to 2023

Tuesday, February 26, 2013, 10:00 AM

By Michael G. Bindner

Center for Fiscal Equity

Chairman Baucus and Minority Leader Hatch, thank you for the opportunity to provide comments for the record on this topic. As always, we are available to more fully brief members and staff regarding our comments or to answer any questions.

We expect that Dr. Elmendorf will bring you his best assumptions, as is his duty as Director of the CBO. Meanwhile, Dr. Holtz-Eaken will likely continue to call for the need to cut entitlements while Mr. Greenstein will defend them.

At the Center for Fiscal Equity, we continue to offer a fresh approach that will help control spending, improve the performance of entitlement programs and lead to the paying down, if not paying off, of the national debt. In today’s comments, we will highlight how our four part plan of reform accomplishes this – especially if taken to its fullest extent. Our plan is as follows:

• A Value Added Tax (VAT) to fund domestic military spending and domestic discretionary spending with a rate between 10% and 13%, which makes sure very American pays something.
• A VAT-like Net Business Receipts Tax (NBRT), which is essentially a subtraction VAT with additional tax expenditures for family support, health care and the private delivery of governmental services, to fund entitlement spending and replace income tax filing for most people (including people who file without paying), the corporate income tax, business tax filing through individual income taxes and the employer contribution to OASI, all payroll taxes for hospital insurance, disability insurance, unemployment insurance and survivors under age 60.
• Employee contributions to Old Age and Survivors Insurance (OASI) with a lower income cap, which allows for lower payment levels to wealthier retirees without making bend points more progressive. The floor of contributions could also occur where the Earned Income Tax Credit occurs now, because employer contributions will be funded equally (regardless of individual wage). 
• Personal income surtaxes on joint and widowed filers with net annual incomes of $100,000 and single filers earning $50,000 per year to fund net interest payments, debt retirement, regional deficits and overseas and strategic military spending and other international spending, with graduated rates between 5% and 25% in either 5% or 10% increments. Heirs would also pay taxes on distributions from estates, but not the assets themselves, with distributions from sales to a qualified ESOP continuing to be exempt.

Using these tools, we can gain control over our budgetary and economic policy, rather than have it happen too us as the CBO projections seem to indicate.

The debate for many years now centers on discretionary spending. Indeed, the current sequester takes place solely in that sphere because it is most controllable. Both parties hold on to the dream that the budget could be controlled if wasteful pork-barrel spending were limited. At the Center, we agree, although providing such control would require a constitutional amendment, as a Value Added Tax qualifies as excise taxes for constitutional purposes. Our proposal would be to segregate discretionary non-strategic military and civil spending into regional pools and have them be fully funded by a regional VAT. If a region wanted more spending, it would raise its tax rate. If it wanted less spending, spending cuts would occur. On the occasion that a region is facing dire economic circumstances and fiscal policy appears to be the answer, it would be allowed to run a deficit – but only then. This puts the power to determine the size of government back in the hands of the people, especially if the VAT is receipt visible.

Net Business Receipts Taxes (NBRT) are similar to a VAT, except that they allow employer offsets for providing social goals. If employer contributions to Social Security were to include personal retirement accounts (which should only hold insured employer voting stock rather than funds for the Wall Street Casino), they would be an offset to this tax. Otherwise, they would be offset from the VAT. This tax would also include offsets for health care funded by the employer as well as an enhanced, consolidated and refundable Child Tax Credit, as the Center has explained in multiple comments over the past two years. If the Affordable Care Act collapses the private insurance system, however, and no offsets are allowed, then the VAT rather than the NBRT would fund any single-payer system. The NBRT could also be regionally set (falling under the same constitutional change allowing regional VATs) and could include deficit spending to develop regions which face human capital deficits.

Individual OASI taxes can be reduced, with more of the burden put on employers and consumers – who in reality pay the tax anyway, especially if the employer tax is shifted to a consumption tax. The goal of such a change would be to reduce or eliminate bend points in the benefit system, with progressivity provided on the employer side while allowing employees an incentive to demand higher wages to build their retirement savings. The OASI taxes would need no adjustment to solve the Social Security funding program, as the easier fix would be to increase NBRT obligations instead. Because the NBRT and/or VAT have no income cap, increasing these taxes will not hurt American workers or jobs as much as a change to the payroll tax or benefit formulas surely would.

As to the income surtax, we would urge that inheritance tax changes recently enacted in the American Tax Relief Act be modified so that inheriting an asset is not a taxable event, but liquidating it becomes one above the same floor as the income tax. We urge you to respect equality among the living rather than among the dead.

