Posted on 08/03/2004 8:09:52 AM PDT by CSM
Tax reform ping!
I've been listening to Neal this morning and I heard him mention this. He's speaking with Sec of Defense Donald Rumsfeld right now.
The fastest and best way to eliminate ALL of that instantly is to eliminate the entire tax code as it exists now. Without question, the greatest amount of money and lobbying done in DC is in regardes to the tax code.
The idea is catching. Neal didn't even mention the bounce that putting billions of dollars now spend on income tax compliance and tax lawyers and tax accountants to more productive uses.
Let us pray for the elimination of the hated income and SS taxes.
I like it except for the rebate portion. Why bother adding an extra level of complexity and bureaucracy? Do like they do in Nevada--just don't tax the necessities of life like food and be done with it. It's that simple.
That is it---
Food is a necessity...a CD player isn't.
What a refreshing quote.
There are some pop-ups, but being able to listen to Neal is worth it.
Indeed, one disadvantage of the rebate method is that it forces everyone to "register" their families with the government. In other words, if you have a new child, and you want to make sure that child gets figured into the tax rebate (which, if you don't make much, you certainly would), then you have to notify the government. Not that they wouldn't already know.
Having said that there are two disadvantages with the food exemption. (Well, one real, and one false.) First, the real one: food isn't the only "necessity" we have. For most people, a car is a necessity, so is gasoline. The rebate takes all of that into account, a simple food exemption doesn't. Now I really don't mind exempting necessities from the sales tax---but if you start adding exemption after exemption it will get complicated, and of course there will always be an interest in adding a new exemption.
The other one, which I already said was false, is a class warfare issue. If you exempt food, then that means that the person buying premium food at higher prices (presumably, the richer person) will be in effect receiving a larger "rebate". If you exempt cars, then the more expensive cars will in effect give a larger "rebate." (OK, so you could exempt, say, just the first $10K of a car purchase, but again, there's the complexity.) Like I said, this is not a "real" disadvantage, it's a political one---it's an angle that class warfare nuts can exploit if they are so inclined.
Indeed, one disadvantage of the rebate method is that it forces everyone to "register" their families with the government. In other words, if you have a new child, and you want to make sure that child gets figured into the tax rebate (which, if you don't make much, you certainly would), then you have to notify the government. Not that they wouldn't already know.
Having said that there are two disadvantages with the food exemption. (Well, one real, and one false.) First, the real one: food isn't the only "necessity" we have. For most people, a car is a necessity, so is gasoline. The rebate takes all of that into account, a simple food exemption doesn't. Now I really don't mind exempting necessities from the sales tax---but if you start adding exemption after exemption it will get complicated, and of course there will always be an interest in adding a new exemption.
The other one, which I already said was false, is a class warfare issue. If you exempt food, then that means that the person buying premium food at higher prices (presumably, the richer person) will be in effect receiving a larger "rebate". If you exempt cars, then the more expensive cars will in effect give a larger "rebate." (OK, so you could exempt, say, just the first $10K of a car purchase, but again, there's the complexity.) Like I said, this is not a "real" disadvantage, it's a political one---it's an angle that class warfare nuts can exploit if they are so inclined.
Could someone please explain how the sales tax rebate would work? Would I be required to keep every single receipt I get? Just curious.
The fairness of a tax code should be judged on the ratio of compliance and enforcement costs to the amount of revunue raised. Unfair taxes, like the income and capital gains taxes, require enormous amounts of information to be collected for compliance and enforcement. This information is essential for politicians and lobbyists who want to use the power of government for personal vendettas or personal enrichment.
Paying for government with an excise tax on demand deposit (M1) account transactions at U.S. financial institutions only takes an account number and transaction amount for compliance and enforcement. For progressivity, those who don't pay income taxes now could legally avoid any tax by using cash or barter.
IIRC, a 3% M1 transaction tax would easily balance the budget while providing a permanent tax cut amounting to hundreds of billions of dollars because virtually all compliance and enforcement costs would be eliminated.
I've used this arguement for tax fairness several times to silence leftists promoting the income and capital gains taxes.
"just don't tax the necessities of life like food and be done with it."
FairTax.org's FAQ covers this:
Exempting items by category is neither fair nor simple. Respected economists have shown that the wealthy spend much more on unprepared food, clothing, housing, and medical care than do the poor. Exempting these goods, as many state sales taxes do, actually gives the wealthy a disproportionate benefit. Also, today these purchases are not exempted from federal taxation. The purchase of food, clothing, and medical services is made from after income tax and after payroll tax dollars, while their purchase price hides the cost of corporate taxes and private sector compliance costs.
Finally, exempting one product or service, but not another, opens the door to the army of lobbyists and special interest groups that plague and distort our taxation system today. Those who have the money will send their lobbyists to Washington to obtain special tax breaks in their own self-interest. This process causes unfair and inefficient distortions in our economy and must be stopped.
Ancient_Geezer has a great table that shows how it works and he is much better at answering to the specifics that me, but I'll give it a shot.
Basically, the poverty levels dictate the amount of tax-exempt spending by an individual or family. Depending on the size of the family, the amount of spending that is tax-exempt will fluctuate. Assuming the poverty level is $20,000 for an individual, my first $4,600 in spending would be considered "tax-exempt" (20K*.23). Since it isn't possible (that I can figure) to track that spending by any specific individual, they would send me a monthly stipend of $383.333333.
A few of the FR opponents of the fair tax have brought up a valid concern for me. That is that this system would put all citizens on the government payroll, everyone would receive a monthly check. However, I see this one potential negative to be far outweighed by the positives of the entire paradigm shift.
The government figures out what the "poverty level" is for each family size. You tell the government where you live and they send you a check for the sales tax that would paid on the poverty level amount. No recordkeeping needed for the citizen. For example (numbers made up), if the poverty level for a family of 4 is $2,000 per month and the tax rate is 23%, that family would get a check for $460 every month. In effect, that family would have a net tax rate of 0%.
If Bill Gates had a family of 4, they would also get the same $460 monthly rebate. But his overall sales tax rate would be almost the full 23% because (presumably) he spends a lot more than $2000 per month.
I may have the tax-inclusive vs. tax-exclusive method of calculating messed up, but you should get the idea.
No receipts needed. They use a formula using family size, national poverty level and assumed amount spent on necessities.
Thanks all. I can see the potential bureaucracy associated, but it's gotta be much less than the current IRS.
Would there be tax on home sales? Wouldn't the tax benefit for home ownership disapear?
Is the 23% number mentioned here revenue neutral with income tax and SS/medicare eliminated?
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