Welcome to Libertaria 2020!

Occasionally I'm going to make new installments in a series posts that wil be my fictitious vision of an America that has reformed itself into the capitalist democratic republic that it was originally designed to be.

January 21, 2020:

Beginning today the Federal Income Tax is a flat 10% and all employers pay their employees the full gross amount of earnings, except for a while, less state taxes and employee installments to 401k's, et cetera. No Federal taxes are taken out of any kind. In time, as the States get on board and workers get used to the new system, the check given to the employee can be 100% of the gross wages earned.

What makes this possible is that the employee is regarded as a responsible adult who is capable of paying his own taxes and other obligations. Part of those obligations is to plan for their own health care needs and future plans regarding possible unemployment and eventual retirement.

This is how it works:
Let's say that the average hourly wage is $20/hour. Next month is February, which is exactly 4 weeks long, so this average worker who gets paid under the fully developed system will receive payment of $3,200 for the month. He would get a paystub that is the duplicate of the record that the employer sends to the IRS.

When the worker sits down at the kitchen table to deal with the monthly bills he will use a standard form that he will send to the IRS. On this form he will be able to make three deductions, one is a reduction of his taxable income of up to 10% of the gross for a contribution to his family HSA (Health Savings Account). That is $320 that is deposited into an approved fund that earns interest on any remaining balances. It can be used to pay premiums for a catastrophic heath care insurance plan which are very much less expensive than a regular health care insurance product. When individuals use HSA's they pay the individual medical bills themselves, they become administrators of their own funds and make sure there is no waste, fraud or unneccessary charges. He can use those funds to pay for the health care of anyone who is a blood relative and if he wants to donate some of that fund to an approved health care charity, that is allowable.

The second deduction he may make is, up to another 10% of his gross income which becomes untaxable, to his Retirement Portfolio. It should be diversified to include an IRA (Individual Retirement Account).  There would be approved investments such as the familiar mutual funds and other financial devices, but also the ability to purchase Indexed Accounts that have guaranteed minimal returns with both an unemployment insurance and a life insurance component. These accounts can also be accessed for emergency situations. If a portion of the account is liquid it can be donated to an individual in the case of a financial emergency.

The third and final possible deduction is another 10% that can be donated to authorized charities. An authorized charity is one that contributes to filling the social welfare void since we are dismantling the welfare state.

The worker fills out the form that shows his gross pay, his health-care, retirement and charitable contributions, and writes out a check for 10% of what is left or $224 for his February 2020 federal taxes and mails it in.

Now the worker has taken on the responsibility of his own health care and he is in control. He along with hundreds of thousands, even millions, of other Americans are challenging their medical bills, they've taken the established insurance industry out of the loop and the catastrophic health insurance is there for the big unavoidably expensive events.

The workers retirement is also his own to plan and to manage. If his employer has a pension plan for his employees, as a way to attract and retain the best workers for his business, then that is a deferred taxation situation for the worker. Since the flat rate income tax is 10% it doesn't substantially matter if the tax is paid now or later. For the employer the expense of the pension is deductible now and helps him to be more profitable.

What also helps business is the reduction of HR expense and decreased accounting requirements. When overhead costs are decreased lower consumer prices can also be realized.