Knowing that there are mean incomes variations set forth in nine (9) different regions and from rural to urban areas as researched by the Bureau of Labor Statistics (BLS). For the purpose of calculation, a general view of income as a conservative estimate of mean income will be calculated by combining mean family income of $45,000, mean government income of $70,000 and mean corporate income of $160,000. This will give us an overall combined mean income of $91,600 dollars. This figure will be used for this calculation.

Personal Income Tax: Since ‘taxable income’ will start at $10,000, 151 million people constituting full and part time working citizens will be used to calculate the needed flat-tax to cover the current 2012 Budget of $3.7 trillion. The population count should adjust for the accounting for and from an 8.1% to 11.4% unemployment rate and those making under $10,000 and/or are on health and retirement plans. Neither inflation nor base-line budgeting will be used for the purpose of these calculations.

A Flat-tax of 14% will be used for the purpose of these calculations [down from the current 27%-56% now used] thus cutting personal income tax already by nearly half.

The Calculation: Using a flat-tax of 14% we will carry out the calculation. Thus; $91,600 minus $10,000 non taxable income=$81,600 taxable x .14= $11,424 x 151 million people = $1,725,024,000,000 [$1.7 trillion].

The goal is still short by $2 trillion dollars.

Corporate Income Tax: However…By taxing all forms of Corporations only 20% [down from the 35% that they currently rarely pay] will help balance the deficit and give them a ‘stake-in-the-game’. The Mean Corporate income of 275 Fortune 500 companies is $102 billion dollars each thus totaling 28,050,000,000,000 trillion gross income combined. With ALL the Fortune 500 companies plus all other American corporations inside and outside our borders weather or not their main office is in Ireland, the Caymans, the Netherlands, Dubai or any other country utilizing the ‘Double Irish’ or ‘Dutch Sandwich’ as tax loop holes or non-compliance, will be expected to pay their income tax…No exceptions will be allowed.  

For a working figure for all American corporations, $29 trillion gross income will be used.

Thus; 20% of $29 trillion = 5.8 trillion dollars

Using $2 trillion to cover the budget short-fall above, this will leave a 3.8 trillion dollar surplus within the first year of which we can pay off the Chinese debt of $2 trillion. The reserve surplus of $1.8 trillion will be used to start paying down the principle of our $15.1 trillion dollar sovereign debt while spending cuts; the down-sizing and/or decentralization of governmental departments, agencies and institutions ensue.

Multi-National Corporation Income Tax: Most International Tax Treaties with other countries will have to be renegotiated or the tax burden for MNC’s (Multi-National Corporation) will exceed their current level. Since protections for American corporations are given by law, reciprocal revenues should be collected. The 20% tax on a MNC will be paid to the US Treasury is both non-negotiable and nor will be allowed any exemptions.

Example: Let us use China for example which ranges anywhere from 15% to 25% tax for MNCs doing business over-seas. If the MNC is a ‘cutting-edge’ company that China wants, then their tax rate is lowered to 15%...If not it is 25%. High tech companies are given a larger tax break if the host country desires their “patents and knowledge” (pending copyright enforcement). If high tech MNC-A is paying 15% in China, paying the 5% balance to equal 20% to the US would seem fair but skew the US tax revenue by a negative -15%. Therefore that is not acceptable. If MNC-A was low tech and paid 25% to China, they would under the new provisions NOT get a 5% rebate from the US. That would also be unacceptable.

What would be more likely to happen...Is that if high tech MNC-A paid 15% to China...They still owe 20% to the US, thus making their total tax burden overseas 35% as a cost of doing business…Unless they renegotiate their Tax Treaty.

Renegotiation example: If MNC-A pays 15% to China and 20% to the US where they are based then their tax burden is 35% unless the Chinese are willing to renegotiate their Tax Treaty (Tax Treaty is required before granting or extending a Most Favored Nation Trade status).  

If China renegotiates and are willing pay to the US say 10% (or whatever settled amount) of that 15% to the US, while the MNC pays the other 10% or remainder from their gross income, then that will make the MNC’s total tax burden then only 25% and the 20% tax requirement paid to the US Treasury fulfilled. Still 10% lower than what they are required to pay today at 35% but don’t due to current tax loop-holes. Which ever way, a 20% corporate tax is what is required and is what will be paid to the US Treasury.

“In many places around the globe already, taxes are paid “before” the final global “passport-transaction” (who gets what, when & how) takes place to the banks. This makes it real simple. This can and should be paid either in cash or accrual method to reduce loopholes and accounting errors.” 

Note: Aside from “Executive Remuneration” and managerial payment allocation doing a complete 180 degree shift in the last twenty years from; i.e. “Employee, Company Stockholder” to “Stockholder, Company, Employee”, thus passing on ‘high-risk portfolio’s’ to the American tax-payer. Taxation and the payment of those taxes from the corporate world is probably the single most important factor that would restore financial responsibility, integrity and obligation of governmental operations under this current economic crisis and its recovery while reducing the tax burden at the same time. One may want to consider; who is in whose pocket.

Best Regards; John Wayne, Pres. ARRC