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"The IRS is an out-of-date, trillion-dollar-a-year drag on our economy," said King.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/
"I still have to see how they will handle the cost of doing business like buying new equpment and machinery. Without those write offs no one is going to be buying anything new and will hold on to the old stuff as long as they can."
It's a paradigm shift. The purpose of any tax write-off is so that you can pay for a particular expenditure with pre-tax money. With the FairTax, you pay for everything with pre-tax money. There may be some psychological incentive to spend for the tax deduction now, but with businesses having more money because of the removal of corporate income and payroll taxes, there will be an offset there. In addition, remember that because of the removal of imbedded taxes and the resultant price decline US produced goods purchased as business inputs will cost less than they do now - by about 20% or so.
Therefore, we would have a new business environment in which:
(1) Demand for US produced goods is significantly higher than it is now, which creates an strong incentive for busimess investments
(2) The cost of US produced business inputs is lower than it is now, and
(3) cash flows of businesses will have improved because of not having to pay corporate income and payroll taxes. Much of that cash flow, of course, will be used to lower prices in response to competition.
When you balance all that out, I think that it is reasonable to assume that there are plenty of factors which would, at the very least, offset the loss of the tax deduction for business capital acquisitions.
The same situation would hold true for charitable deductions and homes. Even though the FairTax does not provide specific tax breaks, the environment for those types of expenditures would be extremely healthy.
"None of those taxes are avoided by U.s. subsidiaries of foreign corporations, so you still haven't answered the question."
I don't think that I understand your question. Please restate.
"Any reasonable person knows that the labor supply cannot increase 30% in one year."
Therefore, Dr. Dale Jorgenson, former chairman of Harvard's economics department, is not a "reasonable person". Correct?
"....we don't just turn back the clock to 1813,..."
Oops - should have been 1913.
"The more I think about this whole thing the more I realize it's a pipe dream, we will probably end up with a VAT if we do anything at all."
Which would make Your Nightmare and Solid Supply Sider very happy campers.
I think there ought to be a choice of tax plans, this one is tiltled towards the rich, already established companies and thats why it is nothing more than just talk.
"I thought your were talking about Kerry LoL. That is funny!!"
Well, Your Nightmare and John Kerry do have a lot in common, come to think of it.
"New houses will have all the costs of the old system also until they are build entirely with components produced under the new system that would take years."
Incorrect. There is a transition rule that allows the holders of inventory on the implementation date to apply for a credit against the sales tax. This will enable them to pass along the savings immediately to their customers.
"If it were then prices in fast turning over areas would soon be wildly higher than those in slow turnover areas since the tax would be added after each sale. This means that homes in cities would soon be priced out of the reach of all but the richest."
Incorrect. This is a one-time tax. Used goods (including homes) are not taxable.
"No one denies that a tax system is costly."
But some are costlier than others and the range of variation is great. I haven't been able to locate data to support this, but I would bet that ours is by far the most complex and costliest on the planet. Do you really think we are getting value for the hundreds of billions of $$$ we are spending on our tax system?
"But such a drastic change would unleash a vast series of uncertainties which will require great understanding and political will and handling. The complexities and uncertainties of such a system weigh against such a drastic change from my perspective."
That is a fair point, but implicit in this perspective is that continuing on the path we are on is a lower risk alternative. The current system is growing like a cancer and the trendline indicates that the rate of growth is not only unsustainable, but accelerating. We are now up over 60,000 pages, according to CCH, and will pass through 100,000 sometime between now and 2010. The signs that the system is crumbling of its own weight are abundant.
There is no risk-free option and the rewards, if we do this right, are potentially immense.
I do agree that this will need more careful study before implementation, however.
A yes or no answer will suffice.No it won't because you are asking a question that has absolutely nothing to do with what we were talking about. The results of the Jorgenson/Wilcoxen model are based on a unrealistic labor supply response. If you model for a realistic labor supply response you don't get the results shown in J/W's experiment.