The recent CBO report, which will undoubtedly be discussed, shows that the major driver for our deficit is the funding of net interest on the debt, especially internationally. The Center commented upon this instance to the House Ways and Means Committee on February 14th on this topic regarding tax reform and charitable contributions. We stated, regarding Net Interest, that:

This explosion essentially fuels the growth of the growth of the Dollar as the world’s currency. Essentially, this means that we pay our expenses with taxation (even without adopting the Center for Fiscal Equity Plan) while we roll over our debt without repaying it. This seems like a wonderful way for American consumers to continue to live like imperial Rome, however it cannot last.

There are two possible ends to this gravy train. The first is the internationalization of the Dollar, the Federal Reserve and our entire political system into a world currency or government and its concurrent loss of national sovereignty or the eventual creation of rival currencies, like a tradable Yuan or a consolidated European Debt and Income Tax to back its currency. In the prior case, all nations which use the Dollar will contribute to an expanded income tax to repay or finance the interest on the global debt. In the second case, the American taxpayer will be required to pay the debt back – and because raising taxes on all but the wealthy will hurt the economy, it will be the wealthy and their children who will bear the burden of much higher tax levies. 

In order to avert either crisis, there are two possibilities. The first is the elimination of deductions, including the Charitable Deduction itemized on personal income taxes – especially for the wealthy. If the charitable sector, from the caring community to the arts, industrial and education sectors, convince wealthier taxpayers to fight for this deduction, then the only alternative is higher rates than would otherwise occur, possibly including a much more graduated tax system.

 

Luckily, the American Tax Relief Act may provide a solution to some of these problems. In our studies on the relationship between tax policy, the federal capital markets and economic growth, which we shared with this committee on February 7, 2012, we showed that in Democratic regimes which raise taxes on the wealthy, the relationship between reducing the deficit and economic growth changes slope because more is taken out of the savings sector and added to the spending sector. If ATRA impacts over the next decade duplicate the Clinton years, much of the net interest problem will solve itself. If we have learned our lesson from the 2000s, we shall not make the same mistake again.

Thank you again for the opportunity to present our comments. We are always available to discuss them further with members, staff and the general public.

Increasing Adoptions from Foster Care

Comments for the Record

United States House of Representatives

Committee on Ways and Means

Subcommittee on Human Resources

Hearing on Increasing Adoptions from Foster Care

Wednesday, February 20, 2013, 2:00 PM

By Michael G. Bindner

Center for Fiscal Equity

Chairman Reichert and Ranking Member Doggett, thank you for the opportunity to submit comments on these issues.  As always, the Center for Fiscal Equity is available to brief the Subcommittee, individual Members and staff regarding this issue and our approach to it, which we have provided before.  We await your invitation to talk.

We write today to urge caution on going too far in encouraging quick adoption.  Many children in foster care have been placed there because their families of origin have fallen apart due to drug or alcohol addiction, crimes resulting from such addiction (including violent crimes such as robbery, spousal abuse or murder and prostitution) and mental illness, often with one or both parents deemed by the courts unable to be a fit parent to the child.  Economic conditions can also lead to the breakup of families and the use of foster care.  While such a litany seems to support quick adoption, we suggest that it need not.

There is an alternative to quick adoption and that is family sponsorship whereby the entire family is sponsored by another family, provided that no one in the fostered family is currently dangerous.  Indeed, this happens privately when a sibling takes in relatives during family crises.  Turning this into a systematic enterprise, whether trained fostering families are used or families are given a stipend for the extra expenses of food and shelter, will preserve families intact while giving them a time to heal, as healing does eventually happen with the right care.

Trained adoptive families will also help with the crisis of mentally ill adults, many of whom find their mental health care in the community and are instead incarcerated.  There must, of course, be safeguards, such as the easy rehospitalization in the event of alcohol or drug relapse or non-compliance with medication regimes – and with that hospitalization extending for enough of a term so that the patient is not just stable, but comfortable for a length of time in either sobriety and/or medication regimes.  Deinstitutionalization has turned much of the mental health sector into triage designed to stabilize clients on meds and then send them into community services or families before all side effects are managed.  Paying for longer stays in improved facilities, possibly even inviting members of the Catholic Health Association to open new hospitals with federal funding, is both more fiscally prudent and more humane than using jails and the foster care system and adoptive to manage human tragedy.

Thank you again for the opportunity to present our comments.  Again, we are always available to members, staff and the general public to discuss these issues.  

