by John Koraska

June 4, 2005  Revised: June 28, 2006

 

For Social Security updates please visit my new website US Public Policy

 

 

Any strategy for income tax reform, social security reform and general welfare reform (including Medicare and Medicaid) must first acknowledge that the United States is bankrupting itself and then consider these essential facts.

 

The United States cannot balance its budget without incurring further unsustainable debt unless immediate and fundamental changes are made to convoluted tax and welfare policies that now exist. Policy makers cannot make accurate policy decisions with the fuzzy accounting math it currently employs.

 

 Mathematically challenged Congressmen collect two bucks in taxes, borrow two more, spend six and call the difference a surplus instead of a deficit. Further complicating the situation is the Credit Card mentality of  the Bush Administration.

 

The military is called upon to war against terrorism and invade Iraq while the civilian populace is rewarded with tax cuts. How much longer will foreign investors and Central Banks be willing to finance this nonsense? Does anyone think Communist China is a U.S. ally? What happens to U.S. dollar "$" hegemony and American prosperity when China and kindred lenders decide to pull the plug on unsustainable U.S. debt?

 

What happened to old fashioned responsible conservatism that encouraged savings and personal economic independence and responsibility? How and Why did freedom-loving Americans surrender themselves to Socialism and Debtism? Is there any remaining safe haven for a spirit that yearns to be free? Can current trends toward economic Armageddon be reversed without economic catastrophe? Is it too late? Who cares?

 

TELL your Congressman, your Senator and your President to STOP pawning your future! These people are supposed to be working for you. Is the public blind, deaf, too selfish or weak to complain or just plain stupid? Our government is going to hell in a hand basket and it seems as if no one is trying to stop it. The sheer arrogance of our almighty POWERFUL federal government is enough to bring shudders into the hearts of strong, Constitutional-abiding, freedom-loving American men and women.

 

In 2004, Corporations reported $666.59 billion in Federal Insurance Contributions Act (FICA) taxes to the Social Security Administration (SSA). Corporations withheld from the pay of employees an additional $746.98 billion in Federal Income Taxes (FIT) from an estimated $5.028 Trillion wage expense. According to federal law, corporations may deduct from gross corporate revenues up to 35 percent of total wage expense including all the payroll taxes withheld from their employees. They may also deduct the "so-called" 7.65 percent matching corporate FICA taxes as an expense. 7.65 percent of $5.028 Trillion in wages is $384.6 billion. The total of the expense deductions for wages and corporate paid FICA tax is $5.41 Trillion. 35 percent of 5.41 Trillion is $1.89 Trillion. The $1.89 Trillion might be appropriately called "Corporate Welfare". This is in addition to grants, credits, bailouts, and other subsidies.

 

The U.S. Treasury reported $189.37 billion in Corporate Income Taxes received in 2004 from estimated gross corporate income of $541.05 billion that represents 10 percent of the combined $5.41 Trillion total of wages, FICA taxes, and FIT withholding.

 

By eliminating the corporate income tax, the U.S. Treasury would no longer receive the $189.37 billion in corporate revenues. Instead the Treasury would receive the total of $666.59 billion in FICA taxes and $746.98 billion corporations collected from employees and matching corporate FICA taxes. $1.414 Trillion minus $189.37 billion is $1.224 Trillion.

 

Commingling wages with FICA and FIT taxes at the corporate level created this accounting monstrosity and changing the law is the ONLY means of  straightening it out. Employees are told that employers are withholding these taxes for transfer to the Treasury Department and the Social Security Administration. Employees are not told these tax deductions and their total wages are expense deductions so corporations can pad their profits and the CEO can buy a new corporate jet and expense its cost and operation to a government not smart enough to figure it all out.

 

But of course, expensing wages and payroll taxes is just one aspect of corporate welfare. Without a Corporate Income Tax, the trillions in deductions for interest on corporate debt, advertising, travel, etcetera could no longer be expensed. CEO's publicly bemoan the punishing 35% corporate tax rate. The $189.37 billion corporations sent to the IRS last year was merely a "bogus tip" for the government to keep on doing what it is doing. If you want to hear real screams of agony from CEOs, try eliminating the tax.

 

The corporate income tax is in reality nothing more than a complex accounting scheme that cleverly distorts government handouts that far out weigh the illusory revenues that purportedly accrue to the government from the (misnamed) Corporate Income Tax. See Eliminate Corporate Income Tax

 

U.S. Tax Law (including the Social Security Income Tax) is unquestionably corrupt. And, according to Judge Robert Bork "Social Security is Unconstitutional". The question for employees and other taxpayers is now that you know the government, the media and your employer have betrayed the public trust:

" WHAT ARE YOU GOING TO DO ABOUT IT?"

 

COMMENTARY

 

Rampant greed, among many of my own generation, is flamboyantly exhibited by Winnebago bumper stickers that proclaim: "I'm spending my kids inheritance". First, they've got it wrong. They're spending cash extracted from the paychecks of their own sons and daughters augmented by increasing government debt. Government doesn't produce wealth. It redistributes it. Under the guise of "caring for them" the future is being literally stolen from today's youth by their elected representatives.

 

Absent significant tax and welfare reform, I fear this nation is headed for a fiscal/monetary crisis of inestimable dimension. The increasing debt (including growing un-funded liabilities) incurred by government, business and the general public is not sustainable. I have spent countless hours sorting, compiling, researching and analyzing economic data, mostly made available by government agencies. I have generalized the data and estimates so they may more easily be understood. It may therefore contain minor mistakes and/or omissions both in calculation and interpretation. Nevertheless, absent substantive arguments to the contrary, I believe these articles approximate the truth more accurately than most of the information and disinformation disseminated by government or media.

