This is a brainstorm and a really rough draft, but I'll assert that it's worthy of discussion. I'm going to take interested readers through a bit of a lengthy intro before getting to a fairly specific plan designed to encourage further discussion and brainstorming. If you can handle the read, I commend you. If you give up, I understand.

Question: You know the real problem with sales tax, other than inflating the cost of goods/services to customers in an already desperate economy?

The problem is that the money cycles into the government's control, where theoretically that would be a good thing, but in practice it's not. It's being cycled into the pocket of a government administration that is bankrupt and shows no real signs of possessing the ability to find solutions to improve the economic situation of Puerto Rico's citizens. Once the money reaches the government where it (under their control) may be badly leveraged (or not leveraged at all), it's tied up and essentially lost without any clear value to the people.

Do elections matter? Citizens have no control again until the next election, at which time they are forced to choose the lessor of a few different "evils". In other words, their choices are limited, and the prospects of better management by any of the candidates for governor (or even mayor) may be extremely unlikely.

How do we change this? Let's focus on what the government is reasonably good at: "collections". The government has been effectively able to collect the newly imposed sales tax from businesses. What it's not good at is operations and strategy, specifically making decisions where and when to put that money back into the economy.

So let's revamp the structure: We'll keep the sales tax in place, but we'll restrict the governments role to collections, NOT strategic decisions about where to place the money. We'll democratize that part, and let the people decide by making individual "consumer" choices, not political ones. Bottom level consumer choices are subject to the force of needs/desires, not corruption.

1 in 20 Americans (5%) are said to be millionaires, i.e. having total combined assets of all sorts in excess of $1 MILLION. Impressive... you might not have known that. I bet it's really easy to believe the other 19 are NOT. That part you knew instinctively. The important distinction is how they handle cash.

• Do you know what a millionaire does when you give him $1000?

  He puts it in the bank and invests it, locking it up. It has almost no impact on his current rate of consumer spending.

• Do you know what a poor person does when you give him $1000?

  He spends it. It can be large %-age increase in his normal spending activity, especially for consumer items.

Putting money in banks ties up money in the economy. It puts it in the control of institutions (subject to corruption), who may lend it back to you via high interest credit cards, 10%+ lines of credit or auto loans, etc.

Poor people don't charge interest. They quickly spend the money in their neighborhoods, a large portion of which goes to support the local economy and small businesses, and also helps to increase the standard of living there for everyone.

The American economic stimulus plan is almost entirely based on ensuring that spending continues such as propping up the failing auto industry, so that workers have money to spend, and other Americans have cars to spend it on, etc.

Yet the government bail out funds went to Billion/Trillion dollar corporations. You've heard what AIG did. Heads like Dodd's are about to roll because of it. It's enough of an issue that people can actually forget Obama's late night insulting comment towards special needs athletes (accidental, but it "came out of him without coercion") and move on without much fuss. So, AIG paid $165,000,000 in *bonuses* to executives of a bankrupt insurance company that has the ability to severely impact the Global Economy if it fails.

But that's what millionaires do! Mr. Spitzer, Wall Street watchdog and lover of high end prostitutes, former governor of New York, was interviewed on CNN and discussed how most of the money they (i.e. AIG) were given in the bail out was quickly cycled out to other firms, 100 cents on the dollar. Even the collection agents that call to hassle us little guys (i.e. the consumers) are willing to take 60/70 cents on the dollar in settlement for bad debts. They can take the rest as a write off against their corporate taxes.

Do we really expect a top down strategy to work when it was a top down failure that created the situation?

• Working class Americans get up every day and go to work.
• They do their 9-5, and then they submit a portion of their weekly earnings back to their 401k, which is basically giving money back to their employers to play with on Wall Street.
• Then they pay their taxes which is certainly (right now) going back to Wall Street (i.e. government bailout).
• And the profits they earn for their employers from their hard work, goes back to Wall Street as executive bonuses.

