Revising U.S. Taxes

I just saw a video clip from CBS's "60 Minutes." U.S. Republican presidential candidate Mitt Romney said that he thinks it's fair that he pays a lower tax rate than someone earning $50,000 per year.

Even Ronald Reagan said that was unfair. But wealthy Americans like Mitt Romney have had great success convincing Congress and the last U.S. president (George W. Bush) to revise the U.S. tax code in ways that are highly favorable to the wealthy and to corporations. The compromised tax code is one of the three major reasons why the U.S. economy is weak and why deficits are moderately high. (The other two reasons are privatized medical care rather than single payer, and too much spending on wars of choice, including the "war on drugs" and other contributors to the high incarceration rate in the U.S.)

I've posted my ideas for fixing the U.S. tax code before, but here's a simpler version:

1. Raise the top income tax rate to at least 40%, or add a new rate;
2. Tax all interest, dividends, and capital gains at the ordinary progressive income tax rate after adjusting for inflation (i.e. index the gains first);
3. Eliminate all Social Security and Medicare payroll taxes on the first $15,000 of income, with that amount adjusted for inflation every year;
4. Eliminate the income cap for payroll taxes, and extend payroll taxes to interest, dividends, and capital gains;
5. Eliminate the "carried interest" and other loopholes involving financial assets.

I'd also like to see the U.S. federal government, through the U.S. Postal Service, enter the supplemental defined benefit pension business. That is, you could visit any Post Office to open a modest retirement account, and you'd have a guaranteed retirement benefit above Social Security. Those retirement accounts would be managed (and taxed) just like any other classic, private sector defined benefit pension. The Post Office would also be allowed to provide basic banking services (but not loans), including low cost international remittance services.

Financial Institutions in Singapore Are Strange

Here are a few things I don't like about financial institutions in Singapore:

1. They insist on seeing a passport instead of the Singaporean government's own photo ID card (which every resident must have and which is valid for all sorts of official purposes). Do they really think that a passport issued by, for example, the Tanzanian government is more authoritative in Singapore than Singaporean government-issued ID? It's bizarre.

2. They ask for your "overseas address" if you're not a Singaporean. I live in Singapore, 100% of the time. I neither own nor rent any real estate outside Singapore, nor does my wife. Why should we? We live in Singapore. And when I point out that simple fact, they still ask for an overseas address. I gave one bank the address of the civil records office where my birth certificate is kept, and I explained what I was doing. They didn't like that, but what exactly am I supposed to do? Would they prefer the address of a Holiday Inn overseas? Or the address where my second cousin-in-law lives?

3. One bank -- and there may be others -- simply refuses to issue a credit card to anyone who is not a Singaporean citizen or permanent resident. You could show up with impeccable credit (like mine), and it simply wouldn't matter. Those are the rules, and in Singapore we follow the rules. I should point out that this particular bank isn't even headquartered in Singapore, so it can't even issue a credit card to its own country's prime minister. But did I mention the rules?

4. Using a Singaporean credit or debit card outside Singapore is expensive -- 2.5% or higher markup -- with the possible exception of a Diners Club card issued in Singapore. Singapore is tiny, so practically every Singaporean travels outside Singapore. You can take a city bus or taxi to Malaysia or a quick ferry to Indonesia, after all. It's actually cheaper for me to use, say, a U.S. credit card and move funds from Singapore to the U.S. to pay the credit card bill. And, with at least one bank, it's cheaper to withdraw cash at an ATM outside Singapore and spend that instead of using a credit card issued by the same bank. Crazy isn't it?

5. Speaking of foreign transaction fees, shame on the Monetary Authority of Singapore (MAS) for not mandating much more clear disclosures about such fees. I found one bank that simply doesn't disclose such fees even in their fine print unless you specifically ask a bank employee. And then is that information accurate?

6. It's extremely expensive to invest in mutual funds, stocks, bonds, etc. in Singapore. Management fees are both poorly disclosed and ridiculous -- 2% per annum is on the low side. Trading fees are also ridiculous. Again, it's far cheaper to move money to, say, the U.S. and to buy financial investments there. A company like The Vanguard Group could do extremely well in the retail investment market in Singapore.

