Proposal For U.S. Treasury Securities

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?

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What are the details on China vs. U.S. on taxes?

I didn't know that and zero taxes on owning treasuries would be one hell of an incentive to buy them.

Also, I cannot find the specific article in FT and the link just goes to the website.

I don't know enough of the reasoning around why they would limit their auctions, increase the minimum to $1k, but I would imagine they need to keep the system very stable.

China and other foreign investors pay zero taxes

from U.S. standpoint. Now, I don't know about the home countries tax schemes but in terms of US - zilch. In the case, of China definitely not.

I am trying to find the article - I read it in the print edition months ago. I am trying to find the article on online.

The auctions wouldn't have to change - the proposal addresses increasing the retail market of Treasuries.

anything that reduces China debt holdings

to me is a very good idea. I'm wondering about the political implications. Is it whoever owns the debt controls the politics?

Do U.S. citizens need to buy their country back?

On the market, we need some T-bill experts here to comment, what about market stability, no speculation, etc.?

How about this: Special retirement accounts

I should probably wait to think this through but WTH:

How about special retirement accounts that would hold people's purchased treasury securities and receive the coupon payments and those pymts would accrue some interest - similar to a savings account. Then upon withdrawal at certain retirement age all income is tax free.