What you own or owe of the national debt, within class averages

We do not owe the national debt or own debt assets on a per capita basis. What you owe is based on income tax paid (not social security, that is an asset you buy). What you own is based on your money, retirement, pension or social security program's debt assets (you don't own them, they provide you with income later) and high yield assets (savings bonds, T-Bills, mutual funds - but not stocks as they are not backed by debt). 

This video explains what you owe (gross and net) or own by income class.

If you are in the bottom 80% (making under $117K), your family owes $61 K and nets 16.3K - for a family of 4, that's $15K owed, but once assets are added, you own 4K. That is most people, just by being born, the government owes you, on average $4,000.

On the other end, if you are in the top 0.1$, making $3.3 Mil per year, your family owes $39M and you owe 9.8M - but adding back assets, your family nets $19M if all debts were paid and debt assets distributed. That's $4.75M per rich person, when born.

The upper middle, from 0.1% to 2% make over $439K, owe $2.8M ($701K/person) and, even when assets are settled, still owe $1M ($271/person).

The middle ($117K to $439K, from 2% to 20%) owe $370K ($92/person) and have a net debt of $31K ($7,9K/person).

The top 0.1%, 153,000 families, don't get most of their money from wages or even profits from businesses they own - although it is not a small amount. The vast majority of that money is capital gains (long and short term) for the sale of either direct or mutual fund asset sales - net of losses (if you lose big, you move down in class for that year - so you owe and pay less).

This gives us the answer on how to give the very reach less of a share of the net debt - so that all of the upper and middle classes "break even." Raise the capital gains tax rate - particularly the long-term rate - which is 20% now on (and 37% for short term). Each year, your share of the capital gains for your fund is a taxable event - and they disclose that amount to you and the IRS if you are in a fund (and not cheating - and some do). There is a 3.8% Obamacare surtax as well - and that revenue should be broad-based, not a tax on the wealthy. Biden wanted to raise the tax (including Obamacare) to 28.8%. 

Under Reagan, it was 28%, Papa Bush raised it to 31% , with Clinton making it 39.6% before he cut it back to 28%. W made it 20% and Obama added the surtax of 3.8%, with Trump and Biden leaving it there with no talk of changing it in the Big Beautiful Bill. Letting the Trump 45 tax cuts expire does not change it at all. B3 largely keeps tax policy on capital income and gains where Obama left them and extends the tax fixes that made things simpler. Trump's cuts to corporate income taxes were allowed to become permanent in 2017 - meaning Dems did not stop them - even in private - and the whole thing was negotiated in private - as is the BBB).

IT WILL TAKE REAL REFORM TO FIX THIS.

On the whole, government spending on entitlements, the military, domestic non-military and net interest cannot be changed much - or at all in any meaningful way. Most tax rates, including the 37% rate at the top, are not going anywhere - (the 37% rate is fairly bipartisan, falling between the rates set by Clinton/Obama and Bush).

That leaves business taxes - all of which should move at the same rate.

It's where the money is. The current level is between 22% and 24%. Biden proposed 29%.

So, lets VAT or tariff fund Obamacare or have employers pay for it as a subtraction VAT item. Kill the income tax and establish subtraction VAT surtaxes for high incomes and dividends, paid for by companies based on wages and dividends paid to individuals and mutual/retirement funds - but let them prepay these taxes and trade them as bond assets. Pay for other spending the same way EXCEPT

Create an asset value added tax - 26% is the sweet spot between where the Democrats and Republicans would put it. Repeal corporate profits taxes on a worldwide basis and have the world sign onto the AVAT at about the same rate.

Use the funds for overseas military expenses, net interest and - when the budget goes into balance - debt reduction.

THERE IS NO ALTERNATIVE

If you zero rate public stock sales to an qualified employee stock ownership program - so that heirs who sell the company shares pay no tax if you mark taxes to market after death, gift, or donation, plus IPO and Option exercise) - and repeal the death tax (while enacting VAT and/or decent tariffs), then the size of the capitalist sector goes down while the employee-owned share goes up - as does the demand for government. Again, TINA. They used to use TINA to say capitalism will never go away. Now, TINA if we want to keep the dollar solvent.

Letter on tariffs to Ways & Means and Finance Trade Subcommittees

We strongly recommend that a baseline tariff amount be enacted as proposed here, giving the Administration limited ability to negotiate on specific products based on these amounts and removing blanket authorization to declare an emergency to work around the enactment of detailed tariff policies.

