Posted on 03/02/2004 10:23:45 PM PST by esarlls3
Congress Must Pass the Fair Tax Act
By U.S. Rep. Mac Collins
CNSNews.com Commentary
February 27, 2004
Past Congresses have moved in the wrong direction by making our tax laws more complex and expensive for business and individuals to comply with. To keep our economy growing, Congress needs to take action now.
My colleague, Georgia Republican Congressman John Linder, has sponsored the "Fair Tax Act" (H.R. 25), a national retail sales tax on new goods and services. It would replace all individual and corporate income taxes, payroll taxes as well as capital gains taxes, estate taxes and gift taxes.
The Fair Tax replaces the way we are currently taxed, which is based on our annual income, with a tax on goods and services. The Fair Tax, basically, is a voluntary "consumption" tax. The more you buy, the more you pay in taxes. The less you buy, the less you pay in taxes.
The federal government will continue to be fully funded, including Social Security and Medicare.
The Fair Tax will reduce the costs of goods and services by 20 to 30 percent. It will allow workers to keep 100 percent of their paycheck, pension and Social Security payments with the exception being state or local withholding
The Gross Domestic Product will increase by almost 10.5 percent in the first year after its enactment because real wages would increase and tax compliance costs for business would decrease by 90 percent.
The fair tax would also be good news for investors. Real investment will initially increase by 76 percent relative to investments that would be made under our present tax laws. While this increase will gradually decline, it remains 15 percent higher than under the existing tax structure.
American exports will increase by 26 percent initially and would remain more than 13 percent above present levels under the current tax system.
Studies of the Fair Tax have shown that many U.S. companies will choose expansion here in the United States versus abroad, and in turn the United States will become more attractive to many foreign owned companies looking for expansion possibilities.
President Bush, during his State of the Union address in January, said the economy is turning around because the American people are using their money far better than government would have. The Republican majority in Congress was right to return it to the American people and not keep it in Washington.
A fresh and a fairer approach to a Federal tax system is needed. Therefore, it is time for Congress to pass the Fair Tax (H.R. 25).
As a cosponsor of the Fair Tax Act, I have asked Chairman Thomas of the Ways and Means Committee to hold hearings on this vital legislation. I am hoping those hearings will get under way in the near future.
(Congressman Mac Collins is a Republican representing Georgia's 8th Congressional District. He serves on the House Ways and Means Committee and the House Select Committee on Intelligence.)
Regardless of expenditures,
One question, how much do you think the average household with less than $20,000 income (including wages, interest, dividends, welfare, pension benefits, SS/Medicare, etc.) spends?
Just curious as to what your answer will be.
And think of the money saved just by defunding the IRS. What 50 - 75 Billion?
Only $8 billion in direct IRS budget costs, however, that's not counting the real impact as a consequence of dealing with the IRS.
American General Contractor's Association
http://www.agc.org/Legislative_Info/Members_Testify/testimony_04-10-00.asp
To this we must add the shear wastefulness of the colossal compliance costs of the current tax system. To administer the tax laws, the IRS directly employs about 112 thousand employees. The IRS budget is about $8 billion. However, direct expenses of the IRS are not the central compliance problem; rather, it is the expenses that are pushed forward on the taxpayer to be tax collector, tax accountant, and record-keeper.
According to the non-partisan Tax Foundation in 1997 Americans spent no less than $225 billion complying with the income tax. The most recent projections made by the IRS of tax returns to be filed in Calendar Year (CY) 1999 indicate that the grand total, or sum of all major tax return filings, will be 228.2 million. This number is then expected to grow at 1.24 percent annually until CY 2005, when the grand total return count is expected to reach 245.2 million. This does not include the 1 billion information returns that will be filed. In addition, more than 8 billion forms and instructions are sent to taxpayers each year, enough to encircle the globe several times.
Paperwork is the most visible compliance cost, but it is clearly not the only, and perhaps not the largest compliance costs. Return processing, determining liability, recordkeeping and other burdens are an estimated 19 to 33 % of the total revenue raised by the income tax system and 2.0 to 3.5% of the Gross Domestic Product (GDP)[an additional 3% of GDP1999 = $279Billion]. We waste money each year on seeking to avoid taxes, avoid trouble with the IRS, interpret the laws or determining the best course of actions with the laws.
