To implement an effective and immediate surcharge on all transactions of a financial nature including goods and services non-wholesale in nature, to serve as the basis for a plan of action to reduce the national deficit of the United States of America without interfering with the normal flow of governmental business nor placing an overwhelming burden on any individual or group of individuals. Once the threshold amount of $__________, or __________% total deficit of GDP is attained, then assessment of surcharges would terminate.
In order to make this a plan that is bullet-proof to political piracy, the law would stipulate that the funds collected under this assessment can be used solely, and irrevocably for debt reduction, not new spending barring the provisions in Step 1 below.
Step 1. To assure compliance, an amount as of a static date, (i.e. FYE 2011 the Federal Deficit was approx. $15 trillion) would be the sole and immediate destination of this revenue stream unless 80% of both houses of the Congress and the President agree to change it in any way. The deficit reduction assessment stream would be generated in two separate and distinct methods.
Part 1 of the assessment phase would place a one-penny-per-dollar Federal surcharge on all consumer goods AND services for the sole purpose of being applied to the Federal Deficit as defined in step #1 above.
No progressive levels, no scales, no brackets. If a non-wholesale, non-capitalizable purchase of consumer goods or services is rendered, whether by cash, check, credit card, or loan, a 1% surcharge must be collected and remitted to the Department of Treasury by the 10th day following month end.
Part 2 of the assessment phase would be tied to Wall Street transactions
(a) “A small tax (i.e., 1/3ȼ surcharge) on all financial market transactions has the potential to raise significant revenue and simultaneously limit reckless short-term speculation that can threaten financial stability.” This one small surcharge will add trillions more to deficit reduction over time for those who enjoy Capital Gains favorable income taxation.
Both Part 1 and Part 2 surcharges will be collected at the time of the transaction(s) in the same manner that VATs are assessed, collected and remitted at state levels now.
Threshold and Scope Phase
Step 2. The Threshold and Scope of the assessment would be dependent upon a pre-determined level at which the assessment would end. If Congress and the President decide that the debt in Step 1 should be taken to zero with the assessment or if it were decided that some other measurement was appropriate, then once that threshold was achieved by the assessment all surcharges would end.
No exceptions, no exemptions, no ceilings, nor floors will be granted. Every citizen, prisoner, non-resident alien, temporary worker…every person enjoying the rights and freedoms that come with literally being on American soil, would be contributing to reducing the debt created over the last forty years that now threatens the U.S. economy.
This plan would eliminate finger-pointing, blaming “the other party”, it would alleviate claims of “class-warfare”. This financial crisis is tantamount to a world-war crisis. And just as Americans did in WWII, EVERYONE was rationed on sugar, rubber products, etc. Only with this plan, everyone would contribute directly to a deficit reduction/demand-growth plan.
Literally, no one would be exempt. The wealthy, poor people receiving government, assistance, criminals, non-citizens, even prisoners who currently purchase items from correctional commissaries would be contributing to this deficit reduction.
This assessment would virtually ensure that every person in the country is contributing to the debt reduction without placing an impossible burden on any group, gender, state, race or religion, or political ideology.
“Normal” political wrangling could resume on short-term fiscal issues. Balanced budgets could be argued for short term issues. Appropriations could still be based on, well, whatever the heck they are based on now.
The important part of this entire plan is to remove the cover from which politicians have been hiding for far too long. Their constituency.
Once the legislation is on the books, politicians, even from opposing parties, have little incentive to change it. Markets don’t want counterproductive measures. For credibility, what matters is the nature and the composition of the tax…and the clarity of the purpose and a quantifiable schedule.
This policy is not nuanced. It is a sledgehammer. The key element is dynamics. It uses a credible plan to lower a long-term fiscal problem, while not taking immediate austerity measures that would raise unemployment when what countries need most is growth.
Current measures aren’t working. Eventually, politicians and citizens will demand a strategy that does.
This is that strategy. For as GDP grows, the amount and rate of deficit reduction accelerates as well.