Posted on 10/12/2005 8:39:34 AM PDT by pigdog
TAX REFORM COMMISSION? YEAH ... RIGHT.
The president's so-called tax reform commission telegraphed its intentions several months ago when members stated that they were not going to recommend a full reform of our federal tax system, rather they were going to recommend some incremental reforms. The The FairTax Book hit the book stores and debuted at No. 1 on the New York Times Bestseller's list. Politicians and other Beltway denizens told co-author Congressman John Linder that the success of The FairTax Book was a certain indication that the people of this country were in the mood for wholesale reform. Who knew?
Now we're starting to get an indication of what the tax reform commission is going to recommend. It's very simple. Tax increases, not tax reform.
(Excerpt) Read more at boortz.com ...
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Welcome aboard! You are now on the pinger :O)
But the so-called "Fair Tax" eliminated any preferential treatment for home loan interest and medical insurance premiums altogether.
"If the reduction of preferential treatment is, in Boortz's words, a tax increase. What is the elimination of these preferential treatments? It must be a tax increase magnitudes of order greater than the commission recommends. But that is precisely what the so-called 'Fair Tax' does. So Boortz is decrying the recommendations of the commission as a tax increase while simultaneously advocating even a higher tax increase."
I think you missed the part where the FairTax not only eliminates the deductions, but also the tax that the deductions are taken against. The purpose of these various deductions is so that you can pay for these items with pre-tax dollars. With the FairTax, you pay for EVERYTHING with pre-tax dollars.
I heard one person say it well - think of the income tax as an illness and the deductions as medicine that you take to reduce the symptoms of the illness. If you eliminate the illness, you no longer need the medicine.
Does that make it any clearer?
"Flat tax is the only way to go as it is incremental enough to actually make it."
Been there, done that. The current system started out as a flat tax many years ago. It was flattened into only two rates in 1986. The current mess is the result of 90 years of failed attempts to define the term "taxable income".
I once heard the term "insanity" described as doing the same thing over and over and expecting different results. I think that definition applies here.
"My point was that the "all or nothing" approach from sales tax advocates hurts tax reform efforts. If both sides got together, I believe they could work together and enact a postcard type system like Armey proposed. Primarily because the elimination of witholding could be postponed."
The Armey plan is now the Burgess plan and is apparently favored by Steve Forbes. It adds a flat tax option onto the current system.
IOW, not a word of the current 60,000 page monstrosity is eliminated and additional verbiage is presumably added to define the flat tax option. Therefore, from a standpoint of simplification, it fails abysmally.
In addition, it isn't revenue neutral, so it does not meet the President's criteria and has no chance of being enacted.
Furthermore, it does not address any of the major economic challenges that this country faces which are tax system related, such as the looming insolvency of Social Security and Medicare or our ballooning trade deficit.
Other than that, the Burgess plan is great.
"Eliminating withholding would be as difficult as passing the NRST. Withholding is the key to the scheme called the income tax."
Amen to that. If you eliminate withholding, the whole income tax system would collapse. Can you imagine what it would take for the federal government to chase down all the lower income types who spend every dime between paychecks?
Anyone who advocates that approach to tax reform is either (a) disengenuous, or (b) not thinking clearly.
a) While 1 out of 3 isn't bad in some cases, here it disqualifies you. Not having a separate payroll/withholding tax saves commandeering 15.3% (18.06% t.e) of most wage earners pay making it the largest tax many pay. Getting rid of that is far more than "nice"; it is hugely beneficial to the wage earner. As for arguments in favor of it when it isn't required there can really be none that make much sense - why argue to have something that is not required (along with the corresponding compliance costs)? The third one, "pernicious" understates the case, if anything.
"b) ... with one exemption for lower incomes and no deductions, almost all of those pages would disappear."
b) Show us the actual wording in the flat tax bill before Congress that makes them "disappear" along with all of he rules on depreciation, roll backs, roll forwards, etc. Your making such an unsupported claim isn't too meaningful. While you're at it, show us how an actual, proposed flat tax is revenue neutral. Forbes says his isn't.
"c) Who needs the tax code to subsidize exports?"
c) Nowhere does the FairTax "subsidize exports" - nor did I say that. Any income-based tax system punishes exporters by embedding tax costs into the prices of their products which PUNISHES them in the other countries. the FairTax removes that punishment - it is not a subsidy.
"d) All the hidden costs of compliance such as tax sheltering and uneconomic tax-related business decisions would go with a flat tax."
d) Sorry, but no - that's not at all true; but you're welcome to show me an actual flat tax bill that you believe does this. It would have to eliminate all business (not just corporate) income taxes since those embed cascading tax costs into prices and will continue to do so. The tinkering that is endemic - and almost mandated by any income-based tax will still be there with any flat tax along with the ability to complicate and manipulate the tax code to benefit patrons - just as at present. K-Street wouldn't even have to cut back on paper clip spending. Don't forget the present tax started as a flat tax and look what it has grown into. With all of the experience in manipulating the tax code for their own benefit you're kidding yourself if you think the manipulators won't be right back at it in far less than a year and the business decisions skewed by the tax code will be right there, too.
