Read GOP lips: No more IRS -- Hastert hints of Bush's secret plan to end income tax

WorldNetDaily.com ^ | Tuesday, August 3, 2004

[JohnHuang2]

WASHINGTON – Is it real or is it an election year scheme to win votes?

That's the question many in this town are asking about House Speaker Dennis Hastert's proposal to eliminate the income tax and abolish the Internal Revenue Service in a second Bush administration.

In his upcoming book, "Speaker: Lessons from Forty Years in Coaching and Politics," Hastert says the bold move – sure to be immensely popular with voters – will be the centerpiece of President Bush's domestic agenda in a second term.

Hastert, for his part, says he will push for replacing the nation's current tax system with a national sales tax or a value added tax.

"People ask me if I'm really calling for the elimination of the IRS, and I say I think that's a great thing to do for future generations of Americans," he writes in "Speaker," set for release tomorrow.

House Majority Leader Tom DeLay, R-Texas, offered a preview of the House GOP leadership's post-election tax agenda in a March speech in which he said the Republicans are determined to repeal the federal income tax.

Long an advocate of a national sales tax, a confident DeLay told a conference of tax lobbyists that House Republicans will have hearings and push the issue in 2005 and 2006.

He said that replacing the income tax, payroll and other related federal taxes would provide more money for people to use, and he endorsed a proposal from Rep. John Linder, R-Ga., for a national sales tax.

Yet, even as Republican leaders in the GOP-led House, Senate and Bush White House have praised the concept of tax simplification over the last 3 1/2 years, the U.S. tax code has been expanded by over 10,000 pages as the Bush tax cuts and other changes – part of a total of 227 changes to the code – were implemented.

"Pushing reform legislation will be difficult," admits Hastert. "Change of any sort seldom comes easy. But these changes are critical to our economic vitality and our economic security abroad."

Americans for Fair Taxation has been pushing the plan for years. Recently, the group has been pushing H.R. 25 as the vehicle.

"The current federal income tax system is broken. Patching up the existing code is pointless. It's time for a fresh approach, a fair approach. It's time for the FairTax," says the group's website. "From its humble beginnings, the income tax has grown like a cancer by taxing our hard work and discouraging savings and investment."

H.R. 25 would eliminate the federal income tax and replace it with a 23 percent consumption tax paid by the end user. That means business-to-business purchases for the production of goods and services would not be taxed. The organization estimates consumer prices will drop by an estimated 20-30 percent as a result of the change.

The group's website describes how the bill's rebate function works. It assures that those living in poverty would not pay any tax.

"Under the FairTax, no American will pay taxes on necessities. The rebate will be equivalent to the tax paid on essential goods and services. The rebate will be mailed before the tax is actually paid [and] will be paid in equal installments at the beginning of the month. The size of the monthly rebate will be determined by the federal poverty level for a particular household size."

The bill's Senate version is S.1493, sponsored by Sen. Saxby Chambliss, R-Ga., was introduced last year.

"If you own property, stock, or, say, one hundred acres of farmland and tax time is approaching, you don't want to make a mistake, so you're almost obliged to go to a certified public accountant, tax preparer, or tax attorney to help you file a correct return. That costs a lot of money," writes Hastert. "Now multiply the amount you have to pay by the total number of people who are in the same boat. You can't. No one can because precise numbers don't exist. But we can stipulate that we're talking about a huge amount. Now consider that a flat tax, national sales tax, or VAT would not only eliminate the need to do this, it could also eliminate the Internal Revenue Service (IRS) itself and make the process of paying taxes much easier."

Would a campaign promise to eliminate the IRS be taken seriously? If the Bush administration were really planning such a dramatic move in a second term, why would campaign officials not be making more of it? Could Bush really deliver on a promise so bold?

These were some of the questions being asked around the Capitol today. Nevertheless, the leak from Hastert is sure to sell books.

"By adopting a VAT, sales tax, or some other alternative, we could begin to change productivity," Hastert continued. "If you can do that, you can change gross national product and start growing the economy. You could double the economy over the next fifteen years. All of a sudden, the problem of what future generations owe in Social Security and Medicare won't be so daunting anymore. The answer is to grow the economy, and the key to doing that is making sure we have a tax system that attracts capital and builds incentives to keep it here instead of forcing it out to other nations."

