Only YOU can make it happen…

  Ben Franklin wrote a treatise entitled The Way to Wealth in which the original Poor Richard Saunders outlined the wisdom of the day by reporting a talk given by “Father Abraham”.  He talked to a group of citizens, just prior to an auction, about everything from savings and debt to taxes and big government.  At the conclusion, Poor Richard wrote: “Thus [Father Abraham] ended his harangue.  The people heard it and approved the doctrine, and immediately practiced the contrary…”

Poor Richard, Reborn begs you:

“Please, don’t be like the people at that auction 200 years ago.”

• The current system of taxation is broken beyond repair.
• The only way the American people – you and I – will ever escape from this monster is to kill it completely and replace it with a 21^st century system that recognizes and corrects the errors of the past.
• Our elected officials will not change the system that keeps laying golden eggs in their nests.
• The lobbyists are too powerful.  America needs to rid itself of them.
• The election process has become perverted by influence peddlers and ideologues who care only for their issues and care not about America
• There is no reasonable health care solution forthcoming from the Congress or the White House or any candidates for those offices…all of the proposals they are parading before you are designed by money hungry special interest groups or power grabbing politicians and are not in the common interest
• Retirement planning has become a patchwork quilt of plans and programs that carry large price tags and promise only mediocre results[1]

The 33% Solution resolves all of these issues in your favor.  Use the system to change the system…Contact your Congressperson, your Senator, and the White House and tell them to adopt The 33% Solution.[2]

Contact your family, friends, neighbors, co-workers, doctor, dentist…anyone you can think of… and refer them to The 33% Solution web site and encourage them to buy a copy of The 33% Solution.

www.33PercentSolution.com

Tell them to contact Congress with the message:

IT’S TIME - Adopt The 33% Solution.

“We have it in our power to begin the world over again.”  Thomas Paine ________________________________________________________________________

If not you – who?  If not now – when?

We need to send MILLIONS of messages to Washington D.C. to make this happen.

Respectfully and hopefully submitted for your serious consideration…

July 4, 2007     Poor Richard, Reborn

PS – Poor Richard is not naïve.  Even if millions of Americans demand this change, the congress will fool with it and try to reinvent their Golden Goose.  Poor Richard encourages every person who reads this essay to go to www.33percentsolution.com

HEALTH CARE…

  A Dilemma…

“Nothing will ever be attempted, if all possible objections must first be overcome.”  Samuel Johnson

Health care is a particularly difficult issue for the Federal Government to deal with.

• Creating a national health plan and socializing medical care takes the free enterprise system out of the equation and that could create many more problems than it solves.
• Ignoring the issues that make the system less effective than it could and should be is also problematic.

Don’t Mess with Medicare…

First, don’t mess with Medicare.  It’s taken the country four decades to get it working reasonably well so let’s just keep tweaking it to make it better and use the vast knowledge and information it had given us to solve the rest of the problem.

There Is a Solution…

The 33% Solution to this problem is comprehensive and straightforward.

• Allow Medicare to cover the children of America universally until they are 25 years old…
• If a child is covered or is eligible for coverage under a parent’s policy through work, then Medicare only covers what the primary plan doesn’t cover.
• The State Agency would cover parentless children.  A revenue sharing program, perhaps something like Medicaid, would pay for this coverage.
• When parents cannot cover a child because they do not have health insurance, then Medicare would be mandatory and primary for the child but parents would have to contribute to the cost. 
• The parents’ contributions would be three times their tax rate.  If the parents were in the 10% bracket for taxes, they would pay 30% of the Medicare cost.  If they were in the highest tax bracket and paying the entire 33% tax, they would then pay 100% of the Medicare cost.  (Poor Richard believes a similar formula ought to be applied to all Medicare recipients)
• Employers would be required to make health insurance available to all employees.
• Employers would be required to pay a part of the premium for employees and employers would reduce their income tax contribution for those employees in some proportion, e.g., 50%.
• Employees would have to pay a part of the premium based on the same income scale that decides their income tax contribution.  (If you pay 10% in taxes you would pay 10% of the medical premium.)
• Money paid for health care premiums would reduce the employees “earned income”.
• Insurance companies would be required to
• allow all employees to join these plans regardless of medical conditions
• allow the employee to take the same coverage with them as an individual policy if they terminate employment for any reason.
• Terminated employees who qualify for unemployment benefits
• would continue to pay their share of the premium based on the amount of income they receive and the state unemployment system would pay the balance.
• If a person exhausts their unemployment benefits, cannot find work and cannot afford to continue paying for their health insurance, they will be become a temporary Medicare beneficiary and pay some portion of the premium based on their ability to do so.[1]
• The Federal government would reimburse insurance companies for costs they incur on any given patient that exceed a specified amount – say $100,000.00 in a year or $1,000,000.00 in a lifetime.[2]  This allows insurance companies to control their costs, accept everyone regardless of their medical conditions, and still charge affordable premiums.[3]  It also keeps the government out of the free enterprise system for most Americans.
• The 33% Solution could include provision to impose a medical-care tax surcharge in years where expenses are greater than budgeted.

