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.
The FairTax replaces the income tax and is not "on top" of it which you should have realized had you done even minimal reading on links provided many, many times on theese threads. I'd suggest you read the bill itself.
Frankly, I doubt that 80% endorse things as "totally fine" the way they are. I suspect it's more like that portion actually detests things the way they are but have a "deer-in-the=headlights" approach to accepting the status quo thinking they can do nothing about it. Certainly, the tax system CAN be changed to be far better from the standpoint of individual liberty.
To my way of thinking, a tax is "fair" when everyone pays the same rate with the pretax protecting the lower-income folks and each person can decide when and how much tax to pay by timing his purchases. Do you not agree???
The lottery suggested by you and Ben F. is regressive in the extreme if everyone to participate in it but at least it is up to the buyer to decide to participate or not. Perhaps you should get some Congressman to introduce such a bill. It would be interesting to see how it fares.
Yeah, the UK guy's complaints aboput their tax system were really funny, but well-founded. I'd like to see some of a taxpayers comments from, say, Zambia which boasts about the most wunnerful VAT system ever yet also has both a personal and corporate income tax. That's truly a nightmare (notice the small "n" so as not to confuse a real VAT/income tax system with the Nightmare Tax identified on these threads).
I certainly enjoyed your comments about the governed offering up a restricted set of rights to the governing. That has continued to be gradually usurped ever since it begaan with maybe the biggest kick in the pants to boost it along from a guy named Woodrow Wilson who I think must have been the hero role model for FDR etc. as well as the current crew of liberal crazies.
The 30% guy you mention seems to be one of the unalterably-opposed (i.e., status quo) guys as you'll probably come to see. It is up to us, the voters, to get on the backs of the Congressmen to support and pass the FairTax without making it any sort of hybrid (Zambian-like VAT and/or income) tax. If more of the status quo defenders would get on board to help it would get done that much quicker. THEN they could work to change it ... and even slow down their purchases if they don't like the level of government spending - few do, I think. And in any event they would be able to see what government actually is costing them which they can't now no matter how arcane their arguments in support of the status quo.
That is why I have trouble with some of your assertions on the powers of the government to lay and collect any manner of tax it sees fit and the idea that it also allows for liberal powers to us force against the people.
Unfortunately that has been the interpretation right from the very first day of its ratification by those we hold to be the founders themselves, not just some extension of a prenumbra in a modern day court.
As far as the use of force to collect a tax, seems the all time example of that lay with the ole General and first President himself George Washington collecting a still tax from the farmers in Pennsylvania. And that was right out of the gate after ratification of the Constitution.
George Washington's Proclamation Whiskey Rebellion August 7, 1794:
http://www.yale.edu/lawweb/avalon/presiden/proclamations/gwproc03.htmGeorge Washington's address on October 20 1794
to General Lee at Bedford, PA
As far as limits on powers to lay collect those taxes the first tax case before the USSC, comprised of several members of the Constitutional convention responsible for the provisions regarding taxation, made clear what little limts to tax there actually are.
Hylton v. United States(1796), 3 U.S. 171
"A general power is given to Congress, to lay and collect taxes, of every kind or nature, without any restraint, except only on exports; but two rules are prescribed for their government, namely, uniformity and apportionment: Three kinds of taxes, to wit, duties, imposts, and excises by the first rule, and capitation, or other direct taxes, by the second rule. " "the present Constitution was particularly intended to affect individuals, and not states, except in particular cases specified: And this is the leading distinction between the articles of Confederation and the present Constitution." "Uniformity is an instant operation on individuals, without the intervention of assessments, or any regard to states," "[T]he DIRECT TAXES contemplated by the Constitution, are only two, to wit, A CAPITATION OR POLL TAX, simply, without regard to property, profession, or any other circumstance; and a tax on LAND."
If that does any damage to any preconceived notions on what national government can or can't do as regards taxes, not much I can do about that.
unfortunately, I think that is why it is still doomed
It may be doomed, but not because of lack of any effort on the part of FairTax folks.
or it will be hashed up with a hybrid income tax mess.
The sponsors (Linder in the House, & Chamblis, Senate) of the AFT legislation, agree with us in any such attempts that might lead to substantive change in HR25. The bill will be withdraw from consideration, and none of us will support an effort pushing for a hybrid anything.
