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Posted on 05/13/2005 11:03:17 PM PDT by n-tres-ted
Former Bush economic adviser R. Glenn Hubbard on May 12 outlined for the President’s Advisory Panel on Federal Tax Reform a new consumption-based business tax system that would repeal the interest deduction and replace depreciation with full expensing while also broadening the base for individuals and eliminating the alternative minimum tax as well as deductions for state and local taxes and home mortgage interest.
With President Bush’s marginal rate cuts and tax reductions on saving and investment, the groundwork for his proposal has already been laid, Hubbard, now with Columbia Business School, told the panel.
“I think we’ve already started,” Hubbard said. Hubbard was the first witness on the nine-member panel’s second day of a two-day hearing on specific tax reforms. Seven witnesses on May 12 described for the panel ways to reduce the double taxation of income, including plans based on the income tax to create a comprehensive business income tax (CBIT) and a business enterprise income tax (BEIT).
Hubbard described his tax overhaul plan as a “household tax” for individuals as well as a “general business tax system” that has as its base business sales minus purchases from other firms minus compensation paid to employees. Full expensing “provides a better way to go and a larger stimulus to business investment,” Hubbard said.
Hubbard’s “household tax” would be on compensation, not interest, dividends, or capital gains.
The resulting system would be neutral for savings and investment decisions and would tax all income only once, Hubbard said.
Hubbard also raised the idea that transition costs related to moving from the current code to a new system may be overstated. “In fact, cold-turkey transition to tax reform may be less problematic than some think,” Hubbard said. Cutting dividends and capital gains taxes has “very, very positive effects on asset values that can offset some of the other costs of tax reform,” Hubbard said.
Hubbard found a sympathetic ear in panel chair Connie Mack. But Mack said some of Hubbard’s ideas were politically unsalable.
“I feel strongly that we should not have double taxation,” Mack said. But “you’d have no individual taxation on dividends and capital gains -- that obviously causes a political problem.”
Panel member Charles O. Rossotti asked Hubbard how to prevent multinationals from moving to low-tax jurisdictions to avoid paying tax on intangibles and then repatriating profits tax-free.
“Current law also puts pressure on multinationals to relocate pieces of what they do. I don’t see a change here,” Hubbard said. “But I see territoriality, what’s implied by tax reform, is really like a dividend exemption system.”
May we have a PING for the former chairman, please?
Hubbard described his tax overhaul plan as a “household tax” for individuals as well as a “general business tax system” that has as its base business sales minus purchases from other firms minus compensation paid to employees. Full expensing “provides a better way to go and a larger stimulus to business investment,” Hubbard said.
Please tell me how this is not an individual income tax with a corporate tax same as we have now?
Hubbard’s “household tax” would be on compensation, not interest, dividends, or capital gains.
Current system manages that, just put your money in municipal bond funds, even Theresa (you know the wife of that guy that lost to Bush in the last election, what's his name.) knows that one.
If you would like to be added to this ping list let me know.
John Linder in the House(HR25) & Saxby Chambliss Senate(S25), offer a comprehensive bill to kill all income and SS/Medicare payroll taxes outright, and provide a IRS free replacement in the form of a retail sales tax:
H.R.25,S.25
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.Refer for additional information:
Sounds like this will give us more, not less.
“I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man.” [Thomas Jefferson, letter to Benjamin Rush, 1800.]
Click here, here and, now here to help us scrap the Code, scrap the IRS and abolish the VLWC!
You can also click here to sign a petition in support of Fundamental Tax Replacement.
We will never be a truly FRee people so long as we have the income tax and the IRS!
Thanks for your responses. Looking at Hubbard's specific proposals, I would categorize them as positive, incremental reforms in the nature of those made by the GWB administration (and Bill Thomas) during May, 2003. For example, zero income tax rates for capital gains, dividends, interest - that would be real progress in making the income tax system better and much more investment friendly. Also, on the business side, allowing immediate expensing of expenditures for plant and equipment would be much more beneficial to capital investment in this country (and to job creation) than the present income tax treatment of individuals and business. But fundamental tax reform on the scale of the Fair Tax Act it is not.
On a related point, I just tuned in to "Fox & Friends" on the Fox News cable channel this morning. I walked in on a discussion of a "national sales tax" reform idea. One fellow (the young, dark-haired fellow) was strongly supporting the idea, but was not well-informed about the Fair Tax Act. For example, he was saying there could be an exemption of poor folks to make it okay for them. No mention of repeal of the payroll taxes, etc. Most of the rest were saying terrible idea for elderly: they've already paid taxes on their savings and now they will be taxed again; AARP will never let it happen. Even arguing that black market evasion and shop-lifting would be a lot worse. There's a "whole lot of ignorance goin' on out theah."
One more thing. I am surprised that Hubbard proposes eliminating the mortgage interest deduction on residential housing. However, in the context of his proposals it makes sense. The elimination of all income tax on capital gains would more than off-set this deduction, and it would finally put housing on the same plane as all other investments. Thus, perhaps it would somewhat reduce the flight of capital into housing and the unaffordability of housing in some markets, as at present in California and other places
Connie Mack sounds more like a politician than a tax reformer. He says the Fair Tax won't work because no one has ever tried it and that the elimination of other taxes is not salable. He is obviously the wrong man for this job.
Connie Mack ought to know that Florida is one of the major governments/economies that relies on a sales tax - without an income tax - and it is one of the fastest growing economies in the USA (and in the world). The only distinction between Florida and the Congress is the political ability to get it done. Hopefully, he was just being "devil's advocate," because he has been a supporter of consumption tax type reform in the past and is a supply-side supporter.
I am guessing he was referring to the rebate.
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Yes, but he seemed to have no clue that the rebate is already built into the Fair Tax Act. In fact, the FTA was never mentioned in the discussion that I heard.
How about NO taxes on business since they don't pay them anyway, they're just added to the cost of the product and paid by the customers.
How about no taxes on anything? Just put the government in charge of all the vices (booze, cigarettes, drugs, prostitution, gambling, and what ever else they want to outlaw) and the profit from that ought to exceed the taxes they are now collecting. Talk about controlling your own tax rate, that would do it. Political untenable?? You betcha!!
There's a "whole lot of ignorance goin' on out theah."
That has to be a candidate for the understatement of the year, (well at least for this thread.)
No doubt about it, I'm with you and the Fair Tax on that one. I'm just saying that Hubbard's proposals are good incremental change, if that is the most we can get. My guess is the Dems would filibuster even that in the Senate, and even some Reps are talking like budget-balancing Hooverites these days.
You are right: Theys a "whole lot of ignorance goin' on out theah."
[Boy! I say boy! You gotta spell them Southren words the Southren way iffen you wants Foghorn Leghorn credibility! LOL!]
Theys also a whole lotta lyin' goin' on out theah!
The WDC Poobahs and Grand Wizards are getting frightened that the FairTax may grow legs, me also thinks. Stand by for more "ignorance" and lies.
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