Individual citizens, even the poor ones are doing their job. And perhaps the welfare recipients or the drug/alcohol addicts have the right idea in one train of thought. They are just expressing two different ways of giving up. At least the welfare recipients are actually taking something back from the government.

If it were your tax dollars, where would your rather it go? (Option A) To the uneducated welfare mom down the street who got knocked up by an absentee father that's no longer around to help support her, or (Option B) an executive at AIG making $1 MILLION a year in bonuses for a bankrupt company?

If you are a Christian, which you are mostly likely if you are living in Puerto Rico, then your answer *should* be the former, but I realize your answers may vary (sadly).

After you pay your taxes, what do/can you do with the rest of your money? You shell out most of the rest of it for insurances, rents, food, and gas, all essential for you to survive and stay healthy enough to keep going to work, so corporations can keep performing and inflating stock value hundreds of times over actual earnings, and executives can keep getting million dollar bonus checks. How much true control do you have over your expenditures?

• Try getting a mortgage on a new home and not having insurance.
• Try driving your car without insurance and get stopped by the police.
• Try getting proper medical treatment without health insurance. Try getting proper medical treatment "with" proper insurance.
• Try getting your insurance to pay for damages to your home or car when an accident happens.
• Try buying something at Radio Shack or any electronics retailer without being offered insurance.

Life and death are biological. Nothing is certain but "insurance" and "taxes" so it seems.

Consumers work, but they are NOT in control. Even having a vote is only pseudo-control since options are limited and predetermined largely by social class, corruption and family hand me downs (Bush Sr. -> Bush Jr.). Most of us can never aspire to climb the chain of command into political power positions, not that most of us would want to.

Today, Rick Sanchez of CNN profiled some of the costs of winning political office in present times. You need to be a millionaire to begin with if you want to have a statistically significant chance of doing it, better than winning the lottery or getting struck by lightning.

A citizen does not have power in the traditional way we expect or are told. We are not Barack Obama capable. Your mom did not wake you up at 4am to work on extra studies to supplement your education, before actually going to school for the day.

Wall Street is really just one big Ponzi scheme paid for with your money. Consider the basic example:

Using the old classic P/E (Price Earnings ratio) is a joke. I remember learning about this in high school economics, and wondering why they would bother with such a useless metric to evaluate public offerings. Prices vastly exceed earnings for most public securities, because it's falsely inflated by the slick suits down town. Earnings serve only as a psychological tool (one of many) to help inflate prices and make millionaires/billionaires richer. It's all good in positive economic times. The middle class see big enough growth in the market that their 401k delivers them enough stockpiled rent money to survive the last 10 to 20 years of their life in the middle to lower-middle class bracket (if they're lucky & conservative) and avoid a bankrupting medical condition. It's not working out so well now though, is it?

All of these big corporations ultimately need to have demand for their products/services to survive long term. If they don't have a value-delivering product/service, why keep them around? The free market economy should eat them alive. And it seems like it did for participants like the American auto industry. But we're keeping it afloat with top-down manipulation that simply won't work long term, even if it does stay above water in the short-term.

So allow me to take this back into a Puerto Rican focus, and lay out what I mean by democratization of sales tax:

Let's keep having the government collect sales tax, but instead of giving them free reign on where to spend it, let's direct most of it back to the poor and lower middle class workers in Puerto Rico. Let's prop them up first, and they'll return the favor by rapid consumerism that will bring the economy back without much help from the government at all, regardless of what they try to do, other than keeping this program in place.

Why give the sales tax back to the people?

