SAVING OUR ECONOMY

LACA (Los Angeles Conservatives Alliance) interviews Richard McDonald

Reseda, CA 1-11-11

Over the next eleven months, LACA will be featuring a series of articles by the Ownership Society Institute. They will outline a plan the Institute calls Rise Up America (RUA). This plan has been designed to change the way the United States government works in a manner that will substantially increase the material wealth of the nation and each individual as well as their social well-being.

LACA: Our series is authored by Dick McDonald (DM). Dick believes conservatives should adopt RUA to solve many of the economic and social problems the country faces. Please tell us something about yourself and your RUA plan.

DM: I am retired now but I spent my working life as a tax man helping rich people avoid taxes. As a young CPA working for an international accounting firm I did the personal and corporate income taxes for very rich clients like Jimmy Stewart and J. Paul Getty. After ten years there I spent the next 30 years designing and operating tax shelters.

For the last six years I have been perfecting the RUA plan that does for the poor and middle class what Ronald Reagan’s so-called “trickle down” economic theory did for the rich. In other words it creates wealth for the little guy. If adopted it would create enormous wealth for the country as well.

LACA: Dick your background sounds impressive but just how does doing tax work for billionaires equate with creating wealth for poor people?

DM: That is simple. It is so simple that it escapes most people’s radar. I use the same tax shelter for the poor and middle-class people as a tax man uses for the ultra rich – the non-taxability of appreciation in the value of stock. Think about it. Bill Gates is worth $54 Billion in the latest Forbes survey. He didn’t pay income taxes to create after-tax wealth of $54 billion. His wealth is in the stock of Microsoft. He didn’t pay tax on the appreciation in that stock.

LACA: I see where you're going – most people don't think of appreciation as a tax shelter. I see how rich people use it but how can your plan generate wealth for the poor. They don't have the money to invest in stock.

DM: You're right – they don't – and that is where my plan begins. Today the country needs a kick in the economic pants. We need jobs and a better growth rate. But no one is hiring and few are investing in new products and services. So my plan calls for an annual investment (from the private sector) of over a trillion dollars in the stock market. In the first year it should create millions of jobs and jump the country's growth rate towards 10%.

LACA: Dick that's a great idea but where are the poor and middle class going to get new investment capital of a trillion dollars each year.

DM: Here again that is relatively simple – we privatize the Social Security, Disability and Medicare programs, place the 15.3% of payroll taxes in each taxpayer's personal investment account and have it immediately invested at their direction and for their sole benefit into secure index funds for their 40-year working life.

LACA: Wow – that brings up so many questions we don't have time to cover all of them today. But let's take some obvious ones. First there is a great fear of investing in the stock market. How do you overcome that fear.

DM: First of all the average American household makes over $50,000 a year and pays slightly over $7,500 in Federal payroll taxes. Over a 40-year working life they would have invested $300,000 with the government. However such taxes invested weekly in the stock market grow into a $4 million nest egg through accumulation and compounding. The rate of return we use is the same 10% average rate of return the S&P 500 has returned in long-term 40-year investments since 1871.

Now when the recent stock market crashed and the $4 million dropped to $2 million, the taxpayer only had invested $300,000. He was still way ahead of the game. As the stock market has gone from 12,000 on the Dow to 6,000 and returned to 11,500 the taxpayer's account has come almost back to $4 million. The citizens understand simple arithmetic – they just have to be informed.

A $4 million stock account should throw off a $33,000 a month Social Security check which will make a mockery of the $1,300 the government presently pays. On top of that the taxpayer is worth $4 million whereas under our present system they get no nest egg.

LACA: I'm sorry we only have space for one more question. Presently the payroll taxes collected by government are used to pay current retirees. By abandoning these entitlements what happens to current retirees and where will the money come from to pay them.

DM: Our plan will immediately reduce the over $100 trillion unfunded entitlement debt to a manageable $6 to $8 trillion as the growth in each account will eventually eliminate the need to fund retirees. In the meantime we can fund the benefits by privatizing unneeded departments of the government, selling and leasing back government properties such as lands, buildings and rights (oil, airtime) and a myriad of cost cutting steps. We also can borrow a little as we have made such a massive dent in the overall debt of the country.

The increase in economic activity will swell to the point that the private sector will open jobs up to absorb the government workers displaced by privatization. It can be done.

LACA: I'm sorry we'll have to continue next month. Where can the readers presently get more information about RUA.

DM: They can go to www.ownershipsocietyinstitute.com. Your readers should be aware that many benefits emanate from such a plan including cutting the size of the government by 40%.