Posted on 02/17/2004 7:11:48 AM PST by ancient_geezer
EDITORIAL: Tax `loopholes'
Most Americans this time of year begin addressing the matter of filing their tax returns. Meanwhile, some members of Congress discussing taxes remain blind to the forest as they stare down a tree.
On Friday, Senate Budget Committee chairman Don Nickles, an Oklahoma Republican, decried the myriad tax "loopholes" that he called a "shell game" and argued the budget deficit could be reduced if lawmakers addressed the issue by amending the tax code.
Among the items he cited were incorrect payments made under the Earned Income Tax Credit, which provides a subsidy to poor families who don't pay income taxes in the first place, and a complicated corporate write-off involving municipal public works projects.
All well and good.
Lost in all the debate, however, is the obvious notion that all these "loopholes" are the result of the overly complex and virtually incomprehensible tax laws under which Americans now toil.
Virtually every member of Congress -- both Republican and Democrat -- pay homage to tax simplification when it suits their purposes. The issue, though, never gains serious traction, as muddying up the tax code is not only a means for Democrats to redistribute wealth and gain votes, but for all lawmakers to gin up campaign contributions that help perpetuate their own existences.
Just keep rearranging the deck chairs, Sen. Nickles.
If you would like to be added to this ping list let me know.
John Linder in the House & Saxby Chambliss Senate, offer a comprehensive bill to kill all income and payroll taxes outright, and provide a IRS free replacement in the form of a pure consumption tax:
H.R.25
SPONSOR: Rep Linder, John (introduced 01/7/2003)
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.S.1493
Sponsor: Sen Chambliss, Saxby [GA] (introduced 7/30/2003)
Title: A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States.
So Ron Paul's amendment has a chance at enactment & ratification:
H.J.RES.15
Sponsor: Rep Paul, Ron [TX-14] (introduced 1/28/2003)
Title: Proposing an amendment to the Constitution of the United States relative to abolishing personal income, estate, and gift taxes and prohibiting the United States Government from engaging in business in competition with its citizens.
(But lets modified it to prohibit all income, payroll, gift estate taxes as HR25 calls for, or we will see European VAT style hidden taxes along with payroll excises to take over in the place of the of the current individual income tax(i.e. personal income tax) that Ron Paul amendment prohibits.)
A M E N ! ! ! LONG past time really.
There is simply NO reason the United States of American cannot collect tax revenue in a straight forward, honest, and transparent manner and without the need for knowing even the names of individual taxpayers. No reason, that is, save those in Washington who benefit greatly from the CURRENT Marxist system!
Tell us how you really feel.... :)
Seriously, though, a national retail sales tax is not only much simpler than an income tax system, it's also much more consistent with the idea of a free society -- taxes become anonymous, there is no personally-conducted financial audit (filing a tax return) involved, and most importantly, the system adheres to the principle that the person who makes the money has first claim on how it is spent.
Additionally, unlike most other current taxes, it would not tax domestic liquidity, nor would it put domestic industries at a competitive disadvantage compared to foreign ones.
In fact would move our trade towards a decided advantage in our own nation.
With the repeal of income/payroll taxes producer prices can fall 22% due to the cost savings in our domestic businesses, while all imports which normally are only nominally taxed are for the first time placed on even ground with our own industries when the NRST is levied on sale of imports in the US.
The net result, nearly a full 50% change in relative pricing of domestic products over imports in comparison with todays situation.
That is why:
Rep. Bill Archer, Chairman, House Ways and Means Committee:
- "A recent survey was done, in Europe and Japan, of the major corporations and I was astounded at the results. They were asked, 'If the US abolished its income tax and went to a sales tax, would that have any impact on your decisions?' Eighty percent of the corporations said they would build their factories in the United States of America. Twenty percent said they would move their international headquarters to the United States of America."
That is how to bring our dollars back to the United States my friend.
This year, as you are sweating over your tax return, I'd suggest you contemplate your life as it would be without an income tax and an IRS -- a life you could live to the fullest, and an April 15th as just another Nice Spring Day.
Patrick Henry, Virginia Ratifying Convention June 12, 1788:
- "the oppression arising from taxation, is not from the amount but, from the mode -- a thorough acquaintance with the condition of the people, is necessary to a just distribution of taxes. The whole wisdom of the science of Government, with respect to taxation, consists in selecting the mode of collection which will best accommodate to the convenience of the people."
Seems something was forgotten when taxation became the preferred vehicle for political and social control not revenue collection, through the income tax system.
No $H** Sherlock, if government starts taxing these tax-free 'foundations', they are going to rake in taxes by the TRILLIONS!!!!
ancient_geezer wrote:And just how does changing from a tax system based on income taxes to a tax system based on sales taxes fix this problem.
