January 6, 2002

Dear President Bush:

A lot of people are out of work due to a bad economy, and I know that the government is trying to help by extending the expiration of welfare payments. This may still be necessary, but I think there is something else that can be done, and would help keep people off the welfare rolls.

Having run my own business earlier I know that there are a lot of discouragements to taking on new employees for small jobs. In addition to the uncertainty inherent to taking on a new employee, the first dollar paid brings employer costs associated with employment eligibility verification, reporting associated with deadbeat dad tracking, disability, accident and unemployment insurance, social security and medicare taxes. After 25 employees there is the need to cover health insurance. Employees suffer withholding to cover income, social security and medicare taxes. There used to be a $600/year reporting exemption, but that has in practice disappeared, and the $600/year is meaningless anyway and needs to be updated.

What I think would be useful is elimination of all employer and employee taxes and required payments on the first $12000 of income. Current taxes would simply be shifted to become effective only after the first $12000 of income. Reporting would still be required of any employer who had more than 5 employees, $60000 in payroll, or for any specific employee who earned more than $12000. We could also simply require reporting as there is not much incentive left once the taxes go away. Employment eligibility verification would still be required. The specific numbers would have to be worked out, but in essence the rationale is that taking money from anybody making less than that necessary to live only puts them on the dole or turns them into criminals out of necessity. We have already decided approximately $6/hour is the minimum wage, and 2000 hours per year makes that $12000. This is also approximately the poverty line.

This would turn the private sector into a self correcting system. When unemployment is high and labor plentiful, employers would choose to hire more low cost temporary workers, but would keep them on long enough to keep them out of the welfare system. I think this would give the economy a floor that would be hard to break through.

I know that you are scheduled to announce your plan tomorrow. But I think you can propose something like this before things get settled, and trump the perception that only Democrats take care of the common man. I hope that you find this idea as interesting as I do.