What Microsoft Should Do to Recover from Windows 8

Microsoft is struggling to cope with the rise of much bigger non-Microsoft application ecosystems among smartphones and tablets, notably Apple's iOS and Google's Android. While the PC won't "die" in the near term, it's no longer the center of the client computing universe.

With the release of Windows 8, Microsoft has tried to graft a mobile-appropriate user interface that hasn't proven popular atop its franchise desktop and laptop operating system. The result is a disaster that pleases almost no one. It's a technical approach to solving a fundamental business model problem, a problem that Microsoft must address.

As part of the solution, Microsoft ought to consider introducing a base edition of Windows that's genuinely free. Microsoft badly needs to preserve and to extend its application ecosystem, and that's much easier to do if that ecosystem continues to be popular. Apple and Google both offer free ecosystems: iOS and new iOS versions are free with every applicable Apple hardware purchase, and Android is just plain free provided the device manufacturer maintains preferential placement of Google's content services. That's not a problem for Android device manufacturers because Google's content is extremely popular and useful.

Free Windows? Am I crazy? No, not at all. To pull it off, though, Microsoft would need to establish two boundaries in the right places. The first boundary is what level of function to include in the free base Windows package -- more on that in a moment. The second issue is that Microsoft needs to beef up the range and value of optional add-ons available through the application store. In other words, Microsoft needs to offer compelling content that Windows users will want to buy using their free base Windows. Right now Apple is doing a better job in that area. Apple's customers know that the base package offers exceptional value, but then most of them happily buy more. Getting the boundaries right between "free" and "paid" is critical, and Microsoft needs to do a better job in that area.

So here's what a free Windows 8 would include:

1. A smaller download that can install from a 1 GB USB memory key. That would be more than enough to get onto the Internet to perform Internet browsing (but only after applying the latest critical security patches for that purpose) and, optionally, to install the remainder of base Windows.

2. Full English plus a multi-lingual post-install panel to allow users to install any language pack from the Internet.

3. Support for a maximum of two SATA/IDE hard disks, both with full disk encryption if the user desires. (Full disk encryption could be one of the free downloadable features.) USB-attached hard disks and memory keys would be unlimited.

4. A 32-bit version only, with unlimited PAE support, provided that there's a mechanism for the user to pay for an in place upgrade to 64-bit Windows without losing data and settings.

5. No Windows Media Center, IIS, or domain login.

6. Limit of 5 visible user logins. Applications could still create more user IDs for their purposes, but only 5 would be available to choose at the login screen.

7. Reduced accessories and games collection.

8. Mandatory activation via e-mail verification. (Users could opt out of Microsoft's e-mails after that, though.)

9. Support for a maximum of one CPU socket and a maximum of 3 cores.

10. Basic backup, but with support for encrypted/compressed backup to network and cloud drives. (Cloud storage above a certain amount would be chargeable.)

11. Remote desktop to a Windows phone or Windows tablet (single session at a time).

12. Ability to share a maximum of two printers and two network folders at a time.

13. DVD playback (sans Dolby).

14. Single monitor.

15. User interface cleanup.

That's essentially a mixture of Microsoft's previous "Starter" and "Home" (probably "Home Basic") Windows editions. And that's just about right.

Denise Rich's Lawyer: Transparent Bullshit Artist

After Facebook co-founder Eduardo Saverin renounced his U.S. citizenship, Denise Eisenberg (formerly Denise Rich) did the same. She'll save millions in U.S. taxes, but more on that in a moment. Her attorney said that she made the move "so that she can be closer to her family and to Peter Cervinka, her long-time partner."

Bullshit. Ms. Eisenberg is an Austrian citizen and was also a U.S. citizen. She was already living in London with her "partner" based on her EU citizenship. Possession of U.S. citizenship in addition in no way limited her ability to do so. (They aren't living in Havana.) Evidently her lawyer thinks we're fools, and shame on CBS News for not pointing out that her lawyer is a liar. "He said, she said" stenography is not journalism. Saverin's "explanation" for his renunciation was also 100% bullshit.

