Bush Reform Call Seen Part of Consumption Tax Move

Al Reuters-zeera ^ | Sept. 17,2004 | Tim Ahmann

[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.

[Your Nightmare]

The basic reason for the tax on government consumption is that the government does not relieve its contractors and their employees from the reqirement to pay income and payroll taxes today nor provide credits to business for the taxes embedded into consumption price. Thus the government is required to pay the NRST which replaces those taxes paid via government consumption purchases and hiring practices.

The basic reason for the tax on government consumption is that you can make the rate seem lower than it is (kinda like using the inclusive rate). You also need to read up on your constitutional law in regards to income/payroll taxes and government contractors.

[ancient_geezer]

The basic reason for the tax on government consumption is that you can make the rate seem lower than it is

Ok, lets do away with the provision, we won't tax government consumption and decrease revenue by that amount, as government obviously doesn't need it to pay for anything except itself. That is all it is doing when it requires its contractors and suppliers to pay taxes in proxy.

 

You also need to read up on your constitutional law in regards to income/payroll taxes and government contractors.

Hmmm. Which Constitutional provision requires Congress to impose a tax on government contractors?

Or rather is it Congress can not impose a tax on government contractors?

Please do tell us which of the above that Congress is held to in the Constitution?

[phil_will1]

"Guess we should keep the income tax then, huh? Thanks for that info."

We are trying to set up some debates now, YN. That offer to extoll the numerous virtues of our current tax system is still open.

[phil_will1]

"Anybody who has managed to save money under the current set of rules would have that money taxed again when they try to spend it under your fraudulent proposal."

And they will have it taxed again under the current system. The biggest difference under the FairTax (to the extent that they purchase US produced goods) would be that the taxes they pay will be explicitly broken out and identified.

You don't have a problem with a more transparent tax system, do you, Willie?

[Your Nightmare]

We are trying to set up some debates now, YN. That offer to extoll the numerous virtues of our current tax system is still open.

Change it to for or against the FairTax and I'm there.

[Your Nightmare]

BTW, welcome back.

[KantianBurke]

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.

[Your Nightmare]

"The theory, which once won a qualified approval, that a tax on income is legally or economically a tax on its source, is no longer tenable"

Graves v. New York ex rel. O'Keefe, 306 U. S. 466, 480 (1939)

[Your Nightmare]

And they will have it taxed again under the current system. The biggest difference under the FairTax (to the extent that they purchase US produced goods) would be that the taxes they pay will be explicitly broken out and identified.

Except for the 40% of taxes that wouldn't be paid by individuals.

(So you are 60% correct. You get a "D.")

[lewislynn]

Be self-employed for a year then you will know the answer.

I'm self-employed for over 20 yrs and here's your answer:

I'd have to raise the price of my services 30% to cover the tax...Why would I lower my service price knowing I have yet to pay tax on any money I choose to, or even have to spend?

If I lower my service price equal to what my income taxes were, what happens when I pay the new federal tax on what I spend?...I lose.

I'll reduce my income when you agree to reduce yours.

[Willie Green]

would be that the taxes they pay will be explicitly broken out and identified.
You don't have a problem with a more transparent tax system, do you, Willie?

Actually, the NRST shills even blatantly lie about that as well.
This is evident in their preference for "tax included" pricing, which enables them to claim a "low" sales tax rate of 23%. But if the tax was calculated in the normal fashion that people are accustomed to (purchase price + tax), the sales tax rate would have to be expressed at the higher 30% rate.

No, the NRST hypocrits even lie about transparency,
they bury the tax in the price to claim a lower rate.

[lewislynn]

the NRST hypocrits even lie about transparency, they bury the tax in the price to claim a lower rate.

LOL!..So true.

[ancient_geezer]

What you have quoted from is an tax immunity case having nothing to do with whether or not the Congress may expressly exempt business or individuals from paying any Federal tax it chooses to enact within it express powers to levy, or repealing any provision of law it has enacted.

 

Graves v. New York ex rel. O'Keefe, 306 U. S. 466, 480 (1939)

• We are asked to decide whether the imposition by the State of New York of an income tax on the salary of an employee of the Home Owners' Loan Corporation places an unconstitutional burden upon the federal government.

• Congress has declared in 4 of the Act that the Home Owners' Loan Corporation is an instrumentality of the United States and that its bonds are exempt, as to principal and interest, from federal and state taxation, except surtaxes, estate, inheritance and gift taxes. The corporation itself, 'including its franchise, its capital, reserves and surplus, and its loans and income,' is likewise exempted from taxation; its real property is subject to tax to the same extent as other real property. But Congress has given no intimation of any purpose either to grant or withhold immunity from state taxation of the salary of the corporation's employees, and the Congressional intention is not to be gathered from the statute by implication.

• Whether its power to grant tax exemptions as an incident to the exercise of powers specifically granted by the Constitution can ever, in any circumstances, extend beyond the constitutional immunity of federal agencies which courts have implied, is a question which need not now be determined.