These proposed tariff rates are based on the value added taxes of our trading partners. We have also provided information on national gross domestic product in purchasing power parity terms (based on data originally calculated by the International Monetary Fund for 2022, the most recent year available in the vast majority of countries). These percentages were used to adjust the balance of trade figures currently available from the World Population Review. 

As we explained in April,  until the United States adopts its own Value Added Tax System, as we have proposed for the past ten years, it could fund domestic military and civilian discretionary spending - with the higher rate including what is now collected by employers for Old Age and Survivors Insurance. Without such a tax, the enactment of tariffs is necessary to compensate for the lack of one, while those nations who use this levy zero rate it at the border, which damages U.S. competitiveness.  

Dealing with this issue is a main driver behind the President’s efforts to impose a tariff policy. Sadly, the Administration’s imposed tariffs were initially based on total trade amounts by a logic that I cannot understand. The proper metric, if dealing with the national economies of our trading partners, is to adjust trade margins as explained above, but this calculation would mainly be to use tariffs to increase their economies for the benefit of their citizens, while holding American firms harmless from trade relationships that exploit overseas workers, while robbing American workers their jobs. 

Correcting this circumstance was one of President Trump’s main promises, although most of his base did not realize that this would be inflationary unless other taxes were reduced through tax reform. Imposing tariffs before tax reform is enacted has put the cart before the horse. This is why tariff policy should move back to Congress, which should also engage in bipartisan reforms along the lines that we first proposed in 1998.

Sadly, the horse has already left the barn, so tariffs need to be rationalized as soon as possible. They should be based on the exporter's value added tax rate that was zero rated at the border. Let us offer some examples. Canada has a Goods and Services VAT at the Dominion and Provincial levels. The tariff for each trading partner needs to be at least that much. Most Canadian provinces have a 5% rate, while Ontario’s rate is 13%. I offer these in case we wish to enact rates for each province.

The proposed rates in the attachment largely mirror VAT rates for each nation, although different rates were proposed for some nations. If our trade surplus, adjusted as described above, is less than the VAT, the proposed rate is decreased by that amount. If we run a larger surplus, the VAT rate is used as our trading relationship will not be damaged by enacting the higher amount.  

Tariffs for most developing nations were based solely on their VAT rates, as increasing tariff rates to purchasing power parity/trade deficits would effectively stop trade with these economies. The exception to this is for major importers, such as China, Taiwan or Bangladesh, where armies of exploited low wage workers dump products on the American economy.

GDP, adjusted for purchasing power parity and the size of the American economy as expressed as an inverse relationship are provided. Thus, if an economy is only 10% of the American economy, the percentage difference in the table is 90%. This is most of Africa and much of the world. Tariffs on these nations should not include this adjustment in raw form, as this would result in trade embargos without helping overseas workers at all. 

These percentages were used as an adjustment to trade deficit percentages with the U.S., with positive numbers showing a U.S. surplus and negative indicating a trade deficit. Even these amounts would severely damage trade, but because they fit, in general, with the President’s apparent rationale as first proposed, they are provided for information.

Attachment - Long-Term Unemployment Insurance

Social services, especially Unemployment Insurance, need a major overhaul.  The categorical grant approach reinforced a provincial view of federalism; one which created regional economies, especially in the South, with a barely hidden racist intent. The result of these policies has been to keep the region in a state of sustained poverty. Alabama Wealthy is not wealthy in the larger economy. This wound was self-inflicted.

Family incomes must be guaranteed, although not with a one size fits all subsidy. Our proposal has three components; two of which should be familiar to the Committee: 

1. An increase in the minimum wage to at least $11 per hour (if not more to account for pandemic inflation), with a $12 wage for a shorter work week.  This distributes the burden of higher wages for less work with employees and employers.
2. Increase the Child Tax Credit to levels passed by the House, with increases to at least twice that in fairly short order.
3. Replace the current menu of social programs with long term unemployment insurance at below minimum wage levels, which would be supplemented with additional funding for participation in basic education (especially for ex-offenders), employment training, psychiatric or addiction rehabilitation programs. Old Age, Survivors and Disability Insurance would start with this amount as a minimum, with higher benefit levels based on employment history. Dependent payments would be made through the child tax credit once it has been increased to current survivor benefit levels. 
4. Long term unemployment insurance would be awarded on a no fault basis, ending the need for eligibility investigations beyond verification of identity and for punitive disciplinary systems by employers designed to avoid paying benefits. This payment, which would be indexed for inflation, would be $10 per hour for a 28 hour week, would be tax free and funded by a national goods and services tax. States could enact higher benefit levels funded by a local GST.

