Instituting a flat tax benefits you

TOWNHALL.COM ^ | 05/28/2005 | DICK ARMEY

[Extremely Extreme Extremist]

President Bush is calling for a complete overhaul of the broken U.S. tax code, and his Advisory Panel is holding hearings to make recommendations for reform. As I testified to the Panel earlier this month, instituting the flat tax is the right answer.

Our current income tax system is a catalog of favors for special interests and a chamber of horrors for the rest of America. As a country, we spend more time filing taxes than we spend building every car, truck, and van produced in the United States. To put this in perspective, it takes the average taxpayer over 26 hours to file a standard 1040, which has caused over 60 percent of Americans to pay a professional to complete their taxes. Simply complying with the complex tax code costs $194 billion each year, or about $650 for every man, woman, and child in America.

Aside from the tax system’s complexity and unfairness, it also inhibits saving, investment, and job creation; it imposes a heavy burden on working families; and it undermines the integrity of the democratic process. The U.S. tax system cannot be repaired by tinkering or fine-tuning. It must be completely replaced with a simple and more efficient alternative. Of the many proposed reform measures, the flat tax best meets the goal of collecting revenue in the simplest, fairest, and most transparent manner possible.

The flat tax will replace the current tax code with a flat-rate income tax that treats all Americans equally. All income is taxed only once and at one rate. There are no breaks for special interests and no loopholes for powerful lobbies, just a simple tax system that treats every American the same.

Individuals and businesses will simply complete a tax return the size of a postcard. All deductions and credits would be eliminated, while the only income not subject to tax would be a generous personal exemption for every American. For example, a family of four could be exempt from the first $40,000 of income. This personal deduction would be indexed to inflation and the flat tax rate could be calculated to be revenue neutral, so as to not increase the deficit in the process of enacting this important reform. Additionally, according to a study by the former chief economist for Congress’ Joint Committee on Taxation, national income would be 5.7 percent larger after five year under the flat tax than under the current system. That means over $500 billion in increased output or more than $3,000 in additional income for a typical family of four.

One competing idea-- the national sales tax-- exhibits the perception of efficiency, but we cannot introduce such a powerful new tax collecting regime unless the 16th Amendment to the Constitution is repealed (a highly unlikely event). Otherwise, we risk the harmful reality of having to pay both a national sales tax and a federal income tax. Therefore, those in favor of modernizing the current code should work towards enacting the flat tax. It solves the problem and it is politically achievable.

Every American will benefit under a flat tax system. An increase in national income will increase charitable giving, lower interest rates will more than offset the loss of the mortgage deduction in the current system, the income exemption will continue the tax code's progressive precedent, saving for your retirement or children’s education will be easier, the marriage penalty will be eliminated, the deduction for dependent children will double, and every taxpayer will see their tax rates reduced.

For the sake of fairness, simplicity, and an improved economy, I strongly urge the President’s Advisory Panel on Federal Tax Reform to recommend the flat tax.

Former House Majority Leader Dick Armey currently serves as co-chairman of FreedomWorks, a national grassroots organization fighting for lower taxes, less government, and more freedom.

[ancient_geezer]

Interesting that none of your cut & pasties say that the flat tax is a "progressive individual income tax."

Seems you have a problem in reading comprehension along with your other little peccadilloes.

I once again present Robert Hall in describing the "Flat Tax" from the bible of the flat tax [ The Flat Tax; by Robert Hall and Alvin Rabushka] as extracted from comment #112:

You do realize, of course, that a progressive tax on one's wages paid by the worker, is indeed an individual progressive income tax, least it was the last time I took a look the current tax system as it taxed my wages.

 

The Flat Tax; Chapter 3, by Robert Hall and Alvin Rabushka

In our system, all income is classified as either business income or wages (including salaries and retirement benefits). The system is airtight. Taxes on both types of income are equal. The wage tax has features to make the overall system progressive. Both taxes have postcard forms. The low tax rate of 19 percent is enough to match the revenue of the federal tax system as it existed in 1993, the last full year of data available as we write.

Here is the logic of our system, stripped to basics: We want to tax consumption. The public does one of two things with its income—spends it or invests it. We can measure consumption as income minus investment. A really simple tax would just have each firm pay tax on the total amount of income generated by the firm less that firm’s investment in plant and equipment. The value-added tax works just that way. But a value-added tax is unfair because it is not progressive. That’s why we break the tax in two. The firm pays tax on all the income generated at the firm except the income paid to its workers. The workers pay tax on what they earn, and the tax they pay is progressive.

