ENGLISH FOR CONGRESS POSITION PAPER (Revised April 2014)

Budget, Deficit and Taxation

The current budget deficit of about $600 Billion understates the true deficit incurred this fiscal year because it does not include the diversion of any surplus Social Security trust fund receipts of over into the general operating budget (which are used to lower the publicized annual deficit total) and the value of new expenditure commitments made this year that will have to be paid for in future years.  The recently approved increase in the national debt ceiling to $17 Trillion equates to approximately $60,000 per person for every resident and there is continuing need for periodic permanent increases  of the ceiling by another Trillion or more.  In 1940, corporations paid about 60 percent of all income taxes, today that figure is about 16 percent.  Currently, about sixty percent of corporations pay no Federal income taxes.  Corporations should pay their fair share of the cost of running the Federal government and not continue to be subsidized by individual taxpayers. If corporations produce 30% of the Gross Domestic Product, they should pay at least 30% of the income taxes collected.


I propose that the Federal corporation income tax be eliminated and replaced by a Federal gross receipts tax that would allow taxable deductions only for domestic employee payroll and benefit expenditures.  Employee payroll outlays are already taxed when received by the employees (employee benefits either reduce costs for other government programs such as Medicaid or are taxed after they are received such as retirement annuities).  The individual Federal income tax is itself a gross receipts tax taken upfront off the top through mandatory payroll deductions before net income is paid.   Individuals then have to file tax returns with approved exemptions and deductions to recover the excess amount of taxes withheld.   Now that corporations have been given full Bill of Rights protection by the Citizens United ruling of the Supreme Court, why shouldn't corporations being taxed on the same basis?  A gross receipts tax on corporations would eliminate all of the various sophisticated tax avoidance schemes that have arisen to escape taxation.  It would eliminate Federal tax revenue losses from foreign tax havens and tax losses from inflated transfer pricing cost deductions on imported components and similar schemes by foreign companies doing business in the United States.  Since corporations provide about 30% of the USA's
GDP, 
30% of the future Federal gross receipts taxes should be collected from them.   A third of the total national gross receipts taxes collected should be disbursed to the states on the basis of population in each state recorded by the 2010 Census, but only if state income taxes are eliminated and sales taxes on groceries are eliminated and uniform property tax and other tax rates are implemented nationwide.  Taxation equity is a national concern and no state should penalize or reward its residents because they live within borders.

Finally, the incredibly complicated Federal tax code needs to be greatly simplified by eliminating all tax deductions except the individual personal income and standard deduction exemptions. These should be calculated to determine localized tax-free personal deduction amounts that should be set well above minimum cost of living poverty income levels in the specific locations where taxpayers reside.  Federal civilian employee pay now is adjusted for cost-of-living and pay comparability differences according to the geographic locations where Federal employees are employed.  Why shouldn't individual income tax exemptions and standard deductions be calculated on the same basis?   Personal taxable income and standard deduction exemptions should be determined for each three digit postal zip code where taxpayers maintain their permanent residence.   This procedure would equalize tax exemptions for real localized differences in cost of living expenses.  Elimination of all other deductions would end the grossly unfair subsidy that renters (especially the working poor who cannot afford to buy homes) now pay through their relatively higher income taxes, which are used to offset income tax revenue losses from the mortgage and home equity loan interest as well as the property tax deductions now given to all homeowners.  Special one-time only 20 year low fixed-rate interest and property tax-deductible FHA and VA mortgage programs (with second mortgage or home equity lien prohibitions) should be implemented only for the working poor with incomes below 150% of locally-adjusted poverty levels that would be funded by Social Security Trust Fund reserve's receipts. 
(also, please read the Saving Social Security and Pension Reform issue papers).

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