Who pays these compliance costs? You do. The hardest hit segments of our economy are middle income wage earners and business owner. Small corporations in particular endure compliance costs estimated to be several multiples of the tax actually collected. Although duly included in the National Income Product Accounts (NIPA), payments made to tax lawyers, accountants, IRS agents and other tax professionals do not really improve our collective standard of living. These compliance costs are wasteful expenditures, which absorb so much time and energy of American people that they roughly approximate in costs the assets of the entire building industry. None of this is necessary.
Adding to the costs and to unfairness, our tax laws are so complicated not even the common tax lawyer can understand them. There are a number of ways of measuring complexity; one of which is the number of penalties issued and then abated for reasonable cause. There are more than 34 million civil penalties issued each year; more than a third of all small firms receive payroll tax-related penalties alone. More than 50 percent are abated.
The tax system is now so monstrously complex that it is beyond the ability of any one person to understand it. Understanding the system is certainly beyond the reach of most mere tax lawyers, accountants and tax administrators. A system that is so complex must be administered in an arbitrary and unfair way. If no one really understands what the law is, it is impossible to administer fairly and uniformly - and of course, it is not so administered.
Our government embroiled its citizens in more than 35,000 litigation actions. Taxpayers sustained more than 3 million levies. As long as we insist upon an income tax system, the system needs to be complex. The system needs to be enforced with a heavy hand. The system needs to have all of the 34 million in civil penalties. The system needs to be intrusive. It is the price we have to pay for an income tax system.
Perhaps most troublesome, we have gotten little in return for this payment because our current tax system has inspired an increasingly lower level of compliance. Despite the costs of enforcing and maintaining our system, tax evasion is at an all time high. Today's income tax system has invited massive noncompliance. According to the IRS own statistics, only about 80 percent of taxes owed are voluntarily paid -- $200 billion are not. In 1992, the tax gap was estimated to be $127 billion. Taxes evaded continue to be in the range of 22 to 23% of income taxes collected. These IRS figures did not include taxes lost on illegal sources of income. Evaded taxes increased by 67% in the decade between 1982 and 1992. As a percentage of Gross Domestic Product (GDP), tax evasion has reached 2.0% compared to 1.6 % in 1991.
Our current system is also problematic because much of the burden of the current system is hidden from the American taxpayers. Most taxpayers have been taught that an amorphous entity - business -- must pay its fair share. However, they do not understand that businesses are merely a collection of individuals engaged in a productive enterprise. When businesses are taxed, the taxes result in fewer businesses, lower wages or higher priced goods and services if the taxes can be pushed forward. In some businesses, taxes cannot be pushed forward and the owner must endure these taxes. Businesses don't pay taxes, people do; however, the corporate income tax and the employer share of payroll taxes perpetuate this myth.
It is not a harmless myth. The hidden cost of our tax system ensures that Americans remain ever ignorant of the increasing proportion of federal taxes they pay. Taxes are now more than 20 percent of Gross Domestic Product, and despite the claims of tax cuts, Americans pay more now than we have in the history of our nation, including the height of World War II. Upstream taxes only ensure that taxpayers cannot see the true cost of our government, raise the costs of goods and services and ensure more taxes in the future.
There is another problem with hidden taxes. Apart from ensuring the system lacks integrity, hidden taxes buried in goods and services reduce exports, and result in lower profits, lost productivity and a competitive advantage to foreign commodities.
Taken altogether, the true tax burden impressed upon us all through higher prices and loss of productivity exceeds the mere revenue collected by the govenment by substantially more than the $593 billion 65cents for every tax dollar collected estimate of James Payne in 1995:
Town Crier Staff Writer
Clyde Noel : http://www.losaltosonline.com/latc/arch/9528/
"In a book titled "Costly Returns," economist James Payne estimates the nation's bill for tax record-keeping, audits, filing tax attorneys and accountants totals an astonishing $593 billion. To put it another way, that's more than twice as much as last year's entire defense budget and $240 billion more than all 1996 Social Security outlays."
