Posted on 08/14/2004 10:58:52 AM PDT by forest
Last week, Juliet Eilperin reported in the Washington Post(1) that "House Speaker J. Dennis Hastert (R-Ill.) would like to abolish the Internal Revenue Service and replace the current tax system with either a flat tax, a national sales tax or a value-added tax." As reported, Hastert suggests that a new tax system would increase productivity and "double the economy" over the next 15 years. "All of a sudden, the problem of what future generations owe in Social Security and Medicare won't seem so daunting anymore," The Post reports Hastert wrote.
"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," Hastert said.
Hastert is, of course, quite correct. We should abolish that overbearing IRS and all of the unruly tax code. Federal tax law is so complicated, no person in the IRS (or Congress) understands all of it. Yet, every citizen is expected to obey 100%. Truly, it is a corrupt system.
But, before we begin looking for any new "flat tax" proposal, perhaps we should take a quick look at a little history -- see what has already been on the table.
Back in June of 1998, the House actually passed a bill to abolish the income tax code by the year 2003. Albeit, there was one damning caveat: that Congress approves a simplified replacement tax system before then.(2)
That, of course, did not happen. Because, then Treasury Secretary Bobby Rubin -- who is a millionaire hundreds of times over -- immediately jumped on the bill, saying the bill should never became law. "If enacted, it would create enormous uncertainty which could well have a severe adverse impact on our economy, our workers, our businesses, our people. Families, for example, would not know what to pay for a house because they wouldn't know if their mortgage interest would be deductible."
Pete Stark (D-CA) did a good job of representing the whining of the tax and spend Social-Democrats: "With the Republicans in leadership having no understanding of the basic tenets of economics and leading this house in the most amateurish, asinine way, we will destroy this economy, destroy the values upon which the families are based."
Then House Minority Leader Dick Gephardt, (D-MO), said the bill "is yet another irresponsible Republican idea masquerading as a solution. They refuse to have a real debate on tax reform because they know what we know: That the average taxpayer would be worse off under the Republican plans."
That just goes to prove how far out of touch the Democrats really are with the American people. Also, they fear losing the control they wield over the American people via the tax code.
In March of 1999, then House Majority Leader Dick Armey (R-TX) announced that he was reintroducing H.R. 1040, a bill to scrap the current tax system and replace it with a flat 17 percent tax on all income.(3)
"Filling out an IRS tax form can be a frightening experience," Armey said. "The forms and instructions we must deal with are complicated and confusing. Millions would rather pay someone else to deal with their returns than face this frustration. But there's no reason that our system needs to be so complex. My flat tax proposal offers a simple, fair alternative. It allows everyone to file their returns on a simple, postcard-sized form." . . .
"The flat tax offers relief to an America that is overtaxed, and burdened by the current tax system," said Armey. "Millions would find their tax burden reduced -- or eliminated entirely -- under the flat tax. But the flat tax offers no breaks for special interests. No loopholes for powerful lobbies. Just a simple tax system that treats everyone the same."
Armey also reported that the U.S. income tax code is a monument to unnecessary waste. The income tax system is so complex, the IRS publishes 480 tax forms and another 280 forms to explain the 480 forms. The IRS sends out eight billion pages of forms and instructions each year which, if laid end to end, would circle the earth 28 times. Nearly 300,000 trees are cut down each year to produce the paper on which IRS forms and instructions are printed. The tax code does more than complicate people's lives during tax season and reduce living standards. It pollutes Washington's political culture.
As special-interest provisions have been added to the tax code, Washington's lobbying industry has flourished. Washington's lobbying industry, which is the largest private employer in the nation's capital, generates $8.4 billion in revenue each year. If the lobbying industry were its own economy, it would be larger than the economies of 57 countries. While the thousands of lobbyists in Washington have prospered in an environment of tax favoritism, the typical taxpayer has not.
And remember a bean counter named Steve Forbes with a very interesting flat tax plan? His table is still available.(4) Forbes said: "Start by scrapping the tax code. Don't fiddle with it. Junk it. Throw it out. Bury it. Replace it with a pro-growth, pro-family tax cut that lowers tax rates to 17% across the board and expands exemptions for individuals and children so that a family of four would pay no taxes on the first $36,000 of income.