[ancient_geezer]

I favor a consumption tax instead of an income tax, but NO LOOPHOLES. No exemptions, no exceptions, no ten million page tax code.

5% on every sale. That's my plank.

Current federal tax rate.

Effective Total Federal Tax Rate (Percent of gross income)
Income Category	1977	1979	1981	1983	1985	1987	1989	1991	1993	1995	1997	1999	2001
All Families	22.2	22.4	20.4	20.9	20.9	21.6	21.5	21.5	22.0	22.6	22.9	22.9	21.5

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

 

5% on every sale.

With a cascading sales tax as any tax paid on sales to business must ultimately be passed on through to the final consumer (hidden from view no less.)

How do you figure on keeping the voter informed of the tax burden he actually pays as the percentage multiplies with each level of sales it passes through. How much burden on the economy occur in the compliance costs and enforcement of a cascading tax.

Cascading taxes are not nice at all. Sounds alot like a Tobin tax, a VAT on steroids:

Feasibility of the Tobin Tax

Table 1 : Effective Tobin Tax on a Two-Way Transaction (1)

Turnover	1 day	1 week	1 month	3 months	1 year	5 years
Effective Tax Rate (annual %)	73	10.4	2.4	0.8	0.2	0.04
Annual Tax Paid on $24 million Deal   (2)	17.5	2.5	0.6	0.2	0.1	0.0

(1) Based on a nominal tax rate of 0.1 per cent. The horizon of the transaction, motivated by speculation or financial arbitrage, is as indicated in each column.
(2) Average size of a financial swap in the inter-bank market. The figure indicates the amount of tax paid if $24 million were invested for one year and taxed at the effective annual rate.

[lewislynn]

And then start electing people who would cut taxes and shrink government.

I never heard that one before...That's a new concept..< /sarcasm >

[dsc]

Actually, although I spoke carelessly, I had in mind 5% on every *retail* sale.

[dsc]

"I never heard that one before...That's a new concept..< /sarcasm >"

I'm not pretending it's a new idea; I just think that confronting people with their tax burden in an intrusive way might actually bring it about.

[ancient_geezer]

I had in mind 5% on every *retail* sale.

Then you have a very large battle ahead with Congress critters who expect to see the current level of funding available.

However with cuts in programs down to constitutionally sized federal government(once the entire electorate is made can perceive the full federal burden first hand) something close to that level is ultimately attainable.

The principle point being the whole electorate must be engaged in a proportionate participation of the burdens before change can be expected.

 

23%........... Effective total federal tax rate of consumption expenditure

14.91% ..... rate if Social Security and Medicare were eliminated
14% .......... rate if Nat'l Endowment for the Arts were eliminated
11.9%........ rate if Dept. of Education were eliminated
10% .......... rate if welfare were eliminated
9.8%.......... rate if foreign aid were eliminated
etc.

So lets look at what the maximum it would take to fund those functions clearly authorized under Article I Section 8 of the Constitution, in current dollars:

http://w3.access.gpo.gov/usbudget/fy2001/guide02.html#Spending

• $334 Billion --- Defense & Military related expenditure
• $ 31 Billion ---- Administration of Justice
• $ 16 Billion ---- General Government
• $199 Billion ---- Interest on the Debt
  =========================
  $580 Billion ---- Total

Institute an across the board, Flat rate, single stage National Retail Sales Tax, which taxes all imports and domestic products with the same rate.

Replacing all current federal tax law with a retail sales tax would be 23% on new goods and services paid and receipted at the retail register. No hidden tax, no exceptions, exemptions everyone participates.

Such a tax acts in a natural manner to encourage the elimination of excess government functions through visibility of burden among all constituencies of the electorate.

The total federal government budget would move from $2,000 billions towards something less than $580 billions calculated.

The across the board federal tax rate on new goods and services would decline towards less than 6.7%.

As tax rate on sales decreases the economic burden on retail items, the sales volumes and growth in the economy would be tremendous allowing even further reductions in tax rates below that less than 6.7% theoretic level.

