From: mccall@mksol.dseg.ti.com (fred j mccall 575-3539)
Subject: Re: Clinton Policies
Organization: Texas Instruments Inc
Distribution: usa
Date: Fri, 2 Oct 1992 20:32:45 GMT

In <1992Sep30.213640.31229@watson.ibm.com> johniac@johniac.austin.ibm.com (John Iacoletti) writes:

>Scenario 1:  Go bankrupt, default on the debt, and start over.  This
>sometimes happens to organizations that can't control their spending.

This is generally considered a Bad Thing (tm) when done by
governments, and particularly bad when done by the governments of
major nations.  If you don't understand why this would be so, I'm not
sure where to even begin explaining it.

>Scenario 2:  Stop all government spending, except to pay off the debt.
>Start again in four or five years with a balanced budget based on poll 
>tax revenues, with no deficit spending allowed, for any reason.

This is a terrible idea for more reasons than I have time to go into.
Not allowing deficit spending for any reasn is a bad idea.  No
government spending except to service current debt is a bad idea.  A
poll tax as the only tax is a bad idea.

>Scenario 3:  A gradual conversion to minimize the disruption, as
>illustrated below from a post by John Otto (otto@systems.cc.fsu.edu)
>to the Libernet mailing list:

>Step 1. Flatten the income tax to 15% of earnings above $10000.

This is a good idea.  It is also where this should probably stop,
since most of the rest of this is bad ideas, IMHO.  It will require,
however, some *HUGE* cuts in spending.  What gets killed?

>Step 2. Replace the income tax with a sales tax of 18%.

Presumably with no exemptions?  You've just lowered a bunch more
peoples' incomes to below what they need to live based on the
additional tax you just hit them with (18% of everything under $10k
plus an additional 3% on everything else).  Rotten idea, except for
the folks who make their livings by shuffling money around.

>Step 3. Require referenda for changes in taxes or increase in 
>        government debt.

This one I think is probably a good idea.  However, I'm not convinced
that it's a WORKABLE idea.

>Step 4. Eliminate all other taxes and fees, except customs, fines &
>        the 18% sales tax, and implement the contract recording fee.

This refers to "the contract recording fee" as if it is a well-known
thing.  What does it refer to?  Is there a proposal someplace for such
a fee?  What is the expected income from such a fee and what is the
expected loss in income from doing away with all those other taxes?
Presumably we have less money than before, so once again something is
giong to have to go.  Is there anything left that the government is
doing besides debt service that we don't feel like we need?  I doubt
it.  Since we don't want to default on the debt (which is somewhere
around $200 billion/year to service -- more if you expect to retire
it), what else does the government NOT do?

>Step 5. Lower sales tax to 10% and implement head tax of $400/family 
>        member/year.  (Reality check: $400*260*10^6=$104*10^9)

Reality check.  Let's assume a family of 4 with an income of $20k.
Hardly what you'd call well to do, but let's start there.  Because
their income is relatively low, they are spending all of it (and hence
subject to an 18% tax) and are thus paying $3.6k in taxes.  We lower
the sales tax to 10%, which saves them $1.6k.  We then tax them $400
per family member, so we take back the same $1.6k.  What this shows is
that $5k/family member is the break-even point for this proposal, and
that the taxes of anyone making LESS than that go up.  In other words,
more people fail to make it, and we increase the tax load on the poor,
who are least able to afford it.  At the same time, those who are
better off get a tax cut.  I think this is another net revenue loser,
so we cut some more government services, which are now more needed
than ever since people just aren't going to be able to make it on
their own.

Bad idea.

>Step 6. Eliminate customs taxes.

Replacing them with?  Cutting what?

>Step 7. Eliminate sales tax.

Ok, net government income is now down to that $104 billion from head
taxes plus whatever this 'contract fee' is expected to bring in.  We
can probably no longer service the debt, much less do anything else.

>Step 8. Replace head tax with government participation tax of $100/year.

Reducing income to less than 15% of what it was, in one fell swoop.
Now what?  You now have an income of around $10 billion, IF YOU ASSUME
THAT ALMOST ALL ADULTS ELECT TO PARTICIPATE.

Why not just say that we're not going to support a central government
and secede?  You've created the same net effect.  Of course, since the
State is now going to have to do everything, you're probably paying
just as much to fund the same services at the state level.


-- 
"Insisting on perfect safety is for people who don't have the balls to live
 in the real world."   -- Mary Shafer, NASA Ames Dryden
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Fred.McCall@dseg.ti.com - I don't speak for others and they don't speak for me.
Newsgroups: alt.politics.clinton,alt.politics.bush