Posted on 09/17/2004 9:16:15 AM PDT by LincolnLover
WASHINGTON (Reuters) - President Bush (news - web sites)'s call for a simpler tax code could mark the next step in a gradual move toward a system that places more of a tax burden on consumption and less on savings, analysts say, a direction critics think would put a bigger burden on working Americans.
In his speech to the Republican convention two weeks ago, Bush said he would launch a bipartisan tax reform effort if he wins a second term but offered little direction to those who may wonder what types of changes he envisions.
"The American people deserve -- and our economic future demands -- a simpler, fairer, pro-growth system," Bush declared as he accepted his party's presidential nomination.
Bush has consistently sought to reduce the tax burden on capital, winning cuts in levies on investment gains and dividends and pushing for tax-free savings accounts, in addition to reducing marginal income-tax rates.
"You could characterize many of the steps that have been taken as moving us toward a progressive consumption tax," a tax on money spent rather then earned, said budget expert Rudolph Penner of the Urban Institute. "In other words, basically easing the burden on capital."
"I think they're rapidly reaching the end of where they can go in their current incremental approach," he added.
Pamela Olson, a former Treasury Department (news - web sites) official who had examined reform options for the Bush administration, agreed the president would look favorably on changes to spur savings, but said he was unlikely to fully scrap the current code.
"The president likes an income tax because he thinks an income tax is fair," she said. Olson suggested eliminating capital gains and dividend taxes would be a high priority, saying Bush disliked "double taxation" of corporate earnings.
BEARING THE BRUNT
Republicans argue that more incentives for savings would provide a greater pool of capital that could be tapped to expand the economy's productive potential.
Democrats counter that only wealthy Americans have the wherewithal to boost their savings (emphasis added) and worry a Bush reform effort would weigh heavily on middle-income workers.
"I guess you could call it, if you wanted to look at people rather than things, more tax cuts for the rich. But this time it's going to be revenue neutral, so we're going to raise taxes on the middle class," said Bob McIntyre, director of Citizens for Tax Justice.
Olson cautioned against drawing conclusions about where a Bush-led effort might lead and said easy labels stood in the way of fixing a muddled tax code.
"We keep using this as a political football," she said. "When you strip away the rhetoric you find there is a tremendous amount of agreement among people of all stripes."
Indeed, some past efforts to overhaul the tax code have drawn a measure of bipartisan support.
While Bush has shed little light on his reform views, he has offered kind words on the campaign trail for two broad reform ideas -- a flat tax and a national sales tax.
But former Treasury Secretary Paul O'Neill says Bush showed little appetite for fundamental reform while he was in the administration.
"I don't think he really understands what fundamental tax reform is about -- to him, it's just a line from a speech," O'Neill told author Ron Suskind after the president's latest call for reform. Suskind posted the comment and a November 2002 memo from Olson to O'Neill examining reform options on the Web site for his book, "The Price of Loyalty."
In any event, analysts said, political hurdles would likely prove too high for wholesale changes, particularly at a time the government is trying to rein in record budget gaps.
"I think the odds are strongly against it," Penner said.
Surely they cannot seriously mean that average folks wouldn't have the money to increase their savings under a "best case" consumption-based system (i.e., one that maximizes the incentive to save). Therefore, I can only assume that they believe that average Americans are too stupid and/or helpless to save some/more/most of the money they're involuntarily taxed currently, if given the chance.
Why would the Pres. go on about this issue if things like the war, for example, caused him to expend political capital necessary to make this happen prior to this election?
Everybody knows that fundamental tax reform is gonna take some *serious* political capital to get done, and the very best time to do so would be in the first 6 months or so after this election, before House members have to face voters again in 2006 (and face the reliable Dem class warfare issue obsfucation that's sure to follow serious reform).
Why would the Pres. go on about this issue if things like the war, for example, caused him to expend political capital necessary to make this happen prior to this election?
Everybody knows that fundamental tax reform is gonna take some *serious* political capital to get done, and the very best time to do so would be in the first 6 months or so after this election, before House members have to face voters again in 2006 (and face the reliable Dem class warfare issue obsfucation that's sure to follow serious reform).
I've been reading a little about the Fair Tax and so far I like what I see. I hate income tax but I know that certain taxes are necessary and an end-user approach (in some things) seems to make sense.
Yeah, the 'average American versus saving' comment was a cheap shot. People can do whatever they're motivated to do.
tax reform
whenever you see "working Americans" or "working families"
look for the follow up thought: Bush's fault.
whenever you see "working Americans" or "working families"
look for the follow up thought: Bush's fault.
to a democrat, working families usually means someone with 3 kids, never married , never finished H.S. , and likes being hauled around to be put on the 'woe is me' pedestal.
This is hilarious. Let's say I earn $50,000/year and fall into the 28% income tax bracket. So I obviously am middle class. I'd pay $14,000/year in income taxes (omitting Social Security/Medicare). Now, my yearly budget is $20,000 and if I paid 23% (FairTax) on that in consumption taxes, I'd pay $4600. How is that increasing my burden?
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 a IRS free replacement in the form of a 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.Refer for additional information: http://www.fairtax.org & http://www.salestax.org
good! more news about the nrst can only be a good thing
Now, my yearly budget is $20,000 and if I paid 23% (FairTax) on that in consumption taxes, I'd pay $4600. How is that increasing my burden?Does your budget for $20,000 include taxes? Because if you bought stuff priced at $20,000 you'd pay $5,974 in taxes ($20,000 x 29.87%), not $4,600. The 23% comes from $5,974 being 23% of $25,974.
