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Skeleton Government

Definition
 
   A skeleton government is one that addresses the economic matters of a nation where government spending is kept at a minimum and federal programs exist only for the sake of conducting the essential duties and responsibilities of the nation.
Structure

   The structure of a skeleton government consists of departments that are scaled-down versions of themselves (or "bare bones") when considering the minimal services that they provide. This allows for an extremely low federal tax rate that will improve the quality of life for all its citizens.

   An important feature of a skeleton government is that it will replace the bond system with a project-oriented, or P-series, system. Instead of a general fund that provides funding for all government programs, a project-oriented bond system enables every federal program to have its own privately managed P-numbered bond that is independent from the others. An important aspect of this is that it allows federal programs to become better encapsulated which results in greater efficiency and financial responsibility than grouped with other programs (e.g., no more dipping into a general fund that hides cost overruns).

   For example, voters may approve of a new project for the purpose of providing renewable energy (e.g., wind power) to replace fossil fuel consumption. A new P-numbered bond will be assigned to the project, which will be primarily funded through private investment. The reimbursement of bond redemption will be provided when the wind system becomes fully operational (e.g., it pays for itself). Only a minimal amount of federal tax dollars, if any, will be given to the project which would make it more self-sufficient and independent from other projects.

   This will be necessary since a skeleton government by its very nature only provides the basic needs of the nation and not have the extra tax dollars to fund nonessential projects.
Advantages
 
   The primary advantage of a skeleton government is its simplicity in that it may function with an extremely low federal tax rate. On average, a flat 5% federal tax rate would be the norm for a skeleton government though on the extreme end, even a lower 2% or 3% federal tax rate may be possible.

   Reducing an individual's tax rate from 25-33% to 5% would greatly improve personal wealth by a significant
amount. Likewise, a reduction in corporate taxes from 21% to 5% would allow businesses to hire additional workers and offer larger raises/bonuses for their employees. Overall, by lowering both the individual and corporate tax rates in this manner, the result would be a much stronger economy for the nation.

   In addition, a skeleton government will only tax wages and nearly all other forms of taxation would be eliminated: gift tax, estate tax, capital gains tax, etc. would all be removed from the tax code. Gambling and lottery winnings will also become tax-free as well as receiving any tips from customers (e.g., waitresses). Retirement plans will become tax-free though a skeleton government having a 5% or lower federal tax rate will no longer offer pretax contributions to retirement plans.

   Since only wages are taxed (or revenue for businesses) there won't be a need to file taxes at the end of the year with the IRS. Employers will simply withhold the appropriate amount of tax from an employee's paycheck and it's done. There are no deductions, credits, or other adjustments to the tax code since a skeleton government will treat all its citizens in an equal and unbiased fashion regarding their individual life decisions (e.g., single or married, rent or own home, children or none, etc.).
Further Considerations

   A skeleton government with a federal tax rate of 5% or less may require the active military force to be replaced with a volunteer-based civilian force (much like the Minutemen of colonial times). In this case, the defense budget would be primarily used to maintain special/elite forces, while a smaller amount would be used for maintaining Minuteman training camps across the country. Over the years, the skeleton tax rate may be temporarily raised to fund new weapon procurement or other matters for supporting the military.

   State and local city (municipal) governments will likewise need to be converted to their skeleton equivalents. State sales tax and local property tax should be eliminated in most cases, since only wages/revenue will be taxed. By design, to achieve optimal efficiency, a skeleton government should have a maximum of 15% total tax for federal, state, and city combined. Voters can decide how the maximum limit of 15% may be divided among the three factions (e.g., 4% federal/5% state/6% city).
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