That is what I perceive as the ultimate achievements possible under a National Retail Sales Tax structured in the manner of the revenue bill H.R.25. Simple common sense applied to the principal of TANSTAFFEL,( no free lunch, everyone participates in paying their way in proportion to the benefit the extract from their consumption.) encourages the natural change in attitudes required of the electorate as regards the burden of government largess in their lives.

Thomas Hobbes from Leviathan

• It is fairer to tax people on what they extract from the economy, as roughly measured by their consumption, than to tax them on what they produce for the economy, as roughly measured by their income

Hmmmmmm....... It's do able, with time and effort, once the blinders are removed from the electorate.

[dsc]

The trick is moving from what we have now to a consumption tax, without getting stuck with both.

[ancient_geezer]

The trick is moving from what we have now to a consumption tax, without getting stuck with both.

Actually not, as a single bill can repeal the current tax statutes, mandate the destruction of personal records, and defund the IRS, while implementing an NRST in its place.

The trick is follow through by 2/3's of Congress and 3/4ths of the states in prohibiting the future use of taxes on income by Constitutional amendment.

The first step however is getting an alternative tax system in place and sufficient impediment to reopening an income tax while the amendment process goes forward.

As always, it is up to the American electorate to assure a fully successful outcome.

[Your Nightmare]

23%........... Effective total federal tax rate of consumption expenditure

14.91% ..... rate if Social Security and Medicare were eliminated
14% .......... rate if Nat'l Endowment for the Arts were eliminated
11.9%........ rate if Dept. of Education were eliminated
10% .......... rate if welfare were eliminated
9.8%.......... rate if foreign aid were eliminated
etc.

AG, I must have seen you post this a dozen times and this is the first time I realized your have been wrong all this time. The rate would not be 14.91% if Social Security and Medicare were eliminated. And you'll never guess why...you're using tax inclusive rates! The 14.91% is a percentage of the gross payments including the Social Security and Medicare portion. If you take those out, the total is less and the general revenue rate needs to go up to compensate. I'm assuming the rest of your numbers are incorrect also (although I don't have the source numbers to check).

You've shown just one of the reasons why the tax inclusive rate for a sales tax are really, really dumb. Thing that would be simple math with a tax exclusive sales tax rate become very complicated and confusing with a tax inclusive sales tax rate.

I've pinged unPrincipled so he can start calling you a liar.

[ancient_geezer]

The 14.91% is a percentage of the gross payments including the Social Security and Medicare portion.

With reduction of taxes, and for simplicity of calcualtion the level of total dollar consumption expenditure is presumed to remain constant. Thus the percent making up that increased amount of goods purchased remains the same 14.91%.

You are free to calculate it otherwise if you wish, though be prepared to explain why consumption would decrease with more dollars in peoples pockets available for increasing thier standard of living.

I've pinged unPrincipled so he can start calling you a liar.

I see nothing here for Principled to get especially excited about, though you attempts at adhominen are showing through.

You've shown just one of the reasons why the tax inclusive rate for a sales tax are really, really dumb.

You've just shown the extent you will go to try to make an irrelavent point.

As far as whether or not one should use tax inclusive or tax exclusive measurements for comparison purposes:

 

The Wrong Camera: The Denominator of the
Tax Incidence Equation.
Dan R. Mastromarco; LLM, Argus Group, Washington D.C.
Tax Analysts Document Number: Doc 1999-32575
Citations: (October 8, 1999)

---

B. Use a Consistent Size Screen to Portray It.

[118] When considering the rate of a national sales tax, or any tax for that matter, one must always decide which of two distinct means of portraying this rate -- the "tax-inclusive rate" or "tax- exclusive rate" -- best expresses the tax burden. Which one we employ changes absolutely nothing in terms of the taxes that are actually raised or paid by the taxpayer under the taxing regime examined, in the same way that measuring a journey in inches or meters does not change the distance. However, how the rate is presented changes how the relative tax burden is perceived by those who wish to compare the merits of competing tax proposals. Confusion results when we compare alternatives under different measuring scales.

