Posted on 05/12/2005 7:46:54 PM PDT by Your Nightmare
Members of the President's Advisory Panel on Federal Tax Reform on May 11 expressed concerns over the FairTax national retail sales tax, a plan that has emerged as an alternative with a major grass-roots push.
Panel chair Connie Mack, vice chair John B. Breaux, and other members worried the plan would be difficult to enforce, would be regressive, and would require a high rate in order to take in enough money to fund the government.
Breaux raised concerns that the proposed 23 percent (tax-inclusive) rate would not be sufficient to raise the revenue necessary to fund the government. The Joint Committee on Taxation estimated that it would take as much as a 57 percent (tax-exclusive) rate to be revenue-neutral. Further, Breaux said he thought exemptions that would be carved out to make the sales tax progressive would also complicate it.
Mack, who raised concerns similar to his fellow panelists', said he was "intrigued" by the plan. "But if it's such a great idea, why haven't other political entities around the world pursued it?" he asked.
Americans for Fair Taxation Executive Director Tom Wright emphasized that the plan emerged after "thorough academic research" and "thorough polling" The strong grass-roots push has resulted in some of the group's 600,000 members appearing at each of the panel's hearings and has inspired a large comment-writing campaign to the panel in support of the plan.
Sales tax advocates were among the 20 witnesses who gathered before the panel for a full day of testimony on tax reform proposals. Although the group has held several other hearings in Washington and around the country, the May 11 meeting was its first hearing on specific reform plans since Bush appointed the panel in January. The panel has been charged with identifying tax reform proposals that are progressive, encourage charitable giving and home purchases, and are revenue-neutral. The proposals are due by July 31.
Among the tax replacement and reform plans presented to the panel were the value added tax, consumption-based tax, and the flat tax, as well as proposals that would use the current income tax as the foundation.
Witnesses generally claimed that theirs was the fairest, simplest, most flexible, most transparent revenue-neutral proposal that would improve economic growth and savings while meeting the president's criteria of encouraging charitable giving and home buying. Witnesses presenting consumption-based plans praised their overhaul as taking millions of low-income taxpayers off the rolls, being easy to transition to on a worldwide basis, and including safeguards to prevent new loopholes that would result in increased complexity down the road.
Tax reform panel members, who agree the current tax system needs to be fixed, grilled witnesses without revealing whether they will ultimately endorse a consumption- or income-based tax or a different mixture of the two.
Did you ever pause to think that this step might be sufficient to completely revamp our entire system of taxation and spending?
YES! I haven't read the rest of your post but I agree fully with this.
Yes. That is one of the things I like about HR 25. Folks would have to pull green money out of their pocket everyday to pay for the government. ON every receipt it would say "Federal Tax 23%". That portion of the price represents one's full tax burden. We'd feel it and feel it good everyday.
Yes it is. That's because it is not the intent to fight spending battles now - just get a new tax system. Fighting spending battles now would ensure failure of the bill. Nobody is going to agree to less money coming to their pet project. This is an illustration of how hard it would be to rewrite a tax code.
It does nothing to reduce federal spending. The problem is not how to collect taxes but how to reduce spending.
I disagree. I think it will be more effective to change the method of collection than to try to reduce spending under the income tax. I mean, how many DECADES have we been fighting to reduce spending? Folks just aren't going to give up their money. We will not tame the beast under the income tax. Period. It can't be done.
Elination of income tax witholding is an excellent start on that. Also, elemination of FICA witholding would jump start the desire for privitiztion of social secuirity.
HR 25 eliminates all withholding, including FICA for individuals. It also eliminates the "employer contribution" portion. SS is then funded from the sales tax proceeds. INteresting that you note the aid this would be in privatization....the breakdown of taxes is easy to make under the nrst. IIRC SS represents about 9% of the 23% tax, or about 40% of the total cost. It's easy to see from that SS is a major problem. Wow - cut the rate to 14% by privatiizng SS! Yeah man!
Hence the perfect illustration of how I believe this nrst can ultimately tame the government spending beast.
DD: But, if and only if, the 16th is repealed. Otherwise, the price would be increased.
Under then nrst, business inputs are not taxed. Hence products sold outside the US will no longer have the costs of our tax system built into the price... allowing our US companies to compete on a more level playing field.
The elimination of the income tax is what allows price reduction of exports. The nrst does not add one dime to the price of exports.
I'll mention here that imports will have to pay the nrst. CHina's stuff will be hit with he tax as will every import - again making it better for US companies to compete with countries with near zero labor costs.
Irrespective, the amendment proposed makes the taxation of income unconstitutional, which obviously handles the problem.