1. They'll spend it quickly and stimulate the economy (instead of locking it up in a bank immediately)
2. They'll spend the money in less corrupt ways than the government.
3. They deserve it. Often times, the more professional we are, the less "real work" we do. I do feel guilty waking up and going to my laptop, while the young guy outside comes to cut my grass in the heat. Who is really working harder? Why do we think we earned it more by avoiding hard work and staying in a classroom and reading more books for 4-10 more years? I think we earn the right to be qualified in our profession, not necessarily to be paid so excessively for it.
4. It will help enable them to become home owners, and to be able to afford/get approved for the required mortgage. It will stimulate the construction industry, especially for small contractors, specialized tradesmen, and building material/fixture providers.
5. It will reduce their reliance on credit cards, high interest debt, and allow them to pay down more than the minimal monthly payment.
6. It will allow them to afford health insurance, and feel more open to seeing a doctor for preventive care, not avoiding life saving treatment.
7. They'll suffer less from depression, and we may see reduced rates of alcoholism, drug use, and suicide.
8. They'll still send money to the government in income tax.
9. They'll spend money in the local economy, including revenue generation for small business entrepreneurs.
10. They'll buy products from corporations that have good products, and for the surviving ones that are good at marketing.
11. They'll be less inclined to participate in illicit activities, that are forced on them by economic desperation (including drug trafficking), resulting in crime reduction.
12. Some will use their new savings to start their own businesses.
13. Some will use the money to invest in a higher education for themselves, or for their children, which might otherwise be prohibitively expensive, thereby locking them into their low social order for life.
14. They'll start to feel like they can play a part in society and not be pigeonholed into the class into which they were born.
15. It will encourage others who have given up (like welfare recipients) to enter/re-enter the workforce.
16. It will give them (as productive workers) the ability to spend money on new technologies like new computers and Internet service as a very basic example, but also (now prohibitively expensive) trade tools that allow them to become entrepreneurs. Remember, $1,000 is impossible for many low income families to ever save without great discipline (which the majority lack, and should not require in such a wealthy country).
17. It will make less money available to cover an excessive work force of government staffers ("public servants"?), requiring further cuts of non-productive fat. Don't worry about them. They're eligible for unemployment insurance benefits until they leverage their skills to re-enter a growing economy. It's cheaper to rent a boat occasionally than finance, maintain, gas, store, and depreciate one anyway.
18. Increased spending creates jobs.
19. It will reduce the gap between the poor/lower-middle class and upper-middle class/affluent citizens, but only for those who are members of the productive work force (part of the true American dream). Middle class continue to prosper but the gap between them closes in. Don't worry. It's huge. It will take a long time.
20. It will give them the financial ability to take better care of aging, handlecapped, or infirm family members, that might otherwise be relegated to institutions where they may be abused, but where they will certainly not be as happy as they could be with their families.
21. Businesses gain more stable employees (higher retention and better performance) since employees want to keep their jobs and are happier in their lives. They have more to risk by failure to perform or stay employed now.
22. Underground economy will have incentive to get legal, so that employees are eligible for incentives. Employees will insist on it! Otherwise, it will be very hard to find help, and they will simply remain 1-person or single family operations, who will still benefit from the increase in consumer spending.
23. It has the power to re-vitalize the entire economy with a positive cascading effect. Government doesn't lose revenue. They gain it through income tax, which will grow as the economy prospers and consumers pay down debts that would filter out to parasitic credit cards companies, locking those funds up, and not getting them into the hands of small businesses as revenues that can be taxed.

How is this incentive managed?

Pool the sales tax (which is already collected) into a re-distribution fund. Government acts as a collector and "check" distributor only. They do not make any strategic decisions, and cannot direct the money to sources of their choice. They follow the strict (but easily to administer) system. Since the government issues this income, they can deduct income tax before distribution keeping a share immediately for their use. Records will be maintained in a secure system costing less than $200,000 to develop and deploy (by smart modern software developers, not over priced consultants from Microsoft, IBM, Oracle, etc).