Most, if not all, anti-poverty programs would be discontinued, although programs to increase rental housing supplies would be expanded.

Attachment: Consumption Taxes

Background on Consumption Taxes

Eventually, the United States needs to join the rest of the developed world and enact consumption taxes on consumer goods and services, net business receipts and an innovative tax on asset sales - which would replace capital gains taxation and would require negotiation of an international rate to prevent rate arbitrage. 

The first two would make it easier to pay taxes in general because the simplicity of the first and the fact that the second would replace the business income tax while becoming a conduit for employee health and family support benefits - and would entirely replace the need for most families to pay personal income taxes (if not all) - which would greatly cut down on paperwork requirements businesses currently face. 

The reality is that business collects the revenue and submits it to the Treasury, along with a mountain of information to subsidize the tax preparation industry - who are consistent donors to both Chambers - especially the revenue committees. 

Credit Invoice Value-Added Tax (CI-VAT). Border adjustable taxes will appear on purchase invoices. The rate varies according to what is being financed. If Medicare for All does not contain offsets for employers who fund their own medical personnel or for personal retirement accounts, both of which would otherwise be funded by an S-VAT, then they would be funded by the I-VAT to take advantage of border adjustability. 

CI-VAT forces everyone, from the working poor to the beneficiaries of inherited wealth, to pay taxes and share in the cost of government. As part of enactment, gross wages will be reduced to take into account the shift to S-VAT and CI-VAT, however net income will be increased by the same percentage as the CI-VAT. Inherited assets will be taxed under A-VAT when sold. Any inherited cash, or funds borrowed against the value of shares, will face the CI-VAT when sold or the A-VAT if invested.

The proposed Fair Tax’s use of a retail sales tax, rather than use of a value added tax at each purchase (but note - the tax is only paid on the base markup  - not the taxes owed because of the markup) will lead to fraud as retail purchase are credited as wholesale - which under the FT is not taxed. This is a huge potential loss. This schema is proposed by Fair Tax sponsors because they misunderstand how a CI-VAT works. For the Fair Tax to ever pass, rather than being a talking point for fundraising, it must work the same way..

When CI-VAT is paid by a merchant or manufacturer, the CI-VAT that they paid for that good or service supplied is refunded to them.

These taxes will replace the web of tariffs currently in place, ending what amounts to domestic industrial policy.

Subtraction Value-Added Tax (S-VAT). Corporate income taxes and collection of business and farm income taxes will be replaced by this tax, which is an employer paid Net Business Receipts Tax. S-VAT is a vehicle for tax benefits, including

• Health insurance or direct care, including veterans' health care for non-battlefield injuries and long term care. 
• Employer paid educational costs in lieu of taxes are provided as either employee-directed contributions to the public or private unionized school of their choice or direct tuition payments for employee children or for workers (including ESL and remedial skills). Wages will be paid to students to meet opportunity costs.  
• Most importantly, a refundable child tax credit at median income levels (with inflation adjustments)  distributed with pay. 

Subsistence level benefits force the poor into servile labor. Wages and benefits must be high enough to provide justice and human dignity. This allows the ending of state administered subsidy programs and discourages abortions, and as such enactment must be scored as a must pass in voting rankings by pro-life organizations (and feminist organizations as well). To assure child subsidies are distributed, S-VAT will not be border adjustable.

Under the current income tax regime, 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.

Higher tiers of the subtraction VAT would collect taxes on salaries with a 6.5% rate on income over $85,000, with increments of that amount to a top rate of 26% starting at $340,000 in salaried income. Salary surtaxes, with an option to purchase tax prepayment bonds, would start at $425,000 at 6.5% to a top rate of 26% starting at $680,000. Employers could also be given the option to buy tax prepayment bonds - which could be marketable.

Taxation of dividends will be included in surtaxes to the Subtraction VAT for payments over $85,000 in taxes plus dividends in a given year, however individual filing for wage. dividend and interest income under $425,000 will not be required. Again, the capital gains tax will be abolished.

