[Sprite518]

AND WHAT ABOUT THE FLAT TAX?

Yes, I know. Some of the people that we would love to have supporting the FairTax have weighed in in support of a flat tax instead. So ... here's some flat tax vs. FairTax issues some of you may want to consider.

1. In 1986 the Congress reformed our tax code to essentially give us a flat tax ... a flat tax with two rates. Fifteen and twenty-eight percent. Most deductions were eliminated. Today's tax code is the result of that effort.

2. A flat tax leaves the IRS in place. You'll still have to report your income to the IRS every year, and you'll still be subject to audits.

3. Social Security and Medicare payroll taxes? Still there.

4. Do you get 100% of your paycheck? No. Withholding will still be there.

5. Business taxes? Still there .. and they'll remain embedded in the price of every good and service you buy, so you'll be paying them.

6. Corporate board meetings? They'll still spend an inordinate amount of time working on the tax implications of business decisions, rather than just basing their business moves on what's best for their customers and shareholders.

7. K Street lobbyists? They're still there too. They'll still be drawing their six-figure incomes while they game the new flat-tax for the benefit of their clients.

8. Bring American businesses back home? Nope. Business taxes are still there, so American businesses will still locate their operations overseas in order to escape our punishing business income taxes.

9. Death Tax? Gift Tax? Still there in all the flat tax proposals I've seen.

10. Will the flat tax bring American wealth back home? The latest estimates put $10 trillion of American wealth in offshore financial corporations. There is only one reason that money isn't back here working ... and that's our income tax structure. Will the flat tax bring that money back home? Nope. The FairTax? Yup.

11. What about the poor? They're not paying income taxes now ... will they pay the flat tax? No way! But politicians will still be looking for a way to raise taxes on the rich so that they can relieve the poor, poor pitiful poor of the responsibility for paying for their own Social Security and Medicare.

12. Will all Americans be able to buy the basic necessities of life without any federal tax consequences under the flat tax? No. The FairTax? Yes.

13. Will foreign visitors to our shores contribute to our Social Security and Medicare programs under the flat tax? No. The FairTax? Yes.

There's just a few points. If you have some good counterpoints, let me know! From my point of view, the flat tax pales in any comparison to The FairTax.

[ConservativeMind]

Thanks for the post!

[NonValueAdded]

A flat tax leaves the IRS in place. You'll still have to report your income to the IRS every year, and you'll still be subject to audits.

And the "fair tax" doesn't? Just look at all the state tax departments auditing the daylights out of every corporation in America to be sure they are getting every mill of tax they are due. The Federal system will be thrice the size of the current IRS when legislators start with differential rates once the "fair tax" framework is in place. The "flat tax" IRS will be a fraction of the current size, mostly looking for cheats who avoid paying tax altogether.

[M. Peach]

There are two reasons neither plan will pass -

#1 - They makes sense

#2 - The people want it...

[Taxman]

It is all about FReedom!

You will have the absolute FReedom to work, earn, save and invest without the heavy hand of government interfering in your most personal and private financial affairs.

A flat income tax is still an income tax, with all the slave-like implications thereof. Whatever the rate, the goverment will still decide how much of your income they get to steal.

[ancient_geezer]

A Taxreform bump for you all.

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:

• http://www.fairtax.org,
• http://www.myfairtax.org/,
• http://www.salestax.org,
• http://www.geocities.com/cmcofer/ftax.html

[ex-snook]

Appreciation some info on Fair Tax.

Is earned income taxed from all sources including wages, pensions, interest, dividends, capital gains, whatever? In other words no tax free income of any kind.

[Born Conservative]

Ping

[Bigun]

Click on any or all of the links at the bottom of post #12.

[squirt-gun]

I like a wealth tax where the wealthy as well as the poor and everyone else are taxed at a low fixed percent on the value of what they own each year. Any kind of income tax will be unfair in one way or another.

In this fashion, Senator Kennedy, for example, would be motivated to approve things to help balance the budget rather than "give-away" things to motivate the drones of America to vote for him.

A flat tax or the current Islamic like tax code leaves Kennedy and his socialistic clones free to promote more socialism which necessitates more follow on tax increases for the peons like me that he does not share in any way, shape or form.

