January 27, 1983
The President
The White House
Dear Mr. President:
I would like to offer you my suggestion for the reform of Social Security and Taxes. First, let me describe the program without any of the problems of changing over from the present social security system to my proposed one. This proposed deferred income plan is designed to provide income in retirement years, survivor’s income, and income for those periods when the wage earner is unable to work due to disability or periods of economic unemployment. Each employer and employee would contribute 10% of wages (20% total) to a special income (interest, dividend, etc.) earning accounts (investments held in the wage earners name by private financial organizations, banks, mutual funds, etc.) .The maximum wages subject to the 10% contributions would be 10 times the minimum wage. (The minimum wage to be set at the estimated cost of a family of four at a moderate standard of living for one year. This total cost would be divided by 2080 annual work hours to obtain an hourly rate.) The contributions would be included in income when computing Federal, State and local income tax. (See tax plan below.) The payments from the account to the wage earner and survivors would be free from Federal, State, and local tax.
A wage earner could withdraw from the fund if he retired, became disabled, unemployed or stopped full time work for additional training or retraining for a different career. However, if he was under age 50, his withdraw would be limited to three-fourths of the minimum wage. If age 50 or over the withdraw would be based on the money in the account, income it can earn and on the wage earner living to age 100. Upon returning to work, he could no longer withdraw from the account.
At the death of the wage earner, the money would be transferred to the named heir of the wage earner. (The wage earner's spouse and children under age 20 would be required to be named heir. If spouse were already dead, the money would be put in trust for the children to receive income until the age of 20. (Divorced spouse would obtain a portion of the account at the time of the divorce based on an agreement.)
The wage earner would purchase private disability insurance for the period when his account would be too small to provide for his future income at the minimum wage. Also, life insurance would provide his family protection until his account was of sufficient amount to provide future income at the minimum wage.
Medicare would be dropped under this plan. The purchase of private health insurance plans would take care of this need after 65 just as it did before. Under the proposed plan, there would be funds available to purchase private health insurance. The best plan would be one that paid all medical cost over 15% of the wage earner's gross pay.
This plan would begin for all people age 21 on or after January 1, 1984.
Now what about those under the current system, what to do about them. They have been promised benefits and many people are planning on it. We cannot let them down. We must acknowledge our mistakes of the past and pay the price. We must pay it now, we no longer can delay. First, we need to reduce some of the benefits that have out paced the wage increases. We will pay for those currently receiving benefits from a special tax on wages to be paid by the employer and self-employed. The amount needed will be declining over the years as the aged return to the Creator. This tax will disappear in time and the money cannot be used for anything else.
Those now between the ages of 21 and 65 need protection for the future. They would need a combination of the two things above. The current workers would stop paying FICA tax and begin paying the 20% into private accounts. As they retire or become disabled, they would receive benefits under current rules and income from their accounts (using rules stated above) would be used to offset the "Social Security Insurance" payments. The payment to the current 21-65 age group would be funded from the special employer tax that will be used to pay current retirees.
Under the proposed plan above, there would be a large pool of funds available for investments in business that will help to keep this country on the move. And under my minimum wage plan and the booming business situation from the large pool of investment funds there will be few people living in poverty. These few needy people would be helped from income tax funds raised in the local community.
Most company pension plans could be phased out
This brings me to my tax plan. We need to get down to a single and basic tax plan. There would be only one tax of any kind and that would be on gross salary, wages, tips, business gross sales and fees, gross rents, etc. {The one exception is the phase out of the social security program noted above.) The tax rate would be a maximum of 10% {much less should be required) and would be for Federal, State and local government needs. The money would be used for general government expense, such as the Office of the President, and governors, national defense, police, and fire protection, parks, Congress, the courts, the school system and aid to the few needy. This tax would be collected at the local level and passed on to the State and Federal government. The governments must operate within the limits of receipts of this single tax. That would require a balanced budget with a gradual elimination of the national debt.
For all other services, that the government provides it should be self-supporting. These would include postal system, transportation, security and exchange commission, etc. The operating funds would be obtained from user or transactions fees. All government services that can be associated with a user type of revenue should receive total operating funds from this method.
In addition, the Federal pay scale would be tied to the minimum wage. The maximum Federal salary would be ten times the minimum wage. The President would be paid the maximum. A code number between 1 and 10 would identify all other positions.
It would be good if the private economy would use the same type of method for computing salaries. Then labor could get a fair piece of the pie. The investing businessman would get a return in interest and or dividends on the capital he has put to use in the various goods and services industries. You will recall that I propose that there would be no tax on interest and dividends.
The key to these plans is to keep them simple without rules and regulations that only an expert can understand.
Thank you
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