Hearing on Tax Reform and Charitable Contributions

Comments for the Record

United States House of Representatives

Committee on Ways and Means

Hearing on Tax Reform and Charitable Contributions

February 14, 2013, 9:30 AM

1100 Longworth House Office Building

By Michael G. Bindner

Center for Fiscal Equity

Chairman Camp and Ranking Member Levin, thank you for the opportunity to submit comments for the record on these issues. As always, we are available to meet with members and staff to further clarify our comments or to provide a full briefing on our four part tax plan. As you know, the Center for Fiscal Equity has a four part proposal for long term tax and health care reform. The key elements are

• A Value Added Tax (VAT) to fund domestic military spending and domestic discretionary spending with a rate between 10% and 13%, which makes sure every American pays something.
• Personal income surtaxes on joint and widowed filers with net annual incomes of $100,000 and single filers earning $50,000 per year to fund net interest payments, debt retirement and overseas and strategic military spending and other international spending, with graduated rates between 5% and 25% in either 5% or 10% increments. Heirs would also pay taxes on distributions from estates, but not the assets themselves, with distributions from sales to a qualified ESOP continuing to be exempt.
• Employee contributions to Old Age and Survivors Insurance (OASI) with a lower income cap, which allows for lower payment levels to wealthier retirees without making bend points more progressive.
• A VAT-like Net Business Receipts Tax (NBRT), which is essentially a subtraction VAT with additional tax expenditures for family support, health care and the private delivery of governmental services, to fund entitlement spending and replace income tax filing for most people (including people who file without paying), the corporate income tax, business tax filing through individual income taxes and the employer contribution to OASI, all payroll taxes for hospital insurance, disability insurance, unemployment insurance and insurance for survivors under age 60.

Our plan proposes that most direct services provided to those who are truly in need (rather than to trade associations or the arts) would come as an offset to the NBRT, with employers preferring to designate a non-governmental supplier rather than paying a higher tax bill and funding an already overloaded governmental bureaucracy. This allows the work to be spread around and innovative service delivery to be developed with less governmental oversight.

Itemized deductions are irrelevant to VAT and Employee OASI taxes.

Charitable organizations themselves will pay the NBRT because their employees will benefit from the programs funded by this levy or from offsets to it. For example, Catholic Charities employees might designate the Catholic school system as an alternative provider to public schools, which would allow Catholic Charities agencies to take a credit on this levy, which would otherwise be paid against their total value added. Likewise, employees would be paid the same child tax credit as commercial employees – again as an offset to NBRT levies. Health and higher education credits proposed for other enterprises would also be available to charitable organizations, as well as any other applicable credits. Note that because certain payroll and personal income taxes will be eliminated, the gross pay of charitable employees will decline in like manner to those of their commercial counterparts.

Under our proposal, the Income and Inheritance Surtax would contain on simplified form where charitable deductions would appear on a single line. Taxpayers who are also business holders would likely make their deductions through the NBRT, which is designed to be the device by which governmental services are replaced by the charitable sector. The question of whether to further allow a charitable deduction to this surtax is an interesting one, due to the fact that these taxes are dedicated toward debt repayment, the payment of net interest and overseas and at sea military deployment. Unlike the VAT and NBRT, the tax need not be balanced so that in time of military action adequate borrowing can occur quickly.

Recent CBO projections are troubling, however, in that they show that while most discretionary and entitlement spending are projected to remain flat while net interest is due to explode. It is helpful to explore the reasons for this. This explosion essentially fuels the growth of the growth of the Dollar as the world’s currency. Essentially, this means that we pay our expenses with taxation (even without adopting the Center for Fiscal Equity Plan) while we roll over our debt without repaying it. This seems like a wonderful way for American consumers to continue to live like imperial Rome, however it cannot last.

There are two possible ends to this gravy train. The first is the internationalization of the Dollar, the Federal Reserve and our entire political system into a world currency or government and its concurrent loss of national sovereignty or the eventual creation of rival currencies, like a tradable Yuan or a consolidated European Debt and Income Tax to back its currency. In the prior case, all nations which use the Dollar will contribute to an expanded income tax to repay or finance the interest on the global debt. In the second case, the American taxpayer will be required to pay the debt back – and because raising taxes on all but the wealthy will hurt the economy, it will be the wealthy and their children who will bear the burden of much higher tax levies.

In order to avert either crisis, there are two possibilities. The first is the elimination of deductions, including the Charitable Deduction itemized on personal income taxes – especially for the wealthy. If the charitable sector, from the caring community to the arts, industrial and education sectors, convince wealthier taxpayers to fight for this deduction, then the only alternative is higher rates than would otherwise occur, possibly including a much more graduated tax system.

Thank you again for the opportunity to present our comments. We are always available to discuss them further with members, staff and the general public.