It is a frequent complaint of the Internet that everyone complains (I do believe there is an irony there if you care to look), but no one offers solutions.
While I consider them more ideas than “solutions,” I offer them to quell the complaining masses.
I do not mean these to come together in some coherent program. They do not fit into some ideologically pure plan. While some suggestions might go together better than alone, they can be considered individually. They are not really solutions because they have little chance of happening. We might need both the wealth tax and tariff together in order replace the income tax while keeping rates reasonable.
A wealth tax (not a tax on high income)
Politicians love to tell us how the rich do not pay their fare share. The solution offered, higher income taxes, does not tax the wealthy; it merely taxes those with high income.
If you want to tax the wealthy, then you have to tax wealth. Instead of an income tax, I propose a tax on all real and financial wealth held in the USA (or for the benefit of a United States resident). This would include residential property, bank, and other savings or investment accounts. The calculation would be the average daily balance already used by banks and brokerages to calculate interest or fees. State governments already have much property details for their own taxing schemes.
Donald Trump proposed a one off 14.25 percent tax on wealth. I propose a much smaller annual levy, closer to that of local and state property taxes (or lower). This is not about punishing the wealthy anymore than a high income tax is. It is merely the suggestion that a tax on accumulated wealth may be fairer and more efficient than taxes on attempts (income) to build wealth.
Expect to see kicking and screaming from many of the same people who suggest, “taxing the wealthy” via high income taxes. Note, also, that this is not a free lunch; everyone (well most anyway) would have some wealth that would be taxed (bank accounts, residential property, etc.).
Bring back the tariff (and lose the income tax)
The mere mention of tariffs seems to drive some people to outrage. Libertarians, especially, seem to hold this tax in even lower esteem than other forms of taxation. However, it is just a tax, no more or no less evil than the others. The idea is to use the tariff to replace the income tax. You can view it as a form of pay-to-play. If foreign actors want access to the wealth and stability of the US markets, then such a tax is a low price to pay. Free trade may be a good thing, but I do not see a tax on the trade of goods any worse than a tax on the trade of labor.
This is not magical thinking; at least some of the tax will eventually be borne by the US consumer. However, the incidence of the tax may be partial borne by the importers or foreign companies (via reduced profit). If the tariff were to replace the corporate income tax along with personal income taxes, domestic producers would receive some offsetting benefit.
The Estate/Death Tax would pay for the individual’s Medicare expenses. The idea is for each individual to repay his personal Medicare expenses from his estate. A basic allowance (say 25 thousand dollars) would be exempt but after that, the estate would pay back the expenses borne by the system. If they estate was too small to cover expenses, or did not exceed the allowance, no extra fee would be levied.
It may seem cruel, but why should next of kin benefit from the taxpayers generosity; in the absence of Medicare, the recipients and next of kin would have used the estate or their own wealth to fund treatments.
Regarding health, the biggest fear for most is massive liabilities. What bankrupts families are not visits to the doctor for checkups but major medical events. If the government is to involve itself in insurance then it should be to protect against these major events.
The government plan would act as indemnity insurance. The deductible amount would be some portion of gross income. It would then cover 80 percent until expenses breached some other limit, at that point it would cover 100 percent. The insurance would have to cover prescription drugs and long-term treatments (e.g., dialysis).
Deductible 10 percent of prior year gross income. Coverage of 80 percent until the total reached 20 percent of gross, thereafter 100 percent.
Income = $10,000
Deductible = $1,000
80 percent = $1,000 to $6,000 ($5,000×80%=$1,000)
100 percent = $6,000 up
Income = $100,000
Deductible = $10,000
80 percent = $10,000 to $60,000 ($50,000×80%=$10,000)
100 percent = $60,000 up
This does not remove all financial stress; it does prevent financial ruin. Obviously, it is very progressive, but that might lower costs, and thus the taxes needed to support it. By design, it ignores actual assets/savings because it seems unfair to punish savers of modest means while benefiting imprudent high earners. By leaving some of the financial burden on the individual, it keeps their focus on prudent use of medical resources. At the same time, it lessens the likelihood of financial ruin due to medical bad luck.
Thankfully, this is far from my area of experience of expertise. Some of these suggestions may already be part of the formula (although, given that they will tend to benefit men, I doubt it).
Make child support tax deductible to the man and taxable to the woman. This is how it would work if she had remained married; his income would be taxed before it was spent on her or the children. At the very least, he should be able to deduct the children as dependents (at least in proportion to his share of the support calculation).
If she received a house as part of the settlement, the implied rent/mortgage should be deducted from the child support amount.
The man should be able to directly pay for items benefiting the children and have that deducted from his payments to the ex wife (e.g., pay school fees, health insurance, etc.) This ensures that at least some of the child support actually supports the child.
The man should be directly able to pay his children (e.g., via a credit card/bank account in his name, controlled only by him, and accessed only by the child), for certain expenses that the children can handle themselves (e.g., clothes, school lunches).
Unemployment should cut his payments to her, as they would have if she had remained married. If his income drops his payments should drop, as they would if she had remained married. This means that man could deliberately cut his income, just as he could if she had remained married.
Child support should be dependant on the man’s continued access to his children. Hindrance of access (including moving far away) should be cause for withholding or reducing support.
Alimony should be abolished other than short-term payments, much like unemployment insurance, that allow her find her feet. She is no longer providing wifely services; he should no longer be forced to pay for them. She wanted independence; she should get it.
Indeed, we could link the alimony time to unemployment insurance duration, as this tends to move (via extensions) with economic times (and thus the ease with which she will find self-supporting employment). A woman should have no right to maintain a lifestyle she had to which she had become accustomed. Life is full of difficulties; she made her choice and should live with it. Had she remained married her (and her husband’s) circumstances could just as easily changed for the worse. If they exist, alimony laws, and actual implementation, should be completely sex neutral; there should be no assumption of female frailty or virtue.
I know all of these have flaws. All of these programs/taxes could be gamed (much like the current system). Even if not flawed, it is likely that any program will, after lobbyist effort, be implemented in a flawed manner. I did not do much research on the numbers, so I am not sure how viable such schemes might be.
For a tariff the incidence of the tax would be: 1) Consumers (higher prices), importers/foreign producers (lower profits and sales), domestic producers (higher costs for imported materials and services).
Producers also bear some of the incidence of the personal income tax because higher income taxes encourage workers to seek higher (gross) wages. In tough times, the incidence may fall heavily on workers, but in better times, the incidence may fall for heavily on employers.
Regarding tariffs/wealth tax, I would like to abolish the corporate income tax along with the personal income tax. However, I am tempted to leave it there, but a low rate (e.g., 5 percent) to catch pass-through profits (where companies declare profits in a low tax regime to take advantage of the low rate). This would still reduce the burden on domestic producers but might also scoop up some international money too.