To summary
Restructure the Tax Code
Somewhere along the line during the recent years of ''tax reform,'' we lost the concept of a progressive income tax, the concept that income taxes should be based on fairness and the ability to pay. As a result, the gap between rich and poor in America is growing ever wider.
We can correct this imbalance, and restore fairness in our tax system, by taking the following actions:
1. Change the personal exemption in the Federal Income Tax code to index it to the full-time federal minimum wage (what you would earn if you worked at the minimum wage 40 hours a week, 50 weeks a year). Use this minimum annual gross income to establish the level at which an individual starts paying federal income taxes.
The loss in federal revenue under this plan would be made up by revising the tax brackets upward on higher levels of income.
The present personal exemption in the federal income tax code is too low.
When the federal budget was balanced some 25 years ago, the highest tax brackets for the ultra-wealthy were between 70 and 90 percent.
When those higher tax brackets disappeared, the burden to fill the national treasury fell to the lower and middle class.
Under this Economic Security Plan, with the personal exemption tied to the minimum wage, a person who makes less than the minimum annual gross income would pay no federal income taxes.
2. Use the same minimum annual gross income to establish the level at which Social Security premiums begin to be deducted from an individual's pay. People making less than the minimum annual gross income would not pay Social Security premiums.
The loss in revenue to the Social Security Trust Fund under this plan would be made up by eliminating the cap on Social Security premium payments.
Income tax tables are set up to allow for personal exemptions and dependents. Social Security payroll taxes are not. Once you earn $400 each year, Social Security taxes are paid from the first dollar earned, regardless of the family situation. Many low-income people pay far more in Social Security premiums every year than they do in income taxes.
Yet on the other end, because of the cap on Social Security payments, high-wage earners stop paying premiums once they have reached the cap (currently $61,200). Corporate CEOs pay the same amount as one of their middle-level managers who earns $61,200. And those middle-level managers pay the same rate as do the minimum wage workers who clean the offices at night.
With its constant rate regardless of ability to pay, the Social Security payment is regressive without the cap. The cap makes it the most regressive burden facing most wage earners.
Someone living in poverty should not be paying Social Security premiums to the government, because they need every penny to pay day-to-day living expenses. By the same token, million-dollar CEOs, entertainers, and athletes should be paying their Social Security premiums on every dollar they earn above the minimum.
3. Eliminate the home-mortgage interest deduction.
The home-mortgage interest deduction is in reality a bank subsidy. It artificially reduces the effective cost of borrowing money against one's residence, but does so on the backs of the American taxpayer. Many banks will calculate the interest rate, and then the actual effective rate, factoring in the tax bracket of the loan applicant. With income tax brackets of 22 and 28 percent, American taxpayers are picking up the tab for about one-fourth of the interest paid on those loans.
Like the federal government, American consumers must be weaned of their debt. While home ownership needs to be encouraged as part of the American dream, and programs for first-time and low-income borrowers maintained, America needs to get back to the idea that a mortgage is a debt to be paid off.
Interest on home-mortgage and home-equity loans should be paid in after-tax dollars, not be subsidized by renters and those who have worked hard to stay out of debt themselves.
4. Eliminate the standard deduction.
With health care costs folded into other programs and mortgage interest removed as an allowable deduction, most of the reasons for a standard deduction disappear. Charitable contributions, local and state taxes, and other deductions would still be allowed, but would have to be itemized to be claimed.
5. Tax capital gains as ordinary income.
Income is income. It is not fair for earned income to be taxed at a higher rate than unearned income from capital gains. The risks investors take in speculating on securities are voluntary risks, and often pale with the risks to life and limb the average worker faces at the job site each day.
To summary
Make the Minimum Wage a Living Wage
People who work full-time, 40 hours per week, 50 weeks a year, should be able to provide for the basics of their family's survival from the proceeds of their labors.
The concept of a living wage is as much about justice and fairness as it is about money. For that reason, I reject the lament that businesses would be forced to close if they had to pay a living wage. That kind of thinking is too painfully similar to the language used in the South before the Civil War, when plantation owners insisted that the slaves could not be freed because the economy would collapse.