• Assuming, as we do, that the Home Owners' Loan Corporation is clothed with the same immunity from state taxation as the government itself, we cannot say that the present tax on the income of its employees lays any unconstitutional burden upon it. All the reasons for refusing to imply a constitutional prohibition of federal income taxation of salaries of state employees, stated at length in the Gerhardt case, are of equal force when immunity is claimed from state income tax on salaries paid by the national government or its agencies. In this respect we perceive no basis for a difference in result whether the taxed income be salary or some other form of compensation, or whether the taxpayer be an employee or an officer of either a state or the national government, or of its instrumentalities. In no case is there basis for the assumption that any such tangible or certain economic burden is imposed on the government concerned as would justify a court's declaring that the taxpayer is clothed with the implied constitutional tax immunity of the government by which he is employed.

Hmmm this case says nothing as regards what the Congress can chose to do as regards exempting a Federal contractor, or anyone else for that matter, from paying any kind of Federal tax it chooses to give exemption to.

The only thing that can be said about the case is that it reminds us that government employees (federal or state) do not have implied immunity from state or federal taxation as a matter of constitutional law.

Now looking at your excerpt in context:

• The present tax is a non-discriminatory tax on income applied to salaries at a specified rate. It is not in form or substance a tax upon the Home Owners' Loan Corporation or its property or income, nor is it paid by the corporation or the government from their funds. It is measured by income which becomes the property of the taxpayer when received as compensation for his services; and the tax laid upon the privilege of receiving it is paid from his private funds and not from the funds of the government, either directly or indirectly. The theory, which once won a qualified approval, that a tax on income is legally or economically a tax on its source, is no longer tenable, New York ex rel. Cohn v. Graves, 300 U.S. 308, 313 , 314 S., 57 S.Ct. 466, 467, 108 A.L.R. 721; Hale v. State Board, 302 U.S. 95, 108 , 58 S.Ct. 102, 106; Helver- [306 U.S. 466, 481]   ing v. Gerhardt, supra; cf. Metcalf & Eddy v. Mitchell, 269 U.S. 514 , 46 S. Ct. 172; Fox Film Corp. v. Doyal, 286 U.S. 123 , 52 S.Ct. 546; James v. Dravo Contracting Co., supra, page 149, 58 S.Ct. page 216; Helvering v. Mountain Producers Corp., 303 U.S. 376 , 58 S.Ct. 623, and the only possible basis for implying a constitutional immunity from state income tax of the salary of an employee of the national government or of a governmental agency is that the economic burden of the tax is in some way passed on so as to impose a burden on the national government tantamount to an interference by one government with the other in the performance of its functions.

Express exemption by Congress is not "constitutional immunity." and Congess can exempt the payment of any tax it has authority over, just as it is not required to levy any specific tax at all. The power to do a thing is not a demand to exercise it only the authority to do so as Congress will.

[Chilldoubt]

If I lower my service price equal to what my income taxes were, what happens...
=====
you will collect the sales tax from the buyer - so your prices remain constant to the buyer -...

...what happens when I pay the new federal tax on what I spend?

you will be paying the same prices when you spend money -

[Chilldoubt]

if the tax was calculated in the normal fashion that people are accustomed to (purchase price + tax)
=======

everyone i know calculates their federal tax burden with an inclusive rate.... if you pay 25k in taxes and you earned 100K, i don't know anyone except you that would say that's a 33% rate. It's a 25% rate to everyone i know.

[Your Nightmare]

You said "The basic reason for the tax on government consumption is that the government does not relieve its contractors and their employees from the requirement to pay income and payroll taxes today nor provide credits to business for the taxes embedded into consumption price. Thus the government is required to pay the NRST which replaces those taxes paid via government consumption purchases and hiring practices." The quote I posted shows, legally, a tax on income (contractors/employees) is not a tax on its source (government).

Your logic, as usual, is flaw.

[Your Nightmare]

everyone i know calculates their federal tax burden with an inclusive rate.... if you pay 25k in taxes and you earned 100K, i don't know anyone except you that would say that's a 33% rate. It's a 25% rate to everyone i know.

Is that how everyone you know figures a sales tax?

And not all federal taxes are calculated with tax inclusive rates.

[Your Nightmare]

you will collect the sales tax from the buyer - so your prices remain constant to the buyer -...

No, he only pays taxes on his profits. Even if he had a 20% profit margin and paid 33% total effective tax rate, the most he could drop his prices due to taxes is < 7%.

Relative prices would not stay the same. There is no legitimate source that says they will.

[phil_will1]

"Change it to for or against the FairTax and I'm there."

You have to be FOR something, YN. What is your preferred alternative?

[phil_will1]

"Except for the 40% of taxes that wouldn't be paid by individuals."

You must have been dozing off on these threads for the past several years. For the 10 millionth time, ALL taxes are paid by individuals.

What part of that don't you understand? I get an "A".