Presidential Panel Hears About Tax System

AP/Yahoo News ^ | May 11, 2005 | MARY DALRYMPLE

[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.

[pigdog]

Quite the opposite. The studies by a number os "sane economists" show exactly the opposite ... prices declining a good bit.

You are welcome to your opinion but it should be recognized as such. More complete is available at many different places on the FairTax website or even in a number of the panel writeups and/or individual comments from the May 11 meeting of the Tax Panel.

[pigdog]

Guess I should have told you that I use only the spell checker in my WP since it's handier. I can see where you might have been confused by the reference.

It was hardly a lie, looey, merely the choice of spell checker that I made. Now if YOU'D offer to do my spell checking I mnight re-visit that choice.

[pigdog]

It is only a taxable event when it is sold for end use consumption; if you are buying it for resale it is not taxable.

It would help if you'd clarify exactly what it is you're buying and/or selling and under what conditions.

As it is the description is not clear.

[pigdog]

Please don't mumble your words and maeanings.

[pigdog]

Only in your dreams ... the Nightmare Tax as it stands is completely undefined.

A flat tax is one type of income tax - gottit?? It is levied using a base of - guess what - INCOME!

[pigdog]

Because, looey, this is an example to illustrate a point. It does not presume that the retailer is - like some - greedy. Implicit in the example is that market forces prevail and the retailer must compete with others offering similar things.

Get a crip!

[Always Right]

Actually I was pretty clear. I was talking about individual an individual (ie. consumer) so I was confused at why you thought there would be no tax consequences.

[pigdog]

The part of taxes being paaid by Joe P. are only the portion of the cascading at the level to the retailer. Taxes on the earlier cascading in the supply chain have already been paid by others but not by Joe P. He pays the retailer's cost of goods (which already have taxes embedded that have been paid by others) plus some portion for the retailer's income tax portion.

Joe P. forwards no part of the already-embedded taxes to the government (nor does the retailer); others have already done that and none of Joe P's funds go to the government for that portion. The $400 is the tax portion paid by Joe P. in the example. That is a lot less than the FairTax tax revenue that is generated.

[pigdog]

That helps - let me make sure we're on the same page (I think so).

Your question is what happens if an individual purchases a thing for his own end use directly from offshore with no middleman - say an Internet purchase from Hong Kong of A DVD player for example?

[Always Right]

The part of taxes being paaid by Joe P. are only the portion of the cascading at the level to the retailer. Taxes on the earlier cascading in the supply chain have already been paid by others but not by Joe P.

Bzzz, wrong answer. Joe P. and the other end consumers pay all the taxes in the whole supply chain. That is how your economists come up with the 20-30% embedded tax in all the products. The way they figured those numbers is ALL taxes end up in the final product. That is their assumption, at least until that assumption doesn't fit what their point is. Like when they talk about workers, then a new assumption is born, and it is the worker who pays. But I regress into the biggest fraud of your economists, changing assumptions to overstate their case for the fair tax.

[Always Right]

Your question is what happens if an individual purchases a thing for his own end use directly from offshore with no middleman - say an Internet purchase from Hong Kong of A DVD player for example?

It was not a question, it was a hypothetical situation on what the Sale Tax police will consider suspecious and target an individual for. If they recieve lots of packages from foreign countries, it is highly likely that they are trying to avoid paying sales tax and would raise red flags to tax auditors.

[Your Nightmare]

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.

You're kidding, right? Are you really so ignorant of the plan you are making a fool of yourself defending?

If something is shipped to an individual that is a taxable service. The FairTax taxes "taxable property or services."

I think your buddies might want to get together and buy you a new fishing rod. Their movement was doing much better before you came back on the scene.

[ancient_geezer]

The Burton analysis above is bogus.

So speaks LewisLynn ex-cathedra. _yahhhhhhhn

There is no "tax exclusive rate" for income...period.

More delusion and rambling.

