Subject: IFTS / DSSRI Comment: http://home.comcast.net/~PreciousIdeas/TaxReform3.doc COMMENT No.3 To: President George W. Bush’s Tax Advisory Panel May 27, 2005 The purpose of this Comment No. 3 is as a clarification to the “Investment Fee Tax System” proposals submitted. These proposals are alternatives to the current IRS Income Tax System and Social Security Reform. The IFTS / DSSRI proposals have been submitted previously, see: http://home.comcast.net/~Preciousideas/IFTS4-22-05.doc http://home.comcast.net/~Preciousideas/SSReform4-12-5.doc Or, as posted on the President’s Tax Advisory Panel’s web site: As posted on March 29th (Comment #1), and May 7th (Comment #2) In review of the various tax plans submitted and posted on the President’s Tax Advisory Panel web site, I conclude that the alternatives are various options and versions of: 1. Reform current IRS Tax code. 2. Introduce a Flat Income Tax. 3. Introduce a Consumption / Sales / Transaction Tax. 4. Introduce a variation of the EU VAT. OR 5. Introduce the IFTS / DSSRI as the most viable beneficial solution for Tax Reform. Since I have not had the privilege to address the panel directly with a presentation, I have added clarifications to my proposals to emphasize the benefits and implications of a new approach to tax reform with the concepts embedded in the “Investment Fee Tax System” together with the Social Security Reform concept (DSSRI). In my opinion this proposal is the solution to the tax reform dilemma and the Panel should task the appropriate agency to validate the assumptions and conclusions to ensure that this plan is far superior to the other tax plan alternatives. In addition at least one credible capable auditing enterprise, such as KPMG, IBM, or DT, should be tasked to validate proper governance and a performance feasibility study to ensure it will provide desired and predicted results. IFTS provides long term benefits to solve the need for government tax revenue to operate government functions and provide for its obligations to fund Social Security and other earned annuities. IFTS stands alone, but by including the DSSRI concept it is clear that they both fit under the same umbrella and satisfy the need for Tax Reform and SS Reform effectively. The IFTS / DSSRI proposals clearly state the shortcomings of the other alternative proposals. This comment highlights and clarifies the benefits of IFTS. IFTS is a simple direct, fair and constitutional approach to raise government revenue for necessary obligations by imposing a simple nominal fee (<1%) on all investment purchase transactions, on the buyer, not the seller. This is not consumption based, but only for investments which people can afford. Stimulate good growth investments. IFTS will enhance the USA position in a unique advantage in global trade competition, which reflects in economic growth, and peaceful world security while protecting our national sovereignty and culture. IFTS is applicable to both personal, as well as business enterprises big or small. IFTS is better than revenue neutral, meaning that it will not cost additional funds to be compliant with revenue generation. IFTS lowers the federal budget level and cuts down on “Pork” projects or controversial funding programs by introducing the “Focused Government Budget Line Item Investments” which I call “MINI-BONDS.” (“MB”) “MB” will become lucrative potential investment instruments for the citizens. The key is that Congress makes the selection as to which line item is offered as an investment, define the deliverables essential to complete the project or program, and what initial funding profile and time frame is imposed. Each “MB” carries a face value of a current “Treasury Note” interest to the bearer; therefore it remains a safe investment. It carries the full faith and integrity of the US government and investments allow citizens to be empowered to influence government policy and direction, independently of political persuasions. The potential investment advantage of “MB” is that the citizens can invest up to the limit of the funding profile congress set. If funds initially are minimal or practically nonexistent and the MB’s provide sufficient funding from the citizens that proves to be successful to provide its deliverables in a compressed time frame, then the “MB” pays a higher rate of return, proportionately depending upon the cost savings associated with the projected program that would be required if funded to its congressionally scheduled delivery date. IFTS eliminates forms, arbitrary complex codes, compliance schedules, undue enforcement tactics, citizen costs and obligations to comply with mandates that reduce productivity and liberties, as well as the bureaucratic costs and controls to operate an expensive complex unfair taxing system. The IFTS is better than revenue neutral, because it creates new and greater revenue, its voluntary and takes advantage of embedded transaction systems existing to transfer the IFTS fee directly from the purchaser to the Treasury department, electronically, at the time of sale, without complex forms and compliance documents. Immediate cash flow to the treasury gives significant demographics on the economy and a reflection of government policies and accounting basics, without the threat of future tax obligations or negative aspects of tax offsets. Cost of maintaining the collection process at the US Treasury is minimal, verifiable and uneventful. No one in their right mind will try to avoid paying the IFTS fee to save from sending funds to the government. Even if they don’t invest, they will spend and increase cash flow into the economy which is the secondary benefit, because it will stimulate an increase in entrepreneurial businesses and subsequent increase in jobs at all levels. These businesses and jobholders become involved in the economy with investments that further grow the economy, not discourage