Citizens must meet eligibility requirements:

• Responsible Citizenship: Must have all government fees paid (child support owing, outstanding taxes, fines/tickets, vehicle registration, driver's license renewed, etc). If not, funds will be withheld and applied to these sources, not distributed to the worker.
• Bankruptcy or Debt Level has NO Impact. It is NOT a requirement to be in good standing or have a positive credit rating.
• Active Workforce Participant: Must have filed taxes for more than 2 years, as an active member of the workforce, with at a minimum of $10,000 filed in the previous 2 tax years.
• Qualification by Skilled Selection: Must NOT be employed by a direct relative to prevent cheating.
• Societal Contributions: Workers must complete a minimum of 40 hours of volunteer work, with incorporated not-for-profit organizations in Puerto Rico per year. If not completed, they will not be eligible for the incentive in the next year until it is completed. Standard records required with work log.
• Records of Revenue for Taxation: Businesses where consumer transactions occur must have ATH/Visa/Debit billing capabilities in place or employees are NOT eligible.
• Basic Literary: If high school, or GED not completed, a maximum of 3 years within the program before termination if GED is not achieved. After 3 years without GED incentive is canceled until it is achieved or psychological evaluation is rendered that individual is not capable of completing GED (special needs, learning disability, etc).
• Civil Participation: Must be a registered voter.
• Must be paid only by direct deposit (no checks/paper correspondence) to reduce administrative costs & discourage fraud.
• Working under another name (to meet eligibility) results in criminal charges and high fines for both worker and business.

How is Payment Calculated?

Payment is made once monthly, based on previous month's employer payroll tax submissions.

Factors for payment include:

• # of years in work force - Graduated scale for # of years in the work force. Evidence required of tax filing with employment income. More proven years provides additional incentive for years of previous work force participation.
• # of hours per week worked - Full time 37.5 hours per week rewarded more significantly than part-time.
• # of months worked in last 2 years - Positive factor demonstrating recent work ethic demonstration.
• Total registered volunteer time - Incentives for surpassing 40 hours community service requirement.
• Total university credits/degrees obtained - Incentives for achieving a higher education, up until 1st bachelors degree. No incentive for Masters or PHD programs since this level of education mandates self-sufficiency.
• Bilingual Certification - Incentive for learning English language, or additional world languages with valid certification from accredited institution.
• # of points improvement in credit score - Incentive for debt repayment and improvement in credit score, net gain from the time of entrance in the program, regardless of starting score.
• # Income from employer must not exceed $20,000 per year gross for the individual for full eligibility. Maximum allowable eligibility up to $30,000 per year, with graduated scale. $25,000 from employer would result in 25% reduction in payment. Small incentive for breaking $10,000 / year. Small incentive for breaking $15,000 per year.
• # of years participating in program at 75% of maximum incentive - Reduces accumulated points by 10% for each year at that level. This is to encourage higher qualified workers to migrate out into careers, and not stay dependent on the program forever.
• # Completed annual medical physical with blood tests, prostate screening for men over 40, and mammograms for women over 40, level of obesity (measured by physician).

Payments are up to a maximum of  2 times the minimum wage at 40 hours per week for a full month, to be paid monthly.

$7.25 * 2 * 40 hours/week * 4.33 weeks/month = $2511.44

Dependent upon equal distribution of available funds; may be less. Any excessive funds are to be transferred to government job creation fund, allowing small businesses to apply for employee wage subsidization grants.

What would it take to earn the above maximum?

First year of incentives, but more than 50 years in the work force (proven with annual tax submissions, or equivalent), working 40 hours per week, worked the past 24 months without time not working, total registered volunteer time in the last 12 previous months of 400 hours, a bachelors degree or professional trade achieved, with bilingual certification of both Spanish and English + a 3rd language, with a 40 pt.+ improvement in credit score, a registered voter, with full medical examinations completed over 40 years of age.

This money would be paid with normal income tax deducted before being deposited. While it seems like a lot of money, this would be a highly qualified, dedicated employee, who is underpaid in the economy. These types of individuals will eventually leave to go to higher paying careers or start their own businesses.

The calculation would be based on simple data, using a points system.

• Years in workforce: 200 pt. scale. 4 pts. for each proven year in the work force.

• Average hours per week worked:

  • 0 - 10 hours : 10 pts
  • 0 - 20 hours : 15 pts.
  • 0 - 30 hours : 25 pts.
  • 0 - 40 hours : 30 pts.

