Posted on 02/03/2005 9:54:12 AM PST by EternalVigilance
CONGRESSMAN STEVE KING INTRODUCES RESOLUTION TO ELIMINATE IRS
WASHINGTON - As W-2s arrive in mailboxes this week, U.S. Congressman Steve King has introduced a resolution to repeal the 16th Amendment to the Constitution, which gives Congress the authority to collect income taxes.
H.J. Res. 16 would eliminate the IRS and the means for the government to collect income taxes.
"The IRS is an out-of-date, trillion-dollar-a-year drag on our economy," said King. "Instead of continuing to band-aid our complicated, leaking tax system year after year, we can choose a permanent solution and finally rid Americans of the fat leech they feed their paychecks to."
King has been a long-time supporter of the FairTax, a national sales tax placed on goods and services, which would replace the income tax.
H.J. Res. 16 must be approved by two-thirds of both the House and Senate, and then sent to the states, where three-fourths must ratify the amendment.
For information on the FairTax, visit:
http://www.fairtax.org
U.S. Congressman Steve King
Iowa's Fifth Congressional District
1432 Longworth House Office Building · Washington, DC 20515
http://www.house.gov/steveking/
Do you have case cites?
No, sir. My statement regarding not discussing other country's internal tax system was in regard to your misunderstanding my prior post. My discussion of European VAT was to address the issues that your confusion brought up, specifically a comparison of our current sytem of income tax, verses European VATs and how changing to the FairTax would be a net advantage to American industries in terms of trade, even with Europe, contrary to what you had previously asserted.
There is no disadvantage to US exports if they are treated in the same fashion as domestically produced goods in another country.
Granted, but under our present system they are not treated the same, they are treated in a fashion that is a disadvantage for American made goods, whether exported or sold domestically. The FairTax will in some sense treat them more equitably, and in some sense, even advantage American interests.
We do not have taxes included in our exports price thus Europe eliminates that competitive advantage by adding VAT to its imports and subtracting from its exports.
The way our income tax works, we do, in effect have taxes on our export prices. Just because they are levied at production rather than at the point export does not change the fact that there are taxes embedded in our exports. Further, Europe DOES add to our exports to them, a VAT, in a protectionist measure in favor of the european country. We, however, do not add a consumption tax the the European made good, and fund the Fed by taxes on production, which is again, an advantage to the european product over our own, even on our own soil. The advantage to China is even greater, as I understand it, because they have artificially pegged the value of their currency to the dollar.
This does not effect our competitiveness since we do not have VAT.
No, sir. Not having a VAT (or a salestax) puts us at a decided disadvantage.
However, changing to a sales tax will increase the complications of our foreign trade as you have illustrated with your examples.
I don't know an antonym for "euphemism", but that's how I would characterize your use of the word "complications". These "complications" as you put it, would benefit American interests, and remove qualities of our current system that benefit other countires (primarily China) at our own industries' expense.
From Findlaw.com
Constitution: Sixteenth Amendment
INCOME TAX
History and Purpose of the Amendment
The ratification of this Amendment was the direct consequence of the Court's decision in 1895 in Pollock v. Farmers' Loan & Trust Co.,1 whereby the attempt of Congress the previous year to tax incomes uniformly throughout the United States2 was held by a divided court to be unconstitutional. A tax on incomes derived from property,3 the Court declared, was a ''direct tax'' which Congress under the terms of Article I, Sec. 2, and Sec. 9, could impose only by the rule of apportionment according to population, although scarcely fifteen years prior the Justices had unanimously sustained4 the collection of a similar tax during the Civil War,5 the only other occasion preceding the Sixteenth Amendment in which Congress had ventured to utilize this method of raising revenue.6
"Eliminate the IRS and a large segment of the bureaucracy would be unemployed."
Eliminate the bias in our tax system toward foreign producers at the expense of our own manufacturers and farmers and the economy will boom. The IRS employs about 100,000 people. Actually, there are far more employed in the private sector doing tax work than that. Nevertheless, with the stimulus to our economy that the FairTax will generate, far more jobs will be created than will be lost. For a nation which has been losing good jobs for some time now, the FairTax is badly needed.
Furthermore, the jobs that will be created will be productive ones, unlike the tax jobs that will be lost. Our productivity will be much, much higher.
"sure am glad that Elizabeth Cady Stanton, Susan B Anthony and a long list of others didn't feel the way that you do...."
I'm not. The 19th amendment is the next one that we should repeal, right after the 16th.
(Just kidding, ladies)
Excise taxes are taxes paid when purchases are made on a specific good, such as gasoline. Excise taxes are often included in the price of the product. There are also excise taxes on activities, such as on wagering or on highway usage by trucks. Excise Tax has several general excise tax programs. One of the major components of the excise program is motor fuel.
