No tax rate increases, no Medicare cuts and pay off $5 trillion in 10 years

Could the Solution to Solving our National Debt Crisis come down to one word? ? ?


Most Americans have never heard of the “secret” $600 trillion Derivatives market. Since most of these contracts cost over a billion dollars most people do not know anyone who gets to play in this casino for great wealth. And no one is mentioning this option for paying down our National Debt in the biggest debate raging this year about our Country’s value choices.

We are ignoring the herd of elephants in the living room. Try Googling “$600 trillion.” You will get over a hundred thousand responses. All about Derivatives. That is because the Derivatives market is the only thing that big in the world. It boggles the mind.

A small transfer fee of 0.5% on both the buyer and seller each time one of these contracts executes in the United States would raise over a half trillion dollars of revenue for the country. It should be tied by law to paying off the National Debt.  When a consumer buys a suit or a television they pay a transfer fee called sales tax in a range about 5 – 10% in most states.  When a hedge fund or investment bank trades a billion dollar Derivative contract there is no such transaction fee. Why not?

This is not a tax rate increase on rich people. It is a cost of business for those who choose to gamble in this highly lucrative market where fortunes of immense proportions are possible. Anyone who does not want to be subject to this tax can opt to not play in the game.  But if you want to earn profits by trading in this market then there is a fee you should pay.

One of the many root causes of the Financial Crisis of 2008 was Derivatives. There is a cost to our society from the beneficiaries of this system profiting in these high-risk financial instruments. But the players are not required to share in the costs of playing that game right now. That is not fair. A tax on Derivatives trades should be earmarked for paying off our National Debt to compensate the public for the risk we take in backing up those deemed “Too Big To Fail.”

A pamphlet titled How to Pay Off the National Debt by James F Kainz is available on or for $9.95. It is available at by download for $2.95. Most people can read it in less than an hour. It proposes a 19-point plan to pay off the Debt and stimulate the economic growth of our nation. Only 1 point is essential – taxing Derivatives. The rest of the plan is icing on the cake. A website will be coming soon.

This pamphlet proposes the creation of a Federal Assets and Liabilities Board to collect the tax and apply 98% of the proceeds to the debt. It is self-financing from a 2% operations fund generated by the tax. It is a private company for the public good. It is not a part of the government, not subject to government control other than obeying the law, and free from political tampering. The Board would be elected by the whole country and accountable directly to the people.

That way the Derivatives tax would be removed from the partisan politics aspects that most people despise in the operation of our government. Ideology which poisons the discussion would be displaced by bean counting precission in a simple transfer of money locked in to the single purpose of paying off our liabilities.

A huge conflict has been generated in dealing with this problem. It could all be diffused by taxing Derivatives. Addressing alternatives is the appropiate subject of political discourse. Which will the public choose? Cuts to Medicare, Social Security and Medicaid or a tax on Derivatives?

Let the discussion begin.


4 Responses to No tax rate increases, no Medicare cuts and pay off $5 trillion in 10 years

  1. jimkainz says:

    I wonder how you can get the word out. I would imagine most people aren’t aware of this possibility. Pam

  2. Wayne Taylor says:

    Taxing the huge derivatives market is a great idea. This should be put on the table at the national level. I don’t understand how this market could be so much larger than the GDP, and yet few people seem to know it exists. When I buy stuff in the normal market, I pay a sales tax of between 5% and 10%. So if this virtual market of repackaged derivatives were taxed at even 1/10 the rate per transaction, that would be huge. This would be a good way to pay down the national debt, by about 4 Trillion$ in ten years.

  3. jimkainz says:

    From: James Kainz []
    Sent: Friday, August 19, 2011 7:10 PM
    To:; Mishkin, Kelsey
    Subject: Atom bomb in the Budget battle

    Making Bush tax rates permanent will require bipartisan support.

    Republicans will insist on adherence to the Norguist no tax rate increase pledge. Democrats will require increased revenues to replace the loss which will come with no change in existing tax law. There is a $600 trillion market which will accommodate both conditions.


