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.

[lewislynn]

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).

Sounds like their rebate scam.

A rebate so no one would be taxed on their necessities...

If that's what they call a good idea, I have a better idea. Increase the amount of the rebate so we wouldn't have to be taxed for anything....Or, if taxing government purchases is such a good idea for everyone, why not tax only government purchases?

[ancient_geezer]

Since I have never sent you an email that is quite a trick isn't it.

[lewislynn]

Since I have never sent you an email that is quite a trick isn't it.

I still have it.

[ancient_geezer]

Not an email lewis, as I have never replied to you in any email or FRmail at any time.

Your only reference is to an comment made in regard you having to pay taxes, and Clinton handing them to me so I can work on killing the income tax system with my disability pay.

Ain't it wonderful, a twofer.

Course now u'r still paying them income taxes, and Bush has the honor of paying me my disability just to bug you, LOL

That's one of them little known benfits of being an old geezer veteran. Get paid by presidents no less, to stick a finger in lewislynn's eye every once in awhile and feed my puppy dog bon bons while I'm at it. She thanks you very much lewey.

[lewislynn]

Post Office (Alpha Version)
You have one mail message.

[ Refresh | Back to the Forum | Compose New Letter ]

---

Subject: Re: 27 Benefits From the Fair Tax

Just how much you gett'n paid to confuse the issue? Clinton's pay'n me 1700 a month.

Sent 11/28/99 16:49:38 PST by ancient_geezer
[ Reply | Delete ]

[ancient_geezer]

Ohh, by the way looey, ur info is long out of date.

Your pay'n me $2k clams now, Clinton was just ur chincy ol' bag boy delivering 1700 to me. Nice that Bush has decided to make my job a public service and give me a raise besides, in honor of the arduous effort I do in keeping you off the streets where you might harm yourself and some poor streetcleaner would have to clean up the mess. Just think, I get paid having fun an games poking you in the eye ;O)

[lewislynn]

Yea that's right, everyone on the government dole gets their money from the President....

This is the kind of idiocy we're supposed to believe coming from someone trying to sell a new tax scam.

I won't have to bother the president for my checks. I'll see to it your kids and grand kids pay me well with whatever tax they have to pay, and as you can attest, the benefits just keep getting better...Thank them for me would you?

[ancient_geezer]

I won't have to bother the president for my checks. I'll see to it your kids and grand kids pay me well with whatever tax they have to pay, and as you can attest, the benefits just keep getting better...Thank them for me would you?

LOL, have fun trying to get it out of em looey.

Hear the prez & pubbies are working on plans to privatize the system. Sure works for me.

Saying byebye to the Social Security scam just means a much lower NRST tax rate.

Lets see,

 

Total Effective Tax Rates by Level of Government Percent Net National Product(NNP)
Year	Federal	State	Total
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.

Hmmm, Payroll taxes currently make up about 42% of total revenues, get rid of SS/Mediscare that NRST tax rate could very easily be dropped to approximately 11% based on current tax data.

Sure looks like a very good reason to push for making those Bush tax cuts permanent and updating the NRST rate targeting 18% or there abouts, while to pushing hard to privatize and get rid of the SS/Medihoax system to take her down the rest of the way.

That way you can go live on your own kid's dime looey.

[ancient_geezer]

LOL, Interesting, caught me out, I have a lousy memory for unimportant singular events. Could have sworn I put that in a forum reply.

Nov 1999 you looks like just about the beginning of FRmail.

You never did answer the question posed looey.

"Just how much you gett'n paid to confuse the issues?"

[Your Nightmare]

just like they are now

I thought the FairTax was suppose to change things...

[Your Nightmare]

Which is totally irrelavant to the issue of Congress exempting federal contractors and suppliers from any federal tax it chooses to.

No it's not irrelavant. Why would they exempt federal contractors when a tax on the contractor is not considered (legally or economically) a tax on the the source of their income (the government).

You need to get it in your head that your ideas on "embedded" taxes are not reality. They are just a marketing ploy. You seem to think that if the contractor didn't pay taxes, they would lower their prices to the government by the amount of the taxes. It doesn't work that way.

[Your Nightmare]

Sure looks like a very good reason to push for making those Bush tax cuts permanent and updating the NRST rate targeting 18% or there abouts, while to pushing hard to privatize and get rid of the SS/Medihoax system to take her down the rest of the way.

So to figure out the NRST rate you just use the "Total Effective Federal Tax Rate"? I wasn't aware that it the NRST rate was calculated that way.

[Your Nightmare]

Hmmm, Payroll taxes currently make up about 42% of total revenues, get rid of SS/Mediscare that NRST tax rate could very easily be dropped to approximately 11% based on current tax data.

AG, the inclusive rate is confusing you again. You can't do percentages like that with the inclusive rate (you could with the exclusive rate). Multiplying the inclusive rate by 58% doesn't generate 58% percent of the revenue of the original rate because you are changing the gross payment (taxing the tax).

Maybe you should consider switching to avoid confusion.

[lewislynn]

Hmmm, Payroll taxes currently make up about 42% of total revenues, get rid of SS/Mediscare...

LOL!

Posting of fantasyland dreams as reality are signs of desperation...or dementia.

[ancient_geezer]

So to figure out the NRST rate you just use the "Total Effective Federal Tax Rate"? I wasn't aware that it the NRST rate was calculated that way.

