Posted on 03/22/2004 6:47:25 AM PST by ancient_geezer
1) He specifically states that it costs $1 trillion to "enforce" the tax laws. Enforcement is nomhere near that figure.
You really expect the average Congress Critter to totally express the particulars in absolute detail in a new paper interview?
2) The 65% figure is highly dependant on the 33% of "production disincentive", which is not anything that can be acurately measured.
True, however, that is not the only source of information to turn to, other more concrete measures are available that indicate the same ball park figure when updated for economic growth and inflation:
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 $700 estimate of Daniel Pilla in 1995:
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."
And that was 9 years ago,today looks like a $1Trillion is a fair estimate, all due to the current income/payroll tax system.
Depressing, ain't it?
By the time you add taxes and fees that aren't in the actual revenue code and state sales tax, you're back to the old rate.
That 43% is federal FICA plus highest marginal rate of the individual income tax as far as I can figure.
The figure I generally point to is the average federal total rate based on gross income:
| Effective Total Federal Tax Rate (Percent of gross income) | |||||||||||
| Income Category | 1977 | 1979 | 1981 | 1983 | 1985 | 1987 | 1989 | 1991 | 1993 | 1995 | Projected 1999 |
| All Families | 22.8 | 23.4 | 23.5 | 21.4 | 21.8 | 22.6 | 22.5 | 22.6 | 23.5 | 24.7 | 24.2 |
Data from IRS collections statistics and The Bureau of Economic Analysis as compiled in tabular form by the Congressional Budget Office.
http://www.cbo.gov/showdoc.cfm?index=1545&from=4&sequence=0
The NRST replaces 95% of total federal taxes, all income and payroll(FICA etc) taxes, and gift/estate taxes.
A National tax bill can't do anything for state taxes and fees, that is something that is out of federal authority to say anything about. The average figure for total state taxes with respect to gross income is around 10% that's both state income & sales taxes.
I envision a lot of stuff "falling off trucks" nationwide.
No more than today, with cash economy losses under the income tax. IRS estimates 15-20% losses there, with a 24% of gross income taxes and marginal rates as high as 43% and all that is required to evade the income tax as one person deciding not to report/file a return.
The maximum marginal rate for the NRST is 23% of purchases as opposed to gross income, and has the additional risk of requiring two persons in collusion to evade the tax, a buyer plus a seller. At that rate it a higher risk for less potential gain. One could expect better compliance with the NRST and at least no worse.
Cosponsors to 47 now?
I've heard that, unfortunately Thomas hasn't updated the number from 46 yet.
Thanks for the info and links
You're welcome :O)
How many co-sponsors are there?
I believe that he is and I agree that I would love to see some hard figures on this issue.
See replies #10 & #21 for some details.
All of these compliance costs act as a hidden tax burden on every good and service that we use and needs to be eliminated if we ever hope to regain our competitiveness in the global market.
Estimates indicate a reduction in producer costs of approximately 22%. That coupled with the fact that all import goods will be fully taxed instead of coming in with little taxation today would make a significant change in global competitiveness of our industries.
Rep. Bill Archer, Chairman, House Ways and Means Committee 106th Congress:
- "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's the only issue I have about NRST. That companies will see "higher profits" and not be motivated to really lower the price. Some would, certainly, but how soon? Granted, when people start balking at the cost plus the new tax, it would result in a downward shift. But would they go all the way down to a rate that didn't include current taxes?
Why dosen't the republican congress move this legislation forward like a runaway train?
At last count, 47 co-sponsor are signed on. Another 42+ reps favor the bill over other forms of tax reform. AFFT looks to push for 100 co-sponsors by July.
Many are making it part of their campaigns, especially in Texas & Georgia where both sides in Repub primaries are trying to outdo each other in their support of the NRST.
Dennis Umphress, libertarian (California 16th District)
Ben Streusand, (Texas 10th District)
Michael McCaul, (Texas 10th District)
Dave Phillips, (Texas 10th District)
John Devine, (Texas 10th District)
As far as a full court press, I hope to see that in the next session of Congress. Though there has been substantive advance in just this one. Last session there were only 7 co-sponsors and no bill in the Senate. Today 47 cosponsor, and introduction to the Senate. With even folks like Senator Richard Shelby of the Armey/Shelby flat tax showing a preference toward the NRST.
'We know it's not perfect' (Shelby on the Stump in Alabama)
- His preference for a sales tax is even greater than the flat tax he has promoted for years,
The only thing I don't really see happening is companies actually lowering the cost of goods. Basically, they've got us paying prices we're used to.
You are used to paying a specific total amount for goods and service today, that's embedded taxes plus base taxfree prices.
Under the NRST, all that really happens is the embedded tax gets separated from the pricing and listed as separate line items on your receipts.
The downward pressure comes from supply and demand, and the efforts of companies to keep their market share. The supply/demand equilibrium level of todays price(embedded taxes + taxfree price) and the (NRST + taxfree price), are the same. Nothing about the NRST changes that.
But would they go all the way down to a rate that didn't include current taxes?
Market factors set more than same total cost in consumer prices today.
DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation
The full impact of the federal tax system(taxes in gross wage/salaries & other compensation + business income/payroll taxes) added onto the base(taxfree) price of retail consumption goods and services is 36% for federal taxes alone.
All wages and the taxes on them are paid for out of sales receipts to business,(i.e. consumption expenditure).
family consumption expenditure is gross income less taxes and savings.
Federal tax revenues collected as % of family consumption expenditure = fed/(1-state-fed-savings) =
23.5/(1-.235-0.102-0.012) = 36.09%
If we add in the cost of federal tax compliance, planning, litigation & enforcement, the percentage that truely represents the burden on the family due to the Federal income/payroll tax system, product prices are increased by more than 55% over taxfree prices.
Where Have All the Dollars Gone?
How the government robs Peter to pay him back.
By economist James L. Payne, Reason Magazine February '94When the overhead costs are added together, (24 percent compliance costs, 33 percent disincentive costs, and 8 percent other costs), they total 65 percent of tax revenue.
Current total Federal tax revenues are about $1900billion, more than $1,000 billion additional dollars are added on onto consumption prices due to the business costs of complying with the federal income/payroll tax laws.
The percent total current federal burden (taxes + compliance costs) of consumption dollars = 36*(1900+1000)/1900 = 54.95% economic burden added on to base retail(i.e. taxfree) prices.
Too bad that citizens don't get a receipt detailing those "hidden sales taxes" buried in their consumption purchases. If they ever did, some of those 70% of the public clamoring for more from government, thinking someone else foots the bill, might be tempted to change their mind.
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