Posted on 05/12/2005 12:25:08 AM PDT by FairOpinion
WASHINGTON - A presidential commission looking into how to make income taxes fairer and simpler heard pitches Wednesday from experts with ideas about revamping or replacing the current system.
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The commission examined plans to base taxes on spending rather than income, which could mean a national sales tax or a European-style value-added tax.
As for transforming the income tax, the commission heard proposals for comprehensive change and minor tinkering.
"Not one person who we encountered as we traveled the country told us that our current tax system was good for America and that we should leave it alone," said the commission's chairman, former GOP. Sen. Connie Mack of Florida.
After hearing complaints about tax laws, the President's Advisory Panel on Federal Tax Reform used this meeting to consider ways to replace the system.
Michael Graetz, a Yale Law School professor, offered an outline of how to meld income taxes with a value-added tax. That tax, used widely in Europe, imposes a levy on the increased value of a product at each stage of production.
Under his plan, consumers would see a 13 percent to 14 percent value-added tax appear on their purchases.
Individuals earning less than $50,000 and families making under $100,000 no longer would pay income taxes under such a plan. Those still paying income taxes would get a simplified system and a top tax rate of 25 percent.
"I am very skeptical that you can fix the income tax," Graetz said.
Federal Reserve Chairman Alan Greenspan has told the commission that he supports some combination of income and consumption taxes as a catalyst for economic growth. Others have warned about the dangers of a poorly designed hybrid.
A consumption tax could take the form of a national retail sales tax, a potential replacement for income, estate and payroll taxes. Americans for Fair Taxation offered a plan setting a 23 percent sales tax on purchases, with exemptions for the poor.
An alternate plan, offered by David Burton of the Free Enterprise Fund, would reduce the rate to 8.4 percent for individuals by also levying the tax on businesses.
In the event the current income tax was retained, experts made the case for ways to promote savings and to simplify credits and deductions.
That could mean letting businesses immediately expense their investments and expanding individuals' ability to save money tax free.
"Why go searching for some new, magic elixir with unknown results?" said Ernest Christian, director of the Center for Strategic Tax Reform. He said the value-added tax was an "exotic import" at odds with the U.S. tax experience.
Others endorsed keeping the incentives for homeownership and charitable giving that President Bush wants preserved, while reducing the many other deductions and credits now available.
The commission, which expects to make final recommendations this summer, discussed options for a flat tax that eliminates deductions and credits, reduces income tax rates and erases taxes on investment income.
"There's not a human being alive today who knows what's in the code," said Steve Forbes, a one-time presidential contender who favors the flat tax.
Commission members asked about how the country could shift to such a tax, wanting to make sure the government got the revenue it needed during that transition.
Former Sen. John Breaux (news, bio, voting record), D-La., the commission's vice chairman, asked whether people could accept a system that taxes wages but not investment income. Others raised questions about eliminating the current system's progressive tax rates.
Former Rep. Dick Armey, R-Texas, said it is a "big job" to convince voters that the poor and wealthy could benefit from a flat tax.
"What's fair is to treat everybody exactly the same as everybody else," he said.
Trying to bypass the lie doesn't work well.
I have read all the posts in between and they are almost uniformly bad and make it obvious you are not at all serious about the Nightmare VAT/Flat (which doesn't exist as we now know) but merely attack the FairTax as an artifice to attempt to keep the status quo.
That's been tried many times on these threads and you'll find it works no better now than it did for others.
The tax on every transaction under a NRST could be evaded by just one person. The retail collects the tax and doesn't remit it.
Instant witness and evidence to the fraud in issuing a written receipt to customer to effect that kind of transaction. Not to mention covering the books of the business as well as the certificates filed and purchasing sans tax with his suppliers.
Yep that one is going along way in volume sales to generate a profit without getting caught at it, LOL.
The "underground cash economy" isn't tax any more under a NRST than the current system.
Neither income nor sales is being taxed as regards the underground cash economy today by federal taxes. Of interest is what ever portion may represent a profit to such folk, much will be spent in legitimate business collecting the NRST from them.
And subtract a few million Americans visiting foreign countries and ... well?
Bring it back into the U.S. for use or consumption, guess what waiting at the ports, just as they do for collections of duties on incoming "souveniers" today.
H.R.25Fair Tax Act of 2005 (Introduced in House) SEC. 101. IMPOSITION OF SALES TAX.
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Wrong-O! You gave the link to illustrate how your Nightmare Flat tax (which does not exist) might have return free filing. The link does not show that at all as I pointed out (and it does not refer to ANY flat tax let alone a dream world one).
