Posted on 03/26/2002 4:14:42 AM PST by Phantom Lord
From Russia, one-steppe taxation
Soldiers who refuse duty in territories show Americans the way
By DANIEL J. MITCHELL, Knight Ridder/Tribune
WASHINGTON - Eleven years ago, the Soviet Union was a communist dictatorship, an "evil empire," in the words of President Reagan. But today, the Cold War is a fading memory, and the nation that used to represent international socialism has junked its "progressive" income tax for a simple and fair 13 percent flat tax.
What's more -- in a plot twist even novelist Tom Clancy might have scoffed at -- the idea came from President Vladimir Putin, a former head of the KGB.
Who would have thought it: America would beat the Soviets to the moon, but Russia would become the first to adopt the ideal free-market tax system?
Moreover, the Russian flat tax has proved a smashing success since it took effect in January 2001. Russia's economy grew by more than 5 percent last year while most other nations were mired in recession. Even the Organization for Economic Cooperation and Development called Russia's flat-tax system a "key accomplishment," a stunning admission since the Paris-based bureaucracy is infamous for complaining about the "unfairness" of nations using low tax rates to lure jobs and capital.
It also is interesting to note that Russian tax revenues are skyrocketing even though the tax rate now is now far below the 30 percent top rate of the old system. According to preliminary figures, inflation-adjusted tax revenues climbed by 28 percent last year. This proves the class-warfare artists in Washington completely wrong when they argue that tax revenues would fall and the rich would get a big tax cut if America adopted such a system. The Russian experience confirms that tax revenues rise under a flat tax.
In addition to one low rate, Russia's flat tax is much less biased against savings and investment. Unlike our Internal Revenue Code, which taxes income once when you earn it and a second time when you invest it, the Russian flat tax does not double-tax corporate income or impose a capital gains tax on stocks, bonds and home sales. And with few exceptions, there is no double-tax on bank deposit interest.
Fortunately, it appears that some U.S. politicians have noticed. President Bush said last June that he "was so impressed that (Putin) was able to simplify his tax code in Russia with a flat tax." Later that year, the president reiterated his support, stating at a news conference with Putin that "I am impressed by the fact that he has instituted tax reform -- a flat tax. And as he pointed out to me, it is one of the lowest tax rates in Europe. He and I share something in common: We both proudly stand here as tax reformers."
The difference between President Bush and President Putin, of course, is that while Russia enjoys its flat tax, Americans still have to navigate the hundreds of forms required by all 45,000 pages of our mind-numbing tax code. But don't blame Bush. He's boxed in by tax-cut opponents such as Sens. Tom Daschle, D-S.D., and Edward Kennedy, D-Mass. If they're willing to filibuster against a tiny tax cut in a stimulus bill, it's not hard to imagine what they would do to stop a flat tax.
In the past, politicians in Congress have said a flat tax is impractical -- even though jurisdictions such as Hong Kong and Bermuda enjoyed rapid growth in part because of their flat-tax systems. When nations such as Estonia, Latvia and Lithuania enacted flat-tax systems, the special interests claimed these nations were too small to teach us anything. Now that Russia has a successful flat tax, what excuse will they use now?
A flat tax will create jobs and boost growth -- improving America's competitive advantage in the world economy. But tax reform is not just about a bigger economy. A simple and fair flat tax also would reduce political corruption and fulfill our Constitution's promise that all people should be treated equally. If former communists can make this reform, is it too much to hope that Congress can do the same thing?
Daniel Mitchell is the McKenna senior fellow in political economy at The Heritage Foundation (www.heritage.org).
A flat tax, while wide open for debate, in my opinion is the optimum system of taxation over the other current reform alternative. The NRST (sales tax).
What a different world indeed if the Dems backed Brown over the Ozark Caligula...
Sad to say, we may need a second Great Depression to get my preferred tax method--an NRST, enumerated right there on the sales receipt.
Certainly more than the average Californian .... first the tax thing and the fact that they can own AK-47's and M16's while Ca residents are denied both.
"And finally, the coup de grace, the knife to Steve Forbes's throat as Engberg went on camera to end his story. The 'on camera,' as we call it in the TV news business, is when the reporter gets to look the viewer in the eye and deliver a sermonette. This is when the reporter, if he hasn't been slanting the news up to this point, will often give you a little editorial just to make sure you know how you're supposed to think about the subject at hand. Eric Engberg ended his little vaudeville act thus: 'The fact remains: The flat tax is a giant, untested theory. One economist suggested, before we put it in, we should test it out someplace - like Albania.' Engberg flashed his signature smirk and signed off - Eric Engberg, CBS News, Washington."
from Bias by Bernard Goldberg
Remember the fight in NJ between toilet tissue and tissue paper? Which would be exempt, which wouldnt, would both, would neither? Now imagine that on a NATIONAL scale with 1000's of products and their producers in the fight.
With a flat tax i would also end withholding. Make people write a check every quarter.