As for her U.S. tax savings, perhaps. But, like Saverin, she'll now become a pariah in the world's largest economy, an economy with enormous wealth generation opportunities for wealthy people. Even if you're a completely self-obsessed selfish bastard, losing all physical access to the U.S. is a mighty big price. And yes, she (and Saverin) lost access. Justifiable U.S. citizen outrage will make sure of it, and existing law already provides that option to U.S. immigration authorities. Eisenberg will never be able to walk along Park Avenue, shop on Rodeo Drive, or attend an exclusive party in New York City ever again.

Today Greeks vote to decide their national government for the second time this year. SYRIZA, an anti-bailout/anti-austerity party, stands a chance of winning outright.

In my view that'd be a healthy outcome. Policymakers around the world have committed egregious economic malpractice for years. Most western economies need massive jobs programs, with direct government hiring of every woman and man who wants to work. Then that workforce would repair and rehabilitate everything possible: transportation and utility infrastructure, hospitals, schools, post offices, parks, etc., etc.

There's a global depression afoot, with unemployment rates soaring. As with most Greek voters, I'm tired of policies that ignore the massive joblessness and pleas that there's little that can be done. That's bullshit. Hire idle workers, dammit, and do it now. Fire up the Works Progress Administration, the Civilian Conservation Corps, and other programs like them. Fix America, and fix Europe, literally.

Fixing the Federal Budget

Although there are countless "pundits" who pretend otherwise, it's astonishingly simple to repair the U.S. federal budget:

1. Restore corporate and personal income taxes to early Reagan Administration levels.
   
2. Treat capital gains exactly the same as any other income, albeit with capital gains indexed to inflation.
   
3. Treat estate transfers exactly the same as any other income, with $3 million (indexed to inflation) and spousal exemptions.
   
4. Eliminate the "carried interest" and related loopholes.
   
5. Introduce a 40% tax rate plus time limitations on non-repatriated corporate earnings, less credit for foreign taxes paid.
   
6. Offer states and localities centralized federal collection of their corporate and personal taxes. They could set a single percentage based on federal taxes owed. Residents of states that choose not to participate would default to 3%, which the federal government would keep. Whether participating or not, states and localities would still be free to levy their own taxes.
   
7. To reign in healthcare spending (and improve outcomes), open up the Veterans Affairs and Medicare health insurance programs to all Americans.
   
8. Extend Social Security contributions so that there's no income cap and so that all forms of income are included. Also exempt the first portion of income (e.g. the first $15,000, indexed to inflation).
   
9. Cap defense spending at 4.0% of GDP for 5 years then 3.5% of GDP thereafter, with exceptions only permitted if the U.S. Congress passes a formal declaration of war against a specifically named country, if the excess funds are dedicated to that narrow purpose, and if Congress renews that declaration every 24 months.

Family Security: Society's Choice

I don't generally pine for the "good old days" which really weren't so good. However, I am profoundly concerned about the persistent attacks against social insurance in all its forms around the world. (The exceptions, ironically, can be found in the Middle East.)

Let's start with some basic principles. Freedom is good. However, poverty and infirmity are antithetical to freedom. Serfs living 1,000 years ago in Europe weren't free mostly because they were poor and constantly at risk of utter destitution and starvation, not because the lords cared much about which songs they sang.

So why, 1,000 years later, in the developed world, do I worry about much the same problems? Why are so many people one illness away from bankruptcy? One spouse's untimely passing away from poverty? One lawsuit away from financial ruin? There are myriad risks, and many governments seem hell bent on dismantling what little social insurance exists. The private insurance market is flawed in many ways, and it's difficult or impossible to insure against these calamities without government.

As one example, consider disability insurance in Singapore. If your employer is typical, and if you have a job of course, you would receive a maximum of two years' salary if you become disabled and cannot work. If you're disabled for 10 years or for a lifetime, tough. You had better hope that someone in your family or a charity takes pity on you. And that's in Asia's most developed economy excluding Japan.

But "we can't afford social insurance." Rubbish. This is a world in which Mark Zuckerberg is a billionaire , but he will pay a far lower tax rate than his company's employees. Developed countries are comparatively wealthy. Decent social insurance is an affordable choice. It also happens to be consistent or even essential to upward mobility and entrepreneurship.