Posted on 09/29/2005 11:50:45 AM PDT by ancient_geezer
NATIONAL CENTER FOR POLICY ANALYSIS
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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 replace them with with a national retail sales tax administered by the states.
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:
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 replace them with with a national retail sales tax administered by the states.
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:
mark.
The 16% retail sales tax cited here is far less than what I've seen in the past (I want to say it was 26% or 24%). Why is this so much lower than previous proposals?
The particular form (16%) here is to replace income taxes only, leaving the SS/Medicare payroll taxes as is, and has a little higher rebate making the proposed rate for income tax alone 16% instead of 15%.
According to the article, replacing SS/Medicare taxes and implementing personal savings accounts as well, an additional 3% would be necessary bringing the total 19%.
The other factor is that the study is current and reflects the Bush administration tax cuts, which current proposals do not.
19% sure looks alot better than 23% for a revenue neutral rate of a fairtax like implementation.
Thanks!
NATIONAL CENTER FOR POLICY ANALYSIS
Tax and Social Security Reform: Thinking Outside the Box | ||
by Hans Fehr, John C. Goodman, Sabine Jokisch, Laurence J. Kotlikoff
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How can a 3% increase in sales tax replace the SS/Medicare tax of 15.3% on most wages. That doesn't make any sense.
bumped and bookmarked.
Seems to me you have stated many times that you thought the appropriate level for the fair tax was closer to 19%. Very prescient of you. Compliments.
How can a 3% increase in sales tax replace the SS/Medicare tax of 15.3% on most wages. That doesn't make any sense.
Retail consumption is a much broader tax base than FICA wages capped at $90k.
Secondly the SS reforms proposed includes a Personal Savings Accounts financed and owned by the individual with matching government and businesses contributions to it. Payments into that PSA are not treated as part of the tax rate as the PSA accrues to the direct ownership and benefit of the individual.
Refer to the article's chapter describing the SS side of the proposed reform:
Combining Tax Reform and Social Security Reform
http://www.ncpa.org/pub/st/st275/st275g.html"This proposal consists of four elements: (1) replace federal personal and corporate income taxes with a 17 percent flat-rate consumption tax, where the rate is measured on a tax-inclusive basis; (2) use 3 percentage points of the new tax to match contributions of 1 percent each by employees and their employers to create 5 percent personal retirement accounts designed to eventually replace the current pay-as-you-go Social Security system; (3) rebate the 17 percent consumption tax conditionally to the bottom one-third of the income distribution to those with health insurance and retirement accounts, pensions or Individual Development Accounts; and (4) apply the Social Security (FICA) payroll tax to all wage income.
Social Security Reform. In structuring a privatization proposal, we examined the plan of Saving and Rettenmaier,39 who propose 5 percent individual retirement accounts funded by 1 percent payroll contributions from employees, matched by a 1 percent contribution from employers and 3 percent from the government. The governments contribution could consist of a diversion of payroll taxes or payments from general revenue. In either case, the transition is made possible in our proposal by the new consumption tax.
In the Saving/Rettenmaier proposal, the option to establish a personal retirement account (PRA) is voluntary and lower-income workers get larger government matches in order to replicate the progressivity of the current system. As the PRA balances grow over time, government-paid benefits are reduced. Over the course of ones work life, a 5 percent account should be sufficient to replace currently scheduled Social Security benefits for an average-income worker.
In this analysis we assume that all workers participate in the private system and all retirees remain in the current system. We also assume that all workers contribute the same percent of wages (5 percent) regardless of income. "
Seems to me you have stated many times that you thought the appropriate level for the fair tax was closer to 19%. Very prescient of you. Compliments.
Not prescient. just applying what is known and published about the Bush tax cuts and their consequent effective tax rate as compared to pre-2000 tax rates when the FairTax legislation was authored. I merely assume the change in NRST rate would be proportionate to the change in the total effective federal tax rate documented by the Tax Foundation folks.
refer Tax Freedom Day 2005 report PDF: Special Report No.134, April 2005
Total Effective Tax Rates by Level of Government |
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Year | Federal | State | Total |
1996 | 21.3% | 10.4% | 31.6% |
1997 | 21.8% | 10.3% | 32.1% |
1998 | 22.4% | 10.4% | 32.8% |
19990 | 22.5% | 10.4% | 32.9% |
2000 | 23.1% | 10.4% | 33.5% |
2001 | 22.2% | 10.5% | 32.7% |
2002 1 | 19.6% | 10.2% | 29.8% |
2003 2 | 18.8% | 10.1% | 28.9% |
2004 3 | 18.4% | 10.2% | 28.6% |
2005 | 19.0% | 10.1% | 29.1% |
Notes: Leap day is omitted to make dates comparable over time. Since depreciation is not available to pay taxes, GDP is an overstatement of spendable income for the purpose of measuring tax burdens. Depreciation is netted out of NNP. "Overall, NNP provides the best statistical representation of the common notion of spendable resources. In 2004 NNP was $10,371.6 billion. Like GDP and PI, NNP is a component of the National Income Product Accounts (NIPA). These accounts are computed and compiled annually by the Commerce Depart-ments Bureau of Economic Analysis (BEA)." 0 First year introduction of HR2525(Fair Tax legislation). 1 Economic Growth and Tax Reform Reconciliation Act of 2001 Sources: Office of Management and Budget; Internal Revenue Service; Congressional Research Service; National Bureau of Economic Research; Treasury Department; and Tax Foundation calculations. |
So the net tax for someone in the top rate would go from a marginal rate of 37.9% (35% income + 2.9% medicare) to 29.7% (15.3% SS/medicare + 17% of the amount left after SS).
So the net tax for someone in the top rate would go from a marginal rate of 37.9% (35% income + 2.9% medicare) to 29.7% (15.3% SS/medicare + 17% of the amount left after SS).
The maximum marginal tax rate, using the FlatTax (tax inclusive rates) savings & investment expempt would be 14% of consumption + 15.3% (29.3%) assuming a capped (90k) wage base for SS/Medicare.
That would somewhat less with no caps on the Social Security wage base. The actual maximum marginal rate with on the total income tax version would be closer to 11% + 8.2% ~ 19.5% using current figures for SS/Medicare tax revenues as a percentage of total wage rather than capped wages.
Under a NRST tax system the maximum marginal rate would comes out something around 19-20%.
The 5 different tax reform systems covered in the study all use rebates to implement progressivity rather than exemptions or deductibility thus marginal rates are with respect to significantly different tax base than the current taxable income base of today's tax system.
I suggest you read the whole report before making guesses as to maximumum marginal rates for the proposals reviewed in the study, as the tax bases are significantly different from the current income/payroll tax system that would be replaced by any one of the five proposals (10 actually with SS refrom being making up 5 varients.)
I haven't had time to look this over in depth yet as I am very busy at present dealing with the results of Hurricane Rita but I STRONGLY suspect that it supports what many of us have been arguing all along!
Bookmark
Excellent info. Thanks for the post and the ping.
"In some ways, Social Security reform is even more important than tax reform because it avoids dramatic increases over time in payroll taxes that would otherwise be needed to pay benefits to the elderly."
Bears repeating. This is one of the many things about tax reform that the flat taxers just don't get.
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