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.
Whatever twist your tail lewislynn.
The simple fact is the tax exclusive measure is nothing more than a convenient ratio for the customer to use calculate how much more he must add to price to pay his full bill, and nothing more.
From the seller's perspective, which by the way the perspective from which HR25 was written, a tax inclusive measure is the factor used to calculate taxes to be remitted from gross sales receipts for state sales taxes.
Just had to fill a state sales tax form out for some retail I sold in the last month from a sideline, and tax inclusive rate is indeed the methodology used even for state/county sales tax filings.
Sorry, lewislyn you just do not have a leg to stand on in this one, as was clearly pointed out in the Burton analysis above.
I believe you're off on the wrong foot, here.
The Section you post is discussing taxes imposed and - if you have retained your shoebox full of receipts - you are quite in the clear regardless. It is the seller of the thing that has the problem here, not you the buyer. Now of course if you're the seller pulling some stunts that's quite another matter. Most sellers, if audited, would have to produce a number of records showing they collected and paid the tax but the buyer is protected SO LONG AS HE GOT A RECEIPT - it's not even clear that he even has to show these in any event since he has the presumption of innocence on his side and the burden of proof is on the government.
The seller (the one in the dispute with the gov't.) is the one who has the burden of production. Do you feel he's going to show in his documents somehow that you bought something and did not pay the tax?? If that is indeed your concern, as I've said, keep the shoebox full of receipts.
You might go vomit as you so nicely suggested in #177.
At least the ol' duffer didn't say "misspeak"; he said "mistaken".
You might adopt that sort of honesty.
If I buy something overseas that is shipped for consumption in the US, it is absolutely a taxable event. The only way it would not be is if I was a manufacturer or reseller.
You are TOO funny. I actually I thought you would get looey, your spell checker, to correct my horrible spelling,
The statement stands as written. The links describe exactly what I said in the earlier post. Surely you are aware that a flat tax is merely one TYPE of income tax. My comment referred to the tax piling-on with any sort of income tax (or other as far as that goes) in addition to the VAT. That has apparently been the universal experience of countries adopting a VAT.
Perhaps you can show us some number of the countries (which you say is 130) where the VAT has been in effect for a few years that have NOT experienced that tax growth.
Do you feel he's going to show in his documents somehow that you bought something and did not pay the tax??
Of course under circumstances that such documentation is produced by the selller, the purchaser is in deep dodo because there would be prima-facia evidence that purchaser had fraudulently tendered an invalid certificate to evade that tax, pretending to be a business.
SEC. 505. PENALTIES.
(c) Reckless or Willful Assertion of Invalid Exemption-
- `(1) CIVIL PENALTY; FRAUD- Each person who recklessly or willfully asserts an invalid intermediate or export sales exemption from the taxes imposed by this subtitle shall be liable for a penalty equal to the greater of $500 or 20 percent of the tax not collected or remitted.
- `(2) CRIMINAL PENALTY- Each person who willfully asserts an invalid intermediate or export sales exemption from the taxes imposed by this subtitle may be fined an amount up to the amount determined in accordance with paragraph (1) or imprisoned for a period of not more than 1 year or both.
`SEC. 103. RULES RELATING TO COLLECTION AND REMITTANCE OF TAX.
`(a) Liability for Collection and Remittance of the Tax- Except as provided otherwise by this section, any tax imposed by this subtitle shall be collected and remitted by the seller of taxable property or services (including financial intermediation services).
`(b) Tax to Be Remitted by Purchaser in Certain Circumstances-
- `(1) IN GENERAL- In the case of taxable property or services purchased outside of the United States and imported into the United States for use or consumption in the United States, the purchaser shall remit the tax imposed by section 101.
- `(2) CERTAIN WAGES OR SALARY- In the case of wages or salary paid by a taxable employer which are taxable services, the employer shall remit the tax imposed by section 101.
`(c) Conversion of Business or Export Property or Services- Property or services purchased for a business purpose in a trade or business or for export (sold untaxed pursuant to section 102(a)) that is subsequently converted to personal use shall be deemed purchased at the time of conversion and shall be subject to the tax imposed by section 101 at the fair market value of the converted property as of the date of conversion. The tax shall be due as if the property had been sold at the fair market value during the month of conversion. The person using or consuming the converted property is liable for and shall remit the tax.
`(d) Seller Relieved of Liability in Certain Cases- In the case of any taxable property or service which is sold untaxed pursuant to section 102(a), the seller shall be relieved of the duty to collect and remit the tax imposed under section 101 on such purchase if the seller--
- `(1) received in good faith, and retains on file for the period set forth in section 509, a copy of a registration certificate from the purchaser, and
- `(2) did not, at the time of sale, have reasonable cause to believe that the buyer was not registered pursuant to section 502.
`(e) Purchaser Liable to Collect and Remit in Certain Cases- In the case of any taxable property or service which is sold untaxed pursuant to section 102, if the seller is relieved by reason of subsection (d) of the duty to collect and remit the tax imposed by section 101, then the duty to pay any tax due shall rest with the purchaser.
`(f) Barter Transactions- If gross payment for taxable property or services is made in other than money, then the person responsible for collecting and remitting the tax shall remit the tax to the sales tax administering authority in money as if gross payment had been made in money at the tax inclusive fair market value of the taxable property or services purchased.