The FairTax is a far better example of a return-free tax. This next week the "Return Free isues" is only one of 3 panels to meet and it could very well include the FairTax but most probably won't since I think this is part of the President's direction to look at the existing tax system,
Nonetheless, the panel could certainly include the FairTax in such a discussion since it is return-free. It is your comments that are off the mark my man.
The misspeaking bit says PLENTY about you since you do it so frequently.Again with the unfounded claims. You point out me misspeaking once and now I do it frequently.
Apparently you cannot grasp that - as I have pointed out - the actual flat tax (i.e., one that actually becomes law in one or more countrys) never stays either flat and does not stay as a consumption tax too long.I believe that would happen with any tax system, including the NRST. Do you have any references of a NRST being implemented so we can compare?
That is what the links in #99 clearly show despite the fact you don't wish to read them. Since the Nightmare Flat is not a flat tax at all but merely the concept of one in complete theory, it does not qualify at all as a consumption (or any other kind of) tax at all - it is merely a pretty (to you) idea that you can harrangue endlessly about without defining it.Flat tax: a tax system consisting of two parts. The first part taxes businesses on their total sales minus material inputs, investment goods (deducted immediately, not expensed), wages and salaries, and pension expenses. The second part taxes individuals on wages and salaries and pension receipts.
The point of the #99 links is to illustrate what the flat tax in the real world becomes - a companion to the VAT and an embedding of the some part cost of taxation into prices. Your theoretical dream of either type ends up in the same place as those links show when both should be on the ash heap of history.I wasn't aware that Belgium, Poland, or Zambia had a flat tax. Do you have a source for that claim?
Should you try to draft a Nightmare bill (let's call it) for either of your Nightmare tax plans, you would encounter serious difficulties merely using the same code sections replacements. You are merely showing your lack of grasping what is involved in drafting such a bill ... that's understandable since you don't HAVE a tax system in mind and so can't draft a bill for it.Mark red herring off the list.
It is also true that you cannot show your Nightmare VAT/Flat to be revenue-neutral - which the FairTax is - since you don’t have anything but a conceptual figment of your imagination ... and a faulty one to boot.A VAT or flat tax could easily revenue neutral. And, BTW, the FairTax isn't revenue neutral, particularly if you look at it in real terms.
Nope ... just stating the truth. Sorry you can't take it.
You seem to like the term "logical fallacy". I would say that the simple term "fallacy" applies to most of your posts - and they are certainly not logical as witness your trying to weasel out of your statements referring to which theoretical tax system you "support".
no showing of revenue neutrality (which is required for Congress to enact such a law BTW).
Might be good to note that we can actually propose a tax cut now without being shot down by objection of one Congress Critter anymore.
Seems the way Bush got his tax cut past the Dims, is the Repubs allowed PayGo rules and the Budget enforcement act expire. Guess what, neither have been re-instated in any form much less the original:
Ersatz Congressional Budgeting
Jack Kemp, June 14, 2004
So employers won't have to generate W-2s and 1099s when your flat tax proposal is implemented?Probably some form of W-2, but not necessarily.
From the UK -April 12, 2005
US aims at VAT-only tax system
The US are considering the mother of all tax reforms: Ending all taxes in favour of a 23 percent sales tax:
Actually it's "23% of the gross payment" which means it too would tax all those taxes your UK friend was bitching about paying taxes on....Never mind the fact the joint committee on taxation claims it would have to be 57% to be "revenue neutral"...were you saying something about it has to be "revenue neutral" to pass muster?
You're merely flip-flopping again.No I'm not.
That has been clearly shown on this thread.No it hasn't.
Or peerhaps you prefer "misspeaking" again. Or maybe just lying?Easy, slick. You were wrong twice in just the first paragraph. If you want to start throwing the liar crap around, you better tape up your glass house.
To be accurate, you support the theoretical notion of a VAT or flat taxHate to break it to you but the FairTax is just a theory.
best described as a Nightmare VAT or Nightmare FlatBy using names like that you describe yourself more than any tax reform. This isn't grade school.
no showing of revenue neutrality (which is required for Congress to enact such a law BTW).BTW, revenue neutrality isn't required for Congress to enact such a law. So you either misspoke, lied, or were mistaken. Which was it.
The #99 merely shows you saying you prefer the VAT which we now know is true or not true depending ... your honesty problem again is showing again (or lack of it).It is a refrain...sigh. And it's very tiresome (but not surprising). I can see why you fit right in with the FairTax crowd.
But it really is a basically correct statement since the retailer is required to give a receipt which lets the buyer off the hook from the tax standpoint. Once that receipt is in the computer the seller would have to work to get it out along with the inventory track it leaves.