Not one cent to the IRS on the first $36,000. Anything over that would be taxed at a flat, fair 17%. The flat tax would be simple. You could fill it out on a postcard. It would be honest. It would eliminate the principal source of political corruption in Washington. It would be fair. Millions of people would be off the federal income tax rolls. There would be no tax on Social Security. No tax on pensions. No tax on personal savings. It would zero out capital gains taxes. It would set off a boom by letting people keep more of what they earn and by lowering barriers to risk taking. "(5)
Let's not discount any of the above mentioned people. Dick Armey is now at FreedomWorks(6) and still fighting for lower taxes, less government, and more freedom at the grassroots level. Steve Forbes is also still available to lend a hand. Many other "flat taxers" are, too. They may all be quiet at the moment, but that could be for a very good reason.
It appears that House Speaker Dennis Hastert sent up a trial balloon in an election year for a reason. George W. Bush has also mentioned abolishing the IRS as we know it and replacing those many thousands of pages of federal tax law, rules and regulations with a flat tax. This may be the time for President Bush to formally announce that publicly.
As this article was being written, President Bush was addressing an "Ask President Bush" campaign forum in Florida. The flat tax was mentioned and President Bush called it "an interesting idea." Then, Bush came back with: "You know, I'm not exactly sure how big the national sales tax is going to have to be, but it's the kind of interesting idea that we ought to explore seriously."
Was that also a trial balloon? Sure; of sorts. Unfortunately, the media didn't pick up on it and so few Americans know of the statement. In truth, President Bush knows exactly how high any of the flat taxes would need to be. People in the White House and on Capitol Hill have been quietly running the numbers for a couple years. Now is the time for our input -- before the Social-Democrats start whining about the program.
Let's face it, President (candidate) Bush likes to play his cards close to the vest. His campaign committee knows very well that, if President Bush were to formally make such a flat tax proposal within the next few weeks, there just ain't enough Prozac available in the nation to calm down the Social-Democrats and their liberal media cheerleaders enough to be understood properly by the electorate before November.
1. <http://www.washingtonpost.com/wp-dyn/articles/A37806-2004Aug3.html>
3. <http://www.uhuh.com/reports/headsup/hu90.htm>
2. <http://www.uhuh.com/reports/headsup/hu126.htm>
4. <http://www.ctj.org/html/forbedis.htm>
5. <http://www.pbs.org/newshour/bb/congress/forbes_flat_tax.html>
6. <http://www.cse.org/armey/index.php>
"I absolutely support a flat tax. It's the most fair tax system that I've seen introduced. It's about time we junked the IRS."
Your statements are in direct contradiction. The flat tax is an income tax. As such, it retains the IRS. So which is it ... do you support the flat tax or do you want to see the IRS eliminated?
I don't know who this Fiedor guy is, but he is obviously very uniformed when it comes to Fundamental Tax Reform. The person who asked the President that question is a FairTax supporter there in Florida. He specifically mentioned HR25, which is the FairTax bill, in his question. The President responded something like "oh yes, the sales tax bill". After he made his comment about not knowing how high the rate would have to be, he said maybe he would get "Old Miller" here to explain it on the bus or something. "Old Miller" is Sen. Zell Miller, a co-sponsor of S1493, the senate version of the FairTax bill. The next day, the White House said they were not leaning toward the flat tax because of the loss of the home mortgage deduction, which would conflict with the President's main campaign theme of an "ownership society".
The flat tax comes in a distant second in most of the recent polls that I have seen to a sales tax. Also, it wouldn't double the economy in 15 years like the FairTax bill would. Why, you ask? Primarily because it retains the corporate income tax and payroll taxes and therefore continues to imbed the cost of our tax system in the prices of the products that we produce. By levying the sales tax on imports, which won't be able to match the price reductions of removing the current tax system from the pricing model, the FairTax would create a surge in demand for US produced goods sold here in the US. OTOH, we could export at 15 - 30% reduced prices, which would also increase demand for US produced goods in export markets. When Hastert talks about doubling the US economy, that is what he means .... and he is probably being very conservative.
The author should really try to speak with someone with a little familiarity with the topic before he writes a confusing and misleading article such as this one.