Carbon Added Tax (C-AT). A Carbon tax with receipt visibility, which allows comparison shopping based on carbon content, even if it means a more expensive item with lower carbon is purchased. C-AT would also replace fuel taxes. It will fund transportation costs, including mass transit, and research into alternative fuels. This tax would not be border adjustable unless it is in other nations, however in this case the imposition of this tax at the border will be noted, with the U.S. tax applied to the overseas base.

Debt Ownership - TY2022 Debt June 2025

Visibility into how the national debt, held by both the public and the government at the household level, sheds light on why Social Security, rather than payments for interest on the debt, are a concern of so many sponsored advocacy institutions across the political spectrum.

Direct household attribution can be made by calculating  direct bond holdings, income provided by Social Security payments and secondary financial instruments backed with debt assets for each income quintile.

Responsibility to repay the debt is attributed based on personal income tax collection. Payroll taxes create an asset for the payer, so they are not included in the calculation of who owes the debt.  In 2019, just after the President’s tax cuts were passed, the ratio was 19 dollars of debt for every dollar of income tax collected. The 2022 ratio was 13 - so our financial position is actually improving - largely because post-pandemic inflation grew the economy.

The bottom 80% of taxpaying units hold few, if any, public debt assets in the form of Treasury Bonds or Securities or in accounts holding such assets and only take home one-third of adjusted gross income. Their main national debt assets are held on their behalf by the Government. They are owed more debt than they owe through taxes. The next 10% (the middle class), hold more in terms of long term investments and mutual fund and bond assets. They hold a bit under a fifth of social insurance assets.

The top 10% pay more than half of income taxes (the dividing line is about 97.5% - and has been for a while). Asset shares within the top 10% are estimated using the same breakdown as the entire population, that is, the top 1% hold 54% of Federal Reserve and Long Term Investment Assets and 77% of mutual funds and bonds as held by the top 10%. A similar fraction is used to estimate holdings by the top 0.01% - which is consistent with how much income they receive (note that I did not say earn. 

This illustration shows who benefits the most from having a national debt, therefore who has the most to lose through default. The relative shares of debt ownership, however, are current as reflected in the 2022 Federal Reserve Survey.

Additional charts on debt ownership.

Attachment: Social Insurance Taxes

WM Social Security and Welfare & Work: Hearing with the Commissioner of Social Security, Frank J. Bisignano

There are two ways to define solvency: budgetary and adequacy. Solvency is willingness to raise income taxes to honor Social Security Trust Fund obligations as they come due and to continue to use personal income and consumption or payroll taxes to provide adequate funding for retirees. The second way to see solvency is in the adequacy of benefits. The current system leaves most seniors and the disabled barely solvent, which requires them to use food stamps, energy assistance, assisted housing and homestead exemptions for property taxes. This inadequacy threatens state and local finance as well.

Most seniors run out of their savings or simply have not built them up in the first place. Leaving payments low is a cruel joke, because savings is not neglected because of indolence or overspending during our working years, but because incomes have been inadequate. Inflation follows the median dollar, not the median income. Percentage based COLAs, rather than equal dollar ones, magnify inequality. Most families cannot keep up.

The wealthy and their pet non-profits don’t fund studies warning about the accumulation of publicly held debt but fund numerous efforts to get entitlement spending under control. CBO projections show the biggest driver of future debt is the continual rolling over of net interest. The demands of retirees are stable, not so the demands of bond holders. When the nation stops rolling over the interest, the wealthy can talk about the health of federally held trust funds.

The debt assets owed to the bottom 60% (indeed, to the bottom 90%) are sacrosanct, as they paid for it with regressive payroll taxes while they were working. Others had to shift from the Civil Service Retirement System to the Federal Employee Retirement System which required savings rather than a defined benefit and included Social Security. 

Forty years ago, the decision was made to advance fund the retirement of the baby boomers, rather than immediately begin subsidies from the general fund. Doing so would have required repealing the tax cuts on the rich enacted by President Reagan, the Senate and just enough conservative Democrats in the House to do damage.  They also gave us the ill-advised 1986 tax reform. 

Now that it is time for the wealthy to pay what they owe to the trust fund (or rather, the children of the wealthy of the 80s), people are talking about means testing Social Security and were talking about making it attractive to upper classes by investing it. The desire to invest Social Security accounts in Wall Street died in 2008. Private accounts held by Wall Street would again make the working class fix the debt liability of the top 10%. Means testing benefits would also rob the bottom two quintiles of their most effective voice – higher income taxpayers who do receive benefits. As long as the higher quintiles get benefits, the program is safe.