Killing the IRS, By Daniel J. Pilla, Reason Magazine July 1995
"There is little about a flat-tax system that will trim the staggering cost of tax law compliance. At present, this burden is estimated at $700 billion annually. Much of the cost is associated with recordkeeping and tax law enforcement, neither of which is reduced by a flat tax. A flat tax certainly involves a simpler tax return, but return preparation is the smallest component of tax law compliance.
The solution to our tax problem is to adopt a national retail sales tax in place of the personal and corporate income tax. Only a sales tax can eliminate the invasiveness of the IRS, since one's income and lifestyle are irrelevant."
Todays cost of compliance burden is proportiately higher in our larger economy and currency inflation since '95.
So you're saying if people cut their prices, they won't have enough money to pay for stuff because people won't cut their prices? That is tautlogically false.
I wish it did get rid of excise taxes, but the proposed bill does not. It does eliminate income, payroll, estate, and gift taxes. The NRST would be applied on the price prior to the exise tax -- that is, exise taxes would not be themselves taxed.
And all the left has to say is "the Fair Tax Act eliminated Social Security" and it's a loser. Doesn't have to be true.
And I could say that John Doe beats his wife and molests small children and he'd be ostracized. Doesn't have to be true. If someone is willing to tell bald-faced lies, there's always someone who will believe them. Every day, on these threads, we come face-to-face with misrepresentation, disinformation, and outright lies. We're getting pretty good at debunking it.
Social Security is fully funded by the NRST, and we can point to an exact number to show that the rate includes Social Security and Medicare taxes.
And your explanation of the idea... and it's benefits sounds very similar to the Consumption tax version based on income less personal deductions (consumption allowance under the other plan) less savings and investment and taxed at a flat rate. The Consumption tax has no opportunity to tax everything, no exceptions
I know in economic circles, a flat income tax is considered a consumption tax, but it is still first and foremost an income tax in every sense of the word. That includes all of the baggage that goes along with it.
And it's more than just the economic side. It's the personal freedom, too. Under any form of income tax, the government gets first claim on your income before you ever see it or decide what to do with it. It's the government demanding the authority to require individual citizens to file reports on their own financial activities. It is the perception generated that "someone else" is paying the taxes, which leads to people demanding more "goodies" for their own pet causes from the government.
And how is your Family Consumption Allowance going to be calculated? Oh, it would have to be by income and number in the family
I know we're covering a lot of ground on this thread -- and believe me, I enjoy engaging in debate -- but this has been answered before on this thread. The FCA is based solely on family size (number of adult and number of children) and has absolutely no basis in income. Everyone with the same number of adults and children gets exactly the same amount, if they want it.
And you think Congress won't fight over those tables? You are right, forget the earned income tax credit, we'll get a "Lower Income Family Allowance Credit". And if they can't get the sales tax rates to be "progressive", they'll use those Allowance tables to move brackets of income to determine who gets what to offset, not eliminate, the regressive nature.
Ah... but how do they determine that "lower income" family? Remember, the government doesn't get income information for individuals under the NRST. They do get wage information in order to determine Social Security benefits, but there's a lot more to income than just wages. Besides, any mucking around with the FCA affects the at-the-register rate for everybody.
The FCA would take the place of the EITC, whose supposed purpose is to be some kind of adjustment to FICA taxes on low-income wage earners.
Other than the objections I have, is there any draf or introduced legislation that even comes close to the "Milton Friedman concept"? The only real flat tax proposal is the Armey version, and it doesn't sound like what you're talking about.
And the EITC is one of the weirdest tax ideas...hard to compute, file for, is confusing and horribly abused.
No argument from me on that one.
I automatically ignore anything pasted.
You automatically ignore facts, LOL. As if we didn't know that already.
I find it more appropriate to ignore personal opinions masquerading as facts, and look for the source material on which to form my conclusions.
Speak for yourself or you have lost me,
Who am I? Just a screen name with no credential or claim to fame, the issues are of greater import than my personal opinions on anything. Facts are substantive, anyone can have an opinion.
From the tenor of your comments throughout this thread, I doubt we ever had you, or ever would. My replies are to provide material for those who have not made up their minds prior to reading these threads. Your replies are useful for providing springboards and questions on which to base my presentations to them.
