MARTIN CRUTSINGER
Associated Press
Posted on 12/02/2004 6:19:08 PM PST by ancient_geezer
MARTIN CRUTSINGER
Associated Press
WASHINGTON - Basing the government's tax system on consumption rather than income is not as radical a change as it seems, President Bush's chief economic adviser said Thursday.
Bush's goals are tax laws that are simple, fair, promote growth and create jobs, said N. Gregory Mankiw, chairman of the president's Council of Economic Advisers.
Bush has said that he will make overhauling those laws a priority in his second term and will appoint a commission to make recommendations.
Mankiw, reviewing some of the options Bush will consider, said many economists believe that tax laws discourage saving and investment and that changing that could free up money for business investment.
Under a consumption tax, Mankiw said, "The result would be greater saving, increased capital accumulation and higher growth in productivity and wages."
Mankiw did not mention what type of consumption tax might be considered. Some Republicans in Congress have advanced ideas such as a national sales tax or a value added tax, prevalent in Europe. That is, in effect, a sales tax imposed at each level of production of goods and services.
Mankiw said it was wrong to believe that a switch to a system that taxes what Americans spend rather than what they earn would amount to a radical change.
"The current tax code, while nominally an income tax, is actually a hybrid of an income tax and a consumption tax," Mankiw said at a tax conference sponsored by the American Enterprise Institute, a Washington think tank.
He said efforts by Congress to promote savings by allowing for the creation of Individual Retirement Accounts and 401k plans have the effect of exempting savings from taxation and thus moving the tax base away from income toward consumption.
He said the 2003 legislation that lowered taxes on corporate dividends and capital gains had the same impact.
In the effort to make tax laws simpler, Mankiw mentioned the need to amend the Alternative Minimum Tax. This tax was intended to ensure that the wealthy paid their fair share of taxes, but it is beginning to ensnare middle-income taxpayers.
"It is only a matter of time before the AMT hits many tens of millions of taxpayers, far more than it was ever intended to affect," Mankiw said. "In light of the looming AMT problem, tax reform is more than a desirable goal. It is almost a necessity."
Speaking to reporters later, Mankiw stressed that his remarks were not intended to prejudge what a tax advisory panel will recommend to the president or what type of proposals Bush ultimately will send to Congress.
"The president hasn't made any decisions about which way tax reform is going to go," Mankiw said. "The president is going to listen to lots of different ideas before he makes his call."
Mankiw in his speech said he expected Bush soon would name members of the tax advisory panel. It will work with the Treasury Department to develop a program that could be submitted to Congress.
The administration hopes lawmakers will first address Social Security next year and then turn to the tax overhaul.
Mankiw said the "greatest fiscal challenge facing the nation" was the pending retirement of the baby boom generation and the demands that will place on Social Security and Medicare.
Mankiw said that the "current system is not sustainable" and "without reform, the nation will face little choice but vastly higher taxes and the resulting drag on economic growth."
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 & http://www.geocities.com/cmcofer/ftax.html
They do this and I am gonna throw a drunken party for a month!!!!
What a fantastic breath of fresh air and great accomplishment the elimination of the IRS/IRC will be...we will have freedom anew, a legacy of the GOP.
ping.
I'm taking economics and am currently using Mankiw's textbook.
How much does a case of your favorite beer cost?
Have your party before they change the tax laws.........because they'll tax your booze to the hilt!
There is no limmit to the size of the consumption tax when they put it into effect....it will get bigger...all taxes always do....
So don't get too happy for you may get what you want....and a lot more!
Interesting point.
I never liked the idea of a VAT tax and never will. It seems that taxes can be hidden among various levels of production which the consumer will end up paying anyway.
National sales tax would be much more straight forward and that's something the parties can run their campaigns on.
I want to know which Republican is talking about a VAT? Time for a re-education seminar out behind the woodshed!
I'm taking economics and am currently using Mankiw's textbook.
Great, you are hired as a debate referee when the bean counters show, LOL ;O)
Clue: The consumer pays in the end in EVERY Tax system.
The only difference is the degree to which one is more or less regressive than the other.
The IRS has become a KGB/Gestapo organization.
Look for the dems politicos to fight it. They use peoples IRS info, (illegally, to be sure - but that doesn't even slow them down,) for blackmail - keeping people quiet and in line.
Well, plus one good benefit of the sales tax is that it hits people who hide their income and cheat on their taxes.
They say that the 23% that is under consideration (10% income and 13% FICA) would be a vast increase. Not according to my income levels. Although I do pay the average on Social Security (about 14%) I end up paying about 8% in income taxes. Thats at an income of around 45,000. Then add the cost of the two CPAs I have to have to do our taxes..one for my corp taxes and the other for the personal which involves all those forms for those who are corp execs. It takes about 5500 bucks a year to fill out my taxes. You do the math..we pay about 8% and then 12% of 45,000 is 5400..so in fact we pay 34% in total if you add the CPA bills in.
I'll pay 23% any time. But NO to VALUE added tax! A one time collected National retail sales tax.
I think under most national sales tax plans, everyone would get a check back from the gubbmint every month - for the same amount. This is to make up for NOT making exemptions for poor people.
If everyone gets a check for $100, the poor (or the thrifty) actually make money on the deal.
I say bring it on. Nothing can be worse than the current system. NOTHING.
Wrong wrong wrong.
Everybody pays a national sales tax. Everybody.
The poor can file for a pre-fund (refund ahead of time).
Might be worth a trip overe to fairtax.org and find out what is being proposed.
What happened to a fixed (constitutional amendment) sales tax or flat tax?
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