The very rich have the data on their own wealth and know what they pay in taxes.  They won’t like the implication that the rest of us now know how closely the two figures are related. They certainly won’t like it shown that they are on the hook for paying back Social Security and the U.S. debt held for the world. 

Individual payroll taxes. A floor of $20,000 would be instituted for paying these taxes, with a ceiling of $115,000. This lower ceiling reduces the amount of benefits received in retirement for higher income individuals. The logic of the $20,000 floor reflects full time work at a $10 per hour minimum wage offered by the Republican caucus in response to proposals for a $15 wage. The Democrats need get the offer back on the table and take the deal. Doing so in relation to a floor on contributions makes adopting the minimum wage germane in the Senate for purposes of Reconciliation. The rate would be set at 6.25%.

Employer payroll taxes. Unless taxes are diverted to a personal retirement accounts holding voting and preferred stock in the employer, the employer levy would be replaced by a goods and services tax addition of 6.25%. Every worker who meets a minimum hour threshold would be credited for having paid into the system, regardless of wage level. All employees would be credited on an equal dollar basis, rather than as a match to their individual payroll tax. The tax rate would be adjusted to assure adequacy of benefits for all program beneficiaries. As the results of Asset Value Added Tax exclusions for ESOP sales build up that sector, funding this revenue obligation will move to employer-paid Subtraction Value Added Taxes.

Disability and Survivors Insurance: Baseline disability and survivors benefits will be moved to the Long Term Unemployment Insurance Program, which will be funded by employer paid subtraction value added taxes. Payments may be higher based on employee-paid contributions.

Health Spending and Taxes: Medicare, Senior Medicaid, Affordable Care Act subsidies, subsidies for health insurance collected under corporate income taxes and the Public Option will be funded through both the Credit Invoice Value Added Tax and/or the employer-paid Subtraction Value Added Tax.

Pension Reform: Increased saving requires relatively safe investment options; those relatively free of speculative junk. ETFs are not free of junk. They merely hide it until it rots. MBS, crypto, under regulated commodity markets, as well as new technology - such as AI - are the usual suspects.

Pensions are safer, especially when they are not required to be "fully funded." Such a requirement ruined these instruments, forcing workers into defined contribution plans. Such plans are, by their very nature, inadequate for most workers. They can also hide junk. 

Encouraging the return of pensions by reforming solvency requirements is an essential step. Encouraging the expansion of Employee Stock Ownership Programs is another. Please see our attachment regarding asset value added taxes as a replacement to capital gains taxes, the death tax and to prevent any kind of wealth tax.

Long Term Unemployment Insurance: The general approach to reform social services is to provide a form of guaranteed income, but not through a general subsidy for all households. We do not propose free money for all households - which is the gist of basic income proposals. Our approach addresses individual needs, but uses similar tools. 

Until Congress increases the minimum wage, and as importantly, abandons percentage based cost of living adjustments for federal direct and contract employees in favor of a specific dollar amount, the country will face deepening poverty for some and high inflation for others. Prices  chase the wage given to the 90th percentile - which is where the median dollar of income is paid. 

The reforms below will prevent the boom-bust cycle which we seem to be trapped in of late. They will also provide resilience against the next pandemic.

1. An increase in the minimum wage to at least $12 per hour (if not more to account for pandemic inflation), with a $14.50 wage for a shorter work week.  This distributes the burden of higher wages for less work with employees and employers.
2. Increase the Child Tax Credit to levels passed by the House, with increases to at least twice that in fairly short order.
3. Replace the current menu of social programs with long term unemployment insurance at below minimum wage levels, which would be supplemented with additional funding for participation in basic education (especially for ex-offenders), employment training, psychiatric or addiction rehabilitation programs. Old Age, Survivors and Disability Insurance would start with this amount as a minimum, with higher benefit levels based on employment history. Dependent payments would be made through the child tax credit once it has been increased to current survivor benefit levels. 
4. Long term unemployment insurance would be awarded on a no fault basis, ending the need for eligibility investigations beyond verification of identity and for punitive disciplinary systems by employers designed to avoid paying benefits. This payment, which would be indexed for inflation, would be $13.25 per hour for a 28 hour week, would be tax free and funded by a national goods and services tax. States could enact higher benefit levels funded by a local GST.