"Your statements are in direct contradiction. The flat tax is an income tax. As such, it retains the IRS. So which is it ... do you support the flat tax or do you want to see the IRS eliminated?"
Both. They are not in contradiction. I'm talking about two different things. Institute a flat tax AND eliminate the IRS. If we institute a flat and do NOT eliminate the IRS, they wont fire a single one of them. They wont change at all. It will be business as usual.
The entire organization is evil, and is worthy of total destruction. Start over. The IRS has nothing we need. Destroy it. Fire all of them, with NO REHIRE in any government job whatsoever.
And while we're at it, fire everybody employed at the ATF and eliminate the agency. NO REHIRE of those nazis either.
There will always be taxes. If there are taxes, there will be an agency to administer them. So, if by some chance the IRS is abolished, there will be a successor agency that will have the same job. I hope the tax law can be made simpler. But the debate over tax reform (real tax reform, not 100-page "reform bills" that just add to the complexity) is not furthered by this kind of sloganeering.
And this is a problem... why?
Maybe to make up the shortfall we could start by eliminating the Department of Education, the US Forest Service, the Economic Research Service, the Bureau of Economic Analysis. Then we could sell off the National Weather Service to AccuWeather or one of the others, sell off the other 80% of Nevada to the highest bidder, and so on, and so on, and so on.
But by the time we finish all that, there won't be a shortfall anymore.
And that crap about
"corporations don't pay tax
they just pass it on"
will get a horse laugh
in the real world.) Learn to love
our dear IRS.
In the "real world" of today's economy, competition worldwide determines the maximum price a company can charge for products or services. If a company cannot pass on the tax and still make a profit it will cease to exist. Taxes can only be paid out of profits, therefore higher taxes result in either higher prices to consumers (hard to do in competition with other countries with lower production costs), lower wages and or benefits for employees, or closing up shop. Or do you think corporations have a bottomless pit full of money with which to pay taxes? I have run a business of my own on which I had to rely for my daily bread for nearly twenty years , have you?
"The day this happens, I will paint my ass red, stick two macaronis in my nose, put on a miniskirt and run around the block screaming poopee poope woope doby Gillis is cool."
All I want to know is, how did you come up with this idea?
people do not buy houses to write off interest payments on their taxes...
if one cannot afford the payments then one should look elsewhere to live... under the flat tax, they would know how much they could afford to pay for a house... as it is now, with the changing tax laws, no one is really sure how the irs will be satiated...
teeman
Flat tax is the way to go with NO deductions!
However, and I've been thinking about this for quite some time, is simply passing a constitutional amendment stating that the federal government cannot tax, only states can? The federal government would retain control over federal spending and funding would be required from the states based upon their representation in Congress.
The Continental Congress failed because of that system, and is the dominant reason we now have the Constitution with it's grant of authority to the Congress with concurrent authority to "lay and collect" taxes.
- The principle of regulating the contributions of the States to the common treasury by QUOTAS is another fundamental error in the Confederation. Its repugnancy to an adequate supply of the national exigencies has been already pointed out, and has sufficiently appeared from the trial which has been made of it. I speak of it now solely with a view to equality among the States
- "The difference between a federal and national government, as it relates to the OPERATION OF THE GOVERNMENT, is supposed to consist in this, that in the former the powers operate on the political bodies composing the Confederacy, in their political capacities; in the latter, on the individual citizens composing the nation, in their individual capacities. On trying the Constitution by this criterion, it falls under the NATIONAL, not the FEDERAL character;"
- "The change relating to taxation may be regarded as the most important; and yet the present [Continental] sic Congress have as complete authority to REQUIRE of the States indefinite supplies of money for the common defense and general welfare, as the future [Constitutional] Congress will have to require them of individual citizens;
James Madison, Elliots Debates Vol 3 p128:
- "If a government depends on other governments for its revenues -- if it must depend on the voluntary contributions of its members -- its [*129] existence must be precarious."
- "If the general government is to depend on the voluntary contribution of the states for its support, dismemberment of the United States may be the consequence."