growth. Seriously, would anyone really run from a 1% fee in lieu of the current IRS income tax rates and obligations? With the DSSRI involved in investments to make the Social Security System viable, it will emphasize the benefits of investments and compound interest for ownership, even if on a small scale, to start building wealth. Where does the money go? It will go to the bank and investment enterprises, which turn around and create new investment opportunities! This is positive feedback! That is capitalism, USA style! IFTS hits a nerve for some individuals and institutions that “play” the investment market on small or even very small margins, which require a buy or sell order on small gains or losses, to gain favor of a profit. An IFTS fee of 1% for each purchase transaction could possibly make their gains diminish, which would be a disaster to whomever, following that investment scenario. Congress in its infinite wisdom could easily remediate this situation, or other similar issues, by creating weekly or monthly averaging for registered short term marginal investors to maintain the integrity of the market place for their profession. Overall, investments should be geared toward positive growth and productivity not for reflecting the whims and rumors and feeling, rather than strong auditable statistics. Majority of individual investors would benefit from IFTS nominal fee and avoid tax complexities of accounting, forms, compliance schedules and increased taxes that any other tax reform alternative could create. Simplicity of a broad based nominal fee means that the broader the base the lower the IFTS fee imposed, while maintaining full revenue obligations for government operations, pay off the national debt and stimulate a superior world class economy. Once a comprehensive understanding of both proposals is gained, it will be obvious that the IFTS / DSSRI concepts will be the solution to the Tax Reform dilemma. IFTS is a fast pace approach to grow the economy. Imagine the potential power of citizens having the ability to influence government by investing in “MINI-BONDs” for controversial issues such as: Stem Cell research; Public Radio; Planned Parenthood; alternative energy; health and welfare; arts and entertainment; urban mass transportation; educational alternatives; homeland and national security projects; etc. Imagine if people who are very engrossed in supporting or not supporting, critical issues like “stem cell funding” could influence public policy. Those who support “Adult Stem Cell” funding can choose “MB” #1, whereas those who choose to support “Embryonic Stem Cell” funding could invest in “MB” #2. Knowing the success of Adult Stem Cell research to provide results, it will probably be considered it a good investment, whereas Embryonic Stem Cell research might prove more risky and is morally unsatisfactory for government funding out of the general revenue. This reflects objections from those who disagree with their funds going to support unacceptable acts. However, if someone wants to put their money into “Embryonic Stem Cell” MB’s, they understand the risks and outcome of their desire to impose requirements on what funds they feel are important, without dragging unwilling citizens into an unacceptable moral issue. It’s a “follow the money” scenario. Many other similar controversial funding projects, including potential projects considered “pork” projects, could be funded in this way. A project could be highly desirable yet unfunded, but rather than seeing it killed, MB’s could provide the funds. It’s all voluntary! Social Security is a crisis and we are heading to a showdown soon. Unless a new approach is taken the government general revenue from the tax system will be tapped into to pay out annuities to retirees, because Social Security income will not be adequate. This will either require more and more funds from the general revenue, or there will be reductions in benefits and political and emotional issues to be encountered. The Delayed Social Security Retirement Investments (DSSRI) proposal is the best solution for SS viability. The President opened up the possibility of including private investment accounts “PRIAs” as a solution to the SS dilemma. DSSRI expands the PRIA’s without demeaning the current SS benefits. By including the “MB” investments involved as an integral part of the PRIA’s, the Social Security investments create TAX FREE accumulation of wealth over the working lifetime. Greater retirement benefits result, while enabling the government to delay paying out SS benefits until the TAX FREE PRIA’s are drawn down. This could mean that individuals will offset their SS annuity by 10 years or more before the government starts to pay benefits. Wise people will jump at the opportunity to get TAX FREE investments and its potential power to influence public policy. SS retirees will have the priority advantage to select MB investments before the general public will have in open opportunities. In summary: The IFTS / DSSRI have a clear path for simplicity and revenue generation. It is the best solution for Tax Reform. It is requested that a full evaluation and comprehensive understanding of the benefits of the IFTS and DSSRI be undertaken ASAP. Open up public debate and dialog by challenging the public and universities to make a comparison of the various alternatives. It is suggested that an incentive such as a monetary prize be offered to the best predictive graphical analysis of each of the critical issues involved in the various proposals. A complete trade off analysis with conclusions should make the outcome obvious from the results of the study. Please contact me for any additional information or clarifications as to how the IFTS / DSSRI can be implemented and the potential benefits to our great country. Thank you for this opportunity to submit these proposals and this clarification on its benefits. Norman D. Melling |