Paying for Campaigns…

“Though no one can go back and make a brand new start, anyone can start from now and make a brand new ending.”  Carl Bard

The 33% Solution would provide adequate funding to all qualifying candidates for presidential, senate and congressional offices. [1]  Candidates for President, the Senate, or Congress could not raise money from any outside source other than the political party they are affiliated with.  The IRS would distribute these funds to all qualifying candidates.   Each qualified candidate would receive equal amounts of money and they could use it as they saw fit for their individual campaigns.  Individual candidates would not be permitted to spend any of their personal money for campaign purposes.  The New IRS would distribute the funds and the Federal Election Commission would manage the process.

Can the Typical American Help Their Candidate or Political Party with Money…

The 33% Solution to the election process would cost American taxpayers a lot of money.[2]  Every taxpayer would, however, be allowed, and encouraged to support the process by making additional contributions to The 33% Solution Election Fund.[3]  Individuals could also contribute to political parties and to specific candidates through the candidate’s party.

Rules for Political Parties and Other Organizations…

Political parties could not accept more than $1000.00 from any one person per presidential candidate, Senate seat, or Congressional seat.  Only you could make these contributions; other individuals, businesses or organizations could not make these contributions on your behalf.  This avoids wealthy individuals and organizations with a lot of money from having too much influence with the political parties. 

Political parties could spend any amount of money for their candidates.  Political parties could allocate all of their money to a single candidate or they could spread it among several or all candidates.  If you contributed to a specific candidate of a Political Party, that money would have to be used to support that candidate unless the candidate released the money to be used elsewhere.

How About Other Organizations Such as Labor Unions or Lobbyists…

Organizations must be qualified political parties and must have a unique candidate on the ballot in order to do any campaign advertising, soliciting, etc.  A candidate from one political party (let’s say the Martian Party) would not qualify as a candidate for another political party (let’s call it the Moon Party) that wants to support that Martian Party’s candidate.

If an organization like the Firefighters Union or the Free Enterprise Association wants to “endorse” a candidate and to promote and support a candidate, they may do so and they can use as much of their money as they want.  They would not, however, be allowed to mention opposing candidates or political parties in their advertising or promotions.

The Federal Election Commission would have jurisdiction over the process that qualifies political parties and candidates and the creation and enforcement of rules relating to campaigns.

Free Speech…

New Retirement Plans From Your Employer…

If employers need to provide “retirement” benefits to attract and retain the best workers, the marketplace would dictate how they should do that.  The 33% Solution would tax these benefits using “earned income” rates but – and this is important – the employer would put all of the money into these plans and would pay all of the taxes.  Employers’ would be able to create longer vesting schedules than those in the old system.  However, they could not keep you from taking all of the money they put aside for you for longer than is reasonable.[1]

Life Insurance…

Life insurance death benefits paid to a spouse (directly or through the estate of the deceased person) and life insurance death benefits paid to a named beneficiary would free of income tax and estate tax.  These monies become a part of the estate of the beneficiary and incur a tax only at the death of the beneficiary.  Proceeds payable to a trust are also tax-free, and incur a 33% tax when the trust owner closes the trust or distributes the money to the beneficiaries of the trust. [2]

What if You Give a Gift to a Charity…

Gifts to recognized charities would reduce the size of your estate and therefore the taxes that your estate would have to pay.  If you make a charitable gift while you are still paying “earned income” taxes you can report that gift in the year it is made and receive a tax credit for the amount of the gift but not for more than you personally paid in taxes.  The credit will increase your lifetime earnings exemption but will not have an effect on your current “earned income” taxes.

You can make personal gifts whenever you wish up to $12,000 per year per giver and per recipient.[1]  That means, for example, that you and your spouse could give each of your children and each of your grandchildren $24,000 each year and it would have no effect on your “earned income” taxes.[2]  It would reduce, however, your taxable estate that exceeded your “earned income” retirement/estate tax exemption.

The gift tax process that The 33% Solution advocates is similar to the gift tax program of the current system.  It is one of the better parts of that system.

Where Does That Leave Pensions, 401(k)’s, etc…

Pensions, 401(k)’s, and the myriad of other retirement schemes that plague American workers and employers are the result of decades of lobbying for “tax-favored” retirement plans.  When you look at all of these programs closely, it is apparent that “the system” created them and they would not be there if The 33% Solution replaced the mile-high tax code.

