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US Federal Budget opinion piece written by Bill Smart

US Federal Budget 2012 Today the amount of the US Federal Budget and the amount of revenue generated by taxes and investments are now only loosely associated.  As argued in a companion opinion article Institute An Aggregated Wealth Tax the tax codes should be constructed in a way to provide the  amount of tax revenue required by the national budget,  not the other way around as is done today.

The federal budget should be constructed each year as follows:

1.       Funds to completely pay off any budget deficit of the previous year.

2.       Pay a portion of any National Debt to ensure the debt is completely paid off by a certain future date.  Example: 10% of the outstanding national debt.

3.       Projected Mandatory Spending such as entitlements, Social Security, Medicare, Medicaid, etc…

4.       Projected Discretionary Spending

       a.       Defense

       b.      Non-Defense

5.       Contingency Fund to cover any mis-projected or unexpected spending.  Example: 10% of the total of Mandatory and Discretionary Spending.

The total of this budget would be the amount of revenue the government needs to receive from taxes and all other sources.

Because it is useful for individuals, small businesses and corporations to be able to estimate their taxes ahead of time for planning purposes this budget could be used to set the tax codes for a year or more in advance.  Example:  Using a two-year buffer the budget for the fiscal year 2020 would be used to set the tax codes for 2022.  The budget for fiscal year 2021 would be used to set the tax codes for 2023.  This buffer could be more if necessary, but should be kept as small as possible.  Also the projections could be extended for more than just one year to allow the tax codes to be changed less often.  Example:  A five-year projection in 2020 could set the tax codes for 2022 through 2026.

If a surplus exists after the fiscal year ends, the surplus could be used to make an additional payment on the national debt if one exists or could be kept in the treasury and credited to the next fiscal year lowering the total budget requirements.

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Copyright © 2013 Bill Smart.  All rights reserved.  Reproductions permitted.