• Months worked in last 24:

  • 1 - 6 : 10 pts.
  • 7 - 12: 20 pts.
  • 13 - 18: 35 pts.
  • 19 - 24: 55 pts.

• Total registered volunteer time:

  • 0 - 40: 1 pt.
  • 40 - 80: 5 pt.
  • 80 - 120: 15 pt.
  • 120 - 140: 25 pt.
  • 140 - 180: 40 pt.
  • 180 - 220: 60 pt.
  • 220 - 260: 85 pt.
  • 260 - 300: 110 pt.
  • 300 - 340: 140 pt.
  • 340 - 400: 180 pt.
  • 400+: 250 pt.

• Total University Credits:

  • Community College Completed (2 year): 50 pts.

    • 1st year completed: 15 pts.

  • Professional Trade Completed (3-4 year apprenticeship): 75 pts.

    • 1st year completed: 15 pts.
    • 2 - 25 pts.
    • 3 - 45 pts.

  • Bachelor Degree Completed (3-4 year program): 75 pts.

    • 1st year completed: 15 pts.
    • 2 - 25 pts.
    • 3 - 45 pts.

• Multiple Languages

  • Bilingual Certification in English (if Spanish 1st language): 50 pts.
  • Bilingual Certification in Spanish (if English 1st language): 15 pts.
  • Certification in 3+ languages (with Spanish & English included): 75 pts.

• Points improvement in credit score from start:

  • 0 to 10: 25 pts.
  • 10 to 20: 50 pts.
  • 20 to 30: 75 pts.
  • 30 to 40: 100 pts.

• Annual Earnings:

  • $10,000+ : 25 pts.
  • $15,000+ : 50 pts.
  • $20,000+ : 75 pts.

• Health & Well Being:

  • Completed general medical examination: 20 pts.
  • Completed blood profile screening: 20 pts.
  • Completed prostrate exam (over 40): 20 pts.
  • Completed mammogram (over 40): 20 pts.
  • Completed cardiovascular stress test: 30 pts.
  • Possess health insurance: 50 pts.

TOTAL POINTS: 1,000 (Max)

Number of years of payments totaling at least 75% of max $30,137.28 (i.e. greater than $22,602.96) in gross pre-tax incentive payments (on top of employment income).

• 10% of total Points accumulated, for each year over 75% of max. Example: 1,000 points reduced to 900 after 1 year grossing more than 22,602.96 in incentives.

Other options to adjust for points system include: home ownership, responsible debt use (low credit card balances), hybrid car ownership, energy saving technologies in the home, recycling participant, maybe added to adjust scoring principles, etc.

Now let's do a Juan Doe example:

Juan is a 23 year old man, but lives with his parents. He graduated from high school and currently works at the box office for "El Cine" while going to university. He works an average of 20 hours a week [ 15 pts. ], at minimum wage of $7.25. He filed income taxes for 4 years [ 16 pts ]. He completed 1 year of a Bachelor of Science program [ 15 pts. ] at the University of Mayaguez. He volunteers with an animal shelter every Saturday for 2 hours, for over 100 hours per year [ 15 pts. ] in total. He speaks English and is certified bilingual [ 50 pts ]. He's worked 18 months out of the last 24 [ 35 pts ] . He started with a credit score of 650, but has not increased the score at all [ 0 pts ]. He grossed $8,000 in the last 12 months trailing. He saw his doctor for a physical [ 20 pts ], but he did not do a blood test or cardio stress test. He does not have health insurance.

Juan Doe's point total would be:

15 + 16 + 15 + 15 + 50 + 35 + 20 = 166

• He would be eligible for 16.6% (166/1000) of the maximum incentive payment of $2511.44 or a monthly gross payment to him (before tax) of $416.90. This would take his average salary from minimum wage of $7.25 to approximately $12.06 per hour without requiring any additional payments from El Cine.
• However, he will NOT be eligible for this unless "El Cine" establishes ATH/Visa/Debit billing for responsible sales tracking/taxable income reporting.
• Juan will certainly inject almost his entire monthly incentive of $416.90 (pre tax) into the local economy by spending it, or $5000 per year he would not otherwise have had.