In recognition of the plight of low-wage working parents, we American taxpayers are now supplementing those incomes through the Earned Income Credit. At its highest point, the credit amounts to a subsidy of between $1 and $1.50 per hour, for working parents earning up to $5.65 per hour.
Even though this supplement is paid directly to workers, the Earned Income Credit is in reality a business subsidy, one which lets off the hook those businesses which pay substandard wages.
And then, business quarter after business quarter, we watch as record profits are posted by the fast-food and designer-fashion chains whose names are synonymous with the lowest of wages. This is not fair, to either the workers or the American taxpayers.
But rather than cut funding for the EIC, as the Republicans want to do, I propose we raise the minimum wage to a living wage, thereby making many Americans ineligible for the EIC because they would be making too much money.
The issue of the minimum wage being a living wage is really about fairness. If the minimum wage had kept pace with inflation, it would be in the neighborhood of $6.50 per hour right now. That's $13,000 per year for a full-time worker, still not a lot of money.
Under my Economic Security Plan, the minimum wage would also apply to restaurant workers, who currently can legally be paid half the current minimum wage.
Also note that with the restructuring of FICA deductions to begin at the minimum wage level, the employer's contribution to Social Security taxes would begin there as well, and would only be assessed on wages above the minimum.
To summary
Restructure Social Security
Because of the impending crisis facing the Social Security Trust Fund, we need to engage in a national discussion of how we will continue to fund Social Security. Should a fair pay-in level be based on all personal income, not just earned income? And what part should Social Security continue to play in assuring a basic minimum income for the retired or disabled?
1. Convert Social Security to an income insurance program, instead of an entitlement paid out regardless of need.
Up to now, the high numbers of people in the work force compared to those in retirement have allowed payment of Social Security benefits to almost every retired worker. But my generation did not have as many children as did my parents. Thus the ratio of workers to retirees has dropped, and will change even more dramatically when the Baby Boomers, of which I am one, start reaching retirement age in less than 20 years.
When we reach the point that the demographics will not support the current system, we will have to change the way we look at Social Security. We will of necessity have to stop seeing it as an entitlement based on contributions, and look at it as similar to an insurance policy, with the payroll deductions as the premiums, and the pay-outs in retirement based on need. And, like car insurance, we pay our premiums but do everything we can to reduce the need to file a claim.
2. Program funded by a reasonable tax on all types of income, not just earned income.
If we accept Social Security as a national program set up to guarantee income security to our nation's elderly and disabled, then the reason to limit the revenue source to earned income simply disappears.
We need to consider assessing all income, including income from interest, dividends, and capital gains, at the same rate.
By the same token, everyone paying into the system under such an extended plan would become a potential beneficiary, based on need.
3. Basic payments made to retirees, disabled and other qualified individuals based on need.
Pay-outs would be made starting with those most in need, at a basic minimum level, and only then advancing to those less in need, to the point where annual income to the fund does not exceed expenses.
Once a universal health care program is established, the medical portion of Medicare and Medicaid can be folded into that program, taking it out of the Social Security system. Social Security would continue to cover basic needs, including the non-medical portion of long-term care for those in nursing homes or those needing assisted-living care in their homes.
To summary
Establish a Single-Payer Health Plan
Access to services, choice of provider, individuals' responsibility for caring for themselves, and an equitable distribution of health-care costs based on the ability to pay are the primary concerns of any universal health-care program. The three-part program in the Economic Security Plan meet those concerns.
It recognizes that a healthy population benefits the entire country, and thus funds the government's portion of health care from both the personal and corporate income taxes. It provides for catastrophic and long-term medical coverage, but it also places some of the burden for the cost of intermediate care on the consumer.
The basis of the plan is a focus on preventive medicine, along with patient involvement in the process, including responsibility for keeping costs to a reasonable level. Under this plan, health-care is a matter between the patient and the provider.
1. The individual annual allotment.
At the low end, a basic level of health care would be available to everyone, with the choice of providers solely in the hands of the patient.