[ancient_geezer]

So you were just trying to show how inflation was a tax?

ROTFLM(_|_)!!! Only you would try to strain the camel through the needles eye.

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The Big picture of where we are, where we have been, and where we are headed:

Grandfather Economic Report
- Home Page -
by MWHodges

 

Without a significant change in our paradigm of taxation and its relationship to the growth of government control over our nation the trends are clear:

 

Extracts From:
Grandfather Tax Report - MWHodges

 

TAX DAY IS EVERY DAY
FOR 5 MONTHS EACH YEAR

That's 258% more months 'working for government' than it used to be, as shown in the chart.

The government taxes when you earn it, taxes you when you save it, taxes you when you invest it, taxes you when you spend it, and, when you die, they tax what's left over. What did they leave out?

5.1 months working for taxes is 43% of a year. In 1776 Thomas Paine argued that if a king demanded 50% in taxes, we wouldn't  pay it. We are nearly there.

Who said the 'era of big government is over?'

 

TAXES INCREASE -
SAVINGS PLUMMET

 

HOW OUR MONEY IS SPENT
we know from above that we work 5 months for government
- here's another view, compared to food, clothing, etc.

 

"This 42% for government, you will notice, is more than the sum of the food, housing and clothing components in the chart which total 37%. Many will say one needs food & housing more than government - - especially more than large government.

We know government's taxes and regulations impact family cost of living and inflation, just as any other item faced by individuals and families.

• We know our federal income taxes have not gone down, nor sales taxes, nor property taxes, nor social security taxes, nor Medicare taxes, nor excise taxes, nor utility & telephone taxes, nor - - (you name the ones I left off). Have you ever heard of a tax going down, and staying down? If they go up, which they do, or if they slip in more taxes (or reduce deductions) at federal, state, or local government levels, which they do - - that is added cost to is added costs to families just as food and clothing, which also is subject to inflation that should be in the cost of living index so individuals and families can better understand total inflation Yet - - taxes are not included in the CPI computation, yet the cost of government is the largest spending component in the economy. Question: Why Not?- - as reported in the Inflation Report.
• we also know government tax revenue at all levels has been increasing at a faster rate than both GDP and personal incomes. And, from where does that revenue originate?
  Answer: It all comes from individuals and families, because they pay all costs of government, in one way or another, both direct and indirect.
• and, we know federal government spending has increased faster than general CPI inflation and even faster than growth of the entire economy. See the Federal Government Spending Report.
• and, we know state and local government continues to increase their employee headcount faster than growth of the general population - - as shown in the State & Local Government Spending Report. What percentage of households have experienced a reduction each year in their property taxes? Answer: that's not on anyone's radar screen. How many have seen their property taxes rise? Everyone! That's inflation, and must be included in the CPI.
• and, we know government employees don't just sit around doing nothing, they write more regulations each year, which increases compliance costs impacting families, as shown in the Regulation Compliance Cost Report. This component is not shown in the 42% slice of the above pie chart. "

 

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And what does government do with it all?

 

More Extracts From:
Grandfather Government Growth Report by MWHodges

"America is more a socialistic nation, and less a free-market economy, then ever before in its history, because our total economy has become significantly more government-dominated and dependent.

Think of the total economy as a pie, divided into two economic slices (the government sector share and the pure private sector share), where the whole pie is the total national income. If the government share expands faster than the total economy, then the free-market private sector's share is compressed.

With 3 simple color pictures, we will view the relationship between these sectors at three different times in our history (prior 1930 and the New Deal, after World War II disarmament in 1947, and as it is today) - - and observe the march of socialization in America.

Keep your eye on the red slice of the economic pie, as we will move from the first pie chart (below) to the second, and then to the third. That's the government [federal + state & local] spending sector dominating & controlling more and more of the nation's economic pie.

Therefore, less and less of the nation's economic pie is left for the pure private sector, being that part of our economy not dependent on government spending yet upon which national productivity, savings, living standards AND freedom fully depend for our youth. "

 

Relative Shares of Economy
pre-1930	post WWII (1947)	TODAY (2004)

Pre-1930, "12% of national income was consumed by government spending."
Post-WWII, "22% of national income was consumed by government spending"
TODAY, "47% of national income is consumed by government spending."