[119] The sales tax is particularly susceptible to this confusion because state sales taxes are normally expressed on a tax- exclusive basis, while income, estate, and payroll taxes, as well as the Flat Tax and other VATs, are normally expressed on a tax- inclusive basis. If we were to express a sales tax rate as a percent of the product price as is done in the states, we would be unfairly overstating the burden of the tax when we compare it to what it is meant to replace at the national level. Or conversely, we would be greatly understating the relative burden of the federal income and payroll taxes for those who don't have time to learn the different measuring systems.

[120] Presentation of a rate of tax on a tax-exclusive basis simply means that the rate of the tax is expressed as the tax paid over a base determined after the tax was already imposed (for example, taxable income under our personal income tax system that is net of the tax). In other words, a tax-exclusive rate would be defined as:

$ tax paid
-------------------------------------------------------------------
($ base on which the tax was imposed)-($ tax paid)

[121] The rate therefore reflects the ratio of taxes paid to what is left in the base, such as net of tax income.

[122] On the other hand, defining the rate of tax on a tax- inclusive basis simply means that the rate of the tax is expressed as the tax paid over the base before the tax has been imposed. In other words, a tax-inclusive rate would be defined as:

$ tax paid
-------------------------------------------------------
$ base on which the tax is to be imposed

[123] Since the base of the tax before the tax is imposed is always more than the base after tax (the denominator is greater), expressing the tax in a tax-exclusive way will always yield a higher rate. In other words, it will express the tax as having a higher burden. /56/

[124] Let us take the following example.

Example: An individual earns $1,000 and pays $200 in taxes
(under either a VAT, income tax, or sales tax) but spends the
remaining $800 on a stereo. Although the taxpayer will pay the
same amount of taxes ($200) out of the same amount of pretaxed
income ($1,000) a question arises as to how the rate should best
be expressed? Is the tax rate 20 percent or 25 percent?

[125] Clearly, one might say that the income or Flat Tax rate is the lower rate, 20 percent, since the taxpayer paid $200 on $1,000 of pretaxed income. That is because the income tax and VATs are normally looked at (unquestionably looked on) on a tax-inclusive basis. However, when we view traditional state sales taxes we might say that the state sales tax rate needed to raise $200 of revenues is 25 percent, even though the sales tax rate raises the same amount of revenue as a 20 percent tax-inclusive income or Flat Tax rate. The taxpayer would be considered to have paid the tax at a 25 percent rate since the taxpayer paid $200 of tax on $800 worth of goods exclusive of tax. That is because the state sales taxes are normally looked on on an after-tax or tax-exclusive basis. To use our formula for tax-exclusive representation:

$ tax paid
--------------------------------------------------------------
(base on which the tax was imposed)-(tax paid)

or,

$200/$800 or, 25 percent.

[126] Which is the correct way of expressing this rate? To the casual observer, it is obvious which tax to prefer. All else being equal, one would prefer a 20 percent rate over a 25 percent rate. But that same person may be surprised to find out that they are saying the same thing, and paying the same tax.

[127] The problem with using a tax-exclusive basis for determining the rate of a national sales tax and a tax-inclusive base to portray the income tax is that it can be very misleading. Let us look at a taxpayer who is at the top marginal rate under each taxing scheme. The tax-inclusive and tax-exclusive rates would be compared as shown in the charts just above and just below.

[128] In the tax-inclusive chart, we see comparisons that we are used to seeing. This chart reflects the maximum marginal rate of the current personal income tax system as 43.3 percent. /57/ Here the sales tax rate is 23 percent and the Flat Tax rate is 32.3 percent, reflecting the combined payroll and Flat Tax burdens. /58/ But the tax-exclusive chart indicates that the income tax with the payroll tax bears a maximum marginal rate that is 75.8 percent of the tax- exclusive base. Even the federal individual income tax alone reflects a maximum marginal tax-exclusive base of 43.3 percent. According to the chart above, the Flat Tax bears a maximum marginal rate of 47.7. The FairTax plan bears a maximum marginal rate of 29.9 percent. In this chart, the taxes paid are calculated as a percentage of what remains after tax.