Seems something was forgotten when taxation became the preferred vehicle for political and social control not revenue collection,
The problem is that Congress manipulates whatever tax code we have for social and political control. The fact that many of the co-sponsors of the fair tax also vote for many (most) of the (thousands of) changes in the current system shows that they are a big part of the social engineering problem.
A screwed up, incomprehensible sales tax system is just as bad as a screwed up, incomprehensible income tax system.
Taxman wrote:What worries me is that between the "Tax Simplification Act" of 1986 and now, February of 2004, there have been thousands of changes to the tax code. I think the total number of changes in that period is over 6,000 (but I could be off a little).
Let us start over now with a simple, fair, flat National Retail Sales Tax and then hold the politician's feet to the fire just a little bit closer than our fellow citizens did between 1913 and 2004!
That means, if we adopt the fair tax system, we can reasonably expect that there will be at least 5,000 (maybe more) changes to the sales tax code in the next 15-20 years. Most of those changes will be of a "social engineering" nature, trying to encourage the purchase of some goods, and discouraging the purchas of other goods. Others will be "stick it to the rich" changes that place higher taxes on "luxury" items. Imagine the complexity and compliance costs associated with that. It'll take supercomputers in the stores just to figure out the taxes on your purchases when you check out.
Taxman wrote:I'm sorry to hear that you have such a quick acting, terminal illness. However, I am quite healthy, and I plan to be around for a few more years (a few decades if I'm lucky).
By the time the National Retail Sales Tax becomes a "screwed up, incomprehensible sales tax system," we'll long be dead.
I'll agree that our current system is unwieldy and unworkable. I'm all for some changes to make that better. But, still, I have 4 main objections to the Fair Tax as it has been proposed.
This is my first major objection. There's no way that the lobbyists and the social engineers are going to vanish when (if?) the Fair Tax passes. And after the 5,000th "improvement" (social engineering amendment) to the sales tax code, I doubt it will be much more fair than what we have today in the income tax.
My other major objections are:
Actually, I would prefer a constitutional amendment that mandated that all tax changes must take effect at least 30 days after the start of the next congressional session (after the next Federal congressional election), and that the new Congress has the authority to repeal tax changes (full repeal only, no other changes) within the first 30 days of their new session. That way, if We the People don't like the new tax policy, we can vote the pols who wrote it out of office and elect representatives to repeal it.
Under the "Fair Tax", my business would have to pay federal sales tax on the vehicle (unless my business is to resell it), and on all maintenance and operating supplies and services. On the other hand, under the "Fair Tax", there's no tax disadvantage to paying myself a bonus or giving myself a raise to cover the cost of the vehicle. And, there's a Social Security advantage to increasing my salary to cover the cost of the vehicle, because ultimately, my Social Security benefits will be based on my reported "wages and salary". So, buying the vehicle personally will put more money in my pocket in the long run (and hasten the fall of the Social Security scheme). One unintended consequence of the Fair Tax is that it could make things much worse for Social Security in the long term.
This is just one reasonably foreseeable unintended consequence, just as the collapse of the commercial real estate market and subsequent S&L problems were reasonably foreseeable unintended conseqences of the 1986 Tax Simplification Act. I'm sure there are other unintended side effects of the "Fair Tax", but I haven't really given them that much thought. What concerns me is that "Fair Tax" supporters haven't given them much thought either.
That means, if we adopt the fair tax system, we can reasonably expect that there will be at least 5,000 (maybe more) changes to the sales tax code in the next 15-20 years.
Remember the retail sales tax is on all new products across the board no exceptions. Any change to the formula means either a higher tax rate on every thing else, or a taxcut for everyone.
Secondly, the income tax complexity arises for the fact that income is not everything a person may receive, capital investment must be removed from receipts to calculate "income", (i.e. gain to be taxed). The opportunities for such monkeying in a "RETAIL" sales tax is quite limited, for in an income tax deductibility in defining income is the name of the game. The whole retail price of a product for sale is not subject to the kind of piece-meal deductibility that an income tax inherently promotes.
Most of those changes will be of a "social engineering" nature, trying to encourage the purchase of some goods, and discouraging the purchas of other goods.
Same reasoning applies, remove some goods necessitates raising the very visible rate on everything else. Also imposes sever accounting problems that are demonstably resisted by business in current retail tax systems. Merely removing the tax from some items means lower tax revenues to government and a taxbreak to citizens. Not a bad thing at all.
Imagine the complexity and compliance costs associated with that. It'll take supercomputers in the stores just to figure out the taxes on your purchases when you check out.
Which is why of the 45 states that have retail sales taxes such has been successfully resisted and has never become a substantive practice. All you end up with in your scenario is the evolution to what already exists in the plethora of excise taxes that both the federal government and states levy today. I haven't noticed any trend in that to become the kind of monster you suggest.
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