It seems a little obvious. If you expect to save for retirement, you need something out of which to save. In the current state of society, that means you need a wage system job . . . and those are disappearing in competition with advancing technology or cheaper labor elsewhere.
The solution to this conundrum is not, as Academician Walter Russell Mead proposed, to turn everyone into a temporary or leased employee, with a high probability of everyone being transformed into government workers rented to private sector companies. This may sound good to an academic, but not to real-life people.
So, what should be done?
|Pius XI: People, not the State, should take care of people.|
Well, certainly not to let the State do more and more, and ever more. That is egregious misuse of a very powerful — and dangerous — social tool. As Pope Pius XI explained in § 78 of Quadragesimo Anno,
When we speak of the reform of institutions, the State comes chiefly to mind, not as if universal well-being were to be expected from its activity, but because things have come to such a pass through the evil of what we have termed “individualism” that, following upon the overthrow and near extinction of that rich social life which was once highly developed through associations of various kinds, there remain virtually only individuals and the State. This is to the great harm of the State itself; for, with a structure of social governance lost, and with the taking over of all the burdens which the wrecked associations once bore, the State has been overwhelmed and crushed by almost infinite tasks and duties.
We should not, therefore, try to make the State into the universal landlord, the universal caregiver, the universal employer, or the universal anything else. When it comes to providing for ordinary needs such as food, clothing, shelter, education, healthcare, and whatever, the individual and the family are the first resort.
The State is the absolute last; it is not, as one enthusiast put it, “the sole intercessor available to the poor.” Ironically, the individual who said that — and we have quoted his exact words — accused the Just Third Way of being “breathtakingly statist” due to the necessity of Congress or some other country’s legislature adopting a Capital Homestead Act.
Which segues into a better solution than the one Dr. Mead came up with: a Capital Homestead Act. And what is “Capital Homesteading” you ask?
A Capital Homestead Act is a comprehensive legislative program of Kelsonian tax, monetary, and fiscal reforms to make every citizen a shareholder in the technological frontier. It is designed to connect every person to the global economy as a fully empowered participant and owner of new technologies, by dismantling structural barriers in our basic institutions and financing capital formation through ownership democratization vehicles.
This economic agenda for the 21st Century provides a blueprint for leaders committed to restructuring the legal and financial system to grow the economy at maximum rates with no inflation, in ways that build a Just Third Way version of economic democracy as the essential foundation for effective political democracy.
Capital Homesteading for every citizen offers a private property and free market-oriented alternative for saving the Social Security System as a national retirement income security plan. At the same time, the Capital Homestead Act offers a new national policy to foster life-long “capital self-sufficiency” as a means to achieve true economic independence for all Americans. If implemented, capital ownership would be systematically de-concentrated and made directly accessible to every person, without reducing property rights of the wealthy.
A Capital Homestead program has three essential components:
1. Changing the Money and Credit System
Through a Capital Homestead Act, access to asset-backed money and capital credit — which today helps make the rich richer — would be enshrined in law as a fundamental right of citizenship, like the right to vote.
Using its powers under Sec. 13, para. 2 of the Federal Reserve Act, the Federal Reserve System would create money for specific financially feasible capital projects. The new money and credit for private sector growth would, however, be “irrigated” through Capital Homestead Accounts and other economic empowerment vehicles.
Through a well-regulated central banking system and other safeguards (including capital credit insurance to cover the risk of bad loans), all citizens could purchase with interest-free capital credit, newly issued shares representing newly added machines and structures. These purchases would be paid off with tax-deductible dividends of these companies. Nothing would come out of existing savings or reduce consumption income.
2. Changing the Tax System
Capital Homestead reforms would simplify today’s overly complex and unfair tax system by substituting a single-rate tax on non-exempt personal incomes from all sources, while:
· paying from general revenues all entitlements and other government spending at present levels,
· eliminating the payroll tax on workers and employers,
· making dividend payouts deductible to corporations, and
· balancing the budget.
A Capital Homestead Act would re-write and radically simplify the existing federal tax system to automatically balance the budget. Its tax reforms would keep more money in the pockets of taxpayers from their initial earnings to cover their own health, education, housing and other basic household living expenses. CHA tax reforms would make Congress more directly accountable and responsive to all taxpayers.
|Capital Homesteading: A Better Plan|
While encouraging corporations to issue new shares to finance their growth and pay out all dividends on their shares, the Capital Homestead Act would eliminate all tax provisions, personal deductions, tax credits, and exemptions (except for the front-end exemptions for adults and dependents) that unjustly discriminate against or discourage property accumulations and investment incomes for poor and non-rich families.
A single tax rate on all sources of labor or capital income over exemptions would be automatically set to meet all Federal entitlement and other programs, and to pay down past deficits. To meet personal living costs the basic incomes of all taxpayers up to $30,000 per adult and $20,000 per dependent (or $100,000 for a family of four) would be free from any income or payroll taxes. To increase taxable income incomes for all citizens, corporations could escape from the multiple tax on corporate incomes by deducting dividend payouts.
In contrast to the present system, a single tax covering incomes from dividends, interest, rents, and inflation-indexed capital gains would enable the over-burdened Medicare and Social Security systems to be funded out of general revenues. The single tax rate would drop significantly with a broadening of the tax base, as all citizens begin to receive substantial dividend incomes through their Capital Homestead accounts and as entitlements (constituting two-thirds of the current budget) can be radically reduced after keeping all current entitlement promises.
3. Changing Inheritance Policy
Under a Capital Homestead Act, the wealthy would be encouraged to break up the estates they leave to their heirs, so that wealth would not keep concentrating from generation to generation. Rather than taxing the estate, the recipient/s of the estate would be taxed over a certain amount (say $1 million) on what they receive through inheritance.
Thus the wealthy person could avoid all estate and inheritance taxes if he or she left the estate to many people, such as relatives, friends, employees, etc. The recipients could further shelter their portion of the inheritance from taxation if they roll the assets into their tax-sheltered Capital Homestead Account.
Surely this is a better solution than making everyone dependent on government.