Taken together, these reforms will remove the punitive features from anti-poverty programs, especially those which require an excess of red tape to participate -  the earned income tax credit and supplemental security income.

Attachment: Consumption Taxes

FY26 Treasury Budget and Tax Reform

WM:  Hearing with Treasury Secretary Scott Bessent, June 11, 2025

Finance: The President’s Fiscal Year 2026 Budget for the Department of Treasury and Tax Reform, June 12, 2025

The revenue issue dominating the headlines are the President’s tariff policies, which are dynamic rather than according to a master plan. In real life, that is how the world works in the President’s experience. We have developed a systematic approach to bring order into the chaos. It is based on how most nations deal with value added taxes - which we do not follow because we don’t use this as a revenue source. The President’s tariffs are a response to the fact that in every other nation, exporters benefit from the zero rating of these levies at the border while fully burdening imports with these taxes. 

This is the basis for our proposal, which is to link tariffs to the VAT rate of the exporting country, adjusted, where appropriate, to the trade balance they have with the United States and the per capita gross domestic product of these nations. When nations are too poor, no adjustment is made for trade balance issues (with the exception of high volume exporters from Asia). For nations where the United States has a trade surplus, the tariff is adjusted by reducing it to not overly burden American exporters. For example, we have 3.8% trade surplus (adjusted to the size of their economy) with Bahrain and 1.4% surplus with Belgium. Bahrain’s VAT is 10%, and Belgium’s is 21%. The resulting suggested tariffs are 6.2% and 19.6%, respectively. A comprehensive listing of tariff rates would push out all of the other attachments and will be provided separately to the Trade Subcommittee.

Another important issue is the national debt. America’s bond rating has been damaged - not because of the size of the debt but because of the Majority’s reticence to keep reauthorizing debt limit increases and to raise taxes on those who benefit from net interest payments - which is a major drain on the budget. Firstly, 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. Secondly, there is a misunderstanding of who is receiving the benefits from net and governmental account interest expenditures. 

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 (not families or individuals per capita - as most could not pay and we should not scare them by saying they do). For every dollar of income tax paid, thirteen are owed. Due to the expansion of the economy (especially workers wages) since the pandemic, the factor of gross debt to income tax collections has fallen from 19 to 13. The reduction of the debt held by the public because of the retirement of the Baby Boomers also contributes to this statistic. 

The Majority needs to take note that 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. For the investment economy to grow, a deficit is necessary unless the economy is driven to employee-owned financing of the retirement funding and debt management of employee-owned firms - ending securitization of both assets and consumer and housing debt. Please see the first attachment for more detail, including our latest table which includes how ownership of the debt is currently held.

The strangely named Big Beautiful Bill contains increased subsidies for families through the expansion of the Child Tax Credit (which partly offsets the continued repeal of personal exemptions). Some of the bipartisan opposition in the Senate in the prior Congress 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 rather than individual tax filing.

Current law makes the credit (as well as the earned income credit) seem like free money. Under the tax reform proposals attached, a subtraction value added tax paid by employers moves the distribution of family based subsidies out of personal income taxes to payroll or additions to government beneficiaries.

We also propose gutting the current social service structure and replacing it with long term unemployment insurance, a feature of which will include the retirement to improve literacy, engage in further education for some and occupational therapy, drug and alcohol treatment and use of psychiatric rehabilitation services. The army of tax preparers and benefit analysts would be retrained to help people navigate through long term payments toward work. Our LTIU proposals can be found in a second attachment.

Our tax reform proposal is in two parts. The first is a menu of consumption taxes paid by consumers (credit invoice value added tax), subtraction VAT (with a surtax on higher salaried workers and dividend/interest recipients) and a carbon added tax. The second is the proposal for an asset value added tax to replace all forms of the capital gains tax. Rates for this tax will be higher (but with expanded zero rating of sales to ESOPs) to reduce the deficit in a way that slowly decreases securitization so transition to a new economy is evolutionary, not revolutionary. These are detailed in the third and fourth attachments.

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. Tax Administration post reform is detailed in the last attachment.

