May 15, 2005

THE ROAD AHEAD:

NoSpeedBumps Major Reforms: RSA+HSA+EFT (Dan Morgan, NoSpeedBumps.com)

My math isn't good enough to figure out the numbers for the EFT, but the universal, compulsory RSA and HSA portions, including subsidies, are certainly the direction in which we should be headed.

Posted by Orrin Judd at May 15, 2005 11:54 PM
Comments

This was a good catch OJ,

It is easy to explain & understand. Basically, the fixed HSA and RSA savings, combined with standard 'deductions' make this progressive while still being "flat".

Now if we could only blackmail 240 congressmen & 60 Senators....

Posted by: BB at May 16, 2005 1:12 AM

[T]he universal, compulsory RSA and HSA portions, including subsidies, are certainly the direction in which we should be headed.

Agreed, and I'm hopeful that we'll get there within a couple of decades. Essentially, defined contributions, instead of defined benefits.
Overall, the proposal is A Very Interesting Idea, but not one that could be enacted in today's America.

Objections, in no particular order:

The capital gains tax is the same as the tax on other income, which discourages people from transfering the asset, and giving tax revenues to the government. The goal here is asset turnover, with every holder paying a bit of tax on their gain, every couple of years.
It's the same as with the economy as a whole: In a consumer society, such as the U.S., the goal is to get people to spend most of their money, so as to provide income and jobs for others. A millionaire who lives a middle class lifestyle stimulates the economy no more than a person who only earns a middle class wage, and a millionaire whose wealth is illiquid, tied up in appreciating but not income-producing property, is of less value to the gov't as a source of tax revenues than a middle class wage earner is.
We should give asset-holders an incentive to sell and take their profits, such as a 50% break from normal tax rates.

Mr. Morgan's proposed overall tax rate, ( EFT + HSA + RSA ), of 25% is way too low. It would be just "too low", requiring about 30%, in my estimation, but Mr. Morgan shovels so much of that 25% into the RSAs that the overall rate would have to be maybe 40%. Alternatively, we could just have a lower mandated retirement savings.

Having ALL of the revenues collected for RSAs going into private accounts is a big problem, from an accounting perspective. That's why President Bush is only pushing for 1/3 of SS pension revenues to be diverted to private accounts. Otherwise, we'd have to borrow vast sums for decades to cover the ongoing cost of SS outlays.
From an economic perspective, of course, it might be worth it to borrow a few trillion now, and pay it back later, as the gov't's obligation to pay pensions disappears with the passing of those not fully vested in the private system.
Also, the U.S. Federal gov't would be borrowing a lot of those dollars from the RSA funds, but many people wouldn't be interested in investing their retirement money in gov't bonds.

Posted by: Michael Herdegen at May 16, 2005 11:23 AM

[T]he universal, compulsory RSA and HSA portions, including subsidies, are certainly the direction in which we should be headed.

Agreed, and I'm hopeful that we'll get there within a couple of decades. Essentially, defined contributions, instead of defined benefits.
Overall, the proposal is A Very Interesting Idea, but not one that could be enacted in today's America.

Objections, in no particular order:

The capital gains tax is the same as the tax on other income, which discourages people from transfering the asset, and giving tax revenues to the government. The goal here is asset turnover, with every holder paying a bit of tax on their gain, every couple of years.
It's the same as with the economy as a whole: In a consumer society, such as the U.S., the goal is to get people to spend most of their money, so as to provide income and jobs for others. A millionaire who lives a middle class lifestyle stimulates the economy no more than a person who only earns a middle class wage, and a millionaire whose wealth is illiquid, tied up in appreciating but not income-producing property, is of less value to the gov't as a source of tax revenues than a middle class wage earner is.
We should give asset-holders an incentive to sell and take their profits, such as a 50% break from normal tax rates.

Mr. Morgan's proposed overall tax rate, ( EFT + HSA + RSA ), of 25% is way too low. It would be just "too low", requiring about 30%, in my estimation, but Mr. Morgan shovels so much of that 25% into the RSAs that the overall rate would have to be maybe 40%. Alternatively, we could just have a lower mandated retirement savings.

Having ALL of the revenues collected for RSAs going into private accounts is a big problem, from an accounting perspective. That's why President Bush is only pushing for 1/3 of SS pension revenues to be diverted to private accounts. Otherwise, we'd have to borrow vast sums for decades to cover the ongoing cost of SS outlays.
From an economic perspective, of course, it might be worth it to borrow a few trillion now, and pay it back later, as the gov't's obligation to pay pensions disappears with the passing of those not fully vested in the private system.
Also, the U.S. Federal gov't would be borrowing a lot of those dollars from the RSA funds, but many people wouldn't be interested in investing their retirement money in gov't bonds.

Posted by: Michael Herdegen at May 16, 2005 11:26 AM
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