Rep. Chaka Fattah (D-PA) has offered a national debt reduction plan: 1% of every transaction (or 1 cent on the dollar) — aka H.R. 1125, the Debt Free America Act.
Fine print: those earning under $250,000 get a rebate.
Fattah claims that his plan retires the national debt within 10 years and shows the way to overhauling our tax system.
So, Fattah has been drinking from the same water fountain as the wishful thinking Republicans that would cut taxes in order to pay off the debt — because we would all run out and magically buy so much stuff that the new less tax revenue would multiple like voracious rabbits and overwhelm Washington with hundreds of billions of new little tax rabblets.
I don’t think so.
For Fattah’s plan to make sense it would need to be closer to 5-6% WITH NO EXEMPTIONS for anyone.
In 2010, the interest alone on our national debt was $413,954,825,362.17 billion.
A 1% tax would require a $40.2 trillion GDP just to handle the annual interest payment.
Since our GDP is $14.4 trillion then the tax would have to be at least 3% just to handle the interest payment.
A 6% tax would pay off the annual interest and reduce the debt by roughly $400 billion per year.
And for any of this to make sense we need to factor in that much of the wealth within that $14.4 trillion GDP escapes taxation — such as the rebate for those earning $250,000 or less per year, and less not forget all those folks with expensive CPAs and software programs to maximize their deductions for other things.
Calculators and calculations should be required of all solutions. Representative Fattah shows absolutely no fiscal calculations on his website announcing his plan. Fail, but an idea in the right direction.
Didn’t we have a “Victory Tax” during WWII? See http://www.constitution.org/tax/us-ic/hist/victorytax.htm#Sec450 The tax was 5%. I wonder why we couldn’t have a “Retire the National Debt” tax similar to what you are suggesting. If there was to be any rate it would only be to those at perhaps 100-200% of the federal poverty level–no one else would be exempt.This would be an income tax not a consumption tax.
Here are the present federal poverty numbers:
2011 HHS Poverty Guidelines Persons
in Family 48 Contiguous
States and D.C. Alaska Hawaii
1 $10,890 $13,600 $12,540
2 14,710 18,380 16,930
3 18,530 23,160 21,320
4 22,350 27,940 25,710
5 26,170 32,720 30,100
6 29,990 37,500 34,490
7 33,810 42,280 38,880
8 37,630 47,060 43,270
For each additional
person, add 3,820 4,780 4,390
SOURCE: Federal Register, Vol. 76, No. 13, January 20, 2011, pp. 3637-3638
This is what needs to happen, rather than talking incessantly about who pays. Only the poor are exempt.