From: Jason.C.Vallier@gsk.com
\[[[mailto:Jason.C.Vallier@gsk.com]{.underline}](mailto:Jason.C.Vallier@gsk.com)\]

Sent: Thursday, February 17, 2005 12:28 PM

To: comments@taxreformpanel.gov

Subject: Bipartsan Proposal to Finance Privatizing Social Security via
Tax code changes

Financing the partial privatizing of social security is a topic that I
assume is being discussed among this committee. Please review the
attached bipartisan proposal.

Jason Vallier

Pittsburgh, PA

412-682-6357

A Democratic / Republican Proposal for Social Security Reform

FACTS:

1.  The current Social Security system, in conjunction with the current
    tax code, means Social Security will become financially insolvent.

2.  The majority of Americans support the concept of investing part of
    their Social Security in the stock market.

3.  Revising the Social Security system without revising the tax code to
    offset the loss of revenue will contribute substantially to our
    national debt.

4.  The President has reforming Social Security and reforming the Tax
    Code on his 2^nd^ term agenda.

Congress must find a way to work together to resolve the impending
crisis on Social Security for the benefit of our nation's future. In
this vein, I offer the following proposal:

**Democratic Compromise:** The Democratic Party first must acknowledge
facts \# 1 and \# 2 above. They also would be wise to listen to the
opinions of most economic scholars and acknowledge that individuals who
choose to invest part of their Social Security in the stock market, by
and large, will be much better off than those who opt out of this
option.

The people who make the best return on their money are those who put
their money to work for them. We put our money to work through investing
in corporations. This is the free enterprise system on which our nation
has developed and prospered. We should embrace using it. After all, the
% return for owners, on average, far exceeds the % annual raise of
workers. This is why our government should enable and even foster this
type of investing.

**So, the Democratic compromise should be to back the President's plan
to enable the privatization of Social Security**. This must be done on
behalf of the good of the country, on behalf of the interest of the
majority of Americans, and most importantly, on behalf of a solution
which represents the best financial interest of the American people.

**Republican Compromise:** The Republican leaders, by and large, need to
recognize fact \# 3 above. A few of them already do, and are getting
ready to join the Democrats in the trenches to help block Social
Security reform, for fear it may set the country on a road to a
catastrophic financial collapse. Doing nothing, however, is not the
answer in light of fact \# 1.

The only way to gain support from the Democrats as well as the
Republican fiscal conservatives is to establish a way to finance the
necessary Social Security reform.

**So, the Republican compromise should be to repeal the 5% Capital Gains
tax cut, thus reverting to 20%. Furthermore, those that reap over
\$250,000/year in capital gains should be subject to a 25% Capital Gains
tax.**

This compromise merits some explanation and understanding, not just for
the Republican leaders, but for all the people within our nation.

The beneficiaries of Social Security today are those individuals who
spent their life working for corporations and/or private companies.

The average annual return of the stock market has been about 7% after
inflation. It is safe to assume the private sector, since it often
competes with public companies, returns averaged about the same. In
contrast, salaries of the American worker have increased at less than
half this rate (2-3% annually) after inflation over the last century.

And so, it is only fair to finance Social Security though a tax which is
predominantly financed by those who are the beneficiaries of owning
public and/or private companies. They should help give a little back to
the labor force, for all that the labor force has given them. Keep in
mind, money earned through investment is not the same as money earned by
rolling up one's sleeves and working. By and large, it was the American
labor force that produced the high returns. Owners of corporations and
private business had the privilege of investing their wealth to reap the
reward. **A tax on capital gains to help pay for Social Security would,
in essence, return to retirees a percentage of the wealth that the
retirees themselves created.**

There is one additional point to mention to further strengthen this tax
proposal. It is this: although the average returns for owners are far
better than the returns for the labor force on which they depend, the
average middle class citizen, at a 30% income tax bracket, has a tax
rate which is exactly double what the owner class presently pays in
capital gains -- 15%. Furthermore, wage taxes are subjected to most
Local, State and Federal tax there is. In stark contrast, Capital Gains
are exempt from many of these taxes, including the Social Security tax.

From the facts noted above, I hope we can agree why capital gains should
not be exempt from supplementing Social Security for the renaissance
period through which we aim to fix it.