This proposal is not my idea but one I read about in the Financial Times. I believe it is a good one.
Right now the biggest challenge for Treasury Securities is supply/demand. Supply, because of the mountain of debt that Treasury will have to issue to fund government spending. Demand, because of increased appetite for risk and China's potential diversification away from U.S. Treasuries.
Here is the proposal:
1) Make interest payments on Treasury Securities Tax-Exempt from Federal Income Tax. Currently, a U.S. taxpayer has to include any interest payments from Treasury Securities as income for tax purposes. Foreign investors, such as China, earn interest payments tax free. There is also some back-door double taxation or something circular about the inclusion of interest payments as income for tax purposes because we are paying income taxes to fund government spending and we have pay taxes on the income we earn from owning Treasury Securities. There is definitely something circular about that.
2) Open up or widen the sale of Treasury Securities to Individual Investors. Treasury Department does have a good website that allows people to open accounts and purchase Treasury Securities but the website has its limits. What about allowing banks, credit unions, grocery stores and even possibly post offices to sell Treasury Securities.
This proposal may increase the demand and market for Treasury Securities at a crucial time in our history. Plus, this may help with our continued personal saving rate as a country. What better way to safely invest our money but right here in the U.S. Our children and grandchildren may thank us for it.
Goldman Sachs won't like it.
What do you think?