Friday, June 28, 2013

The Flow of Information

I am a computer programmer. My primary interest is the flow of information.

I've put two reform packages on the table: The "The Medical Savings and Loan" concerns health care reform. The second is a tax reform proposal called "The Object Tax."

Both reforms are about the flow of information. Both reforms seek to give individuals greater control over their personal information.

In both reforms I talk extensively about the flow of money. I see money simply as a tool to quantify the value of resources.

I often note that information follows the flow of money. But this is tautology because money is nothing more than a bit of information.

When one follows the money, one follows the primary flow of information.

In the current health care system, the money flows from centralized pools to large health care providers. Our health care information follows the flow of money back to the centralized provider.

The Medical Savings and Loan gives each person a Medical Account. The money flows from this account and health information flows back into the account. This gives the individual greater control over personal health resources.

Our current tax system is quite convoluted. The money flows from employers in the form of payroll with-holdings. Employers report the finalized payments on a W2 Form. People then file a tax return with necessary adjustments.

The Object Tax is named after Object Oriented Programming. This is a programming technique used in system design. It is used in the design of most operating systems, web browsers, smartphones and the Internet.

The goal of the Object Tax is to change the flow of the money.  Object Technology allows us to change the flow of money with minimal disruption. The process works as follows:

We start by making an object model of the current tax code. This model can be implemented as the current income tax.

We invite financial institutions to create new implementations of the the tax code.

A Tax Aware Account is one possible implementation. This implementation works as follows: Workers have their entire paycheck deposited into a Tax Aware Account. They pay taxes when they withdraw money for spending.

The design of the Object Tax allows for incremental change. Congress creates a tax code that can be implemented as the current income tax. It invites financial firms to create implementations of the Tax Aware Account.

We can rigorously test the implementations before putting them into production. Once in production, people would gradually adopt the new technology as they found it advantageous.

The program is based on the same solid design techniques as smartphones and the internet. This is a solid approach to reform.

The long term affect of the reform is that it would give individuals greater control over their personal finances.

In contrast, the Fair Tax takes the opposite approach. The Fair Tax replaces individual income tax with a national sales tax. The National Sales Tax removes the individual from the tax equation altogether.

From a system design perspective, the Fair Tax horrifies me because it cuts people out of the system. When you cut people out of the system, the system grows, but the people diminish.

I challenged Fair Tax Supporters to a debate. All I've received is a condescending remark and a put down.

As I pointed out in the previous post, Tax Reform is in the air.

The Object Tax and the Medical Savings and Loan are basically the same idea. The goal of both programs is to change the flow of money so that it goes through individuals accounts. Changing the flow of money would give individuals greater power over their personal information.

Giving people control over their personal information empowers people.

I fear that the opportunity to discuss free market health care reform has passed.

The issue of tax reform is in the air. Presenting a tax reform based on the principles as free market health care could set our nation on a path of restoring our nation's experiment in self rule.

Wednesday, June 26, 2013

The MSL and Object Tax

An ongoing series of IRS scandals has tax reform in the air.

A particularly loud group is pushing an ill conceived tax reform program called "The Fair Tax."

The Fair Tax Replaces the personal income tax with a whopping 23% National Sales Tax that will be added on top of existing state taxes.

Supporters of the FairTax make the false claim that their tax will end the IRS (tax collection).

What they are doing is replacing a personal tax with a business tax. This change reduces the need for individual audits, but will increase the need for business audits.

The Fair Tax places a 23% tax on sale of new goods and business to consumer expenses. Modern businesses tend to have extremely complex supply chains with multiple points of interaction with the mainstream economy. Deciding what is a final sale of a new item and the final sale of a service is extremely complex. It is as complex as the deduction problem.

The FairTax will require detailed business audits. Businesses will have to apply for tax ids and permits from the IRS. This gives the IRS the ability to target groups they do not like.

The current state income tax system is a complete mess. Different types of businesses have different tax rates. The rates are often collected through different agencies and have different rules. Food is often taxed at a lower rate than dry goods. Hotels are often taxed at a higher rate than clothes. Gas, you phone and utility bills are all laden with strange taxes.

If state sales taxes are a mess; then adding a national sales tax in the mix will create pandemonium.

For this last week I've been blogging against the Fair Tax.

The best way to defeat a bad idea is to create a better idea. With the other idea on the table, one can compare the ideas and see the fault of the bad idea.

While developing the Medical Savings and Loan, I spent a great deal of time thinking about the best approach to health care and tax reform.

Alongside my presentation on the Medical Savings and Loan, I developed a presentation called "The Object Tax."

The idea behind this reform is to apply proven design techniques from Silicon Valley to tax reform.

In the presentation I apply basic object oriented design techniques to tax reform ... hence the funny name.

The design starts by creating an abstract model of the existing system. Rather than taxing income, I simply state that I want to tax financial objects at some point between income and consumption using a progressive tax rate.

By breaking the current tax code into objects, I now have a tax code that can be implemented like the current income tax. I can also start experimenting with other ways of implementing the tax.

One way is to create a system of Tax Aware Accounts. A Tax Aware Account works as follows:

You have your entire paycheck (nothing withheld) deposited into the account. You pay taxes when you withdraw money for spending.

The tax aware account eliminates employee withholdings, w2, 1099 forms. If done correctly, it can eliminate the need for the annual tax return.

The great thing about this reform is that it does not require disruptive change. People happy with the income tax can continue to file yearly returns. It would only be adopted by people looking for a switch.

I wrote an intro to the Object Tax called "The Object Tax in a Nutshell"

With this reform on the table, I can argue that the Fair Tax is a Business Tax and not a true consumption tax. I make a variety of other arguments showing that the complexity of taxes is not the tax rate, but the process of accumulating tax info. With the Tax Aware Account, one touches a tax decision only once ... when you transfer money from the account.

The Object Tax is a much more elegant path to reform than the Fair Tax, and I put out a general challenge to the Fair Tax crowd to debate the issue.

My hidden agenda is that the Object Tax also happens to be the same basic structure as the Medical Savings and Loan. If my challenge to debate the Fair Tax is ever accepted, then I might be able to combine the two presentations in the same meeting.

I issued a challenge to debate the Fair Tax. I doubt anyone will take me up on the challenge, but if they do, I will be able to use the challenge as a vehicle to introduce the Medical Savings and Loan ... which is similar to the Object Tax.

Wednesday, June 12, 2013

AAPS Presentations

AAPS in Tucson puts on great presentations about ObamaCare from a doctor's perspective.

In the video below, Adam Harris, MD brings argues that doctors should stop accepting Medicare and opt out of ObamaCare if the laws become too intrusive.

The good doctor makes a compelling argument. Unfortunately, the case for doctors opting out of ObamaCare do not come across well. The good doctor sounds like a greedy capitalist complaining about pay and too much government intrusion.

The AAPS and AMA suffer the same problem. Doctor's have an incomplete perspective of health care. The real power of the opt out arguments comes on the consumer side. For the opt out argument to win the day, there needs to be someone arguing from the perspective of the individual.

I put together such a presentation five years ago. I am just patiently waiting to find someone to review it.