[129] In making comparisons between alternative taxing systems it is important to ensure therefore that these comparisons are consistent, fair in terms of expectations, and are well explained. Fair comparisons eliminate and do not exacerbate confusion over a relatively critical point as the means of expressing the tax rate. The only means to do so is to ensure that a tax-inclusive rate is compared with a tax-inclusive rate.

Footnotes:

/56/ When calculating the tax-inclusive sales tax base, two algebraically equivalent methods may be used. The tax-exclusive rate may be converted into a tax-inclusive rate by dividing the tax- exclusive rate by one plus the tax-exclusive rate: ti = te / (1+ te). Conversely, a tax-inclusive rate may be converted into a tax- exclusive rate by dividing the tax-inclusive rate by one minus the tax-inclusive rate: te = ti / (1-ti). Alternatively, the tax- inclusive sales tax rate may be calculated by adding the repealed income tax revenue back into the tax base (consumers, after all, would have that money to spend), whereas one would not do so when calculating the tax-exclusive base (consumers would be spending that amount on tax and it would not be appropriation to include it in the calculation of a tax-exclusive base).

/57/ The maximum marginal payroll rate is 15.3 percent, but this rate applies regressively between $0 and $72,600 for 1999. When this rate attaches, it is possible for a tax to apply at a maximum marginal rate of 43.3 percent (28 percent individual income tax rate plus 15.3 percent payroll tax rate).

/58/ While it is beyond the scope of this article, it is important to understand that the Flat Tax rate of 17 percent assumes a substantial reduction in government revenues.

[Your Nightmare]

With reduction of taxes, and for simplicity of calcualtion the level of total dollar consumption expenditure is presumed to remain constant.

The 14.91% was not calculated keeping the total dollar consumption expenditure constant. Total dollar consumption expenditure was increased by the amount of the tax.

You are flat out wrong and can't admit it. Again.

[lewislynn]

You always claim the rate is tax inclusive "so folks can compare" then you have to go into a 5 page essay to explain it...

The "23% tax inclusive" rate is a first year only, fraudulent teaser rate and used only as a dangling carrot.

[ancient_geezer]

The 14.91% was not calculated keeping the total dollar consumption expenditure constant. Total dollar consumption expenditure was increased by the amount of the tax.

Current prices are expected to fall by approximately the level of the NRST (20-25%) on implementation. In terms of current consumption dollars, the NRST is inclusive. The calculation retains the constant dollar level of consumption.

You are flat out wrong and can't admit it. Again.

You are just full of aimless assertions aren't you.

[rwfromkansas]

not if you read the bill you moron

Everybody receives a rebate up to the poverty line for necessities

[lewislynn]

Funny he didn't mention what the rate would be if the phony rebate was eliminated.

[Your Nightmare]

Current prices are expected to fall by approximately the level of the NRST (20-25%) on implementation. In terms of current consumption dollars, the NRST is inclusive. The calculation retains the constant dollar level of consumption.

Well that's irrelevant, isn't it? You got the 14.91% from legislation thinking you could just subtract the FICA withholdings, but now you know you can't. The 14.91% does not retain the constant dollar level of consumption. That's just not true.

You are just full of aimless assertions aren't you.

It's not aimless, you know the 14.91% is wrong. You can't show me that it is right. You got caught in the confusion of the tax inclusive sales tax mess and you can't admit it.

[Your Nightmare]

The "23% tax inclusive" rate is a first year only, fraudulent teaser rate and used only as a dangling carrot.

What's funny, too, is something I just realized. The yearly OASDI rate and the Medicare rate are set by the Social Security Administration but the general revenue rate is a static 14.91%. But 14.91% of what? It's 14.91% tax inclusive of the gross payments. If the OASDI and Medicare rates go up then the gross payment goes up which mean people are paying a higher amount of general revenue tax. It's a general revenue tax increase (even thought the rate is the same!). So, because these clowns want to deceive the public with a tax inclusive sales tax rate, we have the SSA raising not just the OASDI and Medicare taxes, but the general revenue taxes also. All with out a vote by our representatives.