The plan, funded through general revenues of the federal budget, would have a basic minimum annual health care allotment, somewhere in the neighborhood of what health maintenance organizations now pay doctors to take care of one patient. One recent estimate placed this at around $2,100 per year. However this number (and the numbers for percentage of income which follow) could float from year to year as the country gets a better handle on the costs or savings of operating under this plan.
This basic coverage would be provided via a coded health ID card similar to a bank debit card, which can be used to pay any health care provider licensed to accept health card payments.
Dental, eyecare, mental health services, and alternative medicine providers would be included. The choice of which types of services, as well as which providers, would be left to the discretion of the patient, based on the patient's perceived need for those services.
This plan would result in the doctor or provider deciding in consultation with the patient, rather than a remote billing clerk with no medical training except a chart of approved practices, which tests or services to perform under the circumstances.
The structure of this plan would address one major problem with open-ended health care plans -- the tendency to view insurance payments as free money, with a ''heck, no skin off my nose, the insurance will cover it'' attitude. Fraud and over-billing runs rampant under such an open-ended system.
The allotment plan would encourage the patient to check the bills for accuracy, and to shop around for the best prices for routine services, in an effort to stretch the allotment as far as possible.
If an individual is healthy, and does not use the full allotment in a given year, unused portions would be rolled over and added to the next year's allotment, thereby extending the time before that second stage, self-payment, kicked in.
2. Self-pay
The inducement for the individual to check bills and price-shop while using the annual health care allotment card is to forestall as long as possible the next stage of this plan, which is the out-of-pocket patient-paid portion.
Once the annual allotment is used up, individuals would be responsible for the entire next level of their medical bills, based on a percentage of their annual income.
(Since this concept is new and untested, the percentage should not be cast in stone. I recommend a starting figure of 10 percent, until we see how effective the cost-containment works.)
The individual would have several options to cover the self-pay portion of this plan. The simplest would be to pay cash, to draw from personal checking or savings accounts or other assets, until the income share has been reached.
Another option might be for an individual private insurance policy to cover this type of situation.
A third option might be through a payroll deduction. By adding a line on the W-4 form, an individual could divert a portion of his pay, up to the annual self-pay share, which would be added to the medical ID allotment card.
As a last resort, the patient could contract with the government to pay the patient's portion after the medical bill is incurred, with a payroll deduction or other plan set up to repay the government loan.
Regardless of how it got paid, once the individual handled the self-pay portion, the third part of the Economic Security Plan, the catastrophic coverage, would kick in.
3. Catastrophic care and long term medical care
Catastrophic coverage, including the medical portion of long-term health care, would be paid by the federal government, from a dedicated Catastrophic Trust Fund funded through a surcharge on all income (personal and corporate). The medical portions of Medicare and Medicaid would fold into this program and disappear as a separate entity.
4. Health-care Conclusions
This proposed national health care system, with allotments, self-pay portions, and catastrophic coverage, would make some level of basic health care available to everyone, encourage prevention programs such as immunizations, and early intervention, while limiting the financial risk to both the individual and health care provider.
Cost-shifting and cut-rate payments to providers by insurance companies would become a thing of the past.
This plan would eliminate the need for regulations about insurance portability, pre-existing conditions, deductibility of health care premiums and costs, coverage for family members or significant others, and a myriad of other details which now take up the time, energy, and attention of a lot of people.
It would also return personal responsibility to the health care scene, rewarding preventive medical care and good health, as well as vigilance toward the details in billings.
To summary
Protecting our Economic Ecosystem
Just as in natural systems, our economic system has a grand diversity, with many inter-related parts, each having an impact beyond its narrow scope. And, just as in our dealings with natural systems, too often we have focused our attention too narrowly, ignoring the interactions beyond the artificial boundaries we have set up.
Just as nature thrives in bio-diversity, we need an integrated approach to the diversity inherent in our economic eco-system.
In this Plan for National Economic Security, I have attempted to coordinate four interrelated aspects of our economy, using fairness, justice, personal responsibility and compassion as guiding principles.
If the concepts are sound, we can change the details as the needs, times or circumstances change. This document is intended to serve as a solid foundation on which to build economic justice and security for all people living in this great nation.
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