There has been much talk recently about a living wage and potentially mandating it.  While I believe the drive toward a living wage is good, I don’t believe mandating it is.  Henry Ford decided on his own to double the wages of his workers, and I believe that was one of the most significant contributors to higher wages in the US.

How about tax incentives toward a living wage?  If people are on a living wage, they should be off public assistance.  Thus, it seems to make sense to pay for that with tax incentives to stimulate it.

It would go something like this….  Offer businesses a tax credit per employee on a living wage as long as ALL their employees are on a living wage.  We would need to figure out the size of the incentive, but I believe it would need to be quite high, like $10K, to be effective.  There would need to be some exceptions like people under 18.  I would say that anyone over 18 or with a high school diploma should be on a living wage.  Dealing with part-time would be difficult.  We would want to allow it, because some people can only work part time, but want to avoid encouraging it.  To qualify, the part time people would still need to receive a prorated living wage.  We would cap it at something like 50 employees.  Living wage be calculated by the federal government and based on the local economy.

I say give this to the economists to study and determine if such a scenario is viable.

I have heard calls recently for lenders to “lower the principal” of loans.  I don’t think that is likely to happen or if it is even a reasonable request.  If people were duped into taking out the loan, the request might be reasonable.  However, in that condition, I would like to see even more drastic action taken against the lender like prosecution for fraud.  If the both the borrower and lender went into the loan in good faith, should they not both be treated fairly?

How about this?  Set up a program where lenders can lower principal in exchange for an equity interest in the house.  If the lender lowered the principal by 25%, they would get a 25% equity interest in the house.  The borrower would gain immediate relief and the lender would have an investment.  When the borrower sold the house, they would pay off the mortgage and the lender would get their percentage of the net proceeds.  The lender and borrower both would share in the pain and the gain.

When I was in high school in the late 60s, I wrote a paper called Administrative Democracy.  It formulated the premise that citizens should vote directly on proposed law with the purpose of Congress being to draft legislation, not vote it into law.  I recommended kiosks where citizens would stop on their way to or from work to vote.  Now I am thinking of a name more along the line of Direct Voting Republic or just Direct Republic.

Remember the only computers in widespread use at this time were mainframes.  This was before widespread use of mini-computers and long before personal computers.  With such devices and the Internet, I believe this proposal has become practical.  Of course, kiosk-type access would still be necessary as not everyone has access to a computer or the Internet.  However, many do and could take care of business on-line.

In my original proposal, I proposed the laws be written and then one paragraph descriptions for and against be drafted for voters to consider when they voted.  We would need to decide how often to vote.  Maybe every Tuesday.  We would also need to decide how long a law went through public debate before voting.  Perhaps there could be a  normal track, a fast track, and an emergency track.

Note, also there would be no more executive veto.  That is not necessary in such a purer democracy.

The Constitution would still be in force so that laws would still be held to judicial review.  We would need to fold the amendment process into this system as well with appropriate two-thirds and/or three-fourths requirements.

We would need to develop rules for Congress.  Maybe 10% of members of either house could initiate action on a law.  Maybe all members who voted in the action initiating group would be allowed to participate in the drafting of the law consulting other members as appropriate.  When the law is drafted, of course, there would be room for debate in Congress.  Maybe the law goes to a vote of the people based on a vote of 25% or more of both houses.  Maybe any group of 25% or more is allowed to draft a paragraph, for or against, which would appear on the ballot.  Maybe a majority vote of those paragraph writers are needed to report the paragraph out.  Of course, on the normal track, there would be a deadline for that.

Anyway, we would need to draft appropriate rules for Congress.

Well, that is all I can think of right now.  When should we get started?

Copyright © 2008 Richard L. Mitchell

I propose a progressive payroll tax, which corporations would pay, to replace personal income and sales tax.  Corporations would pay tax on their total payroll.  The percent tax would rise as the payroll rose.  That is the “progressive” part.  Note, most payroll tax proposals I have seen earlier are a flat percentage.

There would be no tax withholding from individual pay as the individual pays no taxes.  I am not, however, recommending this to replace payments for social security and medicare insurance at this time, but maybe.  This withholding would thus continue.  Corporations would continue to pay tax on their profits, but, of course, the payroll tax would be an expense as payroll itself is.  Subchapter S corporations and such would pay progressive payroll tax on their earnings.  The advantage of being a Subchapter S would tend to lessen.

Individuals may still file “tax” returns to claim credits that Congress might deem to be needed.  Adjusted gross income and taxable income would be a thing of the past though.  Your income is your income.  The individuals would then claim the credits they are eligible for based on the situation and income.  If you are claiming no credits, no “tax” return is required.  This should greatly reduce the number of tax returns as corporations already do one, many individuals would not do one because they are not eligible for any credits, and the individual returns would be much less complicated.

I haven’t decided what to propose for interest and dividend income, but perhaps that also would be paid by the entities paying the interest and dividends.  It would, of course, be progressive based on the total of interest and dividends paid.  Then there are capital gains.  Perhaps that would require an individual return.

The transition would be difficult and would need to involve “guidelines” as to how this affected pay.  Basically, people’s current take home pay would become their pay i.e. gross and net (except for SSI and Medicare) would be the same.  There would need to be “guidelines”, however, as there would be some market forces and “fairness” to account for.

The bottom line is this should provide the same income to the government as income and sales tax, be more easily enforceable, and make some corporations think twice about executive pay.

I would think this is appropriate for all levels of government i.e. federal, state, and local.  Maybe it could even replace property tax and, instead, do everything tied to property as fees appropriately allocated.

Copyright © 2008, Richard L. Mitchell