 

If a nation expects to be ignorant and free, it expects what never was and never will be . . . The People cannot be safe without information. When the press is free, and every man is able to read, all is safe. Thomas Jefferson

 

Note: If Tom were alive today and could avail himself of the C-Span side show and the disinformation dispersed by mass media sponsored by big business and the federal government, I suspect he would "revise and extend" his remarks, as current legislators are prone to say.

 

Only in a political "Dream World" can more money be misappropriated or embezzled than can be confiscated by a corrupt tax system and magically transform Social Security income shortages into surplus savings! Even the Government Accounting Office doesn't swallow this hogwash. Only Congress can spend money and call the same money savings! And, they can get away with it only as long they can keep voters ignorant of their shenanigans. The Democratic Socialist Debtist Welfare State may be compared to Two Foxes and a Chicken, voting on What's for Breakfast.

 

BOTTOM LINE: The United States has become a debtor nation because of policies that penalizes earnings, capital and enterprise and rewards debt and welfare. What are the merits and where is the JUSTICE in laws that tax citizens into dependency on government? Should a citizen be grateful to a government that taxes away his ability to take care of his own needs and then returns a portion in the form of a Social Security check that equates to what the government decides is equitable compensation or charity? What we have is a group of elected, mathematically challenged individuals who hire pro's to prepare their own income tax returns, while making Trillion dollar decisions about who to PENALIZE and who to REWARD with a tax code, that legislators, themselves cannot comprehend. Attitudes that they can better decide how much of YOUR MONEY you may keep and how much of it to GIVE someone else is absurd.

 

A middle class, single, taxpaying employee is the most abused creature in the United States. Household pets get better treatment. The combined nominal tax rates on single workers to subsidize their married cohorts with children is higher than the tax rate of many millionaires. The cumulative blunders of policy makers have created an incomprehensible accounting charade that is unjust and unjustifiable.

 

A bachelor would not permit the family next door to pick his pockets, nor would a reasonable family try. So why is it the government is permitted to perform this legalized robbery? And how did a government of the people attain this power? The short answer is the power transfer occurred primarily because of public complacency and greed.

 

While intent of law-makers may arguably have some merit; the net effect is tax and welfare laws that induce excessive debt throughout society, tax corruption, widening compensation gaps between corporate executives and factory workers. Politicians will not change their habits until an enlightened public holds them accountable. The choice is yours. Real, comprehensive tax and welfare reform must occur or -- "The Legacy of Perpetual Debt" is certain!

 

INCOME TAX REFORM, SOCIAL SECURITY REFORM AND DEBTISM

 

Income tax reform or social security reform will be both mindless and meaningless unless DEBTISM and SOCIALISM are renounced so that personal savings can replace debt as fundamental to business and family financial planning. Proposals for a simplified flat tax (tax on income) or national sales tax (a tax on consumption) to replace the present convoluted system are unlikely to achieve success unless the incentives to debt and disincentives to savings are removed.

 

The government bemoans anemic personal savings; but it is government policies that produce this outcome. Using the tax code to transfer wealth is what complicates tax law so the government can "Rob Peter to pay Paul" (not poor Paul, not rich Paul, just Paul).

 

The role of government is to protect this nation against invasions and promote the general welfare. It is not their role to establish puppet governments in foreign lands or to redistribute income among the masses, or to become employer of first and last resort. It is government's role to promote a healthy environment whereby people of good faith can have friendly debate and enterprise to the betterment of all. We need less not more government interference into private affairs.

 

While the politicians and pundits debate reform, this country is confronted by significant economic challenges right now, this minute. Evidence to support this fact abounds. All measures of inflation (the CRB index, the PPI and CPI) are replicating the inflationary cycle of the 1970s and early 1980s that preceded the S&L crisis (resulting in a huge government bailout).

 

This time around, loaded with unsustainable debt throughout society, the fix may become significantly more painful and long lasting. Among many industrial giants facing difficult times are General Motors and Ford. They all suffer from the same economic illness of debt overload. They are all victims of government tax policies that encouraged corporate debt, and by penalizing workers to provide for the welfare state.

 

The withdrawal from debt addiction must be careful and deliberate. Any abrupt changes to cure a chronic debtism disease could very well exacerbate the problem instead of providing a lasting cure. It is time for grassroots debate of these issues, candidly and honestly. The input from a knowledgeable public is vital to any hope of a successful outcome.

 

<>Note: Since "9-11" The CRB Index (that tracks basic natural resource commodities) has risen over eighty percent (80%). This is not a one time phenomenon. The increasing global demand for basic commodities, especially energy, almost insures that prices will increase far into the future. This does not bode well for a U.S. economy already suffering from debt over-load.

 

If you want your freedom back, GET OUT OF DEBT! DOWNSIZE from "WANTS" to basic "NEEDS"! DO IT NOW! In the not distant future, liquidity will be in high demand. Cash (even a depreciating paper currency) and/or its precious metal (appreciating) equivalent will gain significant new appeal. Treat personal assets with respect. Put them in a "SAFE" place. (A hint to the wise is sufficient.)

 

I have just completed a summary of articles. It reveals how government programs and policies interact, so results can be more clearly identified. Additionally, Getting Ready for Hard Times provides evidence that tax and welfare policies erected on a depreciating currency with no regard for equity are doomed to fail.

 

 

Strategy for Tax and Welfare Reform (Art#15)