Mish’s Pie in the Sky, Tax and Spending Compromise Proposal

Something For Everyone to Hate

I propose a combination Flat Tax + a Consumption Tax + Surtaxes. Here are some general starting point ideas. I reserve the right to change my mind on any of these proposals.

• My consumption tax would exclude food, medicine, cleaning supplies, and clothes up to a certain amount. As proposed, my consumption tax is anti-regressive.
• To encourage work, I would do two things: For starters, exclude the first $X in income from any taxes, say $15,000. Second, I would prohibit food stamps from buying snacks, beverages, candy, ice cream, etc., but they could be used to buy soap, cleaning supplies, shampoo, etc. 
• I would end all subsidies, tariffs, and itemized deductions including mortgages and charitable deductions. All, means all. This of course means the end of the marriage penalty. Everyone pays their share and everyone is treated alike. 
• To appease the progressives, I would put a surtax on income above a certain amount, say $1,000,000. I would put a huge surtax on stock options above $250,000 treating them as ordinary income. This would rein in shareholder dilution and pretty much force CEOs to get paid in salary rather options. The net result would be a flat tax from $15,000 to $1,000,000 with stock options hammered ending shareholder dilution as executives would toss them.
• In return for the high end taxes on the wealthy, I want something in return: National right to work laws, the end of public unions, and bankruptcy reform. All cities and municipalities would immediately be eligible to declare bankruptcy. States too, why not? Something needs to be done with the public union pension crisis and bankruptcy is the only practical solution. 
• The ideal corporate tax rate is zero, but in the spirit of compromise and to guarantee offending everyone on something, a modest increase from 21% to 22% is in order. To encourage production in the US, the same minimum tax would apply on foreign operations as well, ending overseas tax havens.  

Expected Moans

The result would be an extremely simple tax code sure to offend everyone on something.

• CEOs and executives would moan about stock options. 
• Those making more than $1,000,000 would moan about the surtax
• Multinational corporations would moan about inability to shelter foreign income.
• Progressives would moan about food stamps and right-to-work.
• Union advocates would moan about right-to-work, bankruptcy reform, and the end of public unions. 
• Homebuilders would moan about the end of mortgage deductions.
• Charities would moan about the end of charitable deductions.
• Exporters would howl over the end of tariffs.
• Any businesses getting subsidies would howl.

Apologies offered if I did not upset everyone on something. Let’s continue with the income side of the ledger to see if I can offend still more classes.

The Income Side

How about a balanced budget amendment? 

That would force some real compromises on spending. Let’s start by bringing home all the troops from everywhere. Cut military spending in half. If the world wants us to be the world’s policeman then they should help foot the bill. 

The only way to reduce medical spending is to put skin in the game. Medicare for all is the reverse of what’s needed.

We waste too much money fighting terminal illnesses only to keep people in pain and misery.

I do not want to be artificially kept “alive” nor do I want to pay for others to be artificially kept alive. 

We need a right-to-die law and right of refusal. 

If people want to be kept alive in misery, then private insurance is the ticket. 

Want to be treated for cancer? Then buy a policy that covers it. Otherwise, you don’t get chemo, but you do get all the pain killers you need. 

Need insurance for a heart transplant? OK, provided one is able to travel, let insurance companies offer lower cost plans mandating expensive operation take place overseas, say India. Demand treatment in the US? OK, pay more. The idea is to increase competition and reduce costs in as many ways as possible.

US citizens should not pay more for drugs than corporations charge overseas citizens. Right-to-import would take care of that. We would have immediate drug price parity. 

How about tort reform? 

The opportunities to cut medical spending waste are endless. 

Have I offended everyone on something yet? Possibly not so let’s go after the banks hard.

Sound Money

I propose sound money, a 100% gold-backed dollar.

That means a dollar represents a certain weight of gold, available immediately on demand. 

The implied result is an end to fractional reserve lending.

And I would end the Fed.

For details on how this might be done, please see The Case for a 100% Gold Dollar by Murray Rothbard.

Biden’s $2.3 Trillion Infrastructure Boondoggle: What Would You Cut?

This post is in response to a comment made to Biden’s $2.3 Trillion Infrastructure Boondoggle: What Would You Cut?

A reader commented 

America has been in two wars for nearly 15 years! That was a lot of money being spent too, did you have a problem with that, considering the value of these two endeavors? 

Hardly anyone has been more against military spending waste than me. I have repeatedly called for enormous cuts. 

Defense spending was not in Biden’s proposal and I asked for ideas regarding Biden’s proposal, not pie in the sky ideas. 

Pie in the Sky Compromises

This post addresses the tax side, the spending side, sound money, and genuine pie in the sky compromise ideas.

I am OK with compromise tax hikes as long as they are accompanied by genuine reform elsewhere. 

An additional beauty of my proposal is that each side stands alone. Tax reform can work in isolation, so can spending reform and bank lending.

The best result would come from a combination of ideas. I offer the above plan as a genuine set of compromises.

Addendum

Here is an interesting reader suggestion to consider.

Has other benefits
Incentivizes US share ownership over foreign ( as locals can use the tax credit)
Companies with good cashflow but low reinvestment returns are valued for their tax efficient dividend distribution (better mkt capital allocation) .
Tax positive for the govt.

— SOG (@SOGMeister) June 1, 2021

Mish