"e)" glad we agree on that. That alone will provide greatly more tax revenue and should soon lead to rate lowering of the basic general rate.
"f) With a flat tax you just fill out a postcard ..."
f) We've heard that old saw from Armey, Forbes, and many others and it's a wonderful campaign slogan, yet their magical claim never really gets off the ground - and still hasn't. The devil is in he details and I'd suggest you read:
Flat Tax as Seen by a Tax Preparer
by Vern Hoven
Please note that aside from the extra compliance problems he mentions, there is the problem of how any flat tax redistributes the tax burden - shifting it onto places where is probably has no business being.
"g)... political control of the public's financial decisions to a large part by tinkering with the tax laws ..."
Who cares about changing the so-called flat rate (even if the supermajority requirement could ever be written into the law) when you as a politician have all of the other tempting bits of tax code to carve out benes for your favored few? Plenty of damage can be done that way and - hey, just like at present - almost no taxpayers is any the wiser. He'll still think a tax refund is "free money". Just make tax laws to force behavior where you (or your $$$ buds) want it.
"h). When Russia instituted a flat tax, massive amounts of hidden capital suddenly reappeared. With a low, fair, simple, rate, it usually makes more economic sense to pay than avoid."
UNN-HUH!! And that's no doubt why they are now attempting to switch to a retail sales tax to eliminate the problems that have been caused.
"i). A growing economy is what really attracts foreign investment."
No argument there, but it needs to be combined by other attractive factors in a country the size of ours (markets, infrastructure, etc.) since Hong Kong WAS a special case and is now far less attractive because of real or possible government interference in its economy. Foreign capital is no now rushing to HK and should the US implement the FairTax, the US would be, by far, the biggest tax haven in the world and HK would lose capital even more quickly.
As for your comment about "I can add another to your list: a big red "FEDERAL TAX 25%" at the bottom of every receipt would be a huge pressure to lower the rate and lower federal spending". That actually doesn't fit with your flat tax list (nor a FairTax list for that matter if that's what you intended). The FairTax already has the 23% tax inclusive rate included on every receipt so that is quite visible by law.
We could add an equivalent point to your flat tax list, though, by pointing out:
"j). Add a big, red "FEDERAL TAX IS 32.3% tax inclusive (or 47.71% tax exclusive) rate" at the bottom of all paychecks, receipts, daily newspapers, and radio and TV broadcasts so that people will wish they had had the sense to have voted for the FairTax - and will do so the next time it comes up for a vote.
"We must walk before we run and conversion to a sales tax is sprinting."
From my perspective, a little sprinting is exactly what is needed. For example, we have a trade deficit which is over $600 billion/year and growing at an alarming rate. Since no other country on this planet has ever run these kind of massive trade deficits, either on an absolute or a relative basis, one cannot know when this trend will produce a crisis. The only thing that we know for sure is that we cannot continue down this path indefinitely without paying the consequences at some time.
The insolvency of Social Security and Medicare is another serious economic challenge. Trying to maintain this system on a payroll basis is an exercise in futility.
These are just two examples if ticking time bombs that absoluteley WILL explode if we continue to stick our heads in the sand. Therefore, a little sprinting away from these problems may not be all bad.
"I continue to believe the 'Fairtax' momentum does a disservice to the intent of tax reform (simplification)."
That is certainly an odd position, given that the FairTax is FAR simpler than any of the flat tax proposals that I am aware of, and that history teaches us that flat income taxes don't stay that way for long.
If the flat tax is so achievable, why is it that the vast majority of flat taxers don't support a specific flat tax proposal (in fact, many of them could not tell you what they are and the differences between them), but rather the flat tax as a form of taxation. If the flat tax is so politically attractive in actuality, one would think that at least one specific proposal would have gained traction by now. After all, it isn't like the flat tax is a new concept.
"It is now officially DEAD.
No flat tax.
No NRST.
As of October 12, 2005, tax reform is dead and over."
Not necessarily. If AFFT follows through on plans to launch a national media campaign by the end of the year, the panel's recommendations won't matter much to the public, and the public WILL demand it. Pres. Bush may not lead the charge, but he won't veto it, either, if it has mass appeal. I heard someone say that, as politically weak as he is right now, having him lead the charge may not have even been helpful.
The other major factor is whether Delay gets back on his feet. I spoke with one highly placed staffer today who said that what Delay was doing was exactly what the FEC has been advising for some time and what is being done by both sides on a widespread basis. It may not play well in the media, but it is either (a) not illegal, or (b) most, if not all of the elected reps in congress are guilty of the same "crimes" that Delay is guilty of.
I would say that IF (a) AFFT rolls out the media campaign and (b) Delay recovers his position, we could have far more momentum this time next year than we do now.
