Posted on 08/15/2005 5:55:06 AM PDT by OESY
A major domestic battle looms this fall, when tax reform-- a centerpiece of the president's bold domestic agenda-- will finally be on the table. The President's Advisory Panel on Federal Tax Reform is expected to release its findings by the end of September. After the political shellacking the White House took on Social Security, the administration will be strongly tempted to take a conciliatory path that supports only superficial reforms, essentially preserving the status quo of our hideous income tax code.
Such a course would have perilous consequences, economically and politically. In fact, the administration has an opportunity here to boldly retake the initiative, to recover lost political support and thrust an already decent economy into high gear and, at the same time, make America better able to meet intensifying competition from China, India and others. How? By junking the entire federal income tax code and starting over with a flat tax. A growing number of countries are doing this -- and so should we.
The current system is beyond redemption, a beast whose complexity, confusion and outright unfairness have corrupted our economy and society. Americans waste more than $200 billion and over six billion hours each year filling out tax forms. They engage in all kinds of useless economic activity intended to take advantage of the code's complicated maze of deductions and to reduce taxes -- from deducting donations of old socks to making unwanted investments. The waste of brainpower -- at a time of increasing global competition -- is incalculable.
The code corrupts our system of government by encouraging the crassest political conduct and by creating a massive, intrusive federal bureaucracy. One-sixth of the private-sector employees in Washington are employed by the lobbying industry. One-half of their efforts are directed at wrangling changes in the tax code....
(Excerpt) Read more at online.wsj.com ...
I'd rather return to a currency backed by something solid, and not the full faith and credit of the US government, which is, frankly, worthless.
They love it, it keeps them afloat, and fantasizing about a flat or fair tax system gives us peons an endless source of false hope to distract us from the reality that it will never be fixed.
You certainly do as all your concerns are addressed. Our present system is full of hidden taxes, that is why they withhold from paychecks so that you never see the money you pay, while the sales tax, only on new items at retail and services, are right out there in the open for all to see. We want everyone to know how much they are paying for government.
The poor and everyone else get a check to cover the taxes on essentials based on number in the family and the current government determined poverty level.
It is by far the best. An individual tax payer never has to keep a receipt nor file a return, not even a postcard.
Dear clee1,
"The current code allows the very richest to shelter their earnings in ways that are unavailable to Joe Sixpack,..."
Well, not really. One way to shelter earnings is through active investment in real estate. Many wealthy folks derive significant amounts of income from real estate investments, and much of the income from these investments is essentially un-taxed (technically, taxes are deferred, but that's another story, and they can be deferred for very, very long times).
Well, non-wealthy people who are frugal can also invest in real estate. Over the years, several of my employees have invested carefully in residential real estate, buying fixer-uppers, fixing them up, renting them out, and enjoying income that is mostly, or even completely long-term tax-deferred. These are ordinary folks.
Another way that the wealthy reduce their tax burden is by investing in shares of companies that pay dividends or that significantly appreciate in value. When they collect their dividend checks, the income is taxed at a maximum of 15%. So, too, their capital gains when they sell their stocks for a profit. However, keep in mind that dividend income is paid by corporations that are usually paying a federal corporate tax rate of 35%, so that dividend money, taxed at the personal level of 15%, is actually taxed twice by that point.
And for the wealthy, capital gains are always taxed upon realization of the gain.
Of course, if one doesn't sell one's stock, one doesn't realize the gain, and one pays no tax.
However, individuals who are frugal and who manage to save a bit can also participate in this form of wealth-building. In fact, most middle class Americans enjoy a relative advantage over wealthy people, in that most middle class Americans can build their wealth from these investments mostly or entirely through tax-deferred accounts.
Of course, both the wealthy and non-wealthy can purchase tax-free bonds, but frankly, the returns on these bonds are worthwhile only for generating current income and preserving capital nominally. Capital invested in these instruments will erode over time against inflation. If you're not a relatively short-term investor, you must be very wealthy indeed to have the luxury to permit your investment to become a wasting asset.
The primary advantage that the very wealthy enjoy is that their earned income may be relatively low in comparison to their overall income, and their payroll taxes, if paid at all, being fixed at about $13,500 (if self-employed), although just as great in absolute terms as anyone else's will be a very small percentage of overall income.
Thus, the effects of taxation become diluted by the large income that these folks enjoy.
But that would happen under a national retail sales tax, as well. The fact is, folks who have multi-million dollar annual incomes typically spend a significantly lower percentage of their income than middle class folks. Someone with, say, $100 million, likely has reported income in the range of around $1 million - $3 million, perhaps some realized capital gains of a couple of million or so, with the rest of his increase in wealth coming in the form of unrealized capital gains.
