Sunday Extra: A simplified approach to 'unified budget'

Sunday Extra: A simplified approach to 'unified budget'

By GEORGE HESS

I believe the "unified budget" as a method of government revenue collection and budgeting is a mistake. It hides the cost of government and creates problems for Social Security and Medicare. Let me suggest a simplified and fair approach.

1. Create two separate budgets: a general revenue budget and a social services budget.

2. Set a time frame to balance both budgets.

3. The general revenue budget will be funded by a flat 17 percent tax on income after a $12,500 dollar per person deduction.

4. The social service budget will be funded by an 8 percent tax on all income. Government activities like infrastructure, government agencies and military will be funded from the general revenue budget. Social benefits provided by government such as Social Security, health care and disability will be funded by the social service budget.

Benefits:

A: Social Security payroll taxes go away. This is a huge boost for the self-employed and small business.

B: With a $12,500 per person deduction, a family of four making less than $50,000 a year would only pay an 8 percent social services tax. They currently pay 7.65 percent, plus income tax.

C: Total tax for all families, individuals and business would be something less than 25 percent. Example: A family of four with a $100,000 income would have an effective general revenue tax of 8.5 percent plus 8 percent social services tax for a total tax of 16.5 percent, or $16,500. On the other hand, a family of two making $500,000 would pay 16.15 percent general revenue tax and 8 percent social service tax for a total tax of 24.15 percent or $120,750.

D: People that have avoided paying Social Security taxes because they have non-payroll income will now pay their fair share.

E: Simplifying the tax system will increase growth and remove government from trying to steer society by using the tax code for punishment and reward. The concept of steering activity through tax laws is impossible with the influence of lobbyists in Washington.

Estate taxes would be paid after some established exemption like $10 million and then only on the gains not previously taxed.

Corporate taxes would be 17 percent general revenue and 8 percent social service tax, which is less than current rates. Corporations providing a minimum standard of health care and retirement benefits would be exempt from the 8 percent social service tax.

This approach actually simplifies congressional work as well. If someone wants more infrastructure, military or other kinds of government investments, it comes from the general revenue budget without threatening social services like health care and pensions. It also exposes the real cost of expanded government.

If someone wants more social services, like larger pensions, disability payments and enhanced health care benefits, the funding comes from the social service budget without threatening general government spending. This will also help expose the real cost of providing social services to the American people.

It's simple. But maybe when things are too complicated, it's best to restart with simple.

George A. Hess of Philo is a retired associate director of construction services at the University of Illinois.