The real danger coming at us in the way of hybrid taxes comes out of folks like NCPA & Bruce Bartlett pushing a EU style VAT ontop of the current tax system and totally against retail sales taxes as being too visible and hard to increase revenues to government with.
The Fair Tax is the closest we have come to ridding ourselves of the burden of opressive income taxes. It has legs, it has a bill in the house, it has co-sponsors and it has the ear of the tax panel. We may not get it in its proposed form but we sure do have a chance. If we don't grab it now we may not have another chance in our lifetimes.
I have been a layman economist by necessity for 25 years. I'm not an expert but when I hear that international corporations will relocate jobs and headquarters here in the US because of the FT I believe them. It only makes sense to situate your company where corporate taxes, whether income VA or other are not burdensom.
I can't imagine the explosive growth that will occur under a FT. Yes prices will rise, yes it will be a difficult transition. New home prices? Yeah that's a problem but escalations of 10-20% a year in the price of homes in my neighborhood has not stymied demand.
We can argue details till the sun goes down but I'll tell you right now nothting one the table that I know of would be as good for the economy as the fair tax.
Yes, and think of the incentive to corporate relocation to here that is offered by Sec. 905 of the FairTax bill!!
. I suspect it's more like that portion actually detests things the way they are but have a "deer-in-the=headlights" approach to accepting the status quo thinking they can do nothing about it.
That, unfortunately, seems to be an all to prevalent attitude that has been with us from our very beginnings. The key is overcoming it with resolve. There is little doubt among historians that a poll taken in 1776 in regard to a revolution to cast of the chains of the English, would have shown less support than a national retail sales tax has today in casting off the chains of the federal income tax.
"Deer-in-the-headlights" were around before we even had headlights ;O)
"all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed."
Declaration of Independance
Despite foolish court precedents, the constitution is just a fancy way of describing the overriding CONTRACT between the ‘governing’ and the ‘governed’.
Simple test for you to distinguish the difference between law and mere contract. Exercise of a law can kill you inspite of your immediate objections to such violation, exercise of the provisions of a contract can't.
Contrary to some notions offered in this and that quarter to the contrary, a constitution is not a contract. A constitution is however an imposed "Supreme Law of the Land" instituted for particular purpose, that of defining the powers and limits of a government. You and I are bound to a constitution's government by our mere presence under the jurisdiction(read guns) of the govenment it defines and by no other factor, inspite of all rhetorical or philosophical conjectures of social contracts and such to make reality more palatable to those that don't exactly like their exposure to reality in raw terms.
Yes, and think of the incentive to corporate relocation to here that is offered by Sec. 905 of the FairTax bill!!You mean the one that says the FairTax is an income tax for foreign entities? That's a lot of incentive to relocate.
I take it he's saying that the incentive would be to become a domestic corporation.
You mean the one that says the FairTax is an income tax for foreign entities? That's a lot of incentive to relocate.
Seems to me I remember that Conservative Goddess has weight in on this providing some insights on this provision in past threads. Perhaps she can weigh in here on those issues.
Facing a 23% tax on income earned in the United States by foreign Corporations would appear to be an excellent incentive for said corporations to relocate headquarters and manufacturing to the U.S. where they are not subject to such a tax.
I note it also provides an out in paragraph(c) providing a strong invitation for foreign governments to enter bilateral tax treaties with the U.S. that can provide protection of our corporations and business interests operating under the jurisdictions of their countries in return for lower tax rates and protections extended to their businesses operating here.
H.R.25Fair Tax Act of 2005 (Introduced in House)
`SEC. 905. WITHHOLDING OF TAX ON NONRESIDENT ALIENS AND FOREIGN CORPORATIONS.
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Once again, you miss the point ... certainly the descriptuion you use applies to one of us.
I'll leave it to the readers of the post to decide which is which ...
BINGO!!!
On the money, too, old fellow!!
The WTO Lovers will hate it along those countries trying to punish us tax wise (more than we already do ourselves, that is).
The WTO Lovers will hate it along those countries trying to punish us tax wise (more than we already do ourselves, that is).
HR25 generally and Sec 905 specifically goes a long ways in providing options to address issues raised by CATO concerning international tax competition, in their Handbook for Congress:
I note it also provides an out in paragraph(c) providing a strong invitation for foreign governments to enter bilateral tax treaties with the U.S. that can provide protection of our corporations and business interests operating under the jurisdictions of their countries in return for lower tax rates and protections extended to their businesses operating here.Why couldn't they do that now? Oh, right. Everything is possible with the FairTax and only with the FairTax.
