Welcome to a Constitutional Convention

Introduction

  1. Declarations

    2.  
  2. Legislative Branch

    3.  
  3. Executive Branch

    4.  
  4. Judicial Branch

    5.  
  5. Electoral Branch

    6.  
  6. Nominations & Elections

    7.  
  7. Federal Service

    8.  
  8. Finance

    9.  
  9. Governmental Responsibilities

    10.  
  10. Citizenship

    11.  
  11. Limits on Government Power

    12.  
  12. Amendments

Nomination & Election Schedule
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VIII. FINANCE[1]

A.  General

1.  The Legislative and Executive Branches share responsibility for the finances of the Federal Government.

2.  The federal government will obtain revenue, disburse funds when obligations are due, manage sequestered funds, borrow, and redeem debt only under laws which can deal with no other subject.

3.  All revenue is fungible, and all disbursements will be made from the one common pool of financial assets[2].

4.  The fiscal year of the federal government will be the calendar year.

B.  Budgets

1.  At least three months before the start of a new year:

  1. The President will submit to the Senate an overall budget that includes a forecast of revenues, the budgets of the executive departments, and an estimate of other disbursements that may originate in the legislature.
  2. Adhering to the overall plan of the President, the senior appointed official of each executive department, sub-department, and independent agency will submit a budget to the appropriate committee of the House in the level of detail requested. 

2.  Prior to the start of a new fiscal year, the Senate may pass a law to accept the budget of a department or agency, increasing or decreasing the amounts in the level of detail submitted.  Where a budget is increased, the law will indicate if the extra funds have to be spent.  Disbursements are authorized when the law is passed that accepts the adjusted budget[3].

3.  The Senate may specifically reject the budget of a department or agency, in which case the senior official who submitted the budget is forced to resign without prejudice to future federal service[4].   If a budget is rejected, or if the Senate fails to accept a budget for the new fiscal year, disbursements will be authorized under the previous law in effect relating to that department or agency. 

C.  Other Disbursements

Laws may authorize separate specific disbursements, not included in the budgets of individual executive departments, designated for any purpose to any recipient or class of recipients.   These laws will deal with no other subject and can be vetoed by the President or rejected by the House one provision at a time[5]. 

D.  Excluded Taxes

1.  Businesses will not pay a tax based on net income to any level of government[6]. 

2.  Neither employers nor employees will pay a tax based on payroll to any level of government, but employers may withhold estimated personal income tax due by employees and contributions to privately funded employee benefits[7].  

E.  Sources of Revenue

1.  Providers of goods and services will pay a value-added tax.  Financial institutions will pay a tax based on the value of transactions.  Rates will be set by law for each fiscal year and may be different for each type of product, or service or transaction[8]. 

2.  The laws that set the rates for the value-added and financial-transaction taxes will give the President authority to increase or decrease these rates once each quarter by limited increments[9].

3.  Persons and family units will pay an income tax at progressive rates on increasing levels of income regardless of source or type[10]. 

  1. Income will be defined as cash and assets equivalent to cash derived from all sources.
  2. Deductions from income will be limited to per capita amounts[11], donations to eleemosynary institutions, and contributions to personal retirement accounts. 
  3. Neither non-cash accounting entries that adjust income nor trusts or other legal constructs that shield income will be recognized.

4.  Estates above a defined level will pay an estate tax.  Taxpayers will pay a tax on gifts given to an individual or family above a defined level.  Trusts and other legal constructs designed to reduce or delay the payment of estate and gift taxes will not be recognized[12].

5.  Individuals and closely held businesses will pay a tax on capital gains defined as cash and property equivalent to cash received from the sale of investments less the cash and property equivalent to cash disbursed for the acquisition of same[13].

6.  Businesses will pay a tax on excess retained earnings[14].

7.  Federal laws will set the revenues to be derived from royalties on minerals extracted from the earth and products taken from the waters, charges at commercial rates for the products and usage of federal lands, and fees for specific federal services. 

8.  Revenues will be derived from tariffs on imports as set by the President. 

9.  Federal law will define the criteria under which organizations are classed as eleemosynary institutions.  Donations to these institutions made in cash and property equivalent to cash may be deducted from income subject to personal income tax and from the value of an estate subject to estate tax.  Institutions will not be taxed on donations received.

F.  State Revenues

1.  States may impose taxes like those defined by federal law.  Upon the request of a state, if the state taxes are a fixed add-on percentage of the federal taxes, the federal government may act as a collection agent.  Federal laws will define the rules for states to divide revenue from the same taxable source.

2.  Except as noted herein, states and local governments may impose taxes unlike those defined by federal law.


Footnotes:

[1] This Article attempts to eliminate many of the pernicious practices now current whereby the federal government passes out hidden financial benefits to narrow constituencies.  

[2] While there may be fees for specific services, the revenues will not be earmarked to pay for the services provided or for any other specific program.  If a program merits funding, the general pool of federal money should pay for it.

[3] The separate authorization process is eliminated.

[4] A budget can be reduced without be rejected.  In a touch of English practice, a rejected budget is a vote of no confidence in the department head – which may or may not have anything to do with money.

[5] The legislature is given ample opportunity for pork barrel projects, but each must be specified as a separate item that is subject to a veto.  This provision is designed to eliminate the need for special tax deductions which are hidden from public view and difficult to measure in aggregate.  

[6] The national economy will be more efficient if business executives can make strategic decisions that benefit various stakeholders without reference to minimizing tax on net income. 

[7] Payroll taxes paid by the employer discourage hiring.  Payroll taxes paid by the employee are regressive.

[8] The value-added tax will eliminate the various federal excise taxes.  The transaction tax on banks, stock brokers, insurance companies, etc. puts financial institutions on the same tax-paying basis as providers of goods and services; example transaction taxes are: mil per dollar on insurance premiums and loan repayments.  These two taxes should provide over half of the revenue of the federal government.  While these taxes are regressive, they replace the regressive payroll taxes and the manipulated tax on net business income.

[9] Giving the President authority to modify the rates – announcement on Saturday night, effective Monday morning (another touch of English process) – provides an important new fiscal lever to control the economy. 
 

[10] The personal income tax should be the other major source of federal revenue.  Calculated on a cash basis with limited types of deductions, the tax should be as simple as possible.  If (e.g.) the government wants to support home ownership, instead of complicating personal income tax returns, the government will devise a plan to subsidize mortgages with cash disbursements.


[11] The per capita deductions might be different for different members of the family unit at different ages.  They should be set so that a substantial population pays no income tax and should be coordinated with the definition of a minimum standard of living and maintenance support to persons at the lowest income levels (see Article IX).

[12] The estate and gift taxes are primarily for social objectives and secondarily for revenue.  The level of exemption should be set so the tax will apply to only a few estates and givers.  But untaxed inheritance and gifts should count as taxable income to the recipients. 

[13] For simplicity, the capital gains tax should apply only to securities and real estate, the latter on a cash basis (i.e., excluding depreciation).

[14] The retained earnings tax should be designed so that a closely held business cannot be a piggy bank that allows the owners to avoid the personal income tax.

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