Attachment: Debt Ownership Tax Year and SCF 2022, June 2025 Treasury Bulletin

Attachment: Social Services and Solvency: Long Term Unemployment Insurance

Attachment: Consumption Taxes

Attachment: Asset Value Added Tax

Attachment: Tax Administration Video

Futures for (Foster) Youth

WM Work & Welfare: Aging Out is Not a Plan: Reimagining Futures for Foster Youth, June 12, 2025

As we suggested last year, to better meet the needs of the non-college bound, expand the Job Corps program, especially those centers with residential facilities. The program has been a demonstration project for long enough. It needs to be expanded and devolved to the states, but with sufficient block grant support.  

Students on an academic track should be enrolled at a four-year university or college (including private colleges) for the semester during which they age out. “Aging out” of both foster care and parental care should be an option at age 16 - not on one’s birthday but after grade 10. Students on the academic track should switch to community college courses when ready. Students who seek non-academic careers should be allowed to attend either a technical high school or enter a trade school or apprenticeship program. 

One year ago this month, we provided the subcommittee with a proposal for Long-Term Unemployment Insurance. This included changes to minimum wage, payment of the child tax credit (increased to $750 per year), payment for ongoing training from ESL to trade school or an Associates degree, adoption of no-fault long-term unemployment insurance and the ending of the current suite of social programs that will no longer be necessary due to these changes. Please see the first attachment for these comments.

The semester after 10th Grade, everyone should be included in this program - which requires some form of education for those who are not working. This is especially the case for young adults. The level of support suggested here should be due to anyone until full retirement age.

Funding for this subsidy will be provided by a combination of tariffs or a credit invoice VAT and an employer-paid subtraction VAT at both the federal and state levels. Please see the second attachment for our latest proposal for these consumption taxes.

Attachment: Long-Term Unemployment Insurance

Attachment: Consumption Taxes

The Big Beautiful Bill - a letter to my Senators

 Please share the following in a Dear Colleague letter.

The June Treasury Bulletin is hot off the presses. Using information in this document, along with information from the Federal Reserve Survey of Consumer Finance, I have calculated the distribution of ownership of high yield debt assets, which include mutual funds, individual bond holders, US savings bonds and bonds held by individuals and foreign entities in tax shelter countries - not including those funds held by governments. 

The gross debt is $36 trillion dollars. Of that, $7 trillion is held by foreign governments, state and local governments and federal accounts not including retirement funds (which can be attributed to individuals in Social Security, federal retirement and related health care trust funds - which is another $5 trillion). 

Long term investments and bank assets hold $8 trillion. The top 10% of the $11 trillion dollars in federal retirement accounts hold 54% of these funds. The top 1% hold 54% of that 54%, so 27% in the top percent and 26% in the remaining 9%. The top 0.1% hold 54% of that 27% comes out to 14% - or roughly $1.7 trillion for 154 thousand households earning more than $3 million per year.

The top 10% of households hold 77% of high yield assets, with the top 0.1% holding 46% of these assets. The total amount of debt backing these assets is a bit over $15 trillion.  The top 0.1% therefore hold $7 trillion of this debt - which is the engine of capitalist investment in debt backed funds - or a total of $10 trillion - a third of the $29 trillion of the national debt held by households.

Put another way, the efforts by members of the Senate to reduce the deficit (and ultimately the debt) will reduce the ability to leverage it to create assets - which means that assets that are created will be riskier to the economy at large. When Alan Greenspan warned against paying down the debt in 2001, it was this pool of money he was talking about.

Applying these formulas to the top 001% - or 1,500 households, results in debt holdings of roughly $5 trillion in both high yield and long term assets. These individuals pay about $80 billion in taxes annually. If the obligation for repaying the national debt is a factor of income taxes paid, these households owe $1 trillion, so they hold over $3 trillion more than they owe. Note that the IRS reports that these families earn $347 billion per year, of which all but $23 billion is from salaries. The rate of return on debt assets (not including assets not backed by the national debt) is about 5.5% of capital assets (excluding business returns). This shows that the debt ownership calculation offered here  for the top 1500 households is within reason.

The remainder is earned from capital and business income - which is taxed at preferred rates. These rates are in the permanent law - they are not adjusted in the Big Beautiful Bill. Perhaps they should be. Ultimately, it would secure these assets to do so. Reducing debt by raising taxes on capital income is the only way to reduce the debt without hurting the economy at large (as this simply reduces speculation). As they are by far the chief beneficiaries of this debt reduction - by trillions of dollars - they should shoulder most of the burden. Note that when the debt is paid down, the households holding this debt will get substantial payouts from doing so. Heads they win, tails we lose.