PERMANENT SOLUTION FOR SOCIAL SECURITY AND MEDICARE
Factors to be dealt with:
- SS/Medicare represents a gigantic $50Trillion plus unfunded mandate on our future.
- Medicare is constantly being cut, and now severely so, leading to dangerous reductions in service, just when the population it serves is exploding.
- The SS/Medicare system needs a new tax base that is rooted in the whole economy and not just worker earned income.
- Ideally, the permanent solution to the above would be preferred NOT to propose any change in benefit payments to current, near future, OR far future recipients.
- Ideally, the permanent solution to the above should provide for current job and economic stimulus without adding to the deficit.
To solve these problems in accordance with the above:
- The SS/Medicare payroll taxes for both employee and employer should be eliminated permanently and replaced by a total transaction tax base related to economic activity as opposed to earned income alone.
- The tax rate to cover the 2010 SS and Medicare benefits paid ($1.18 trillion) using only one-half of the calculated transactional tax base, is 0.12%, on both sides of every transaction in the US extended financial system (ex government expenditures, inter-bank , and Federal Reserve operations).
- In order to stay ahead of rising benefits a rate higher than just current revenue neutral rate of 0.12%, such as 0.14% is suggested.
No other changes are necessary to completely fund SS/Medicare into the future ASSUMING the collected revenue is forbidden to be used in the general budget (a so called “lockbox” is established and enforced).
This would immediately provide permanent relief to individuals of what is a regressive payroll tax, which, for 50%+ of people, exceeds the income tax they pay. This would be a permanent corporate tax reduction of 7.6% on total payroll expense. This is a much larger business benefit than just cutting taxes on net profit on which corporate income tax is paid. Likewise, this reduction here would benefit even those corporations temporarily losing money but still able to hire, as they not subject to corporate income tax and would get no benefit from a reduction in that tax rate. A psychological boost to the economy would be enjoyed as a major future dark cloud is cleared from the horizon. Compliance and evasion/enforcement savings would be considerable. The convenience and power of a transaction tax would be experienced by the public. The software exists already and banks would be reimbursed for the expense of collection. A new calculation of the transactional tax base and alignment of expected benefit payout vs the $1.4 trillion per year revenue should be done – a cumulative surplus in early years should be planned to cover expected higher expenditures later.
Invoking efficiencies in healthcare administration, incentivizing prevention and good patient care outcomes while eliminating fraud and criminal behavior from the Medicare program MUST be done regardless — why is there the feeling that progress in these areas can only be achieve if the program is under the threat of severe budget cuts. If these management efforts are not happening – somebody is not providing appropriate leadership and thousands of bureaucrats are not doing their jobs – improvement and exposure of fraud has nothing to do with funding or funding of recipient benefits.
Although the concept of taxing every transaction shifts a large amount of the burden to business and financial trading, as with any business tax, much will be reversed to the consumer. However, when considering the consequences of these facts one must “do the math” and you realize quickly that even if ALL of one’s consumer transactions had tax from both sides added, the combined amount would still be extremely small. For example, if a family earned $50,000 and spent it all they would have $100,000 in total annual transactions – on which they would pay 0.14% or $140. Then, if ALL the businesses they dealt with passed the opposite/business share to them, requiring them to pay the tax on both sides of ALL their transactions, the tax bill would still only be $280. That is opposed to the 7.6% or $3825 payroll tax they would pay in the current system. I wonder how many stores would rather advertise “No Tax” than collect fourteen cents on one hundred dollars, especially when they are running sales of merchandise with 25% off. Another argument that is raised is that the small 0.14% would balloon to giant proportions as intermediate goods are delivered and taxed in the supply chain as they transform to finished goods. Of course this can occur to some extent, but consider the size of the tax ,and that such an amount would be lost in contract negotiations between companies; further, everyone in the supply chain is aware that the supplying company’s payroll cost has been reduced 7.6% and it would be rather ridiculous to insist of passing the small transaction tax amount through. As far as the tax to be paid by the receiving company, again it pales in comparison to the 7.6% reduction and is also tiny compared to inflation at 2 to 3% per year. Even if the transaction tax was attached to the price, it is done so once, whereas, the inflation factor is added on repetitively every year. A special provision would be needed for so-called high frequency security/commodity trading as that is a new phenomenon not provided for when the tax was conceived – nor are those extremely numerous transactions considered in the tax base estimate.
I have been working with the Automated Payment Transaction Tax for eight years along with the author Edgar Feige, PhD, Professor Emeritus in Economics, University of Wisconsin, Madison.
I have authored the website providing in depth description of the concept www.apttax.com My professional position is Medical Director of Laboratories, Memorial Hermann Memorial City Medical Center for 34 years
For further discussion or questions please call:
Bill Hermann, MD
BigBatUSA: The above is good news completely apart from anticipating savings through the adoption of the four health quadrant model, and the elimination over time, with transparency, of the 50% of every health dollar that is fraud, waste, or abuse.