It sucks that they're taxing what every person needs to do to live, except for those who can successfully live under the table, but that doesn't mean it's necessarily unconstitutional or beyond the taxing power of Congress.
"A NRST would be the best type of tax reform that I can think of. While I don't think the Fair Tax proposal is perfect, I do think that it is good enough that once it is enacted if we do find some problems, we can fix them then (and maybe I am wrong, maybe it doesn't affect big ticket item sales like I think it will.)
It only takes 2/3s of each house to get it to the states, where the greater fight is since 3/4s of the state legislatures have to also assent."
I think you are confused on your legislative details. The FairTax,which is a federal bill, requires only a simple majority in both houses and signature by the President. Realistically, it would have to be passed and put into place before serious consideration of repeal of the 16th would begin. The repeal of a constitutional amendment, like the ratification of one, would require a 2/3 vote in both houses of the US congress and 3/4 of the states (both houses of each state). The President would not sign a constitutional amendment ratification or repeal.
I can agree with most of what you said, particularly that used home prices will rise (aka will have a net gain in equity). I do not think the construction industry will collapse, except that they are arguably so over built in some areas of the country already, and already about to collapse, the adjustment may push some over the edge. But the adjustment to the FairTax by itself will not collapse the construction industry, especially since building for rentals and other business will be relatively cheaper than new homes for consuption, and arguably relatively cheaper than current costs.
In addition, the removal of interest deductibility will also be a drag on real estate sales and prices and reduce the number of people able to afford homes. Should prices collapse too much there could be serious unintended consequences for banks and mortgage companies as the value of mortgages drops.
With the elimination of tax-free interest, you also get the benefit of tax-free principle (if you already own your home). Certainly "unintended consequences" are always a valid concern, however, I think your predictions tend to be on the apocolyptic end of the prediction spectrum, although, I think on the issue of housing, there is much evidense to support your outlook.
There are no "hidden" taxes in older homes from the income tax nor is there any chance this tax scheme will pass without great changes in the way it proposes to treat real estate sales. States do not treat real estate sales with sales taxes and there is a very good reason they don't.
There is some disagreement in terms of whether or not there are hidden income taxes in the cost of homes. Obviously the cost of the home has to pay for not only all the wages that go into building it, but also the portion of those wages that will be paid in income tax. However, unless the wages decrease by the amount of income tax paid, your assertion is correct, at least in terms of PERSONAL income tax. Corporate income tax and payroll taxes are another matter. As has been discussed in other threads, payroll taxes are USUALLY considered to be payed by the wage earner in the form of lower wages, however in this model, unless gross wages INCREASE by the amount of payroll taxes, that claim can not be made, and therefore must be included along with corporate income tax, in the cost of the house.
I agree that state sales taxes avoid real estate (at least at the same rate as other purchases) for good reason, mainly salability. Also I would acknoledge that the inclusion of new Homes in the FiarTax base can be pointed to and used to diminish the FairTax's salability.
I don't consider your statement as a personal attack. Real estate is a special area of economic activity which is not treated in the same fashion under the tax codes as other transactions. The amount of money and the long terms involved make them different and means they cannot be taxed as other transactions for some of the reasons I go into in the first paragraph. Construction is a huge component of out economy and things which affect it have consequences in other sectors thus any proposal which will have major impacts on it must be carefully considered.
I very much agree with what you say here.
It doesn't take much thought to figure out that a huge price increase in new homes would collapse the construction industry and drastically increase the cost of home owning. Taxes which will be on the order of 100G/house will be financed which means you will pay many times the 100G before the mortgage is paid off. This type of increase will drastically reduce the number of people who can afford homes because of the initial impact and because those priced out of new homes will purchase older ones which will drive demand for them up and prices as well.
I can certainly understand this point of view (if we confine our definition of construction to new home construction), especially considering how so many areas are already ridiculously overpriced, and in many areas there are an overabundance of empty new homes, and in some cases, these areas overlap. The commercial side of construction however, should expect a boom... However, considering our pressent situation is so whack, I expect the net effect could be bad for new home construction. I believe the housing market is overpriced now, and that nothing is going to prevent a crash anyway. The FairTax, arguably would tend to speed this up rather than delay it. Housing will arguably be the most dramaticly visible elements hit with economic upheaval, not just because of the FairTax, but because it is arguably heading for some upheaval as it is now.
The more I think about this the more questions come to mind. If one buys a new home paying the new sales tax how will he get that tax back when he sells? That tax will not be folded into the home's value thus would appear to be unrecoverable. I buy new house for 300G and pay another 100G for tax while you buy old house for 300G and pay no tax. When you sell you do not have to consider recouping the 100G but I must sell my house for 300G plus the 100G or I'm a loser. But the houses have equal value, 300G.