The money that these programs currently hold belongs to you and to other individual Americans who put their hard-earned dollars into them.  There is no reason why you should not receive your money back with no strings attached, no penalties, tax-free.  You could then put your money into any money buckets you choose…insurance, annuities, mutual funds, real estate, a tin can in the back yard…and take it out when you want.  This money would be a part of your estate as discussed above.

Tax-amnesty for American Workers’ Money…

Tax-amnesty for American workers’ money seems like a deal that would hurt no one and would help everyone.  The companies that are currently managing your money would continue to have the opportunity to do so.  Your employer would be unburdened from their reporting requirements.  The New IRS would not have to track hundreds of thousands of “plans” but would not lose a penny since The 33% Solution would produce more revenue than the old system did with all of its rules and exceptions to its rules.

American’s who retire should not have to bear the same tax burden as those who are still working.  That does not mean that they should be exempt from paying taxes.  The 33% Solution is the income tax schedule and a combined retirement/estate tax schedule.  Once a person elects to “retire”,[1] the New IRS exempts that person’s unearned income[2] from taxation until “retirement income” exceeds that person’s pre-retirement “earned income” that was already taxed.

The New IRS will know – just as the current IRS knows - exactly how much you earn in a lifetime.  You will have already paid tax on that amount.  Therefore, when you (or the second spouse in the case of married couples) “retire” or die, any asset you still own or control that adds up to less than the amount the New IRS shows you had earned during your working years will not incur a tax.

For example, assume that you made $1 million during your working career.  You wisely saved some money and invested carefully.  The mortgage on your $200,000.00 home is paid off when you “retire”.  Your savings and investments have grown to $1 million and you only take interest and earnings from these accounts.  This leaves the $1 million you saved intact.  When you die, 20 years later, you have taken $1 million of income from your retirement funds ($50,000.00 per year).  That money was tax-free because it didn’t exceed the $1 million you had earned during your working career.

This means your estate - the $1 million you had invested and your home that is now valued at about $400,000.00 - is worth $1.4 million.  Your heirs would pay the 33% Retirement/estate Tax and receive about $1 million from you as a legacy.

  Social Security…

When Social Security was initially enacted in 1935 it was intended to provide working Americans with a base retirement income from the Social Security System.  This is still a valid aim for the Social Security System.  The question is not whether The 33% Solution will provide this base income…it must.  The question is how The 33% Solution directs the government to manage the money to insure this benefit.

The 33% Solution addresses this question from a unique perspective.  If America wants a Social Security System that does what it was intended to do, then America must face up to the fact that the Social Security System designed in 1935 is not good enough to serve the retirees of 2035 and beyond.  We aren’t driving cars designed in 1935or putting 1935 appliances in our homes.  Why in the world are we relying on an outdated Social Security System that was designed in 1935 and hasn’t been changed since?

The 33% Solution believes it will take a temporary surtax on employers to fund the Social Security System through a transition period and a Restructured Social Security System to guarantee the income of future retirees. [1]

Spineless and greedy politicians in Washington DC refuse to consider any change to the Social Security System because they fear

• accountability for their spending
• having to present America with a balanced budget
• the reaction of those lobbyists who rely on it

Americans are not stupid.  If an alternative approach looks reasonable, and gives back as much - or more - than it takes away, Americans will embrace it.

Lobbyist organizations like AARP, that act more in their own interest than in the interest of those they claim to serve, throw up a smoke screen of scare tactics whenever a new idea comes along…especially if it would reduce their assumed-but-not-deserved power over the aforementioned congress.  As Americans, we need to rid ourselves of as much lobbyist influence in the Congress of the United States as we can…especially when it comes to Social Security.  If we don’t there will never be clear thinking on this (or any other) subject the congress addresses.

The 33% Solution also protects American companies from unfair competition from foreign businesses.  Every company that sells goods to America would pay an import tax on the same scale as American based businesses.

Foreign companies that import goods into America – whether parts to be assembled here or finished goods – would pay an import tax that makes the labor cost in the price of their goods fair in relation to labor costs in America.  This protects American workers and is fair to workers in other countries.[1]

What Else Will the New IRS Do…

The 33% Solution diminishes the role of the IRS.  The New IRS’s main job is to oversee tax reporting and collection.  In addition, since companies - not individuals – pay all the taxes, this approach simplifies the collection process and would save billions of dollars every year.

Local government (city, township, county, etc.) could actually collect the Federal Tax and charge a fee to the IRS for doing so.  Since most local governments already collect taxes and track employment, they could keep a close watch on the employers within their boundaries and the New IRS could support their efforts and oversee their activity.  When a local government does not have an income tax of its own, the State Government could collect the taxes for them.

Non-profits that are recognized charities or that provide services to the general population would be exempt from paying the employer portion of the taxes.  Non-profits that serve special interest groups like labor unions, trade associations, ethnic groups or racially based organizations could pay a reduced percentage of the employer portion as long as they could demonstrate that

Political parties, 527’s (if The 33% Solution doesn’t rid America of this scourge) and similar organizations would have to pay the full employer contribution since they specifically promote ideological and political agendas.

