Posted on 05/27/2004 12:09:23 PM PDT by .cnI redruM
Since Russia adopted a flat tax three years ago, the nation’s real tax revenue has nearly doubled and the gospel of its success has spread across Eastern Europe. Even China has taken steps to consider the flat tax as a policy alternative.
On January 1, 2001, a 13 percent flat-rate tax on personal income took effect in Russia, replacing a 3-bracket system that imposed a top rate of 30 percent on taxable income exceeding $5,000. According to a new report by the Hoover Institution, the flat tax has been an unqualified success:
After 3 years under the flat tax, real tax revenues in Russia have risen by 80 percent. Since economic growth reached a record-high of 10 percent in 2000, growth has slowed to about half that level, suggesting the rise in revenue cannot be attributed solely (or even largely) to growth. Of all the personal income taxes collected, 97 percent came from taxes on income, 2 percent from taxes on dividends (at a higher rate of 30 percent), and 1 percent from taxes on non-residents and entrepreneurs. In addition to the higher rate paid on dividends, Russians who reside in Russia less than 183 days during the tax year are taxed at a rate of 30 percent on their taxable income. Other sources of income (e.g., lotteries) are taxed at 35 percent.
The higher rates on dividends and other sources of income reflect a Russian distinction between so-called "unearned income" and "earned income," even though capital gains on homes and securities are exempt.
Source: Alvin Rabushka, “The Flat Tax at Work in Russia: Year Three,” Hoover Institution, April 2004.
For text http://www.russiaeconomy.org/comments/021803.html
For more on Russian flat tax http://www.russianeconomy.org/comments/022102.html
For more on Flat Tax http://www.ncpa.org/iss/tax/
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Often people learn from our mistakes.
ping
And with a post card system like you described we can end the fraud of withholding and require taxes to be paid monthly, like any other bill. People will rebel against taxation when it gets taken from their checking accounts rather than from their intangible "gross income".
It makes a lot of sense - the progressive income tax leads to a lot of "untaxable" transactions; people simply find creative ways to undertake cash transactions without records.
Oh, to dream....
If the flat tax was implemented in the US, that will mean government officials like our dear congress people will get raises twice a year vice once a year, and people like the Kings of Pork Bobby Byrd and Ted Stevens will get to funnel off more taxpayers money for even more of their pet projects. Pretty soon the money won't last and the US will be in even deeper doo-doo. Russia has her mafia and in a few years, she'll be in more trouble.
How true. The worst thing ever done to the "working" people in this country is the witholding tax by employees. Everyone should have to write the tax check themselves. Politicians would be run out of town and into hiding for their lives.
Employee withholding is evil. It turns employees into ready vicitims, and employers into potential criminals if those employers don't bend to the will of the tyrants.
More than once I have been wrongfully accused of over withholding by an employee. The mere mention of possible impropriety brings the wrath of the SSA tax man down on you like a ton of bricks.
I hate it. I have restructured my business and now subcontract everything out.
There was an article posted about this last year -- I wonder how much has changed along these lines.
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Line 1. Total Income From All Sources__________ Line 2. Line 1 * 0.15 __________ Send Line 2 in. Sign Here:_____________________________ |
Personally I like the Individual Retail Sale Tax form:
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Without even FICA in the mix.
15% !!! Exactly what Terayzaaa Kerry paid on her $5M income last year. LOL.
Income taxes are evil. It doesn't seem ethical to take from someone because they chose to get off their butts and contribute.
I would love to see withholding abolished. But that could only be a single step towards reining in government spending and maybe fundamental tac reform.
Personally, I favor a consumption tax.
Alvin Rabushka, “The Flat Tax at Work in Russia: Year Three,” Hoover Institution, April 2004.
Often people learn from our mistakes.
And repeat the errors of others:
The flat tax is a VAT. None other than the father of the flat tax, Robert Hall of Stanford University (along with Alvin Rabushka), in his 1995 Ways and Means Committee testimony said, "The Hall-Rabushka flat tax is a value-added tax."
Which was pointed out again in additional hearings in April of 2000:
http://waysandmeans.house.gov/fullcomm/106cong/4-11-00/4-11kotl.htm
"Robert Hall, one of the originators of the proposal(Flat Tax), who describes his Flat Tax as, effectively, a Value Added Tax. A value added tax taxes output less investment (because firms get to deduct their investment.)"
"The Flat Tax differs from a VAT in only two respects. First, it asks workers, rather than firm managers, to mail in the check for the tax payment on that portion of output paid to them as wages. Second, it provides a subsidy to workers with low wages."
