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In the 1980's and into the 2000's, Alan Greenspan, the Chairman of Federal Reserve was warning that the National Debt would have to be reduced because the Baby Boomers would rapidly be retiring and could potentially put a huge strain on federal finances in the future. The Future is now... Paul O'Neill, former CEO of Alcoa and Treasury secretary for about first 2 years of W. Bush administration, all the way back in the Reagan years stated: ' The National Debt is a time bomb waiting to exploded' Well ! The wick has been lit and it's burning. Even though, this is not the most popular subject, it's like having a tooth ache that you had been dealing with for a long period of time and the pain has become so intense, it's about to drive you insane and finally you realize you need to get this problem solved.
In Bill Clinton's second term and with the support of the Republican controlled Congress there was some debate about in-acting a National sales tax with the stipulation the monies could only be used to reduce the National Debt. Much to the politicians surprise ! all the polls were showing that the Americans overwhelmingly supported the new tax. Soon after, there was even a bigger surprise ! the Federal Government had realized a month to month running surplus. Which President Clinton used to pay down the National Debt a half Trillion dollars.
There are some of the Republicans and others that still hold to a Fair Tax solution to the National Debt and proposing that it will stimulate economic growth by implementing a sales tax at rate of about 25%. Also, abolishing federal income tax which would take a minimum of 5 years to accomplish. This system has very little chance of succeeding and has lost a lot of it's initial support. You could have two high percentage rate taxes running simultaneously for a indefinite period of time. It would have good chance of increasing federal revenues temporarily but until the 16th Amendment, if and when it could be repealed the effects on the economy would be disastrous.
Some of the recent polls have shown that the second most important issue on Americans minds now is federal deficit spending. Wallstreeters are now complaining about potential corporate tax increases and new Bank taxes. With the expiration of the Bush tax cuts at the end of the year, this will raise taxes on incomes a little, on the average taxpayer which is always unpopular and it will raise the tax rate on capital gains that does effect the majority of the population. What about a National Sales tax at a low rate that decreases when it's goals has been accomplished, will be eliminated ?
- Let's say a 5% National sales tax is imposed and will continue when the National Debt is above $12 Trillion. From $12T to $11 Trillion it is reduced to 4%. At $8 Trillion, written in the law, it expires. The list below will show.
- When the National Debt is above: $12 Trillion the sales tax rate would be at: 5%, above: $11 T - 4%... #10 T - 3%... $ 9 T - 2% ... $ 8 T - 1%... At or below $ 8 Trillion abolished.
- This would draw a line in the sand, put a actual figure for legislators to work with and taxpayers would know where the country is standing on this fiscal situation. Budget caps on spending programs are raised when needed. PayGo, (pay as you go) spending policy of Congress hasn't worked. The not so fiscal conservative Republicans and now the Tea Partyers chanting: We just have to cut spending, cut spending, cut spending that's what we have to do ; In reality doesn't come to be, so this hasn't worked either.
- In the near future, the fiscal obligations of the government are going to increase automatically with the rising costs of Health Care reform bill and with other legislation already in Law. The interest rates are low now but when they eventually go up, the cost of maintaining the National Debt will be also added to the Debt.
- This would draw a line in the sand, put a actual figure for legislators to work with and taxpayers would know where the country is standing on this fiscal situation. Budget caps on spending programs are raised when needed. PayGo, (pay as you go) spending policy of Congress hasn't worked. The not so fiscal conservative Republicans and now the Tea Partyers chanting: We just have to cut spending, cut spending, cut spending that's what we have to do ; In reality doesn't come to be, so this hasn't worked either.
This sales tax could have many positive results to reducing National Debt and could serve as a public monitor to judge where the state of the Nation is at economically. When the employment situation improves putting more people to work, this will increase income tax revenues to government and should boost retail sales growth, as a result, you would have a double flow additional money. When the sales tax is reduced from top rate of 5% and because the income tax rate is at a higher percentage rate, the inflow of cash, should be about the same. But this is not critically important as long as the goals of new tax plan are being fulfilled.
The burden on the public would be reduced because they would not have to be concerned, so much, about what spending programs the government is paying for. The focus could be on what the politicians, no mater what party affiliation, are doing to reduce the sales tax rate and to remove the tax altogether. When it the percentage rate starts to decrease, it would restore confidence with the citizens because they would know that the Debt is being dealt with and finally going down.
