Posted on 01/01/2005 3:24:56 PM PST by wagglebee
WASHINGTON -- While President Bush always has planned not to tackle tax reform until 2006 after the Social Security change is passed, the most influential tax drafter in Congress has been quietly planning to put Social Security and tax reform together.
Rep. Bill Thomas of California, the powerful chairman of the House Ways and Means Committee, has been working with fellow Republicans on his committee to combine the two massive reforms. Thomas keeps secret the details of his plan, but colleagues say it is a workable concept. The conventional wisdom has been that Social Security and tax reform are such complicated and difficult questions that they must be approached separately.
The White House until now has been kept in the dark on the project. The first that top Bush aides heard of Thomas's plan was when he revealed his intentions in an interview on CNN's "Capital Gang" Dec. 18.
Great? you don't even know what it is yet.
My vote is on true tax reform not some watered down version.
From what I've seen of Bill Thomas, it won't be "watered down." The House has always been behind the conservative agenda, then the bills go to the Senate and get watered down.
This is from his website:
Tuesday, November 23, 2004
Thomas Announces Federal Funding for Local Projects
Rios Caledonia Adobe in San Miguel to Receive $200,000 in Federal Funding For more information, click HERE.
Thomas Announces Funds for Clinica de Tolosa Dentistry Program in San Luis Obispo For more information, click HERE.
Thomas Announces $125,000 in Federal Funding for Ridgecrest Hospital For more information, click HERE.
Port San Luis Breakwater Slated to Receive $500,000 for Repairs (from Nov. 22) For more information, click HERE.
Thomas Announces $250,000 for San Miguel Road Safety (from Nov. 22) For more information, click HERE.
Thomas Announces $70,000 for San Luis Obispo County Sheriff's Department (from Nov. 20) For more information, click HERE.
Thomas Announces $2 Million for Lancaster Water Infrastructure Project (from Nov. 20) For more information, click HERE.
Thomas Announces $280,000 for Baker Street Redevelopment (from Nov. 20) For more information, click HERE.
Thomas Announces $300,000 for Kern County Sheriff's Department to Fight Gangs (from Nov. 20) For more information, click HERE.
Thomas Announces $180,000 for Valley Fever Vaccine Research (from Nov. 20) For more information, click HERE.
Thomas Announces Federal Funding for Local Projects "
Quite a lot of federal funding pork projects there isn't it?
I agree this is a lot of pork, but I'm still interested to see what he has in mind for tax reform. I think if it's some sort of BS snowjob, the other Republicans in the House will tear it to pieces.
Has he signed onto the 'Fair Tax' plan?
I think so, but I'm not certain.
Maybe ancient geezer will know. Ping to him!
President Bush has enough great minds in his cabinet and with the House and Senate, he should be able to accomplish all of the promises he ran on in the first year. If he doesn't they will never get done. Politics as usual.
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 SS/Medicare 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
So that Sam Johnson's amendment to the constitution has a chance at enactment & ratification:
H.J.RES.61
Title: Proposing an amendment to the Constitution of the United States to abolish the Federal income tax.
Sponsor: Rep Johnson, Sam [TX-3] (introduced 6/24/2003) Cosponsors: 5
Latest Major Action: 9/4/2003 Referred to House subcommittee. Status: Referred to the Subcommittee on the Constitution.
This would be great!
Not necessarily if Bill Thomas is aiming at something like Laurence J. Kotlikoff and a bunch of economist's threw together as a proposal toward addressing funding of Social Security.
Refer Getting to agreement on a national sales tax
by Lawence Kotlikoff
Foster's Online October 25, 2004"The three-part plan, which has been endorsed by over 150 top U.S. academic economists, is entitled the Personal Security System (PSS).
Part 1 replaces Social Security’s payroll tax with a federal retail sales tax.
Part 2 eliminates any further Social Security benefit accrual, paying (with the sales tax receipts) only the benefits now owed current retirees and current workers.
Part 3 sets up an individual account system, but one Democrats as well as Republicans can support."
Suggesting a national retail sales tax to fund Social Security, repealing the Social Security taxes on wages.
A suggestion not well looked upon by the Fair Tax folks if that is all it does, as it opens the door to both an income tax and federal retail sales taxes which we are all adamently against.
Thomas may figure it to be an step on the way to an NRST or something. Half measures are more likely to go a route that no one in their right minds wants and that is income taxes plus a retail sales tax. If so I can see why he wants to keep the idea underwraps. It rightly would be shot full of holes the minute he make it public and damage the chances for instituting real repeal and replacement of income taxes for a long time to come.
-- Speak for yourself. The GOP will control the House for the next 20+ years, so it's unlikely that the overall Federal tax bite (as a percentage of GDP) would go up due to the implementation of a income-sales tax dual system.
In fact, I see merit in proving that the NRST works. Doing a test run of the NRST will sap anti-NRSTers like your nightmare and lewislynn of their biggest criticisms of the NRST: namely that the rate quoted by AFFT is artificially low and that the FairTax will spawn a massive black market.
On top of that, the GOP can use a partial FairTax to get re-elected time and time again. They can campaign to move programs from the income tax to the NRST until there are very few programs left being funded by the income tax. At that point, the GOP will have enough representation in Government to abolish the income tax for good!
The incremental approach to conservatism was the subject of an important article in the American Spectator this month. The author argued that an incremental approach can often get more done while at the same time avoiding a HillaryCare-type backfire.