In addition, it would not be unheard of for a disgruntled ex-spouse or competitor or even a suspicious purchaser to turn in such evasion. By doing this sort of one-sided evasion the retailer opens himself up for lots of grief and potential criminal penalties since he has, in effect, performed this defalcation for a single sale. If he is doing this on a larger scale with many sales he exposes himself to an even greater likelihood of difficulty. If both parties collude that that just raises the likelihood of being detected.
Keep in mind also that there will be far, far fewer collection points to audit than with other tax systems additionally increasing the likelihood of detection. The merchant would have far more to gain under the VAT/flat system when it is possible to do single-sided defalcations by various means and have a far smaller statistical chance of being detected since there are far more collection points to hide behind. Also, the marginal rates are likely to be higher in such a system.
The underground economy IS indeed captured much more under a plan such as the FairTax since drug dealers, illegal aliens and others will pay the tax when they buy at retail.
The tens of millions of foreign tourists (something like 20 million or more in CA last year) will be hit up for tax and that is not offset by US citizens going to other countries since they already do that. The foreign visitors pay us no taxes now. A noticeable gain for the FairTax on several counts.
As Ronald R. once said about a flip-flopper - "there he goes again ..."
The links o the VAT countries describe how exemptions, excemtions and - in addition income taxCan you point me to the one that describes excemtions. Thanks.
are all part of the VAT/flat scene in actual practice.I don't believe any of those countries have a flat tax. In addition of the excemtions, can you point me to the one that has a flat tax?
Trying to bypass the lie doesn't work well.I wasn't lying. I simply misspoke.
Nightmare VAT/Flat (which doesn't exist as we now know)...
....Never mind the fact the joint committee on taxation claims it would have to be 57% to be "revenue neutral"
Of course such an estimate would have nothing to do with the fact the JCT that owes it very existence and purpose to that sameInternal Revenue Code that would be repealed under HR25,
==> Title 26 Internal Revenue Code Subtitle G - The Joint Committe on Taxation.
and JCT may have slightly adjusted their assumptions and estimates totally outside anything representing the the FairTax legislation as proposed, in favor of maintaining the status quo, hidden taxes and all.
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Prepared for Americans For Fair TaxationPrepared for Americans For Fair Taxation This report responds to Ken Kies’ letter to Chairman Archer of January 12, 1998. In his letter Mr. Kies propounds several objections to the Americans for Fair Taxation (AFFT) FairTax plan (FairTax) as raised by the Joint Committee on Taxation (JCT) staff. This memorandum addresses those objections with respect to three basic issue areas. They are:
I. The Revenue Neutral Rate The JCT, through Mr. Kies’ letter, posits that the FairTax would be revenue neutral only at a 30 percent tax-inclusive rate and a 42 percent tax-exclusive rate, and possibly higher (if other factors are considered (see pages 1-2)).
However, the JCT estimate goes against the weight of authority and is difficult to explain on analytical bases. Not only AFFT but many highly regarded researchers disagree with the JCT’s opinion. For example, Dale Jorgenson (Harvard) has found that the AFFT plan is revenue neutral at 22.9 percent.1 Jim Poterba (MIT) has found that the AFFT plan is revenue neutral at 23.1 percent.2 Laurence Kotlikoff (Boston University) found that the revenue neutral tax rate was 24 percent.3 Researchers at Stanford, the Heritage Foundation, Fiscal Associates and the Cato Institute have reached similar conclusions (22.3 percent to 24 percent). This memorandum demonstrates why the JCT analysis is incorrect and why the Jorgenson, Poterba and AFFT analyses that the AFFT plan is revenue neutral at an approximately 23 percent tax-inclusive rate. A. From a Macroeconomic Perspective, the JCT Calculation of the Rate Is Substantially in Error.
One way of viewing the revenue neutral rate needed under the FairTax replacement plan is to consider the effective rate to be equivalent to the following: Federal Taxes That Must Be Raised / GDP The proportion of the taxes raised under the FairTax should bear the same ratio to GDP as the taxes to be replaced by the FairTax bear to GDP. To arrive at our numerator, the taxes to be raised are the AFFT-repealed taxes; namely, the payroll taxes, income taxes, self-employment taxes, corporate income taxes, capital gains taxes and transfer taxes (death and gift). These replaced taxes, for fiscal year 1998, account for 17.8 percent of GDP. 4 That is because Federal receipts, as a percentage of GDP, are approximately 19.1 percent, and the FairTax plan would repeal 93 percent of current federal taxes and fees. 5 As for the denominator, since investment accounts for 14.6 percent of GDP, the FairTax base can be estimated to be about 85.4 percent of GDP.6 17.8 percent divided by 0.854 is 20.8 percent, the required revenue neutral AFFT tax rate (before the rebate is considered).7 From this aerial view, the conclusion reached by the JCT is clearly off target. In order for the JCT’s 30 percent tax-inclusive rate to be correct, the AFFT tax base would need to fall to 59 percent of GDP. In other words, the correct base would be about 31 percent less than the base we estimate. Likewise, in order for the JCT’s 42 percent tax-exclusive rate to be right, the AFFT tax base would need to fall to 42 percent of GDP.8 B. Detailed Analyses:
*** Snip ***
*** Snip ***
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And continues for another 36 pages of detailed analysis of errors both factual and procedural of the JCT "analysis".
