Posted: Apr 26, 2005 By: Raoul A. Novak

Subject: Revenue concept

Comment: Attached please find in WORD format a suggested approach to establishing the tax code for federal revenue generation.



Respectfully,

R A Novak



3108 Calle Quieto

San Clemente, Ca 92672


April 26, 2005

TO: Hon. C. Mack
Hon. J. Breaux
Mr. J. Kupfer
Members of the Presidential Advisory Panel on Tax Reform

FROM: Raoul A. Novak

SUBJECT: Input Solicitation – Federal revenue generation

I would first take this opportunity to thank each of you; first for your service on this effort and second for attempting to get input from the “common citizen”.

I present a proposal biased by my personal convictions and perceptions, however all attempts have be made to minimize them.

Following are the biases, which were hard to overcome:

This situation will require a “Gordian Knot” type solution. If it is a patch job, the effort will fail.

Most distinguished members of Congress do not have the necessary intestinal strength to make this an objective over a political decision.

The majority of the citizenry do not have the depth to understand the ramifications of the options that will be put before them.

A tax code should be the method of revenue generation for the government, not a vehicle for social engineering. Programs should always be recognized for what they are, costs; not hidden as negative revenues.


The committee’s conclusions, as recently presented in the press, are very encouraging, regarding the complexity and disparity of the current system. What was disturbing, it took a commission to see what the average person on the street could have told you in a five minute conversation, and as past authors of the code, you did not understand what was evolving as it was being generated.


Following is a skeleton proposal on a new tax concept to replace the present code. I’m sure others are presenting very similar concepts, emphasizing simplicity.


Respectfully,

Raoul A. Novak
3108 Calle Quieto
San Clemente, Ca. 92672
949 248 0252
rnovak3@cox.net



ASSUMPTIONS:

Some form of a progressive tax is a political requirement.

Political efforts to hide tax rates; as would be the case in a VAT type tax must be avoided.

A cafeteria approach is preferred to a single concept tax.

A new tax code would be a greater contribution to election finance reform than any new law on that subject.

No tax credits period. Items should be recognized as a cost in the budget if appropriate.

Honor the KISS [ keep it simple, stupid ] system.

MAJOR POINTS:

INCOME TAX: Create a three tiered progressive tax with income of zero to [ A ] paying nothing, [ A ] to [ B ] at rate 1, greater than [ B ] at rate 2.

Eliminate all deductions, and the various options for married, single. HOH etc. keep only the exemptions for: dependents, age, and physical disability. A spouse is a dependent, male or female.

Continue employer based benefits as a business expense and do not attempt to assign them as non cash income.

Income to be defined as wages, investment income, operating income, capital gain and entitlement revenues.

No Minimum Alternative Tax.

Eliminate tax shelters like 401 c, 409 c, charitable trusts etc.. With a good concept and the elimination of the estate/death tax; they should not be needed.

FEES: Costs of using government facilities or services to be charged at market rates for actual usage, no subsidies of any kind. This would be applicable to Amtrak, parks and USPS.

TRANSACTION TAXES: Applied by the selling entity as part of the invoice.

Food and pharmaceutical drugs at zero percent

All goods, consumables and durables, and services by professionals, trades and utilities including communication networks, at rate 1

Once the basic shell is put in place, NO exceptions of any type. As once you open the door, your right back to today’s situation, which is chaotic. Rate changes are always negotiable thru the legislative process.

Since I do not have access to the macro economic data required, no attempt was made to establish any specific rate structures.