Now that the election is over....

time to look at another concept for consideration in setting up the Centrist Party.

This blog is about the national debt.  Not the budget deficit, although the two are related.  Let's define terms:

The budget deficit - the amount by which one year's fiscal spending will exceed that year's revenue.

The national debt - the total amount of money that the U.S. has borrowed over the years, which is about to hit the limit of $16.4 trillion dollars.

The deficit has to be solved by a combination of increasing revenues and decreasing spending.  That's a subject for another entry.  This is about reducing the national debt, which would go a long way toward closing that deficit.  The annual budget deficit is in excess of $1 trillion and has been at that level for several years.  We also happen to be spending more than $350 billion annually in interest on the national debt, making up more than one-third of the annual budget deficit.

So we need a new way to lower the amount we owe to others and are paying interest on, to do two things.  Reduce and ultimately eliminate the national debt, which helping to cut the budget deficit.  How do we do that?  We amend the Constitution to allow a wealth tax to be collected every ten years.  The revenue from this wealth tax will be used solely to buy back part of the national debt.

The Federal Reserve estimates that there is more than $60 trillion in wealth owned by people in the U.S.  Much of this is not liquid wealth and it would be problematic to suddenly take 10% of it in a tax, and that would harm the economy in a number of ways.  Stock prices would fall through the floor as investors were forced to sell shares at bargain prices in order to pay their obligations.  So we have to do this in a smart way.

Here are the steps I suggest, and this is not a perfect plan, just an idea.

1.  We set the tax at 5% of net wealth.  That way anyone who actually owes more than they have in wealth will pay nothing.

2.  We exempt the first $25,000 of all wealth irrespective of the source of the wealth.  Personal property, i.e., home furnishings, electronic equipment and other such items will be exempt from the wealth calcuation.  The first $20,000 of value of one car per person will be exempted.

3.  We exempt the first $300,000 of home equity owned by an individual or couple.  This applies to one home only.  Home equity for second and additional homes will not be exempted.

4.  We exempt the first $1 million in any retirement account owned by an individual. 

5.  We divide the population into tenths and using social security numbers, randomly select one tenth to pay their share of wealth tax each month from January through October.  To avoid problems at the holidays, wealth tax will not be paid in the last two months of the year.

6.  Investments liquidated to pay wealth tax will be given a special capital gains tax rate of ten percent, to encourage people to sell investments and pay their wealth tax obligations.

7.  If someone's only wealth is home equity in excess of $250,000 or there are other hardships where home equity is present, that individual can make an arrangement where a lien is recorded against the home that limits any future borrowing against the property.  Upon the death of the individual, the lien must be paid off or the property will be sold to satisfy it.  No one will lose their home in order to pay wealth tax.

8.  The wealth tax is a personal tax. 

By having it only once every ten years, it's designed to help reduce the national debt while not being overly burdensome to those who will be paying the bulk of this tax, the wealthy.  Once the national debt is fully paid (if ever), the tax is suspended until and unless a future national debt is once again present.