Let's see how Juan could improve this for his next year:

• Juan completes his 2nd year of his Bachelor of Science successfully (sufficient credits w/ documented transcript). + 10 pts.
• He realizes how volunteering helps him and he increases his time to 3 hours per week, taking him to over 150 hours per year. + 25 pts.
• He gets a blood test in addition to his physical. He's young, but he takes the stress test because he wants to increase his points. He passed the test, but the doctor recommends that he lose 10 lbs to get in a healthy weight range. +50 pts.
• He realizes increased hours will help him gain more, so he asks his boss if he can join the after hours theater trash pickup and gains 5 hours per week extra time. + 10 pts.
• This is now his 5th year in the work force (he filed taxes last year). +4 pts.
• He doesn't take any time off now, even with his university schedule. He works hard and has worked every month of the last 24 straight. + 20 pts.
• He started reading Italian, but hasn't made much progress with all his activities (but he tried, and could pick it up in the future). + 0 pts.
• He paid off a Sears credit card for which he had a $100 overdo charge for an air hockey table, and his credit profile improved by 5 points in the last year. He only did this because he knew the incentive would increase. + 25 pts.
• His employment income is just under $10,000 so he did not get that incentive, but he knows he's close and is considering asking for a small raise from his employer since he cannot work any more time with university. With his increased performance, he'll probably get it soon.

• Juan increased his previous score of 166 by an additional 134 pts. His new total is 300 pts of 1000, or 30%.
• His new monthly incentive payment from the sales tax fund before tax is $753.43.
• His new before tax hourly rate equivalent is $14.21/hour.

By continuing his education, improving his work ethic, becoming a better citizen (volunteer), taking a more proactive preventive care approach to his health, and taking care of some debt impacting his important credit profile, Juan is becoming a more productive citizen. He's now grossing $1538.24 per month. He's able to provide his struggling parents with $200 a month to help with food expense at home. He's putting about $300 a month towards his tuition, to help reduce his student loan requirements. Juan has also started eating less popcorn and drinking less free coke while at the theater now that the doctor explained the risks of being overweight.

This is an individual making a very good income for part time work at El Cine, but it's making him a much better person. He's advancing in his life in many ways, avoiding going into inescapable debt, helping out with his family, keeping positive self-esteem, and injecting much of the remaining bits of his income into the local economy by buying a used car, having Pizza at Papa's Pizza with his friends on Saturday's, purchasing clothing at the mall, downing a few Medalla and oysters in Boqueron once in a while, staying at a hotel split-cost with his friends in San Juan about once every couple of months to go to Senior Frogs and meet the big city women, etc. He's a more capable consumer, injecting the money he's provided with back into the economy.

• He's not an executive at AIG and he's not a millionaire. The money cycling to Juan goes right back into the economy.
• Juan is smart and he's legally working the incentive system now to see all the ways he can improve to get his monthly sales tax democratized incentive increased more and more.
• Business improve because of the thousands like Juan who gained these new spending habits and abilities.
• The middle class is a bit jealous, but also benefit by the program as businesses improve creating opportunities for job security and continued career growth.
• The government creates a viable economic stimulus without doing anything other that giving the sales tax directly back to the people who need it most and will demonstrate the need by spending it almost immediately back into the economy.

This was a brainstorm. I congratulate you for reading it all if you did. Many were lost in the introduction I'm sure. Yet, I believe if it has any merit or will promote any further discussion, it is those among you that read this far and gave it real consideration and thought that will be most effective in helping debunk or improve it.

• Help me find the fundamental flaws.
• Why would this work?
• Why would it not work (other than the government lacking the vision to try it)?
• How can it be improved?
• What are some alternatives?

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