Which kind of answers the question why we'll never see it happen.
oops... that is six-thousandths of one... arggh
10% would be plenty. With absolutely no deductions and no $36,000 limit. EVERYONE should pay, whether they make $1,000,000 a year or $10 a year. The ONLY way to reduce the size of government is to limit the amount of money they have to spend.
And remember a bean counter named Steve Forbes with a very interesting flat tax plan?
Forbes says junk it and eliminate source of corruption. Washington's lobbying industry generates $8.4 billion each year.
Forbes misses a bit of a problem problem here. Congress defines what is and what is not income for tax purposes for business as well as for everyone else. That is where lobbying industry thrives.
What ever the flat tax may be to individuals, to business it is another story altogether.
Read:
Flat Tax as Seen by a Tax Preparer
by Vern Hoven
It's an eyeopener.
Replace it with a pro-growth, pro-family tax cut that lowers tax rates to 17% across the board and expands exemptions for individuals and children so that a family of four would pay no taxes on the first $36,000 of income.
Do we really want to expand the constituency not consciously participating in the tax system?
So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?
--- Walter Williams
To remove perception of the tax burdens of the individual, is to remove the goad which assures accountability of government to the electorate. Federal tax rates are high and government grows ever larger because a majority of the electorate do not perceive proportionately the burden their demand for largesse imposes on the minority of citizens.
The siren call for representation without taxation is the formula that got us where we are at today. The ability to hide or disguise taxation from the view of large sectors of the electorate allows the Congress to get away with the creation of the evergrowing monster that it fosters.
Liberty and freedom have a price, responsibility. If the perception of that price is avoided there are no brakes on the growth of government, the ultimate result is the end of freedom through creeping socialism.
If "the ONLY way to reduce the size of government is to limit the amount of money they have to spend," then why do you oppose not taxing the first $36K made? This means there's less money taxed, meaning less money flowing into the Treasury, putting a smaller cap on the budget.
Personally, I think a low NRST would be a great idea, but I'm open to the Flat Tax also, though I think Flat Tax rates would be higher than NRST rates, because with the NRST, you're taking the underground economy and collecting taxes from that. Then again, the Flat Tax is probably easier to pass.
What about the apportionment clause in the constitution???
Furthermore, under the confederation model tax payment to the federal government was voluntary and non-binding.
Under my new proposed system, States would be constitutionally binded to pay their porportion of taxes.
If a State does not pay it all, the Federal government will issue treasury bondsto make up the difference, then make the state pay interest on the treasury plus additinal accrued interest.
Here's Article I, Section II, Clause III (Which was the cause of the 16th amendment as well by the way):
"Clause 3: Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons. (See Note 2) The actual Enumeration shall be made within three Years after the first Meeting of the Congress of the United States, and within every subsequent Term of ten Years, in such Manner as they shall by Law direct. The Number of Representatives shall not exceed one for every thirty Thousand, but each State shall have at Least one Representative; and until such enumeration shall be made, the State of New Hampshire shall be entitled to chuse three, Massachusetts eight, Rhode-Island and Providence Plantations one, Connecticut five, New-York six, New Jersey four, Pennsylvania eight, Delaware one, Maryland six, Virginia ten, North Carolina five, South Carolina five, and Georgia three. "
It's basically a shell game, and we rubes are city-slickered out of our money without the faintest idea of what's happening.
Under my new proposed system, States would be constitutionally binded to pay their porportion of taxes.
They were just as bound under the Articles of Confederation under the system of Quotas read it sometime.
If a State does not pay it all, the Federal government will issue treasury bondsto make up the difference,
Under the system of quotas the Continental Congress could not pay the debt it accrued. It had no effective way to enforce quotas.
then make the state pay interest on the treasury plus additinal accrued interest.
How, goto civil war with a state? That was the problem of the Articles of Confederation. No practical way to enforce the provisions.
If a state is inclined to not pay the tax, what makes you think they will pay the interest?
"The change relating to taxation may be regarded as the most important; and yet the present [Continental] sic Congress have as complete authority to REQUIRE of the States indefinite supplies of money for the common defense and general welfare, as the future [Constitutional] sic Congress will have to require them of individual citizens; and the latter will be no more bound than the States themselves have been, to pay the quotas respectively taxed on them. Had the States complied punctually with the articles of Confederation, or could their compliance have been enforced by as peaceable means as may be used with success towards single persons, our past experience is very far from countenancing an opinion, that the State governments would have lost their constitutional powers, and have gradually undergone an entire consolidation."