"HERE'S WHERE WE ARE - 43% of our economy today is dependent
on government spending & control"

 

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One picture underscores it ALL:

 

TAXES

 

100years of history under the income tax makes it clear that we will not get there
(smaller government) from here (the income tax).

[groanup]

Good links. Thanks. I need to get that site into the local high school economics class. Maybe even the teachers can understand it then.

[Your Nightmare]

Seems you have a problem in reading comprehension along with your other little peccadilloes.

A wage tax is not an income tax.

[Your Nightmare]

So pre-1930 it was 12% and in 2004 is was 43%. That's less than a 400% increase. Your chart shows a >1000% increase. You're still not showning your chart is accurate (but that's never really mattered with you).

[DugwayDuke]

"Which just goes to show you that an income tax, ANY income tax, is a very bad idea, doesn't it?"

Actually, it's much more general than that. One should never trust a politician. You can no more trust those promoting the NRST than those who promoted the income tax. The NRST, no matter how it starts out, will change.

[DugwayDuke]

"Any idea how many people would have to be added to the IRS to track down all the non-filers under such a system? I believe the current headcount of the IRS is about 100,000. Do you think we could expand the IRS to 500,000 to maintain minimal compliance under such a system, or do you think it would take more than that?"

Tracking should not be all that much of a problem. After all, the employer could still produce a W-2 itemizing what is owed. The main thing is that the employee would have to actually write a check. It really wouldn't be all that much different from a compliance stand point.

[DugwayDuke]

"Are you proposing that Social Security taxes no longer be withheld, also?"

Certainly, no witholding. Not even an option you could choose. Write a check, once a month. I don't really have a problem with the employer still producing a W-2 that itemizes the taxes due, just as long as the employee gets his full check and has to write a check to the US treasury. Maybe two, one for tax and one for SS. Just as long as the employee writes the check.

[DugwayDuke]

"Well that is what the bill HR25/Fairtax states."

Really? It says that all IRS employees will lose their federal jobs on 1 Jan 06? Don't think so. New name, same people, different mission - NRST compliance.

"Do you have a problem with the IRS being abolished?"

No problem. Just think it's naive to believe you can fire that many federal employees. One of the most powerful lobbying organizations in Washington is the federal employees union. While this union is not particularly well represented in the DoD, it's pretty strong in most other parts of the government.

These unions are particularly strong with democrats. I would expect they would filibuster this to death in the Senate. Just look at the problems the DoD is having in trying to change it's personnel system to 'reward merit' and make it easier to dismiss for incompetence. Not one person is losing their job but the dems have this tied up in knots. And, you expect to see 100,000 lose their jobs? Not any time soon.

I would expect that one of the things that will have to be changed is the assurance that no one will lose their job in order to get this past. Now, what will these employees do in the future? The only thing they know how to do is tax related so I would expect many of them will be charged with NRST compliance. JMHO.

[ancient_geezer]

Your Nightmare: A wage tax is not an income tax.

It is nice to know we can quit kicking into everyone's favorite SS/Medicare tax on income.

And we don't need to declare them wages for the IRS on it's peachy little 1040EZ then no more.

"Free at last! free at last! thank God Almighty, we are free at last!"
MLK, 1963

For, "A wage tax is not an income tax", YN tells us so.

Please let Congress & the IRS know won't you? They seem to be under the impression there are many income taxes, and a wage tax is just one of them.

I have never made but one prayer to God, a very short one: "O Lord, make my enemies ridiculous." And God granted it.
-- Voltaire

[ancient_geezer]

So pre-1930 it was 12% and in 2004 is was 43%. That's less than a 400% increase.

Failing to notice the economic pie in 2004 greater than in 1930 by a factor of more than a factor of 20, the government's share of control over that pie increased increased >6 times faster than the private sector could grow.

"Think of the total economy as a pie, divided into two economic slices (the government sector share and the pure private sector share), where the whole pie is the total national income. If the government share expands faster than the total economy, then the free-market private sector's share is compressed."

Through that period government growth resulted in a 4 fold increase of the share of government control over the factors of national income, while the the private sector control over the factors of national income shrunk by a factor of 1.5.

 

Relative Shares of Economy
pre-1930	post WWII (1947)	TODAY (2004)

 

In current dollar terms imposed on the individual:

1930, government revenues were ~$700 per Capita, by

2000 that rose to over $11,000 per-capita

That my freind is more than a 10 fold increase in the total impositions of government on the individual between 1930 and 2000.