Currently, this individual will pay taxes on some of that $1 million - $3 million, and will pay capital gains taxes on the realized capital gains. For this individual, taxes will likely run from a few hundred thousand dollars per year to perhaps a million or more dollars per year.
Considering that his increase in wealth will likely be close to $10 million, that seems rather low.
But, under the national retail sales tax, this individual will only pay tax on consumption. Even if this person is spending several hundred thousand dollars per year on new stuff, taxes will amount to less than $100,000 or so.
And, of course, if this individual consumes a significant part of his wealth through the acquisition of antiques, works of art, classic cars, existing properties (rich folks often buy existing real estate, rather than build new), pre-owned yachts, then even the overwhelming bulk of his retail purchases will go tax-free as well, paid for with income and capital gains that will be untaxed, as well.
The truly rich will make out very, very well in all of this. It seems to me that they will make out much better than under the existing code, which has the dreaded AMT, which is difficult to escape without really bolixing up one's investments.
sitetest
The way the Fair Tax is configured it eliminates all your concerns. Does that mean we can control or trust politicians in the future? No, but it does mean we can start with a clean slate and keep a sharp eye on them to try to prevent it.
All the social engineering you fear is happening right now and choking our economy and free society. Why not start over?
The flat tax seems to work where it has been tied. The sales tax appears to be creating another big government agency of collectors and administrators, much like the IRS now. The sales tax appears to be nothing more than VAT and VAT is a beast that never stops biting. In order to get tax reform done and the IRS eliminated, we need to have both ideas shown side by side with bennies and problems for each, examine them both carefully, choose one and get the IRS out of our lives forever!
I've read plenty about the so-called Fair Tax, thank you, and rose-colored glasses don't begin to describe how its advocates view it.
Would there be benefits and retraining for all the unemployed CPAs?
Even those who do not pay would still have to write those monthly checks and then wait until the end of the year for Uncle Sam to send it back to them.
You are correct. Hidden and mandated taxes are killing us. State, county, city and many other taxes are also to blame. More than 50% of my income is taxed and I don't see how these will go away if there is a Fair Tax.
I was speaking in generalities. In the search for mobilizing apathetic sheep, I would rather see the fedgov not be required to return anything (further streamlining). But that's a minor, niggling criticism of the fair tax proposal. Overall, I like it very much.
Actually, you don't even need that mechanism. The true name in Calif is 'Sales & Use Tax'. IOW, it doesn't matter where you buy the asset; if you buy something in Calf, the retailer is the collection agent. Otherwise, the resident is responsible for reporting the purchase.
NO NATIONAL SALES TAX !!
As a small businessperson, I already have to work for free as a tax collector for my state, I don't need another nonpaying job working for the Federal government.
So is "something solid" potentially worthless. Anything is worth what someone will pay for it, period. Gold used to be rare and with an aura of worth, the same as other precious metals. They no longer are nor are diamonds. Their values are artificial, just as the dollars.
Remember, something, anything, is worth what someone will pay. The dollar is backed by the U.S. government, whether you trust them or not, and today we are still the most stable, the strongest, and the most dynamic economy in the world, despite the best efforts of the Democrats and other leftists. Therefore the dollar is sounder than any alternative.
At one time we said that a dollar was worth a certain amount of gold. Now we say gold is worth a certain amount of dollars. World wide trade, especially considering the population of the earth today, makes a gold standard impossible to reestablish nor would it be as flexible as today's dollar.
You could also have the current nightmarishly complicated tax system with a single rate on you Adjusted Gross Income.
In the past couple of months I've had to deal more with taxes than I have in a long time. (No longer a W-2 employee, so I have to worry about estimated taxes now). More than ever I am a fan of the Fair Tax. No forms, no returns, no withholding for most people. Retailers just have to send in a percentage of their retail sales to the feds without worrying about how much was for food, clothing, medicine or any other things which aren't taxed in some state sales taxes.
*Progressive: Moving forward; advancing. Tending to become more severe or wider in scope, as of a disease or paralysis.
What a great optimistic, can-do attitude. That is what made this country as great as it is. Keep on a truckin'.
That can't be. The fair taxers have promised us their bill gets rid of all lobbyists.
The danger is in the Fed tampering with the money supply increasing or decresing its worth, as the case may be. And I'm not certain what I'm getting for a dollar's worth of the full faith and credit of the US government. There certainly is no correlation that I can discern between the worth of the dollar and the worthiness of the US government.
When a dollar was redeemable for an established amount of silver or gold, you knew precisely what you were getting.
"I'm going to have to pay an additional 30% on everything I buy!" is the commentary of a person who does not understand the concept of embedded taxes. It also demonstrates a marked lack of understanding of the Fair Tax. To whit:
http://www.fairtaxvolunteer.org/smart/faq-main.html#47
http://boortz.com/nuze/200508/08032005.html#fairtax
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