I wish you had been present when there was some discussion about this on another thread. I think the general concensus (I hope I am not misrepresenting) was that there would NOT be a 30% difference in price between new and old. The OLD (this applies to automobiles as well) would increase their prices because they would be worth more, considering a new one would now cost 30% more. Also, some of that 30% would be, particularly in the long run, counteracted by savings aforded by eliminating the burden of the existing tax system throughout the entire production tree. So, even though there would be an immediate apparent increase in price, market pressure forcing company's to use the reduction in tax burden to lower prices would compensate in time, at least to some degree. Further, normal market dynamics would eventually stabalize the value of new and used homes.
If the prices of houses fall because of the tax change this would mean that many houses are worth less than their mortgages. Once again there are huge consequences which must be considered.
I'm certain if housing prices fall it is because we are already in a housing bubble, not because of the FairTax. The FairTax emplimentatino may instigate the inevitable crash, but at least in some areas, it's coming regardless.
If these taxes are not imposed on new construction for businesses then the housing market will be pushed towards building more multi-unit apartment buildings and away from single family homes.
I would agree with you here.
Is this what we want? I don't think so.
I would agree with you here, too. :o) Although I think that, as I understand it, both rent and new real estate will be considered consumption, so both will be taxed. I don't know if there will be as much of an inequity between paying for the tax on a new home, verses paying tax on rent. The big winners will be used homes, which, I think, would gain equity by the passage of the FairTax.
These are just things that occur on the spur of the moment with more consideration or with that of finer minds even more will come up. Serious things.
Yes, sir.
But everything I've pointed out has proven to be fact, such as:
The bureaucrats at SS would determine the rates after the first year,
There would be a tax on some earned as well as paid interest,
Wages and self-employment income would be required to be reported,
There's no possible way prices can be reduced 20% or more by just eliminating the income tax on business,
There would be a 30% (not 23%)excise tax on "any government" wages, salaries, retirement and any other benefits.
The most recent argument (once again) is the tax, by law, "is 23% of the gross payment" and a "gross payment" has to include other taxes such as state/local, fee's, excises, etc.
to name a few.
As long as everyone knows what to expect, that it isn't going to be a tax free nirvana and that's what they want...fine by me.
"It's huge accounting shift, and will take time to figure out. The first year is going to be hell."
According to Dr. Dale Jorgenson, then chairman of Harvard's economics department, the first year would see GDP growth above 10%. That is SMOKING! Even during the go-go 90s, we never had a full year of double digit GDP growth.
Let's assume that Dr. Jorgenson is wrong, and that John Lenin is correct. I would still maintain that it would be worth it in the long run, if that is what it would take, to put our producers on an even playing field with their counterparts around the world. If there is any economic trend that should be vividly obvious by now, it is globalization. To continue to operate in this environment with a tax system which drags us down to this extent is sheer insanity.
I was waiting for that... : )
It only takes 2/3s of each house to get it to the states, where the greater fight is since 3/4s of the state legislatures have to also assent."
I think you are confused on your legislative details. The FairTax,which is a federal bill, requires only a simple majority in both houses and signature by the President. Realistically, it would have to be passed and put into place before serious consideration of repeal of the 16th would begin. The repeal of a constitutional amendment, like the ratification of one, would require a 2/3 vote in both houses of the US congress and 3/4 of the states (both houses of each state). The President would not sign a constitutional amendment ratification or repeal.
Sorry, I am well aware of the difference in passing a bill and in amending the constitution; I must have edited out a second paragraph about repealing the 16th amendment, which is obviously what the latter paragraph is referring to, and not the passage of the Fair Tax which does not require a constitutional amendment and is not framed as one (it is H.R. 25, I think.)
I am a little surprised that no one pointed out this before now. I am even more surprised that I didn't catch it, since I try to re-read my postings a few times before sending them (As it is, I delete many more than I end up sending...)
"I see no way it would not cause a drastic drop in consumption initially though and thereby a deep recession or worse."
A common misconception. What it would do primarily is to shift the prices of US produced goods relative to foreign produced goods so that the demand for US produced goods would increase significantly. Unlike a tariff, we could simply point out to the WTO and our trading partners that we would be taxing foreign products the exact same way that we are taxing our own.
The other major reason for economic stimulus is that we would be jettisoning several hundred million $$$ in compliance costs.
Primarily because of those two factors, the economy would boom, even though there would be an initial net decline in consumption. That decline, however, would consist entirely of a decrease in the consumption of imports, partially offset by an increase in the consumption of US produced goods.