The Flat Tax; Chapter 3, by Robert Hall and Alvin Rabushka
| In our system, all income is classified as either business income or wages (including salaries and retirement benefits). The system is airtight. Taxes on both types of income are equal. The wage tax has features to make the overall system progressive. Both taxes have postcard forms. The low tax rate of 19 percent is enough to match the revenue of the federal tax system as it existed in 1993, the last full year of data available as we write. Here is the logic of our system, stripped to basics: We want to tax consumption. The public does one of two things with its income—spends it or invests it. We can measure consumption as income minus investment. A really simple tax would just have each firm pay tax on the total amount of income generated by the firm less that firm’s investment in plant and equipment. The value-added tax works just that way. But a value-added tax is unfair because it is not progressive. That’s why we break the tax in two. The firm pays tax on all the income generated at the firm except the income paid to its workers. The workers pay tax on what they earn, and the tax they pay is progressive. To measure the total amount of income generated at a business, the best approach is to take the total receipts of the firm over the year and subtract the payments the firm has made to its workers and suppliers. This approach guarantees a comprehensive tax base. The successful value-added taxes in Europe work this way. The base for the business tax is the following: Total revenue from sales of goods and services less purchases of inputs from other firms less wages, salaries, and pensions paid to workers less purchases of plant and equipment The other piece is the wage tax. Each family pays 19 percent of its wage, salary, and pension income over a family allowance (the allowance makes the system progressive). The base for the compensation tax is total wages, salaries, and retirement benefits less the total amount of family allowances. |
What was left out of this Article, was the rest of the story as regards the Russion tax system as a whole:
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RUSSIA: PART TWO OF THE RUSSIAN FEDERATION TAX CODE August 10, 2000
Alexander Chmelev and Evgeny Astakhov Baker & McKenzie, Moscow Office
Sent by BISNIS, U.S. Department of Commerce, http://www.bisnis.doc.gov Judith_Robinson@ita.doc.gov, Tel: 202-482-2293. BISNIS sends this report as a courtesy to the U.S. business community. This is not to be construed as endorsement or sponsorship of any information or group. On August 5, 2000, Russian Federation President Vladimir Putin signed into law four chapters of Part Two of the Russian Federation Tax Code and Federal Law No. 118-FZ ôOn the Implementation of Part Two of the Russian Federation Tax Code and Amendments to Certain Federal Laws on Taxationö (the "Implementation Law"). The chapters of the Tax Code signed into law by the President are Chapter 21 - VAT, Chapter 22 - Excise Taxes, Chapter 23 - Personal Income Tax, and Chapter 24 - Unified Social Tax. These four Chapters and the Implementation Law were officially published in Rossijskaya Gazeta on August 10, 2000, and, with few exceptions, will become effective on January 1, 2001. The most sweeping changes introduced into the Russian tax system by this new legislation are as follows: 1. VAT (Chapter 21 of the Tax Code) Although Chapter 21 of the Tax Code does not change VAT rates or the general VAT structure, it contains numerous provisions, which will significantly affect most businesses in Russia. Most notably, Chapter 21 substantially modifies the "place of service" rules, which generally determine whether for VAT purposes a particular transaction has occurred in Russia and is, therefore, subject to Russian VAT. Effective from July 1, 2001, Chapter 21 also will treat export sales to CIS countries in the same way as sales to all other foreign countries, and will exempt them from VAT. On the downside, Chapter 21 will repeal a number of long-standing and important VAT exemptions, including an exemption for license fees for the use of intellectual property (such as, patents, copyrights, and trademarks), and will significantly narrow the VAT exemption for pharmaceuticals. 2. Personal Income Tax (Chapter 23 of the Tax Code)
Chapter 23 of the Tax Code will replace the current progressive tax rates ranging from 12% to 30% with a flat tax rate of 13%. This 13% rate will apply to almost all categories of income earned by individuals who are Russian tax resident. A 30% rate will apply to dividends, and to any Russian source income received by individuals who are not Russian tax resident. A 35% rate will apply to income from gambling, lottery prizes, deemed income from low-interest or interest-free loans, certain insurance payments, and excessive bank interest. 3. Unified Social Tax (Chapter 24 of the Tax Code) Chapter 24 of the Tax Code will replace the existing employersÆ contributions to four separate social benefit funds (which currently are imposed at an over-all rate of 38.5%) with one unified social tax. This unified social tax will have a regressive tax scale from 35.6% to 2% of an employee's salary with the lowest rate applicable to the portion of an employeeÆs annual salary in excess of 600,000 Rubles (approximately US$22,000 at the current exchange rate). It should be noted that under the Implementation Law, as a transition rule, the lower rate of this tax will be 5% rather than 2% during 2001. 4. Excise Taxes (Chapter 22 of the Tax Code) As a countermeasure to reducing rates of other federal taxes, Chapter 22 of the Tax Code provides for an increase in excise tax rates for gasoline and other oil products by almost 300%. It also provides for a less dramatic increase of excise tax rates for tobacco products and certain passenger cars. 5. The Implementation Law a. Turnover Taxes Effective from January 1, 2001, the Implementation Law repeals the Housing Fund Tax of 1.5% and reduces the Road Users Tax from 2.5% down to 1% and completely repeals the Road Users Tax effective January 1, 2003. These taxes are imposed on gross sales and have been among the most onerous taxes on business in Russia. b. Regional Tax Concessions The Implementation Law reconfirms the right of regional authorities to provide tax exemptions for the regional portion of federal taxes retroactive to April 1, 1999. This reconfirmation resolves an issue that arose in 1999 as to whether the regional portion of profits taxes could be reduced pursuant to regional incentive laws. c. Profits Tax Rate Apparently in compensation to local budgets for the cancellation of turnover taxes, the Implementation Law authorizes municipal governments to introduce an additional "municipal" profits tax of up to 5% of a taxpayer's taxable profits. Thus the maximum overall profits tax rate may be increased from 30% to 35%. This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS) |
President Reagan publicly but briefly supported a flat tax in the '80s, apparently until representatives of the multi-billion tax preparers industry spoke to him privately, then he never mentioned it again.
So many people and their fortunes are tied to the current Byzantine tax system that eliminating it would require a true revolution, indeed.
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 an IRS free replacement in the form of a single stage, single rate retail sales tax:
H.R.25, S.1493
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.
It is only a single step, but a necessary one that tax reform advocates often overlook. Dick Armey spoke of ending withholding a few years back but it never caught on.
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