"...were you saying something about it has to be "revenue neutral" to pass muster?
Hmm seems you missed that news in #166 above. But that's understandable, not everyone manages to keep up with the fast pace of changes going on in Congress now days.
Seems the way Bush got his tax cut past the Dims, is the Repubs allowed PayGo rules and the Budget enforcement act expire. Guess what, neither have been re-instated in any form much less the original:
Ersatz Congressional Budgeting
Jack Kemp, June 14, 2004
And since the Fair Tax estimates of revenue neutral rate were made before those Bush tax cuts, well golly, that 23% NRST rate may actually be abit too high and not be "revenue neutral" anymore afterall, especially if Bush manages to get any of his taxcuts made permanent, as he seems well on his way towards doing. Lets see Gift/Estate tax headed out the door, 10% lower bracket rates even them Dems love ....
Taxcuts means lower rates on a larger tax base as the economy grows. Even for an NRST the current revenues collected by government.
refer Tax Freedom Day 2005 PDF: http://www.taxfoundation.org/sr134.pdf
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Total Effective Tax Rates by Level of Government |
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| Year | Federal | State | Total |
| 1997 | 21.8% | 10.3% | 32.1% |
| 1998 | 22.4% | 10.4% | 32.8% |
| 1999 | 22.5% | 10.4% | 32.9% |
| 20000 | 23.1% | 10.4% | 33.5% |
| 2001 | 22.2% | 10.5% | 32.7% |
| 2002 1 | 19.6% | 10.2% | 29.8% |
| 2003 2 | 18.8% | 10.1% | 28.9% |
| 2004 3 | 18.4% | 10.2% | 28.6% |
| 2005 | 19.0% | 10.1% | 29.1% |
| Notes: Leap day is omitted to make dates comparable over time. Since depreciation is not available to pay taxes, GDP is an overstatement of spendable income for the purpose of measuring tax burdens. Depreciation is netted out of NNP. 0 Last year of Clinton administration when the HR25(Fair Tax Act) rate was estimated 1 Economic Growth and Tax Reform Reconciliation Act of 2001 Sources: Office of Management and Budget; Internal Revenue Service; Congressional Research Service; National Bureau of Economic Research; Treasury Department; and Tax Foundation calculations. |
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"The 'underground cash economy' isn't tax any more under a NRST than the current system."
Incorrect. A large portion of the underground cash economy is illegal labor. Those people will be paying the tax at the checkout counter, just like everyone else. However, unlike everyone else, they will not be eligible for the rebate. Therefore, illegals will be paying taxes at a disproportionate rate to everyone else.
Instant witness and evidence to the fraud in issuing a written receipt to customer to effect that kind of transaction. Not to mention covering the books of the business as well as the certificates filed and purchasing sans tax with his suppliers.Does the FairTax allow for random audits of customers?
Neither income nor sales is being taxed as regards the underground cash economy today by federal taxes.Nor would either be tax under a NRST.
Of interest is what ever portion may represent a profit to such folk, much will be spent in legitimate business collecting the NRST from them.You get seller not the buyer under a NRST. You get the buyer, not the seller under an income tax. Where's the gain?
Bring it back into the U.S. for use or consumption, guess what waiting at the ports, just as they do for collections of duties on incoming "souveniers" today.Do I have to vomit up the food I ate on my vacation? What about the hotel? I spent a lot of money at DisneyLand Paris. Do I owe you for that? You don't get all of my plane ticket, either. Do you?
"BTW, revenue neutrality isn't required for Congress to enact such a law."
The President has charged the panel with offering revenue neutral options. It would appear that he considers that an important element.
You seem to like the term "logical fallacy".Acutally, I doubt I've use the term as much in my whole life as I have with you in this thread. But I've never encountered so many logical fallacies.
no showing of revenue neutrality (which is required for Congress to enact such a law BTW).I'm still waiting. Were you misspeaking, lying, or mistaken when you made this statement? Which was it?
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