Does the Federal Government Support Business in Any Way…

There are, of course, issues that are greater than taxes.  It might make sense for the Federal Government to support, for example, research that would free us from dependence on foreign oil, find a cure for cancer, or preserve endangered species.  The Federal Government could do this through legislation in Congress and executive decisions by making grants or awarding contracts to companies or non-profits that are involved in research and development that addresses identified needs.  (Remember to watch them “…like a hawk…”)

The self-employed, small business owners, independent contractors, real estate investors, and professional practices (like accountants, attorneys, doctors and any other business where the owners rely on profits and may not receive salaries or wages) would have to file tax returns just like other businesses.  They would pay the employer portion of taxes for their employees but would only have to pay the employee portion on their own earnings.[1]

Why Is It Important?

Since there are no special tax considerations given to individual companies or to specific industries, businesses no longer have a reason to send lobbyists to Washington DC to promote some tax scheme that benefits just one company or just one industry.  (Knowing the character of our Congress in recent years and the greed of the tax lobbyists, it won’t be long until they find new ways of manipulating the system to their own advantage.  As Goldie Hawn’s character in the movie Protocol said, you’ll need to watch them “…like a hawk…”)

Do Companies Pay Taxes…

The tax money companies pay to the New IRS on your income is the company’s tax burden.  In other words, American companies pay taxes based on the labor that goes into the production of their products and services instead of paying a corporate income tax.  In both the long run and the short term, this creates more revenue for the government and employers pay higher taxes.

However, the reduced staff costs for accounting and tax preparation should partially offset the higher tax expense to employers.  More importantly, this approach lets businesses focus on doing the business they are chartered to do.  Businesses don’t have to spend time and energy struggling through a mile high set of rules to manage and minimize their tax burden.  Employees also benefit because their companies will be able to measure and reward individual and group productivity without having material costs adversely affecting the performance of the employees.

Books and articles abound about the Greatest Generation (1910 - 1924), the Baby Boomers (1946 - 1964), Gen-X and Gen-Y. 

But...what about my generation (1924 - 1945)? Why do the pundits and politicians ignore us? Why are most Americans totally unaware of our existence?

It's our own fault. We failed to defend and pass on the values that our parents inherited from as far back as the founding of America. We were so busy rebuilding an economy that was decimated by the Great Depression and put into a wartime state by WWII that we lost sight of the turmoil that the entitlement thinking and the quick-buck-investment mentality that followed us was wreaking on America's economic stability.

Our inattention has allowed America to flounder its way to a measure of success unseen in the history of the world. This success is, however, also the foundation of our failure. Our economic house is built on sand. Baby Boomers and their progeny deny or are unaware of the Four Pillars of every financially successful and secure family and person

1. Instead of Freedom from Debt-to-others they embrace debt as passionately as they would a lover during a first encounter - mortgages, lines of credit, credit cards, auto loans, furniture, appliances and home improvements financed "same-as-cash" (not)
2. In lieu of keeping three to five years of ready cash and maintaining high levels of equity in their homes, they hold tight to the shibboleth that six months of money reserves is enough to weather the storms they'll encounter during a 90 to 100+ year lifespan and that home equity should be sucked into "investments"
3. Rather than building a financial structure that delivers guaranteed income in good times and bad during their 30 or more years of after-work life, they expect the government, an employer, a union or (often unrealistic) investment returns to assure them security and peace of mind 
4. Perhaps most damning, many Boomers and Beyonds care not whether they leave a legacy to their heirs. Many of them received a legacy of money themselves but, having neither received nor embraced a legacy of understanding, knowledge and wisdom, they simply have nothing to give.

It's time for the Forgotten Generation to step forward and reclaim its destiny as the protectors of the American values that were passed on to it but which will pass out of existence if the Forgotten Generation does not act to restore them and pass on the legacy of wisdom that it received from its forebears. It's also time for the Boomers and Beyonds to discard the falsehoods and foolishness that can lead to America's ruin. Its time for them to put renewed faith in the finacial founding fathers who wrote, spoke and lived the Four Pillars.

Companies calculate, report and pay all the taxes for employees.[1]  You do not have to file income tax returns if you are an hourly or salaried or commission income employee.  Your employer will send you a statement of earnings at the end of each year but you do not need to file any kind of return under normal circumstances.

Companies, therefore, pay all of the taxes and are responsible for reporting both the taxes and the income paid to each employee to the New IRS.  This income reporting is very important because it may affect taxes due during retirement and at your death.  A big part of the New IRS’s job will be to make sure the companies are reporting and paying all the taxes.  You will never be held responsible for paying taxes.  If an employer fails to pay taxes due on your income, it will not affect your retirement income or estate taxes.