Here's Article I, Section II, Clause III (Which was the cause of the 16th amendment as well by the way):
"Clause 3: Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers
Not quite:
Hylton v. United States(1796), 3 U.S. 171
"A general power is given to Congress, to lay and collect taxes, of every kind or nature, without any restraint, except only on exports; but two rules are prescribed for their government, namely, uniformity and apportionment: Three kinds of taxes, to wit, duties, imposts, and excises by the first rule, and capitation, or other direct taxes, by the second rule. " "the present Constitution was particularly intended to affect individuals, and not states, except in particular cases specified: And this is the leading distinction between the articles of Confederation and the present Constitution." "Uniformity is an instant operation on individuals, without the intervention of assessments, or any regard to states," "[T]he DIRECT TAXES contemplated by the Constitution, are only two, to wit, A CAPITATION OR POLL TAX, simply, without regard to property, profession, or any other circumstance; and a tax on LAND."
Springer v. United States(1880), 102 U.S. 586
"The central and controlling question in this case is whether the tax which was levied on the income, gains, and profits of the plaintiff in error, as set forth in the record, and by pretended virtue of the acts of Congress and parts of acts therein mentioned, is a direct tax." "Our conclusions are, that direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate; and that the tax of which the plaintiff in error complains is within the category of an excise or duty." "[W]henever the government has imposed a tax which it recognized as a direct tax, it has never been applied to any objects but real estate and slaves."
And the case that ultimately justified the ratification of the 16th amendment:
POLLOCK v. FARMERS' LOAN & TRUST CO., 158 U.S. 601 (1895):
- "We have considered the act only in respect of the tax on income derived from real estate, and from invested personal property, and have not commented on so much of it as bears on gains or profits from business, privileges, or employments, in view of the instances in which taxation on business, privileges, or employments has assumed the guise of an excise tax and been sustained as such."
- "If that[rents from land] be stricken out, and also the income from all invested personal property, bonds, stocks, investments of all kinds, it is obvious that by a r the largest part of the anticipated revenue would be eliminated, and this would leave the burden of the tax to be borne by professions, trades, employments, or vocations; and in that way what was intended as a tax on capital would remain, in substance, a tax on occupations and labor. We cannot believe that such was the intention of congress."
- "We do not mean to say that an act laying by apportionment a direct tax on all real estate and personal property, or the income thereof, might not also lay excise taxes on business, privileges, employments, and vocations. "
- Our conclusions may therefore be summed up as follows:
First. We adhere to the opinion already announced,-that, taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes.
Second. We are of opinion that taxes on personal property, or on the income of personal property, are likewise direct taxes.
Third. The tax imposed by sections 27 to 37, inclusive, of the act of 1894, so far as it falls on the income of real estate, and of personal property, being a direct tax, within the meaning of the constitution, and therefore unconstitutional and void, because not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid.
- Mr. Justice WHITE, dissenting.
16. The injustice of the conclusion points to the error of adopting it. It takes invested wealth, and reads it into the constitution as a favored and protected class of property, which cannot be taxed without apportionment, while it leaves the occupation of the minister, the doctor, the professor, the lawyer, the inventor, the author, the merchant, the mechanic, and all other forms of industry upon which the prosperity of a people must depend, subject to taxation without that condition.
Because I believe everyone should have to contribute - it gives everyone a stake in this country. But in addition to making everyone pay sales tax, I would also pass a law that said government could not collect taxes or spend money above a certain percentage of the annual GDP. This would limit the amount of money to which the Federal government has access. As it is, that amount is totally open-ended. Taxes get raised for stupid stuff like the "Al Gore Internet Initiative." And on and on and on and on...
Additionally, I think the tax should be a flat tax on income only. So if you had no income, you would pay no tax. That only makes sense. And, yes, the NRST would get to the black market, but how big a market is that? I do not know. If you are including all of the stuff "done under the table," it would get them also. But if tax rates were reasonable, these folks might think twice about risking fines/jail time instead of paying a few bucks to Uncle Sam.
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