Its not. however total federal tax revenue expressed as a percentage of NNP fair approximation for purposes of estimating tax burden and trends. Of course the HR25 only replaces ~94% of total tax revenues and not the total tax revenue but hey what do you expect of a estimate..

AG, the inclusive rate is confusing you again.

Nah, childs play.

You can't do percentages like that with the inclusive rate (you could with the exclusive rate).

Sure you can. You just include the total federal tax revenues in the base, just as Taxfoundation does in calculating percent of NNP for its estimate of effective federal tax rate.

In repealing a portion of the tax (such as payroll taxes in the repeal of Social Security) the dollars released from tax revenues merely return to the economy spuring economic growth and a larger consumption tax base with a lower tax burden.

Maybe you should consider switching to avoid confusion.

The only confusion is that which you would like to introduce by using a state tax measure instead of maintaing a tax base consistant with the taxes being replaced.

Since you seem to think the use of tax inclusive measure is so confusing, prehaps you need a bit of education as to what the terms are about.

It certainly appears that you do have a problem in you understanding when you say things like

doesn't generate 58% percent of the revenue of the original rate because you are changing the gross payment (taxing the tax).

When the dollars available for consumption increase with the repeal of a tax, the economy grows in supporting lower rates than one would otherwise calculate. Using an improper substitutions and static analysis not account for releasing dollars for personal consumption out of the of federal tax revenue decreases is a common oversight when not thinking in terms of the whole instead of just a fixed consumption bucket to calculate static but erroneous rates from. Using the total dollars expenditure in tax inclusive measure helps to avoid that kind of error in calculating rates.

In anycase it appears you need a refresher as to the difference between tax-inclusive and tax-measures and why it is important to select the proper one to measure tax burden on total resource, as opposed to merely tax amount adding to a fixed price.

 

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.

[ancient_geezer]

Hmmm, Payroll taxes currently make up about 42% of total revenues, get rid of SS/Mediscare...

LOL!

Posting of fantasyland dreams as reality are signs of desperation...or dementia.

Nothing ventured, nothing gained lewislynn. Or perhaps you don't mind saddling your kids with a perpetual bonzi scam. Or is it you don't have any and expect to collect on someone elses?

lewislynn:I'll see to it your kids and grand kids pay me well with whatever tax they have to pay, and as you can attest, the benefits just keep getting better...Thank them for me would you?

We all now understand where you are coming from in opposing the repeal of federal payroll taxes and replacing them with a tax that every recognises as a tax instead of a scam "contribution" to retirement plan.

 

HELVERING v. DAVIS, 301 U.S. 619 (1937)

• Title VIII(Social Security Act), as we have said, lays two different types of tax, an 'income tax on employees,' and 'an excise tax on employers.' The income tax on employees is measured by wages paid during the calendar year. Section 801 [26 USC 3101]. The excise tax on the employer [26 USC 3111] is to be paid 'with respect to having individuals in his employ,' and, like the tax on employees, is measured by wages.
• . The proceeds of both taxes are to be paid into the Treasury like internal revenue taxes generally, and are not ear-marked in any way. Section 807(a)[26 USC 3501]. There are penalties for nonpayment. Section 807(c), [26 USC 7203].

 

 

CRS Report for Congress (98-422 EPW)
Social Security: and the Federal Budget:

"Its taxes like all other federal funds flow into the U.S. Treasury and its benefit payments flow out of the U.S. Treasury.

*** snip ***

"Taking the Social Security trust funds "off budget" has not changed how Social Security funds are handled. They are treated the same way today as they were in 1937 when Social Security taxes were first levied -- the tax receipts flow into the U.S. Treasury and benefit payments flow out of the U.S. Treasury. The Treasury Department issues federal securities to the Social Security trust funds to reflect the receipt of these taxes, and redeems securities from the trust funds to reflect Social Security expenditures, but the money itself flows to and from the Treasury. "

 

What Social Security Trust Fund

"The U.S. Supreme Court ruled in Fleming v. Nestor (1960), 363 US 603; that there is no Constitutional right to Social Security benefits. Social Security benefits can legally be cut or eliminated at any time, and beneficiaries have no recourse. The Court held that, "To engraft upon the Social Security System a concept of 'accrued property rights' would deprive it of the flexibility and boldness in adjustments to ever changing conditions which it demands."

[Your Nightmare]

Sure you can. You just include the total federal tax revenues in the base, just as Taxfoundation does in calculating percent of NNP for its estimate of effective federal tax rate.

Then maybe you would like to show us the math the you got your ~11% from.

In repealing a portion of the tax (such as payroll taxes in the repeal of Social Security) the dollars released from tax revenues merely return to the economy spuring economic growth and a larger consumption tax base with a lower tax burden.

And this is a 1 to 1 relationship? Nobody is saving more?

You are so full of it.

[Your Nightmare]

Have you even read Fleming v. Nestor? The case is about a legal alien who was deported for being a communist and wanted to get the money he'd contributed to social security as a lump sum when he left. The Supreme Court said no, he had no property rights to the money.

Duh.

[ancient_geezer]

You are so full of it.

And you're so petty and transparent, LOL.

[Your Nightmare]

I guess the increased spending you were accounting for would have no inflationary pressure on prices.