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.