I agree the tax code is so bloated it takes an army of tax lawyers to figure it out. I have to study this more and see what the details are. It sounds like a scheme to tax the same thing each time it is sold. Some products and services are sold quite a few times before they reach their target of completion.
It's true that after the first year the rate is adjusted to keep the SS portion what it is now, and references the IRC for this purpose. I'm not familiar with the IRC code it refernces, and would appreciate an education in that regard.
There would be a tax on some earned as well as paid interest,
Please explain. I'm not aware of this.
Wages and self-employment income would be required to be reported,
I don't know if they are REQUIRED or not, they likely are. However this is only for the purposes of determining SS benefits.
There's no possible way prices can be reduced 20% or more by just eliminating the income tax on business,
This has been discussed a great deal. There is more than just the business income tax. There is also payroll, and the cascading effect of taxes to consider. (also the effect of non-tax cascading costs such as imports must be considered as well). I expect you are correct, in that the SS & income taxes must be reduced from wages and then prices for full revenue neutrality to occure without affecting gross prices, however, leaving them in wages and allowing for an increase in price accomplishes the same net.
There would be a 30% (not 23%)excise tax on "any government" wages, salaries, retirement and any other benefits.
I don't know what you refer to here, and I would very much appreciate an explaination if you are willing to provide one.
The most recent argument (once again) is the tax, by law, "is 23% of the gross payment" and a "gross payment" has to include other taxes such as state/local, fee's, excises, etc.
This one I'm more familiar with, and I am certain you are misrepresenting the Bill, and have explained how in another post.
I have enjoyed reasoned discussions with several who oppose the FairTax bill, and have benefitted from having my own misconceptions corrected by many of them. However, it has been my experience that you seem to prefer logical sleight of hand and obfuscation to making real and substantive objections. This post is the most reasoned and lacking in deceptive tactics that I think I have ever seen you post... And I expect I could learn much from you were to avoid deceptive obfuscations. I hope this post is more representative of your future posts than your previous ones.
As long as everyone knows what to expect, that it isn't going to be a tax free nirvana and that's what they want...fine by me.
I would agree with this, and would not wish to discredit you for pointing out a valid flaw.
"Most people who support this idea believe it will lower their taxes. If you realize that it won't that is good. But when the news is given that their taxes will likely go UP much of your support will evaporate."
That perspective completely misses the point that we would be moving from a coercive to a voluntary system. Each individual would decide how much taxes he/she would pay by their spending decisions. I am betting that many Americans would gladly trade tax systems just for the freedom.
In addition, even though the FairTax is revenue neutral, it certainly isn't cost neutral. The compliance costs, which are borne either directly or indirectly by US consumers, that would be saved number in the hundreds of millions of $$$.
Furthermore, by taxing illegal immigrants at a rate that is disproportionate to the rest of us, that means that, even though the proposal is revenue neutral in total, less revenue will have to be raised from legal citizens than is the case now.
Also, it should be obvious that economic globalization is THE major economic trend of the first part of the 21st century. To continue to penalize our producers in the way that our current system does is ridiculous. If all the FairTax did was to remove the disadvantage that our current system imposes on our producers, that alone would make it well worth the effort.
Also, it occurs to me, if there IS a reduction in demand for new homes, it will be largely due to demand in USED homes, which would presumably demand an increase in remodelling services. Thus, it is not so much likely to destroy the construction industry, but increase the ratio of remodelling to new construction. This would also tend to move more effort into improving existing properties, and even entire neighborhoods. Possibly (yes, I know this may be a stretch) reversing the trend of wealthier people moving out of the older neighborhoods, leaving them to become slums.
"Not compicated by the record keeping required,mind you, just complicated by the difference in the number of people who must comply."
I certainly don't see how that could be the case. As someone who has designed cost accounting systems, I can tell you that keeping track of the raw material and labor costs of a manufactured product which contains hundreds of parts is not trivial. Now we are saying that each and every one of those parts would have its own VAT component which would have to be tracked and input into a computer system separately from its unit cost.
How can you say that a VAT doesn't impose any additional administrative burden?
"In the interest of fair disclosure, I don't think the FairTax has much of a chance. Any very radical change in how taxes are collected means there will be some BIG WINNERS and BIG LOSERS. The latter will scream bloody murder! It's why radical change is tough to get through Congress -- and if it's your ox that gets gored, you won't think that's a bad thing."
That is a fair point, but it ignores the fact that the FairTax will create far more winners, at least within the USA, than losers. The biggest losers will be the foreign businesses which enjoy an advantage in international competition conferred upon them by the US tax code. Fortunately, they won't have much input into this decision, at least I hope that is the case.
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