[SpinyNorman]

No matter what tax system you use, automatic witholding must be eliminated. Nothing will bring uncontrolled taxes to the forefront faster than having to write a quarterly or yearly check to the IRS!

Do like we do in MA: make them take any tax overrides to the voters. Let them make their case and let us decide.

[taxesareforever]

There will never be income tax modification. Our government officials use the tax system in order to drum up votes by pitting the classes of income against each other. Under a flat tax or fair tax they would have to use other means to drum up votes and they don't have anything else to use. So, everyone, forget ever seeing income tax modification. It's just another opportunity for your congressmen and senators to make you think they are working towards your best interest. It's all a bunch of hogwash.

[jla]

I'd prefer the flat tax, 10%, over the other options. Though it would need to be accompanied by a U.S. constitutional amendment or two so it couldn't be raised. And a proviso limiting the tax to primary income only.

[spetznaz]

Correct me if I am wrong, but isn't the 'fair tax' the same thing as a VAT (value-added tax)? At least it seems to be the same thing to me. Anyways, with that said either of them (fair/vat and/or flat tax) would work better than the current system. But it will be some years before enough people are sufficiently hurt by the AMT for them to really push for change (although that shouldn't take long since more and more and more people are finding themselves squirming due to the AMT).

[SunnyD1182]

1. In 1986 the Congress reformed our tax code to essentially give us a flat tax ... a flat tax with two rates. Fifteen and twenty-eight percent. Most deductions were eliminated. Today's tax code is the result of that effort.

That's not a flat tax, then.

[Soul Seeker]

I never listen to Neal, but coincidentally I turned on the station he was on and heard this discussion today.

My main problem with the Fair Tax is that I feel it would be too much of an initial shock to the American public accustomed to paying taxes through convoluted methods that disguise the tax. They haven't a clue how much they really pay, whereas a Fair Tax would "feeL" like a tax raise even though it actually is not.

While perhaps preferable, I think initially there would be a lot of outcry until people realized their bank accounts may infact be larger thanks to this system. This is why I backed the Flat tax initially. Less of a shock. Same thing with personal accounts. You can't get rid of the whole system with one move. PA's are meant to accumtom people to re-asserting independence over their own financial futures.

13. Will foreign visitors to our shores contribute to our Social Security and Medicare programs under the flat tax? No. The FairTax? Yes.

This is the first attractive proposal about a fair tax that has me willing to re-consider an incremental change in the tax code in favor of the Fair Tax.

[GOP-Gringo]

Human nature is the failing of the sales tax or VAT. Black markets, etc.

Check out the nonsense that France and others deal with in their VAT. Loads of revenue officers looking for fraud.

The VAT / national sales tax always seems to sound great. Until you deal with reality and the human factor.

Under a fair tax, I presume business owners are still required to keep track of sales? And report same? Cash deals? Loads of real world problems.

Some of the points are very weak:

"1. In 1986 the Congress reformed our tax code to essentially give us a flat tax ... a flat tax with two rates. Fifteen and twenty-eight percent. Most deductions were eliminated. Today's tax code is the result of that effort."

Whoa. That was hardly a true flat tax. In fact, it really doesn't fit the definition so the comparison is meaningless.
"Most deductions were eliminated"? Not hardly. The loopholes were still there.

"2. A flat tax leaves the IRS in place. You'll still have to report your income to the IRS every year, and you'll still be subject to audits."

With a simpler tax code and process, the motivation for fraud will be greatly reduced. Most wealthy people would far rather pay a flat amount and not worry about accountants and tax shelters and all the other things we do to avoid taxes. Human nature again.

"4. Do you get 100% of your paycheck? No. Withholding will still be there."

Yes, it will. And for most people in the real world, they don't have to worry about spending it first and then have the very real fear about paying at the end of the year. Slavery, in this case, is hyperbole.

"5. Business taxes? Still there .. and they'll remain embedded in the price of every good and service you buy, so you'll be paying them."

Prices may actually go down to reflect the cost savings from only having to file business taxes on a 3 by 5 card. Competition will have a role in this too. If I can cut my costs and lower my prices to get more business...

