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Please forward to - Ms Sheila Bair

Dear Ms. Sheila Bair,
As I’ve commented to an article of yours previously: “thanks” for your continuing very relevant insights!

The following is my suggestion of a mechanism for affecting the general economy, especially the escalating growth in the national debt (as well as the political system responsible for it), and the ever-increasing successful avoidance of reportable taxable income:

My thoughts had their inception from an advance economics class taught by Hyman Minsky in 1962-63, my senior year at U.C. Berkeley (Accounting major). Professor Minsky was lecturing about the relevance of data. As an example of irrelevance, he wrote on the blackboard the total of “Bank Debits”. After becoming a CPA, and tax preparer, I came across “Bank Debits” (in billions, which actually represented trillions) in a Federal Reserve Bulletin, and thought of Professor Minsky’s observation when I next came to “Federal Fiscal” amounts (in millions, which then actually represented billions). Being aware of the political aspects of “Federal Fiscal” spending, I knew simple math wasn’t a solution to fiscal deficits. And since I believe the Federal Reserve stopped publishing that statistic in the mid-1990s, what follows is based on statistical relationships from the 1990s when gross Federal fiscal (A28) receipts were 0.3+%, and fiscal deficits were 0.05+% of Debits to All Insured Banks (A15).

In the big-picture our country will eventually become of lesser significance in the world economy, politics, and currencies – as always happens to the major players at the time, in the historical long-run. The only question is will it happen in the next 100 years, or will it take the next 1,000+ years – where the dollar becomes a backup currency (e.g., Swiss Franc). Currently, to me, it looks like the next 100 years.

The system of taxation, which is failing as evidenced by the National Debt growth, and government spending will be the determining factors. The tax system needs to change.

There needs to be an extremely modest Income Tax withholding associated with the flow and use of the U.S. Dollar. It should begin as an ancillary part of the current U.S. Income Tax. Specifically, a withholding of Income Tax of 0.3% (i.e., three-tenths-of-one-percent) on every deposit transaction in U.S. Financial Institutions (only exception: Federal Reserve Bank transactions). And, a withholding of Income Tax of 3.0% (three percent) from every withdrawal of “cash” or transfer to a non-U.S. Financial Institution (no exceptions). In those fiscal years when the government budget is “balanced” (i.e., revenues equal or exceed expenditures), U.S. Financial Institutions will immediately refund 50% of only the Income Tax withholding associated with deposit transactions to accounts of individual persons. U.S. Financial Institutions should be compensated for their participation by being allowed to “hold” 50% of withholding associated with accounts of individual persons until the budget results are announced.

For other matters of economic consequence, last year I very much enjoyed Robert Skidelsky’s book “What’s Wrong With Economics?” (the easy read is from the last page of “Chapter 9” to the end; then read the earlier chapters as they might be of interest.)

I do have some additional thoughts about certain other matters of economic consequence. If you have any interest, please let me know.

Again, “thanks” so much for your important contributions to our nation’s economic dialog!

Michael J. Daillak, CPA Direct landline: (949) 768-6385
530 via Estrada, Unit O, Laguna Woods, CA 92637