President's Budget Treasury FY24

Finance: The President’s Fiscal Year 2024 Budget with Treasury Secretary Janet L. Yellen, March 16, 2023

WM: President Biden’s Fiscal Year 2024 Budget Request with Treasury Secretary Yellen, March 10, 2023

The national debt is the issue of hour. The limit needs to be abolished. It was only established because previously, each bond issue was authorized by Congress. That day has long since passed. In the first attachment, we detail who owns the national debt by income class. 

The bottom 60% of households own the debt held by Social Security as beneficiaries. The top 0.1% of households hold about a third of managed fund and bond assets, with the rest of the top 10% holding half and the bottom 90% one sixth. Federal Reserve, bank and long term assets are divided in roughly half between the top 20% and the bottom 80%. 

If the debt were to be defaulted on, a great deal of the damage would be to the top 10% of households. Managed fund and bond holders in the top 1% would take the biggest hit. The debt itself is owed by income tax payers. For every dollar of income tax paid, nineteen are owed. Those who pay and those who owe are the same people: capitalists. Without the national debt, leveraging private banking, debt and investment - especially  the intrinsically worthless assets in secondary markets - is impossible. This is far above historical averages and is unsustainable. The answer to this is increased revenue. 

Inflation is the other big economic issue of the day. As Dodd-Frank rules are being restored, the NYMEX oil trading floor is again an honest market. Prices will go down and stay down to reflect the real availability of oil and gas. This is not to say that higher interest rates were not needed, but this is only so that families, especially retirees, earn a fair return on their savings.

How the pain of inflation is borne is more important. Households making under the 90th percentile have been losing ground for almost half a century,while incomes above that amount have increased on a regular basis.

The source of inequality, aside from abandoning the 91% top marginal tax rate, is granting raises at an equal percentage rather than by an equal amount. When the 91% rate was repealed, incomes were fairly equal, so it was not an issue. 

The federal government plays an outsized role in how salaries are determined through percentage based cost of living adjustments to government workers, beneficiaries, government contractors. The government can change this with the stroke of a pen.  The private sector will follow suit with a higher minimum wage, adequate child tax credits (as described below) and paying individuals in training from ESL to community college the minimum wage to purse their studies.

From here on in, adjust for cost of living on a per dollar an hour rather than on a percentage basis (or dollars per month or week for federal beneficiaries). Calculate the dollar amount based on inflation at the median income level. No one gets more dollars an hour raise, no one gets less dollars per hour in increases. Increase the minimum wage as above and consider decreasing high end salaries paid to government employees and contractors. Even without decreases, simply equalizing raises will soon reduce inequality. Why is this necessary?

Prices chaise the median dollar. The median dollar of income is actually at the 90th percentile, rather than the 77th percentile (which is about where the median is). This strategy will reduce inflation in both the long and short terms as prices adjust to decreases in higher salaried income.. 

Let me repeat this - prices chase income dollars, not income earners.

On the tax side, limit bracket indexing in the same manner - by dollars per bracket, not percentages.

Staying in economics, ast year we projected another depression, which we define as a drop in asset values below what is borrowed against them. We no longer have to project, given the falling price of valueless crypto-currency and the realization that mortgage backed securities holding single family rental  properties are nowhere near what they are rated - and that they have been hidden in exchange traded funds. The recent bank failures are only the beginning. 

Aside from raising income taxes to end the production of junk assets, the answer to the coming depression is enactment of the proposed increase in the child tax credit proposed by the President, although we would make it $1,000 per month and phase it out from the median income to the 90th percentile. 

Some of the bipartisan opposition in the Senate came from those who consider direct subsidies from the IRS to have the “stink of welfare.” I advise such Senators in both parties to raise the minimum wage so that no one is having to work just to receive this credit and that the best way to distribute the credit is with wages.

For middle income taxpayers whose increased credits are less than their annual tax obligation, a simple change in withholding tables is adequate. Procedures are already in place to deliver refundable credits to larger families. 

Employers can work with their bankers to increase funds for payroll throughout the year while requiring less money for their quarterly tax payments (or estimated taxes) to the IRS. The main issue is working out those situations where employers owe less than they pay out. This is especially true for labor intensive industries and even more so for low wage employers. A higher minimum wage would make negative quarterly tax bills less likely. Again, no one should have to subsist mainly on their child tax payments.

Please see the second attachment for the latest version of our tax reform proposals, beginning with how the proposed rates are synergistic. Note that we propose ending corporate income taxes and reporting of business income on personal income taxes. We replace these with consumer paid goods and services and employer paid subtraction value added taxes. 

The income tax for individuals with wage, dividend and salary income under $75,000 would be eliminated. A surtax on employer paid subtraction value added taxes would be paid by employers, but filing of individual income tax would not occur until $450,000 of salary, interest paid and dividend income. Spousal income would not be included in this levy.

We propose ending the capital gains tax on short and long term income and full repeal of the inheritance (death) tax with an asset value added tax. There are two debates in tax policy: how we tax salaries and how we tax assets (returns, gains and inheritances). Shoving too much into the Personal Income Tax mainly benefits the wealthy because it subsidizes losses by allowing investors to not pay tax on higher salaries with malice aforethought. TAX TRANSACTIONS, NOT PEOPLE!

Ending the machinery of self-reporting of asset returns  also puts an end to the Quixotic campaign to enact a wealth tax. To replace revenue loss due to the ending of the personal income tax (for all but the wealthiest workers and celebrities), enact a Goods and Services Tax. A GST is inescapable. Those escapees who are of most concern are not waiters or those who receive refundable tax subsidies. It is those who use tax loopholes and borrowing against their paper wealth to avoid paying taxes. 

For example, if an unnamed billionaire or billionaires borrow against their wealth to go into space, creating such assets would be taxable under a GST or an asset VAT. When the Masters of the Universe on Wall Street borrow against their assets to avoid taxation, having to pay a consumption tax on their spending ends the tax advantage of gaming the system. 

This also applies to inheritors.  No “Death Tax” is necessary beyond marking the sale of inherited assets to market value (with sales to qualified ESOPs tax free). Those who inherit large cash fortunes will pay the GST when they spend the money or Asset VAT when they invest it. No special estate tax is required and no life insurance policy or retirement account inheritance rules will be of any use in tax avoidance.

Tax avoidance is a myth sold by insurance and investment brokers. In reality, explicit and implicit value added taxes are already in force. Individuals and firms that collect retail sales taxes receive a rebate for taxes paid in their federal income taxes.  This is an intergovernmental VAT. Tax withheld by employers for the income and payroll taxes of their labor force is an implicit VAT. A goods and services tax simply makes these taxes visible.

Should the tax reform proposed here pass, there is no need for an IRS to exist, save to do data matching integrity. States and the Customs Service would collect credit invoice taxes, states would collect subtraction VAT, the SEC would collect the asset VAT and the Bureau of the Public Debt would collect income taxes or sell tax-prepayment bonds. See the last attachment for details on this.

Until tax reform occurs, IRS Statistics on Income tax tables  should be adjusted for inflation to get a better idea of the distribution of income. Between $50,000 and $100,000, there should be five groups. Between $100,000 and $200,000, there should at least be four so that the border between the fourth and fifth quintiles can be more adequately expressed. Every tax wonk in the nation will appreciate this.

Attachment: Debt Limit as Class Warfare Video

Attachment: Tax Reform Videos included

Attachment: Tax Administration Video