Posted on 03/31/2005 7:31:46 AM PST by rwrcpa1
A national sales tax By George Will
March 31, 2005
WASHINGTON -- The power to tax involves, as Chief Justice John Marshall said, the power to destroy. So does the power of tax reform, which is one reason why Rep. John Linder, a Georgia Republican, has a 133-page bill to replace 55,000 pages of tax rules.
His bill would abolish the IRS and the many billions of tax forms it sends out and receives. He would erase the federal income tax system -- personal and corporate income taxes, the regressive payroll tax and self-employment tax, capital gains, gift and estate taxes, the alternative minimum tax and the earned income tax credit -- and replace all that with a 23 percent national sales tax on personal consumption. That would not only sensitize consumers to the cost of government with every purchase, it would destroy K Street.
``K Street'' is shorthand for Washington's lawyer-lobbyist complex. It exists to continually complicate and defend the tax code, which is a cornucopia from which the political class pours benefits on constituencies. By replacing the income tax -- Linder had better repeal the 16th Amendment, to make sure the income tax stays gone -- everyone and all businesses would pay their taxes through economic choices, and K Street's intellectual capital, which consists of knowing how to game the tax code, would be radically depreciated.
Under his bill, he says, all goods, imported and domestic, would be treated equally at the checkout counter, and all taxpayers -- including upward of 50 million foreign visitors annually -- would pay ``as much as they choose, when they choose, by how they choose to spend.'' And his bill untaxes the poor by including an advanced monthly rebate, for every household, equal to the sales tax on consumption of essential goods and services, as calculated by the government, up to the annually adjusted poverty level.
Today the percentage of taxpayers who rely on professional tax preparers is at an all-time high. The 67 percent of tax filers who do not itemize may think they avoid compliance costs, which include nagging uncertainty about whether one has properly complied with a tax code about the meaning of which experts differ. But everyone pays the cost of the tax system's vast drag on the economy.
Linder says Americans spend 7 billion hours a year filling out IRS forms and at least that much calculating the tax implications of business decisions. Economic growth suffers because corporate boards waste huge amounts of time on such calculations rather than making economically rational allocations of resources. Money saved on compliance costs would fund job creation.
Corporations do not pay payroll and income taxes and compliance costs, they collect them from consumers through prices. So the 23 percent consumption tax would allow taxpayers to stop paying the huge embedded cost of corporate taxation. Linder says the director of the Congressional Budget Office told him it costs individuals and businesses about $500 billion to remit $2 trillion to Washington. And studies show that it costs the average small business $724 to collect and remit $100.
In 1945, corporations paid more than one-third of the government's revenues. Now they pay only 11 percent because corporations, especially multinationals, are voluntary taxpayers. In a world increasingly without borders that block capital movements, corporations pay where the burden is lowest. Linder says $6 trillion in offshore accounts would have an incentive to come home under his plan.
Furthermore, by ending payroll and corporate taxes, America would become the only nation selling goods with no tax component -- such as Europe's value added tax -- in their prices. With no taxes on capital and labor, multinationals would, Linder thinks, stampede to locate here, which would be an incentive for other nations to emulate America. ``This,'' Linder says, ``would unleash freedom around the globe.''
Critics argue that ending the income tax, with its deductibility of charitable contributions, would depress giving. Linder says: Piffle. In 1980, when the top personal income tax rate was 70 percent, a huge incentive for giving, individual charitable contributions were $40.7 billion. In 1986 the top rate was reduced to 28 percent, and by 1988 charitable giving was $86.7 billion. The lesson, says Linder, is that we give more money when we have more money.
When Speaker Dennis Hastert published a book last year, he was startled that interviewers were most interested in talking about Linder's bill, which then had 54 co-sponsors. This year Hastert added Linder to the Ways and Means Committee. Linder cheerfully says his bill would reduce Ways and Means to ``a B committee'' by ending the political fun of making the tax code ever more baroque for the benefit of K Street's clients. Bliss.
Ping
Beat ya to it!
http://www.freerepublic.com/focus/f-news/1374450/posts
It'll never pass: the power of Congress lies in their ability to dispense favorable tax law.
Without that, how could our Congresscritters attract campaign contributions?
This needs to be discussed and discussed often. the only way the ridiculous tax code will ever be scrapped is if we keep this issue on the forefront. The fair tax is a great idea. It virtually eliminates the IRS, and frees up millions of dollars of capital that are currently being expended on monitoring the tax implications of each and every business move. Those dollars can be allocated for new product lines, new services, hiring employees, lowering prices, etc.
