It sounds too good to be true, but Smith believes his plan could work.
The serial entrepreneur this year co-founded the Partnership for a New Economy, with the goal of promoting and putting into place his revolutionary four-point plan for the U.S. economy.
The key to Smith’s four-part plan is taxing the flow of financial transactions taking place every nanosecond of every day – a whopping $2,510 trillion in regulated annual transactions, he said. All new deposits in banks, wire transfers and cleared securities would be clipped at 0.14 percent per transaction. Granted, bankers won’t like this, and if this ever came to be, they’d find a way to make it up at the consumers’ expense. But we, the consumers, would have more cash on hand to deal with it.
Smith delves into this plan in more detail in his self-published book, “Boom! A Measured Proposal for Economic Revolution.”
Under Smith’s plan, workers would pay just $1.40 for every $1,000 in income, instead of up to the $400 they are taxed today. At the same time, the federal government could balance its budget, receiving $3.6 trillion in income from taxing. Smith asserts this would boom the economy, as consumers would spend the money they save from not paying taxes, boosting the gross domestic product.
“The chronic fight in Congress over raising the debt ceiling shows how desperately we need this solution,” Smith said. “The fact that we could balance the budget and do it without having to pay income taxes only makes the solution I’m proposing that much more compelling.”
He points out that his proposals would result in a substantial increase in the amount of discretionary income for everyone, whether rich, middle class or poor. The actual difference for a hypothetical family of four with a combined income of $100,000 is calculated on page 62 in “Boom!”
Under the current system, assuming a $400,000 mortgage, $100,000 in student loans and $50,000 in consumer debt, the family would have less than $32,000 in discretionary income after paying their taxes and debt. Under the system proposed in Boom, the same family would have more than $89,000 in discretionary income; nearly triple the amount it has today.
Smith has spent most of his career founding companies in finance, education and technology.
He was an early pioneer in structured finance, developing the model for conduit financing that allowed commercial real estate mortgages to be originated and securitized without third-party credit enhancement.
He is the managing member of C Squared Structured Investment Fund in Boulder, tech developer at Boulder-based FinaTech, a portfolio of patent-pending structured solutions for private equity funds, and co-founder of Massively Parallel Technologies Inc. in Boulder.
Smith, who believes the political sphere sorely lacks financially savvy and visionary leaders, is using his book to build support for a broad public campaign that would help turn his approach to public finance into a reality. His book is available through his website, www.boomtheeconomy.com.
Doug Storum can be reached at 303-630-1949 or firstname.lastname@example.org.