One thing that would bring me closer to supporting a NRST would be for all the current federal sales taxes (tobacco, alcohol, gas, etc...) to be repealed so only the NRST would be charged. Otherwise, the ability to selectivly tax items would also morph into the massive complication and unfairness of todays tax system. Though its burden would mostly be laid on producers and retailers, not the ultimate consumers. So while we wouldnt see the problems and complexities like we do with todays income tax, the problems would still be there. We just wouldnt see them as much so most people wouldnt care and reform of those problems would be impossible because there are not enough "votes" to be had by fixing them.
Obviously not an inhouse editorial, but a big surprise that this liberal paper would publish this.
Take a closer look at the full system. You will find out why they tout it.
You will find out the russian tax system is anything but "a simple and fair 13 percent flat tax."
PART TWO OF THE RUSSIAN FEDERATION TAX CODE
Russia would become the first to adopt the ideal free-market tax system?
Russia uses the Euorpean style income tax with a VAT. Businesses (individual & corporate) are also hit with 30-35% tax rates on "profit" above & beyond the income tax and VAT. Individuals pay a regressive wage tax starting at 32% declining to 2% @$22,000/annum for Social taxes.
There is nothing simple or fair about the Russian tax system.
"Still Russia is reporting stellar first results from a bold experiment, a 13 percent flat-rate income tax. The centerpiece of the government's tax reform program, it is the lowest rate in all of Europe and the envy of AMERICAN RIGHT-WINGERS." (EMPHASIS ADDED)
This was a "news article", no on the editorial page. Perhaps the NY Times is in its own little "Moscow on the Hudson"
My problem with the NRST is that it will have "exemptions" and other "loopholes"
No exemptions, every person pays the full 23% at the retail register every time they make a purchase. The tax is levied once but only once on all products and sevices, there are no exceptions, and like the Armey flat tax no investments or savings are taxed.
The Flat Tax on the other hand retains both the personal exemptions and EITC of the current tax system. Where business in concerned it still retains a full range of allowed business deductions and is just as complex as today.
Flat Tax as Seen by a Tax Preparer
by Vern Hoven
Remember the fight in NJ between toilet tissue and tissue paper?
No products are selectively exempted from the NRST which uses a monthly prepayment based on family size to avoid making product exceptions and provide a mechanism that achieve the same effect of the personal exemption of income taxes.
Make people write a check every quarter.
That is primary harm of any income tax. It imposes an affirmative legal jeopardy on every individual in the nation intruding on personal liberty and demanding an accounting of family finances to the government. It demands the maintainence of a police state organisation to enforce the tax and opens the family to abusive enforcement practices of the IRS.
You may also get a good idea of how the FlatTax operates as compared to the the NRST within the economy if you consider:
As the Government extracts revenues from the Citizen.
The substantial difference between the IncomeTax & the NRST lies within who has first control of the allocation of resources, the Citizen or the Government.
Keyes on Taxes & Government Spending:
Alan Keyes Interview with Des Moines Register:
The intent of the structure of any income tax including a Flat Tax is for political and social control not revenue collection. The Individual Income tax is maintained to establish and hold every person in the country perpetual legal jeopardy.
The American people are all slaves to the Federal Reserve System, and the IRS.
No Flat Tax gets rid of either it is still an income tax with no less requirement for enforcement by the IRS, and Federal Reserve operates just the same.
Why can't we have a Flat Tax?
Why do you want a European style tax system?
See the hyperlink in Reply #10 if you really want to know what kind of tax system is being sold in Russia. It is a full fledged Euorpean VAT with income tax plus a few uniquely Russian wrinkles added in.
As far as the Flat Tax goes being proposed in for this country the Forbes/Armey Flat tax is still an income tax, still requires an IRS, and still taxes business passing on such taxes in higher prices to consumers, lower wages to employees, and lower returns to investors/retirees. It is, quite frankly a VAT combined with an individual income tax and retains the SS/Medicare payroll taxes besides.
CONSUMPTION TAX PROPOSALS; 1996 Deloitte & Touche LLP
See also:
Flat Tax as Seen by a Tax Preparer
by Vern Hoven
As long as government is able to play a shell game with hiding taxes from the Voter(i.e. individual) it can rely on the old maxim:
A government which robs Peter to pay Paul can always depend on the support of Paul.
-George Bernard Shaw
and keep right on growing without bound.
Instead the NRST is really a tax "of the gross payment" which means the NRST would tax all other taxes, fees etc. imposed before it...
If there is a $0.50 tax on cigs. the NRST on that would be an additional 30% or $0.65(NOT the 23% lie)
$0.65 minus phony 23% tax = $0.50....get it?
They start their sales pitch with lies about the tax rate...what else are they lying about....plenty
And then not to far down the road, to avoid the hassle of refunding money to "poor" people they will issue little cards that exempt them from sales taxes on most if not all items and then congress with haggle all year, every year over the income limits and who is eligible and who is not eligible for these cards. What products are exempt from the tax and which are not. Sooner or later we will be right back to where we are now as far as complexity and exemptions and loopholes and the whole rest of the mess.
Its a great idea on paper, but the political reality of congress and the vast amount of people with their hand out for my money is what will be its downfall.
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