We must remember that policy and politics are not the same thing. An incremental approach would be highly popular with the rank-and-file GOP members of congress who could use it to campaign on. Here's a look at what I think we should do with an incremental approach starting with transfering payroll taxes to the NRST. It is similar to Koltikoff's plan, but slightly different:
1. Eliminate all payroll taxes and replace it with a ~7% NRST.
2. Establish Thrift Savings Plan (TSP) retirement accounts for every working american adult. Federal Employees and military members already have TSPs. They're great investment vehicles (I have one through the Air Force)
3. Take current NRST receipts and pay out current retirees.
3a. Those within certain age brackets will be forced to stay under the old SS system, another bracket will get a choice, and the youngest bracket will be forced into the new plan.
4. With the leftover money, take a certain high percentage of the NRST revenue and EQUALLY distribute it into every american's TSP account, regardless of income.
5. With the remaining revenue, provide matching funds for individual contributions into their respective TSP, just like how 401(k)s work.
5a. An example would be to allow every American to contribute up to $10,000 into their retirement account every year and have the government match 10% of that. This is on top of $2,000 being contributed by the government into everyobdy's account. So, assuming that the account bore 0% interest, the account holder would get a 10% return on his contribution.
5b. Assuming that a 25 year old maxes out contributions for 40 years, contributions stay static, and he recieves at 10% annualized return on his account, he would have a $5.75M account at age 65. At current market quotes, this individual could purchase an annuity paying over $440,000 a year forever!
5c. Assuming that a 25 year old minimizes his contributions for 40 years, contributions stay static, and he recieves at 10% annualized return on his account, he would have an $885,000 account at age 65. If he then bought an annuity, he would recieve an annuity paying nearly $68,000 per year forever!
6. As a result, individual retirement accounts at the end of the day end up accurately reflecting that individual's income and spending/saving habits without actually having to report income to the government*.
* Even NRSTers must acknowledge that this problem exists in the FairTax plan. After all, how will the government know how to index an individual's Social Security if their income is no longer reported? The answer: employers would still have to report their employee's income (which would now be open to fraud). By setting my (probably also Rep. Thomas' plan as well) proposed system up first, the GOP can (1) implement major SS reform and (2) fundamental tax reform with political capital to spare being spent on tort reform, spending battles, and judicial nominations.
"Has he signed onto the 'Fair Tax' plan?"
He isn't a co-sponsor, but he has written a letter of support. I can't imagine how you would tackle the social security and tax reform problems together, except with something very close to the FairTax.
RS, you make some good points, but I have to agree with Geez here. Have you seen how many posters on the tax threads have said that the only way that they would support a sales tax is if the 16th amendment is repealed FIRST? Of course, that isn't politically feasible, but many conservatives have a justifiable concern that we would end up with both taxes permanently. I think that Linder would pull the bill before he would allow it to pass with the income tax surviving.
I just read the Spectator article. It was very interesting. Although I know the special interests will oppose us vigorously as we get closer and closer to passage, once the FairTax passes, they will be irrelevent. When the economy is booming as a result of the FairTax, noone is going to care that now they don't get their measly home mortgage deduction. 10+% GDP growth is something that no American has ever experienced and I think it is hard for many Americans to even envision. Once it happens, it is going to sound ridiculous for anyone to suggest going backwards.
-- A bill replacing only payroll taxes with a NRST would have nothing to do with HR 25. There would also be no prebate with a payroll tax-only NRST. Why? Because it is already progressive. Remember, every American would get a baseline contribution to their account. Here's an example:
We will assume that a no-prebate NRST of 7% replaces all payroll taxes. We will also assume that the Gov't contributes $2,000 into every American adult's retirement account per year.
With these parameters, anybody who spends less than $28,571.42 on taxable goods per year before the tax was applied would actually recieve more in their retirement account than they were taxed.
If we include up to $1,000 in Gov't matching funds for up to $10,000 in personal contributions, these numbers change. For somebody who "maxes out" contributions ($10k/yr.), they get more back in Gov't contributions than they paid in taxes at an anual consumption level of $42,857.14.
As a result of this, the poor are "protected", just like under the FairTax, from any taxation. A $2,000 Gov't contribution would also protect lower middle class americans (up to $28,571). If we only wanted those below the poverty line to be exampt from tax (like the FairTax), the Gov't baseline contribution would have to be $651 (a poverty line of $9,310).
Under the Fair Tax, ALL EARNINGS would be tax free for savings and investment purposes. Therefore, no reason to spend hard-earned political capital getting maybe 6% out of the payroll taxes.
One more thing. phil is right that Bill Thomas wrote a letter to the Fair Tax supporters in California a few years ago when we met in Bakersfield (his hometown) for a planning session. The letter was very supportive of every aspect of the Fair Tax reform objectives. If anything, Thomas will improve the design if he can find a way to do it and get it passed.
Do you like my SS plan???
One more thing. phil is right that Bill Thomas wrote a letter to the Fair Tax supporters in California a few years ago when we met in Bakersfield (his hometown) for a planning session. The letter was very supportive of every aspect of the Fair Tax reform objectives. If anything, Thomas will improve the design if he can find a way to do it and get it passed.
I would sincerely hope so, unfortunately I am not so sure of where Bill Thomas is actually headed considering how close he is playing his cards to the vest.
The recent push by Bruce Bartlett and other commentators for implementing a VAT and similar schemes leaves one with a great deal to be concerned about. One of such plan in recent hearings would attempt to convert the corporate side of the income/payroll tax into a WTO compliant indirect tax, VAT surrogate as proposed in 2002 Ways & Means testimony trying to create the impression that what is proposed is not a VAT, the reality is that it achieves that end with stealth and misdirection rather than being upfront about it.
Still stinks the same regardless of the name you want to pretend it. http://waysandmeans.house.gov/legacy/srm/107cong/5-9-02/5-9chri.htm
In short small modifications to the current corporate income/payroll tax scheme in place, and abracadabra a full fledged 7-8% VAT in tandem with our individual income tax system, ready to evolve into whatever Congress decides to do with it out of the sight of the electorate.
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