 

The Wrong Camera: The Denominator of the
Tax Incidence Equation.
Dan R. Mastromarco; LLM, Argus Group, Washington D.C.
Tax Analysts Document Number: Doc 1999-32575
Citations: (October 8, 1999)

---

B. Use a Consistent Size Screen to Portray It.

[120] Presentation of a rate of tax on a tax-exclusive basis simply means that the rate of the tax is expressed as the tax paid over a base determined after the tax was already imposed (for example, taxable income under our personal income tax system that is net of the tax). In other words, a tax-exclusive rate would be defined as:

$ tax paid
-------------------------------------------------------------------
($ base on which the tax was imposed)-($ tax paid)

[121] The rate therefore reflects the ratio of taxes paid to what is left in the base, such as net of tax income.

*** SNIP ***

 

Get it?

It obvious you don't. an escapee from the public school system perhaps?

[ancient_geezer]

Guess I should have told you that I use only the spell checker in my WP since it's handier.

Because you added your favorite spellings to the dictionary, like I do?

Always was a pain having to go through an click on all them wurds that WP don't know how to spell and all. ;o)

By the way, creative spelling has been traditionally connected with literary genius. Why even evrey surviving signature of teh ole bard hisself, Shakespeare, is spelled diffrently in each and ever wun of them signatores.

And ole Clark must have set some sort of record in history, having 26 different spell'ns of Souix, as he wrote his jernals on trek across the NW territories with Merrierwhether Lewis.

[pigdog]

Most probably that would fall under:

"`(c) Coordination With Import Duties- The tax imposed by this section is in addition to any import duties imposed by chapter 4 of title 19, United States Code. The Secretary shall provide by regulation that, to the maximum extent practicable, the tax imposed by this section on imported taxable property and services is collected and administered in conjunction with any applicable import duties imposed by the United States.

`(d) Liability for Tax-

`(1) IN GENERAL- The person using or consuming taxable property or services in the United States is liable for the tax imposed by this section, except as provided in paragraph (2) of this subsection.

`(2) EXCEPTION WHERE TAX PAID TO SELLER- A person using or consuming a taxable property or service in the United States is not liable for the tax imposed by this section if the person pays the tax to a person selling the taxable property or service and receives from such person a purchaser's receipt within the meaning of section 510."

so the answer would depend upom the Regulations issued by the Treasury Secretary.

I thought you had some specific situation in mind - apparently not. You don't indicate whether your thing being imported is subject to import duties. Are you still attempting to say you would be repeatedly buying for retail use some item from some offshore source? Does that undergo the import duty condition or not?

[lewislynn]

The Burton analysis above is bogus.

------

The rate therefore reflects the ratio of taxes paid to what is left in the base

So what? It's still less than meaningless and not any less bogus.

Your bogus chart shows that 15 is 17.65% of 85...SO WHAT? In spite of what any moron at AFT says, that is NOT a tax rate exclusive or inclusive.

What does the percentage of tax paid over what is left prove?

BTW, the tax base isn't 100% of your income.

So speaks LewisLynn ex-cathedra.

I have no idea what that means..do you?

[pigdog]

Buzz yourself ... The cascaded portions of taxes prior to the purchase by Joe P. have already been sent on to the IRS before Joe P. arrives and are no longer taxes insofar as Joe P. can see them but merely a higher purchase price.

The fact that he bears the brunt of these intervening (cascaded tax) price increases in no way means that his funds are used to pay those tax amounts (they have already been paid by others in the chain). Joe merely sees the higher price at the end and only a portion of what he pays actually applies to the taxes the retailer pays - as I have said.

If that were not true then every buyer along the chain would be repeatedly paying (and his seller paying to the IRS) multiple instances of tax to the IRS over and over again - the full cascaded increases from the inception of the chain sent repeatedly as tax payments. That obviously is not the case. Once those tax payments have been made upstream in the cascade chain they merely become an increase in the price of the thing and no longer figure into "paying taxes" - those have already been paid and Joe does not pay them again but just bears the higher cost of them that is embedded in what he buys plus some extra amount ($400 in the example) for the current IRS tax payment from the retailer.

[pigdog]

Talk about the pot calling the kettle black ...

[pigdog]

He KNOWS you don't looey - and now you're just confirming that to him. LOL!!!

[lewislynn]

You speak for him, do you chew his food for him too?