[ancient_geezer]

The 14.91% does not retain the constant dollar level of consumption. That's just not true.

Sure it does, because that is how I chose to treat it. The 14.91% rate for general revenues is set by the HR25 legislation and can only be changed by subsequent legislation expressly modifying that rate.

The 14.91% or even less is justifiable by simply recognizing the economy expands as well the consumption base with the removal of the drain of Social Security Act from federal programs.

In fact if we allow the base tax law of HR25 to be modified to remove the FCA demogrant as lewislynn suggests, which could probably be sold to the electorate at a 15% or less level, the rate would be significantly lower.

But then that is not the issue in anycase, as removal of excess spending allows us to target much lower level even below the 7% range that a return to strick limitations of government to article 8 boundries provide.

The point being that for spending to be reduced, the elecorate as a whole must perceive a proportionate participation in paying the burden. Once that begins to occur the conditions for reductions in spending leading to lower burdens is the rule rather than the exception.

[Your Nightmare]

A five page essay from a paid AFT shill!

FairTax History

In 1994 three Houston businessmen were meeting together for lunch. As was common, they began commiserating about the ridiculousness of the Federal Income tax code. But at this particular lunch, they decided to do something about it and each pledged $1.5 Million as seed money to hire the best tax experts in the country to identify the faults with the current system, to determine what American citizens would like to see in tax reform, and then to design the best system of taxation.

With their initial infusion of $4.5 Million, the three went on to raise an additional $17 Million. That money funded focus groups with citizens around the country and studies with nationally prominent experts in tax policy.

Some of the experts funded include:

• Professors David Burton and Dan Mastromarco, University of Maryland and The Argus Group
• Larry Kotlikoff, Boston University
• Stephen Moore, The Cato Institute
• Professor Dale Jorgenson, Harvard University
• Bill Beach, The Heritage Foundation
• Jim Poterba, The National Bureau of Economic Research
• Professor George Zodrow, Rice University and the Baker Institute for Public Policy
• Professor Joseph Kahn, Massachusetts Institute of Technology

source

"What do you want it to equal?"

[Your Nightmare]

The 14.91% rate for general revenues is set by the HR25 legislation and can only be changed by subsequent legislation expressly modifying that rate.

Which includes the OASDI and Medicare rates in the gross payment! If those aren't there the gross payment is reduced and the general revenue rate must go up!

The AFT sure is getting their money's worth with the checks they are sending you.

[ancient_geezer]

Which includes the OASDI and Medicare rates in the gross payment! If those aren't there the gross payment is reduced and the general revenue rate must go up!

The rates are separated in the legislation. The general revenue rate is expressly set separate from will what ever the Congress decides to set, the Senate does not filibuster and the President signs on to. With ever voter in the nation watching which way that rate goes.

The AFT sure is getting their money's worth with the checks they are sending you.

Seeing as their contract for renting space from me has ended, no longer needing the space that I temporarily provided for them, there are no checks.

I support the NRST because I see it as the way to go, and always have and provide service and contributions to the organizations supporting the NRST as I can, not vice verus.

My reasons for supporting the NRST are much more fundamental than your red herrings of rates or who pays what. They extend back to when I supported Alan Keyes run for the presential candidacy and beyond.

 

I discussed the importance of abolishing the income tax because of its tendency to form a habit of servility in the souls of a people that accepts it.

Servility of soul is bad not only in itself, it is also an open door through which will soon walk the abuses of ambitious government power.

Leaders who find themselves with governmental power over a servile people will be quick to conclude that such a people exist to serve them.

Alan Keyes 1999

"As a matter of fact, what the income tax does — and this is the debate that I think we always try to get into in order to let you and him fight, see — and the people of this country are led down a path where the actual control of their resources, which in the end is the control over their will, is handed off to the government."

. . .

"The government then manipulates that will in order to destroy the freedom of our electoral system through the income tax structure, and we call the resulting slavery a free system."

"In point of fact, it is not as the founders understood, and the only way to restore real freedom is to give people back control over the income that they earn so that they won‘t, at the voting booth and in other phony issues, be subject to that manipulation."

- KEYES TRANSCRIPT (01/28/02)