Why couldn't they do that now?
The US does withold US taxes on income paid to foreign corporations and makes bi-lateral tax treaties providing for reciprical treatment of in collecting income taxes in regard our corporations and businesses receiving income from other nations. Net gain in tax treatement to a foreign firm considering relocating manufacturing in the U.S. none. Net gain to our industries from the action, the income payroll taxes system in the U.S. acts as an disincentive to firms located here.
Looks like that KoolAid you are swallowing in abit hard on the gut. I'd suggest you change brands.
For, not only does the FairTax NRST do both as well to provide the club, it has the incentive of not taxing income or business purchases of foreign manufacturers that do relocate to the U.S. to become domestic firms which makes the significant difference.
It is clear foreign manufactures can recognise the significance of the difference in treatment afforded under an NRST as opposed to the current/income payroll tax system.
Chairman of the House Ways and Means Committee,
Rep. Bill Archer (R-TX)
August 12, 1996
- "A recent survey was done, in Europe and Japan, of the major corporations and I was astounded at the results. They were asked, 'If the US abolished its income tax and went to a sales tax, would that have any impact on your decisions?' Eighty percent of the corporations said they would build their factories in the United States of America. Twenty percent said they would move their international headquarters to the United States of America."
Even though you seem to not be able to do so, and prefer to continue to swallow that income/payroll tax swill you are drinking today.
Weren't you just recently whining about cut and paste artists? LOL.
A recent survey was doneOf course you've never been able to produce the actual survey, just some secondhand account of a politician on the campaign trail.
Think about it. Even with the oppressive tax regime we have in the US there are internationals that locate plants here. If they didn't have to contend with corp. taxes, payroll withholding and mounds of tax compliance why wouldn't a majority of them relocate plants and headquarters here. It's just common sense. Believe what you want to about the FT but one thing is certain. It will create a tax haven for international corporations.
Gentlemen,
I can offer two possible explanations for Section 905...
First, It may be necessary to withhold from foreign corporations and remit under an existing tax treaty or treaties. The OECD is pushing harmonization and information exchange and I believe GWB put an end to most of it, but there may be lingering obligations of which I'm not aware.
Second, is the incentive to reincorporate in the U.S. I would like to believe we learned a lesson from the 90's...vis a vis corporate inversions. Our current international tax laws are out of sync with much of the rest of the world. We insist on taxing global income and then allowing offsetting Foreign Tax Credits for taxes paid to other jurisdictions. That means that for the most successful multinationals, they are paying a 35% rate on world wide income. Our corporate tax rate is one of the highest of all OECD countries. Moreover, we have no integration between the individual and corporate tax systems....meaning distributed dividends/capital gains suffer an effective rate of 50%. Because of our self-imposed stupidity, the hurdle rate of return necessary on any project contemplated needs to be significantly higher than in other OECD countries. This drives investment offshore.
To add insult to injury, the WTO insists on maintaining an arcane distinction between direct and indirect taxes. Indirect taxes are those like the VAT, direct taxes are those like the Corporate Net Income Tax. For purposes of International trade, the VAT is border adjustable without penalty, the CNI is NOT. The argument goes like this: CNI is incident on potentially three groups, in an indeterminate and shifting manner. Border adjustment may result in subsidy, so no can do.
The VAT suffers from the same defect, however. To the extent that consumers reduce their consumption in response to the VAT, a portion of the incidence is shifted back onto the shareholders and employees. Blanket border adjustment of the full amount of the VAT, to the extent incident on the shareholders and employees, really is a subsidy to EU based business. This is what we call in the law, a distinction without a difference. Economically, the distinction is meaningless but it gives the bearueacrats a reason to disadvantage our goods under color of right. Nuts to that.
The FairTax will defang the WTO by removing their weapon, the CNI. To the extent that capital flows to where it is treated best, there is no doubt, that over time, capital will flow into the US. For businesses that are already here, reincorporation should occur rather rapidly. Over the course of years, capital stocks should grow as we draw new business. Here's a link to comments by Kenneth Dam, former assistant treasury secretary: http://www.useu.be/Categories/FSC/Nov1402DamFSCInternationalTaxation.html
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