It is useful to have opposition to hand you issues to address, for many people have wonder about those same issues. That's why you bring them up, and that is why I address them as I do.
and most others I suspect.
I'll risk that in view of the continual FRmail requests of persons wanting on an evergrowing *taxreform ping list, LOL.
I only add on request, it is a good feedback of how well these threads are received and viewed by others.
The reason the NRST has no exceptions is to avoid just that type of contested definition. If it is provided to a consumer, it is a taxable service. Services that are used to in the production of a consumable good or service are not taxable.
States will likely want to administer NRST collection within their own borders -- if they do, they will be required to conform to NRST definitions, so all of their current exemptions and related confusion would go away, too. (As well as likely lowering the state sales tax rates because of the expanded base -- though I can imagine cash-strapped states like California and New York conveniently not reducing their rates...)
No one reads that crap.
And I'll bet you anything you want that you will never see your dream enacted in your life. Too bad, getting rid of the Income tax would be fantastic. But your plan has too much baggage. All the problems are addressed by hypotheticals, and they will never sell.
And your opponents are too numerous and powerful to overcome, particularly when this isn't even on the radar for the vast majority of Americans. Most of whom are too busy watching sports or movies and have no taste for meaningful tax reform because they LIKE soaking the rich directly.
Sorry, cut and paste policy wonks will never make a meaningful dent in the problem.
No one reads that crap.
Certainly not you, LOL. But then who is Protogoras that speaks for everybody? Hmmm?
And I'll bet you anything you want that you will never see your dream enacted in your life.
Then you lose out as well, my friend.
And your opponents are too numerous and powerful to overcome
Protogoras speaks ex-cathedra I presume.
Never worry about opposition, they just make life more interesting.
for the vast majority of Americans. Most of whom are too busy watching sports or movies and have no taste for meaningful tax reform
Such an elitist. I go by what I observe from those people who are too busy ...
As stated elsewhere above:
"If Americans could pass referendums like they do constitutional amendments in Alabama, Shelby said voters would probably adopt either the sales tax or the flat tax."
No cut and paste there, I typed it in by hand. Just so it will be less objectionable to your sensitivities.
Sorry, cut and paste policy wonks will never make a meaningful dent in the problem.
Ohhhh! I am cut to the quick ;o{
True but facts, and people disgusted with the income tax certainly will.
I don't know about everyone else, but I read it. "That crap" has convinced me that the NRST is the way to go.
I have introduced the concept to my family, friends and co-workers and, without exception, they think it's a great idea.
My day, who runs a small business, is very excited about the prospects. He wants to know what the holdup is.
For those that had more questions than I had answers, I pointed them to "that crap". They were pleased with the answers that it gave them.
BTW, I know the only reason you like this exchange is that it bumps your thread. And I know you old geezers need someone to talk to.
If this was such a popular thing, you wouldn't need me to bump your thread. You can't get any meaningful traction even in a supposedly conservative forum.
I pointed them to "that crap". They were pleased with the answers that it gave them.
Thank you, that is why I provide "that crap",
BTW, I know the only reason you like this exchange is that it bumps your thread. And I know you old geezers need someone to talk to.
Absolutely, now the real question becomes, what is your excuse? LOL.
If this was such a popular thing, you wouldn't need me to bump your thread.
There are plenty of others that just stand in line to take your place, I assure you. I have about eight of them that are guaranteed to show up sooner or later.
BTW, I used to read all that crap so I know what's in it. And the truth is, the biggest questions are never answered in it except by suppositions and prognostications.
I would support it BTW, in theory. I hate the Income tax, I hate the IRS, and except for the few small and legitimate things the government does, I hate them.
BTW, you wouldn't get rid of the IRS in this system. Instead of what they do now, they would be kicking down doors ,,,looking for black marketeers. When you set out to steal money from people, there is no good way to do it.
There is no 20% embedded compliance cost in the price of goods and services.
Prices will jump 23% on day one of the NRST.
Sales will fall as a result of the price increase.
Employees will be laid off as sales decline.
Some businesses will fold.
No small businessman should ever support this "instant recession" legislation.
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