"6. Corporate board meetings? They'll still spend an inordinate amount of time working on the tax implications of business decisions, rather than just basing their business moves on what's best for their customers and shareholders. "

Huh? There will be very little a board need do concerning with taxes under a true flat tax. Income times the tax rate. How difficult is that? Besides, it is usually the CEO, CFO and upper management that make those decisions in the majority of corporations. Fortune 500 excluded.

"8. Bring American businesses back home? Nope. Business taxes are still there, so American businesses will still locate their operations overseas in order to escape our punishing business income taxes."

Huh? Reduce my effective tax rate and overhead big time by not paying accountants and lawyers while eliminating the back breaking job of sorting and keeping expense records is NOT a big incentive? Own a business before laying that on me.

"10. Will the flat tax bring American wealth back home? The latest estimates put $10 trillion of American wealth in offshore financial corporations. There is only one reason that money isn't back here working ... and that's our income tax structure. Will the flat tax bring that money back home? Nope. The FairTax? Yup."

Nope on a Flat Tax?. A true flat tax makes investment far more inviting. Far easier decision making. I no longer need to worry about the tax implications of my investment and already know what I might pay if it pays off. A wealthy investor will look at their time and say this is a good deal. It really is a draw for both tax plans.

"11. What about the poor? They're not paying income taxes now ... will they pay the flat tax? No way! But politicians will still be looking for a way to raise taxes on the rich so that they can relieve the poor, poor pitiful poor of the responsibility for paying for their own Social Security and Medicare."

Hyperbole. The poor do not pay under a true flat tax either. The exemption, if memory serves, for a family of four was $35,000. But that was some time ago.

The wealthy already pay the majority of taxes. What is not said here, in balance, is that the productivity increases are huge under a true flat tax and you recapture income that was previously not reported. The net receipts to the government go up and thus reduce the need for a rate increase.

"12. Will all Americans be able to buy the basic necessities of life without any federal tax consequences under the flat tax? No. The FairTax? Yes."

Again, good sound bite. The real world says that this opens the door for massive abuse. Under a fair tax, where is the additional incentive to lower prices? As a businessman, I see paperwork under a Fair Tax and that costs money. Paper is the enemy! Now the poor have to keep records for their rebate? They still have to fork over more cash first then get a rebate. This is sounding far more complex for all concerned.

"13. Will foreign visitors to our shores contribute to our Social Security and Medicare programs under the flat tax? No. The FairTax? Yes."

The sales (VAT) tax is refundable for foreign visitors in many other countries. They may expect the same deal in the US and there goes your point.

Again, the points make good sound bites until the rubber hits the road -- or rather, when human nature is factored into the deal.

[Doe Eyes]

I'm for any new tax plan that include a Balanced Budget Amendment (as unpopular as that has become with Conservatives).

Time to start paying our bills.

[Cate]

My view on taxes has been the same for years. I make a dollar (either from working,welfare,retirement,disability,workers comp,lottery,gift,etc.) I pay Uncle Sam 10 cents. He doesn't get one penny more. He has to budget the government on 10%. The IRS is abolished, forms are abolished, tax loops and lawyers are gone. If the government were wise, they would operate their budget on 9% and save the 1% for a rainy day (or 9/11) event.

[phil_will1]

Neal has some good points, but it is hard to beat Dennis Calabrese for a good economic comparison of the flat vs fair taxes. Calabrese was Dick Armey's Chief of Staff when he was developing his flat tax proposal.

Interestingly enough, Rep. Armey's proposal under Rep. Burgess has morphed into a flat tax option, meaning that we would still keep the current system (including, presumably, the AMT), but taxpayers would be able to elect to pay under a separate additional flat tax calculation. When asked if his proposal was revenue-neutral at last fall's budget committee hearings, Mr. Burgess said that he didn't know; they hadn't had a chance to run the numbers yet. I haven't had a chance to run the numbers yet, either, but I can answer the Chairman's question. Duh!!

Anyway, here is the link to Mr. Calabrese's comparison, for those who are interested.

http://www.geocities.com/cmcofer/confess.html

[4KennewickMan2Invent]

I'm for the fair tax. Taxation of income is a monstrosity.

I have read that retail companies are against it. I am sure advertising agents and others are as well. With a tendency of "buy this, it's cool" in marketing, they may have to state a products purpose and durability if people spend in a less frivolous manner.

But congress loses it's tax weapon. To bad we let them have the spend weapon.