In short both the pie charts at an >6:1 change in relative strengths of government vs private sector, is well reflected in the 10 fold increase in per-capita revenues taken extracted with respect to the individual citizen.

 

TAXES

 

100years of history under the income tax makes it clear that we will not get there
(smaller government) from here (the income tax).

 

Your chart shows a >1000% increase. You're still not showning your chart is accurate (but that's never really mattered with you).

The charts are quite accurate, and without a doubt underscore what has happened to the nation in very graphic terms. (not that growth of government at the expense of the private sector matters to you.)

[Your Nightmare]

For, "A wage tax is not an income tax", YN tells us so.

Hmm. Under a flat tax a person could have millions in income and not pay a penny in personal tax.

[Your Nightmare]

Really? It says that all IRS employees will lose their federal jobs on 1 Jan 06? Don't think so. New name, same people, different mission - NRST compliance.

Don't you know they are going to blow up all IRS buildings? And from the rubble they will build Sales Tax Bureau buildings.

STB = IRS

[DennisR]

No - a 10% flat tax (no exceptions) with absolutely no deductions for anything except charitable donations. No one should be rewarded or punished for having kids, being over 65, being blind, and so forth. And everyone should pay whether they make $10 or $10,000,000.

[DugwayDuke]

"Don't you know they are going to blow up all IRS buildings?"

They're not? That'll be news to the 'NRSTopians'.

[groanup]

No - a 10% flat tax (no exceptions) with absolutely no deductions for anything except charitable donations. No one should be rewarded or punished for having kids, being over 65, being blind, and so forth. And everyone should pay whether they make $10 or $10,000,000.

That's what you want? Well congratulations. That's what you have. It's called the income tax. How long do you really believe the flat tax will be "flat"?

[groanup]

Hmm. Under a flat tax a person could have millions in income and not pay a penny in personal tax.

Hmm. Under the current income tax a person could have millions in income and not pay a penny in personal tax. Oh, that's what you just said.

Under a NRST that couldn't happen unless the person spends NO money.

Under a VAT no one would pay any tax, right? Everything would be free and the government would run of fumes. But then again, a wage tax is not an income tax.

[Mikey]

A flat tax is still an income tax.

The IRS would still be around.

Nope, a flat tax is a bad idea.

SCRAP THE CODE, ABOLISH THE IRS

[ancient_geezer]

Hmm. Under a flat tax a person could have millions in income and not pay a penny in personal tax.

Not unlike many who receive only municipal bond interest today under the current income tax.

However, should that same person be a wage earner he/she will indeed be subject to income tax provisions of the "Flat Tax",

H.R.1040 Summary
Title: To amend the Internal Revenue Code of 1986 to provide taxpayers a flat tax alternative to the current income tax system.
Sponsor: Rep Burgess, Michael C. [TX-26] (introduced 3/2/2005)

"Calculates taxable income for individual taxpayers by subtracting a basic standard deduction and an additional standard deduction for each dependent from the total of wages, retirement distributions, and unemployment compensation. "

The Flat Tax; Chapter 3, by Robert Hall and Alvin Rabushka

Here is the logic of our system, stripped to basics: We want to tax consumption. The public does one of two things with its income—spends it or invests it. We can measure consumption as income minus investment. A really simple tax would just have each firm pay tax on the total amount of income generated by the firm less that firm’s investment in plant and equipment. The value-added tax works just that way. But a value-added tax is unfair because it is not progressive. That’s why we break the tax in two. The firm pays tax on all the income generated at the firm except the income paid to its workers. The workers pay tax on what they earn, and the tax they pay is progressive.

 

not to mention the additional tax on wage income for SS/Medicare taxes.

For indeed your "Flat Tax" is far from the what of most folks think it to be, taxing all individual income with no exceptions:

Why Flat Tax Isn't A "True" Flat Tax
http://www.cac.psu.edu/ur/archives/BUSINESS/flattax.html
2-23-96
Charles R. Enis, Associate Professor of Accounting
Penn State's Smeal College of Business Administration

[Paul C. Jesup]

Really? It says that all IRS employees will lose their federal jobs on 1 Jan 06? Don't think so. New name, same people, different mission - NRST compliance.

I guess you just cannot understand a simple concept, your mind has been so warpped that a simple concept is beyond your understanding.