    The $600 trillion market for Derivatives is 40 times the value of the US stock market – yet most Americns have never heard of it. A tiny 0.5% transfer fee when these billion dollar contracts trade would raise $4 trillion over 10 years – enough to cover the Bush tax rates (which are scheduled to bring in an additional $3.8 trillion at current levels). Something both sides can agree to and still declare victory.

    No change from current income tax brackets. No cuts to Medicare or Social Security.

    Whoever announces this solution first will reap a publicity windfall which will improve their standing in the polls and bring in substantial campaign contributions. It is a race to be the leader who puts this idea into the public domain and champion a position both sides can support.

    See for details.

    I have met in person with a member of Representative Grijalva’s staff in the Tucson office and supplied them with 3 copies of the pamphlet.

    From: Mishkin, Kelsey
    Subject: RE: Atom bomb in the Budget battle
    To: “‘James Kainz'”
    Date: Monday, August 22, 2011, 11:27 AM

    Thanks James, take a look at the alternative budget we offered this year:

    The People’s Budget includes:
    Wall Street Gaming Tax A tax on derivatives, credit default swaps and other exotic financial products, including both sides of futures and forwards, option premiums and foreign exchange spot transactions. This is a tax levied directly against the types of opaque, complex trades that Wall Street manipulators used to inflate their profits and were the direct cause of the financial crisis.
    You can also read EPI’s technical analysis for more information.

    Thanks for sharing!


    Kelsey H. Mishkin | Legislative Assistant
    Congressman Raúl M. Grijalva
    Arizona District 7
    202.225.2435 | Fax.202.225.1541

    Subject: RE: Atom bomb in the Budget battle
    To: “KelseyMishkin”
    Date: Wednesday, August 24, 2011, 6:19 AM

    Mr. Mishkin,

    Thank you for your thoughtful response to my message and the link to the EPI Working Paper #290.

    My reaction to that thorough analysis is decidedly mixed:

    I am delighted that it includes a tax on Derivatives.
    I am disappointed that the projected revenue is only $63.5 billion per year.

    The tax I proposed in the pamphlet I gave to Representative Grijalva’s district office staff in Tucson last March raised 1/2 trillion dollars per year.

    I believe that difference is a game changer. I fear that The People’s Budget is dead on arrival in the Republican lead House. A stand alone legislative act focusing exclusively on Derivatives could pass if married to an extension of Bush tax cuts for “the job creators”.

    I volunteer to work with you or a staff member of Representative Grijalva or The Progressive Caucus if you would like my assistance in re-crafting the details of this proposed legislation. My full time effort is devoted to advancing this cause.

    I believe there is an opportunity to make this the defining issue of 2012. I appreciate the global view of The People’s Budget as a counter to Paul Ryan’s budget. I believe a more focused bill concentrating exclusively on the Derivatives transfer fee actually has a greater chance of passage because it can be used as a bargaining chip to obtain Republican support if balanced with their issue of priority – tax cuts for the top income brackets. The only way to obtain a CBO scoring on the stand alone Derivatives transfer fee is to propose a separate bill.

    My congratulations on your including legislation for a Derivatives tax into the public forum for consideration.

    I would be delighted to assist your efforts in any way I can.

    I have talked directly to Representatives Karen Bass, Laura Richardson and Maxine Waters of California about this and provided them with copies of my pamphlet “How to Pay Off the National Debt”. I will keep you posted on their participation.


    James F Kainz

  4. jimkainz says:

    From: Krystal Ball
    Subject: Re: [Website feedback] Save Medicare – Tax Derivatives
    Date: Tuesday, August 30, 2011, 6:37 PM

    Hi Jim! Thanks for emailing me about this. I’m always looking for under-publicized ideas. On it’s face it sounds like a great idea to me and I think I’ve read a bit about it before. I’ll take a look at the link you provided.

    Thanks again!


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