Your objection that this should be done first is valid IMO.
What I'm told is that no lawmaker will eliminate the mechanism for government revenues without first having an acceptable replacement. IMO it would be nice to have HR 25 concurrently become law at the passage of the proposed amendment to repeal 16th and make income taxing unconstituional.
I tend to think this would help too. Economically, the income tax is abysmal though. The nrst is like gas on the economic fire.
Take some time kicking around here.
ANd thans for the thoughtful replies.
"Yes. That is one of the things I like about HR 25. Folks would have to pull green money out of their pocket everyday to pay for the government. ON every receipt it would say "Federal Tax 23%". That portion of the price represents one's full tax burden. We'd feel it and feel it good everyday."
I don't think the practical effect would be significant. NRST is too much like witholding. Every pay check lists federal witholding and FICA. Ask some one how much they made last week and the most likely answer is not their gross but their net income. IOW, they don't pay attention to the witholds only the nets. I would think the chances are great that the same thing would happen under NRST. Asking some one what they paid for an item would get the net answer and not the actual price of the item.
"Under then nrst, business inputs are not taxed. Hence products sold outside the US will no longer have the costs of our tax system built into the price... allowing our US companies to compete on a more level playing field."
Major problems here. First, define 'business inputs'. You've just opened the regulatory tax version of Pandora's box. Pages and pages of words designed to define 'business inputs'. Indeed, much of today's tax code is designed to do just that. You've just taken a big step back to where you were with today's code.
Also, item will be diverted from those scheduled for export. You'll wind up with having to have a tax stamp on every item to prove the NRST was paid on that item. Think of the stamps on cigarettes and booze.
"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."
No need to have a decades long debate, the text of the 16th is quite clear that it grants power to collect an income tax. If this power existed previously, then why the 16th?
Also, from Article I of the Constitution:
"Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons."
There really is no debate. Prior to the 16th, any taxes had to be apportioned to the states relative to their populations. Congress could tax a state but not an individual.
You'll note that the 16th passed almost concurrently with the 17th requiring direct election of senators. This two amendments removed the most powerful blocks on the accumulation of federal power.
Since Congress could only tax the states, one of the most important functions of a senator was to ensure that a congressional apportionment did not arrive at the door of his state legislature. It was quite common for the state legislatures to appoint the state's senators. If such an apportionment were to arrive, then that state legislature would be responsible for raising the necessary revenue to pay the apportionment with rather easily imagined consequences. Now the state could have an income tax or any form of taxation it desired but any federal tax apportionment was guaranteed to inflame the citizenry. Hence, one of the jobs of a senator was to make sure such a tax bill never made it out of congress and to keep a cap on spending.
BTW, plot federal spending both before and after the passage of the 16 and 17th amendments.
What business buys to produce a product.
The tax is only on new goods (never before taxed) and services.
If it's sold in the US for retail consumption and it's never been taxed, the tax is due. The tax is collected at purchase. I don't know how items could be "diverted". Nevertheless, cheating is going to be a problem in any tax system. The intent is to minimize criminal activity. You're never gonna eliminate it. If the tax is fair, easy to understand, and it's easy to get caught with significant penalty then cheating would be lessened IMO.
Because of the way they want it collected.
This is secondary though. The amendment in question does indeed repeal the 16th - and it goes further to make unconstitutional the taxation of any type of income.
I would also like to repeal 17th.
You respond: " Ignorance can never help. Ignoring medical science can leave you dead. Ignoring science will destroy technology. Ignoring Economic Principles will also produce miscarriages.
I am ignorant of automobile mechanics but I don't rant and rail against those who have studied to learn how to fix cars. To do that regarding Economics is equally unwise.
The simple unavoidable fact is that taxes will ALWAYS be paid by those with incomes. And almost always those with higher incomes will pay higher taxes. This is true of EVERY tax system known to man.
I may be ignorant but I'm NOT disingenious as you certianly are and I'll just bet you that others will be able to spot the disingeniousness as well! I'm on to you my friend!
It is plain as the nose on my face that I pay my busines income taxes from my sales proceeds and it is just as clear that I raise my price to cover that cost, as do all of my competitors.
To assert that the income tax is not a cost to me is simply preosterous.
prePosterous
You may have paid more than GM last year. So forget "revenues."I did. They had a ~$280 million dollar credit last year!
Ignorance can never help.Why is it the people squawking the loudest for the FairTax seem to be the people who are most ignorant of basic economic principles? Do you think there is a connection?
My income taxes aren't a cost, so they aren't paid. Absurd.
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