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.