Therefore, Dr. Dale Jorgenson, former chairman of Harvard's economics department, is not a "reasonable person". Correct?I don't know him personally but I'm sure he is a very reasonable person. That is why he stated this about his model:
"The immediate increase in labor supply probably overstates the true short run effect because our model does not include any labor market frictions. Workers are able to move from one industry to another, or into and out of the labor force altogether, without transactions costs."
source
I think there is a significant point you may not be understanding correctly. Namely, businesses are exempt from paying the sales tax, and ALSO no longer pay ANY of the income or payroll tax under the current system. ALL business expenses are TAX FREE by virtue of it being a business expense.
You are used to thinking that the benefit of buying a printer for busniess use rather than personal use is you can deduct the cost of the printer from your income in terms of calculating your tax. Under the FairTax there is no income tax to get a deduction for, the advantage is you don't pay the 23%(30%) sales tax on the printer when you buy it. Likewise, in the factory example, under the FairTax there is no corporate income tax at all, so nothing to deduct from. The savings is, unlike a person building a house for his own consumption, none of the materials, nor any of the services contracted, will have the 23%(30%) tax added. Further, there would no longer be any matching payroll payments for the company (or any of the companies involed) to pay. This is a HUGE incentive for business expansion.
Also, keep in mind, even though individuals may get confused about the value of a tax deduction verses the benefits under the FairTax, large companies typically will not, and will exploit the BUSINESS FRIENDLY nature of the FairTax to expand American industry. Similarly, the average person will recognise the INVESTMENT&SAVINGS-FRIENDLY nature of the FairTax, and build wealth, and savings for their own retirement and their childrens' inheritance. (ALL savings and investments are tax-free under the FairTax.)
You rasing some excellent issues up for scrutiny. Please continue. I think it's important for people to understand how this thing actually works.
There's nothing statutory to back up that rhetoric.
However there is wording in the fairtax bill itself that identifies both halves of the payroll taxes as "wage base"...
Companies will lose that battle. Companies would pay their employee's the employer half of FICA...no savings there.
This is an very important issue you bring up. I think you are pointing out that a foreign business which has a significant of it's operations in the US now, will be as disadvantaged as a foreign company that does all of it's production off-shore and then just ships in the products, and you are correct. What the FairTax does, relative to the existing system, is essentially pusnish off-shore production and reward production in the US. So the larger portion of a company's production is in the US, providing jobs to our economy, the more they will be imune from the change to the FairTax, and the more incentive they would have to move MORE of their production here. Conversly, the less of a company's production is in the US, the greater the disadvantage they would have under the FairTax, however would have even GREATER incentive to move their production to the US.
Our existing system is the exact opposite, and rewards companies for moving their production to other countries, and punishes those who try to produce in the US.
I'm no Marxist, but I will admit that Marx was a brilliant man. The "heavy progressive income tax" called for in the Communist Manefesto is indeed an incredibly effective tool to redistribute wealth in a developed nation's economy, both internally, and internationally.
That is your nightmare, not mine.
Were I you, I'd renegotiate my contract. When I worked as a salaried employee, I made sure that there were ample provisions in my contract to compensate me for overtime work.
HST, if productivity increases were incentivised (e.g., made tax FRee), I am sure that labor (both blue and white collar) would respond accordingly.
Excellent point, AG. Very well clarified.
I have no reason to believe this to be true. But for the sake of argument, if what you are saying is so, then not only would workers have a net gain by no withholding, but their gross would also increase because employers would offer their portion of the payroll tax as a "raise" to their employees. This would lessen the ability of the employer to lower price to some degreee, but would allow more buying power to empoyees.
Personally, I think the most common response will be to let the employees keep their gross income the same, and benefit from no more withholdings. I think there may be some greedy companies out there who will try to lower the gross wages closer to the current net, so that the busniess benefits from the entire payroll tax elimination, and possibly even income tax. I would agree, there may be some very benevolent companies out there that would do as you say, let the employers keep their gross, and give them a raise equal to the employer's portion of the payroll tax, but I think that would be the exception not the rule. But there is certainly room for speculation.
Wow, that's bad... sorry about my last response to you. I should have profread better. I'm hoping you'll be able to discern what I meant, if not please let me know and I'll try again. :o)
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