Nonsense. The power to regulate is the power to pick winners and losers in the marketplace.
The bulk of lobbying is done so for the purpose of altering the tax code in the clients favor.
"And his bill untaxes the poor by including an advanced monthly rebate, for every household, equal to the sales tax on consumption of essential goods and services, as calculated by the government, up to the annually adjusted poverty level."
The main bjection I have to this is calling it a 23% sales tax.
When you by something for $100 and there is a 23% sales tax what would you guess the final cost would be? $123, right?
WRONG!
It would be more like $131, because $31 is 23% of $131. In other words it is really a 31% tax ADDDED to the cost.
This 23% figure they use is a 'tax-inclusive' number- meaning you count the tax as a percentage of the final price WITH the tax included.
In other words, it is a DELIBERATE DECEPTION.
'Tax-inclusive' amounts are near impossible to calculate in your head.
I am willing to discuss the 'fair tax' (although I dont think $31 added is fair) but only if they are not going to use deceptive terms.
I would prefer a FLAT TAX on income -everyone pays 10% no exceptions!!! (including no mortgage interest deductions)
I honestly don't think so, because the importance of regulatory favors to those with an interest in buying influence will then be greater than ever, because favorably regulation will be their only remaining means to tweak the marketplace in their favor. That doesn't mean that NRST won't reduce the economic effects of political meddling; it would.
I still have concerns about a burgeoning black market should NRST be adopted. Frankly, my focus is upon reducing the need for government interference in the marketplace in the first place, via constructed markets in risk offsets that depend upon real tort reform and insurance deregulation.
That would rupture the entire banking system.
If you would like to be added to this ping list let me know.
John Linder in the House(HR25) & Saxby Chambliss Senate(S25), 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.25
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:
why?
The only question I have is who watches the tax collectors? Everyone engaged in commerce will become a tax collector, and there will have to be some system for reporting the collection and remittance of taxes. Yep, businesses will have to be subject to audits by some governmental agency to ensure they have been complying with their requirements as tax collectors.
So the IRS may "disappear", but it will be replaced by some equally burdensome agency in short order. The opportunities for businesses to understate their sales will be simply too tempting for the unscrupulous to resist with an immediate 23% cash return on every dollar of sales not reported (plus any state and/or local sales taxes evaded).
You just brought lobbying back to the forefront in tax policy. Take a look at AG's links for a better understanding of the proposal.
The discussion does seem deceptive, however it is used as a comparator to the income tax (inclusive) and uniformity is the goal. In many discussions you will see both the tax inclusive rate and the tax exclusive rates.
You mean like currently is done with sales taxes?
Yep, businesses will have to be subject to audits by some governmental agency to ensure they have been complying with their requirements as tax collectors.
You mean like currently is done with sales taxes?
Dude. The cost of products will not go up by 23%.
I have no objection at all to the fairtax. I'll take home my entire paycheck and I can do with it what ever I want.
Check out the following website: http://economics.about.com/cs/taxpolicy/a/more_fairtax2.htm
"concerning the increased cost of articles and services given a 23% federal sales tax, is the reduced costs in the product itself due to the lack of taxes on profits all along the chain of production, supply, and sales.
Under the current system each step of the business process must consider the reduction in profits that income taxes will cause, and so, price accordingly.
If I supply ore to a steel manufacturer, I must do so at an after tax profit, or I won't be in business very long. Likewise, so must the steel company, and those who sell their transportive services, equipment, and support services, to us; and so on up the line until the consumer buys the automobile, or the government buys the bridge. Income taxes compound upon income taxes, each cranking up the ultimate cost.
Without this chain of tax the article itself becomes, via competition, much cheaper, and so also the amount that 23% (times a smaller price) would represent. It is certainly conceivable that the final 'federal sales tax added' cost may end up being cheaper for many products than they would have cost without it under the present system. Cheaper products benefit all levels of government as well, thus, reducing their expenses and making for lower taxes than 23% that may seem necessary now."
That is not the case with the Fair Tax. Everyone gets the rebate. Therefore, it is not necessary to figure everyone's income (like we're not doing that now!). You would never file an income tax return again. EVER!
The reason there is a rebate is so that special interests don't create exemption after exemption. Should the first $10 of an Armani suit be exempt from tax, as well as a suit you buy at JC Penney? For example, in Texas, lawyer fees are not subject to state sales taxes by you pay sales tax on getting your lawn mowed. Guess who rights the tax laws?
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