The rate in terms most people think of sales taxes is 29.87%.
The rate as specified in the bill, and for the tax systems it replaces, is percentage of gross payment or income/wage as the case may be:
H.R.25Fair Tax Act of 2003 (Introduced in House)
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So it can be reasonable compared against like expressions of the overall federal tax rates of the federal tax systems it replaces:
Tax Freedom Day 2004 PDF http://www.taxfoundation.org/sr129.pdf
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Total Effective Tax Rates by Level of Government |
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| Year | Federal | State | Total |
| 1996 | 21.3% | 10.4% | 31.7% |
| 1997 | 21.8 | 10.3% | 32.1% |
| 1998 | 22.4% | 10.4% | 32.8% |
| 1999 | 22.5% | 10.4% | 32.9% |
| 2000 | 23.1% | 10.4% | 33.5% |
| 2001 | 22.2% | 10.5% | 33.7% |
| 2002 1 | 19.7% | 10.2% | 29.2% |
| 2003 2 | 18.5% | 10.1% | 28.6% |
| 2004 3 | 17.9% | 10.0% | 27.9% |
| 1 Economic Growth and Tax Reform Reconciliation Act of 2001 2 The Job Creation and Worker Assistance Act of 2002 3 Job Growth and Tax Relief Reconciliation Act of 2003 Sources: Office of Management and Budget; Internal Revenue Service; Congressional Research Service; National Bureau of Economic Research; Treasury Department; and Tax Foundation calculations. |
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Or in terms of comprehensive income of CBO studies:
| Effective Total Federal Tax Rate (Percent of comprehensive 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.
From, Effective Federal Tax Rates 1979-2001
The rate in terms most people think of sales taxes is 29.87%.
Maybe xrp can tell us if he thought the 23% was inclusive or exclusive.
So it can be reasonable compared against like expressions of the overall federal tax rates of the federal tax systems it replaces:Right. So let's compare.
2004 federal tax = 17.9% vs. 23% FairTax
Right. So let's compare.
2004 federal tax = 17.9% vs. 23% FairTax
Guess we should keep the income tax then, huh? Thanks for that info.
You are very welcome. Glad you finally recognise the rate is a bit high for the current tax law and need to be revised downward.
You can add to your info that Linder has submitted HR25 to the Congressional Research Service for a full economic review under current tax law, and economic conditions, with the eye to appropriately adjust the rate. Last time the rate was examined was during the Clinton era, prior to the Bush administration tax cuts.
Neat how that works, but in the mean time it is sufficient to be aware of where the bill sets the rate now 23%, and where it can be expected to be reset to, 18-21% in view of the Tax Foundation's numbers based on NNP (GNP less depreciation of fixed assets) a representative of dollars available for consumption.
You can add to your info that Linder has submitted HR25 to the Congressional Research Service for a full economic review under current tax law, and economic conditions, with the eye to appropriately adjust the rate. Last time the rate was examined was during the Clinton era, prior to the Bush administration tax cuts.You can dream if you want to.
Neat how that works, but in the mean time it is sufficient to be aware of where the bill sets the rate now 23%, and where it can be expected to be reset to, 18-21% in view of the Tax Foundation's numbers based on NNP (GNP less depreciation of fixed assets) a representative of dollars available for consumption.
BTW, Linder didn't go to the CRS
Easy to check, call Linders office.
because they don't release their reports to the public,
Strange I can find all kinds of CRS reports made public after they were finished.
However, merely submitting for review does not mean the work is completed nor released for public view.
did he?
Why would you expect Linder or anyone else to publish anything while work is still in progress and the time not ripe for release.
Seems to me the best time to release results of such a study is during the next hearings as testimony to the House Ways & Means Committee on Tax Reform.
Strange I can find all kinds of CRS reports made public after they were finished.They aren't released by the CRS. They are released by the Reps that request them, if they choose.
Why would you expect Linder or anyone else to publish anything while work is still in progress and the time not ripe for release.What makes you think I meant that?
Seems to me the best time to release results of such a study is during the next hearings as testimony to the House Ways & Means Committee on Tax Reform.Any dates on those hearings?
They aren't released by the CRS. They are released by the Reps that request them, if they choose.
LOL, of course, why would it be otherwise. Linder submitted the bill for analysis, guess who controls when it is released. The report, when ready and time is ripe, will be published, its results in the forum and time when it can have the greatest impact most favorable for the enactment of the legislation.
Any dates on those hearings?
Of course not, we haven't entered the legislative session in which they are to be held yet. The Congress critters supporting the NRST have a bit of preparing to do and there's a bit more educating of the public to be done.
Never fear YN, you have plenty of time to work on your testimony against the NRST and for why we should keep the income tax around. Better get to work though.
The balloons are up and pump is being primed while Kerry spins in the wind:
Hassert and Delay are ready to get the ball rolling once the election is past and we've counted noses in Congress and we are well into the next session of Congress.
LOL, of course, why would it be otherwise. Linder submitted the bill for analysis, guess who controls when it is released.LOL, maybe because we pay their paychecks?
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