`(g) Intercompany Sales- Firms that make purchases from affiliated firms that are untaxed pursuant to section 102, or make sales to affiliated firms that are untaxed pursuant to section 102, shall not need to comply with the requirements of subsection (d) (relating to certificates) for said purchases or sales to remain untaxed.
PayGO??? PayGo??? Where did I say PayGo???
Please re-read my #210. It is a political process that prevents (all that sort of "checks and balabnces" stuff the pols like to claim.
Let me know when you get that 30% reduction (or increase) through in the form of a bill ...
as was clearly pointed out in the Burton analysis above.
The Burton analysis above is bogus. Here's why:
The tax exclusive rate for the fairtax is 29.87% on the purchase...
The tax exclusive rate shown for the income tax isn't...it's 17.65% of what's left after the tax....So what? It's less than meaningless.
There is no "tax exclusive rate" for income...period.
Get it?
Surely you are aware that a flat tax is merely one TYPE of income tax.No it isn't. Surely you don't think a flat rate makes a flat tax? A flat tax is a specific type of consumption tax.
Let's take a more detailed look at your example. Indeed, there are embedded taxes in the $5,000 watch cost and let's say for the purposes of your example (for which BTW we will use a 25% tax inclusive rate) we simplify things to define that $1,000 are these embedded cascading taxes.
We now have Joe Pimp buying a $4,000 and paying $5,000 with a small part of the $1,000 cascading increase representing income tax paid by the seller. Let's be generous and say the amount that actually represents the tax collected is $400 though I would think it would be quite a bit less.
The other $600 goes not to the government but to the cost of goods of the retailer in obtaining the watch (which in turn would have cascaded taxes embedded but these are not part of the issue in the example). Joe P. has now unwittingly helped our tax revenues to the tune of $400.
Now under the FairTax let's say that the $4,000 watch (which now has $0 cascaded into the cost of goods) is purchased by Joe. This means a 20% reduction in the price to the retailer and presumably a corresponding reduction to Joe.
At a 25% tax inclusive rate, Joe's $4,000 purchase would have a sales tax collected by the seller of $1,000 who then passes on as tax revenue not the original $400 but $1.000 - a significant increase. Most likely the actual increase would be much greater.
The FairTax, then, does both reduce the price and capture more tax revenue from guys like Joe P. and his cocaine cash. He should be tickled since the watch is much cheaper. The gov't. should be tickled since they get more from him and you and I should be tickled also since Joe is now helping reduce our tax burden.
This means a 20% reduction in the price to the retailer and presumably a corresponding reduction to Joe.
Why would, more accurately, why should the retailer reduce his price when he knows there's a 30% tax waiting to be paid at the other end of any of his gains?
I really have no idea what you are talking about or are trying to explain. Cascading is the accumulation of taxes at each level. If there is $1000 of embedded taxes, there certainly is $1000 of taxes actually going to the government through various income and payroll taxes. These so-called cost of obtaining the watch have nothing what so ever to do with anything.
Joe P. was a coke dealer, not a user in the earlier example.
In the example you cite you're a making the assumption that Joe User reports and pays taxes on his income including that he uses for the drug purchase. It's more likey that income goes unreported and/or is removed from the tax base since the dollar amounts involved in serious drug use are high and Joe U. should be smart enough to not want to have his returned flagged by the IRS (which DOES have the power to do that sort of thing) since that would ensnare him in the never-ending-hell of the IRS and its tender mercies.
In other words, I doubt that the IRS will ever see the $1,000 in tax you claim they receive. Probably more likely, I think, is that they receive little or none which makes the example not meaningful since no one would be taxed.
You should be able to answer that by reading the bill. Hint: the answer is no - a retail sale (not shipping) is the taxable event.
Certainly you're correct that a bill is not yet a law and bills can be changed as they go through Congress.
That's part and parcel of our political process and I'm not suggesting that the process be changed. I would hope, though, that there is enough impetus behind the FairTax to retain the essence of its present form. It is quite good as I think most people who read it would quickly realize.
I guess it is the job of the proponents to work toward that end - and I intend to do so.
You seem to be overlook the reduction in prices that I believe is offered by a tax sush as he FairTax. And, additionally, you seem to be looking past the prebaate.
Both of these things help mitigate the situation you mention.
What sort of "avoidance" are you including in your statement? And what sort of tax laws apply?
We need some more specifics to talk about it.
I'm thrilled to see you posting here, old friend!
It's been too long.
With reference to the SSN question you had, here is the text of HR25 on that point (Sec 302):
"
`(2) IDENTIFICATION REQUIREMENTS- In order for a person to be counted as a member of the family for purposes of determining the size of the qualified family, such person must--
`(A) have a bona fide Social Security number; and
`(B) be a lawful resident of the United States."
Obviously the political will must be there to enforce that language, but it is at least there. I agree with you about the illegals & SSA $$$ but notice that the language specifies lawful resident (not a resident of some other country).
Presumably you are talking about the FairTax when you use the term "NRST".
The bill does not require any taxpayer (as opposed to a tax remitter) to retain records. If a taxpayer is suspicious enough of his own government then he may certainly stick all his receipts in a shoebox and protect himself. I doubt he would ever use them since the act of receiving an invoice is what is called out in the law, not retaining it nor presenting it.
As has been pointed out there must be a more legalistic basis for a taxpayer to be draggen into the dispute - mere suspicion isn't enough. If that's your concern then keep your shoebox collection.
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