There are losing battles in every war. This may just be one of those. Time will tell.
"The are uniformly displeased with the tax panels cop-out. These voices are just beginning and you can bet they will be heard. Some have some real political heat behind them."
That is a valid point. Even though the final workproduct of the commission may be of poor quality, the whole process may have "stirred up the pot" so to speak. It may very well have increased the visibility and the expectations of the general public to the point where politicians won't be able to put this genie back in the bottle so to speak.
Of course, as I posted before, there are factors that we don't know about yet (such as Delay and a national media campaign) which will have a major impact.
I still say the jury is not in yet.
b) thousands and thousands of pages of tax code which no one understands and which can be easily modified"
"With a flat tax with one exemption for lower incomes and no deductions, almost all of those pages would disappear."
Which flat tax proposal in congress conforms to your description? Certainly not the Burgess bill, which is the leading flat tax proposal in the house.
"a)." that's exactly the point - it IS a wage tax (or more properly an income tax) and should not be forced upon taxpayers when there is a much better way available in the form of the FairTax.
"b)." That's a bunch of gibberish. Take a look at the flat tax bill in congress presently and tell us how many pages of tax code it eliminates - hint: none.
"c)." Show us a 10-year window of all of he flat tax-only countries that have thrived as you claim. Yeah - right!! Border adjustability in the US would drop exporters prices substantially and put us on a more equal footing with the VAT countries which have such adjustability.
"d)." It has always been cascading embedded tax costs, Nightie, and it's a damned shame you know nothing about them since they do exist and were a big reason that many of the VAT countries converted to VATs - to try to eliminate such costs and make their own products more competitive in other countries.
"e)." The illegal economy will always be there and no one pretends otherwise. At least with the FairTax, the money from it spent on taxable retail items will produce 23% in tax revenue ... which it does not do at present (or under a flat tax). That alone will probably be enough to allow the FairTax rate to be lowered early on after implementation.
"f)." Over and above the paperwork compliance requirements are all of the background recordkeeping and compilation required due to the arcane and ever-changing tax rules. All of this is an unnecessary waste of the human condition (but perhaps you don't understand that being a Squirrel and all).
"g)." The flat tax is LESS susceptible??? Balderdash. Look at the flat tax presently befopre congress and notice that is is laid on top of existing tax laws. A statement like that either proves your crass stupidity or your intentional attempts to mislead people - you may choose.
"h)." The statement was about attracting CAPITAL - not earnings, The last sentence in the immediately prior paragraph applies once again. If capital is attracted back the earnings will certainly follow that.
"i)." With a flat tax on top of the existing tax code, it is a certainty that the result would be the antithesis to a "booming" economy; i.e., a failing one.
"j)." You're right about one thing, at least - you DON'T think and when you attempt that foreign effort your mind gets all mushy as you have demonstrated here once again. I presume you have ample capacity but there's nothing of consequence therein (except mush).
Elimination of withholding would create an entirely new government agency, one much more agressive and intrusive than the others, called the Delinguent Taxes Collection Agency.
I think this is another one of your "untruths." Got a source for this? Everything I've read says the Russian flat tax has been a great success."h). When Russia instituted a flat tax, massive amounts of hidden capital suddenly reappeared. With a low, fair, simple, rate, it usually makes more economic sense to pay than avoid."UNN-HUH!! And that's no doubt why they are now attempting to switch to a retail sales tax to eliminate the problems that have been caused.
S 1099 IS. SEC. 106. (b)";b) ... with one exemption for lower incomes and no deductions, almost all of those pages would disappear.";
b) Show us the actual wording in the flat tax bill before Congress that makes them ";disappear"; along with all of he rules on depreciation, roll backs, roll forwards, etc. Your making such an unsupported claim isn't too meaningful. While you're at it, show us how an actual, proposed flat tax is revenue neutral. Forbes says his isn't.
(1) IN GENERAL- Except as provided in paragraph (2), chapter 1 of the Internal Revenue Code of 1986 is hereby repealed.
Moronic oxymoron.
Flat Tax as Seen by a Tax Preparer by Vern HovenLet me get this straight. You think a guy who makes his money giving tax seminars not liking the Flat Tax is a negative for the Flat Tax? He thrives on the complexity of the current system. The more complex the better for him. The Flat Tax would put him out of business. Frankly, what ever this guy hates is probably great for the country.
"a)." that's exactly the point - it IS a wage tax (or more properly an income tax) and should not be forced upon taxpayers when there is a much better way available in the form of the FairTax.A wage tax is no more an income tax than a NRST. In fact, a wage tax would tax less income than a NRST.
"b)." That's a bunch of gibberish. Take a look at the flat tax bill in congress presently and tell us how many pages of tax code it eliminates - hint: none.Hint: you are a liar.
(1) IN GENERAL- Except as provided in paragraph (2), chapter 1 of the Internal Revenue Code of 1986 is hereby repealed.
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