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Suppose we reach a flat tax...
Self | 07-26-02 | BradyLS

Posted on 07/26/2002 10:12:09 PM PDT by BradyLS

Suppose Government works together to roll back taxes to a 10% flat tax/sales tax. Whatever. States and Municipalities roll back taxes, too. Government does just what it's supposed to by the Constitution. It happens in, say, 20 yeras

Okay, what happens to the buying power of our income? I think it should at least remain constant, which would allow people to save and invest without any problem. But is there a danger that inflation would explode to eat up all the dollars that would return to us? I know it may sound naive or even stupid, but I think this is a real concern if we can successfully produce a flat tax and roll back the tide of government.


TOPICS: Business/Economy; Free Republic
KEYWORDS: income; inflation; taxes; taxreform
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A vanity question for the economists. Admins feel free to delete if necessary...
1 posted on 07/26/2002 10:12:09 PM PDT by BradyLS
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To: BradyLS
But first, the voting public must remove Nationalist-Socialists like Daschle and Gephardt, and that is only the first step.
2 posted on 07/26/2002 10:14:20 PM PDT by Vidalia
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To: Vidalia
You're right, of course. In fact, that's what we'd probably have to do to bring about my hypothetical situation. But if the goal is reached, what then?
3 posted on 07/26/2002 10:21:43 PM PDT by BradyLS
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To: BradyLS
How many angels can dance on the head of a pin?

There is absolutely zero, zip, nada chance of either a flat tax or sales tax replacing federal income tax. The RINO party just trots out this old bromide every so often to fire up the base, like they used to do with term limits.

The RINOs are every bit as interested as the democrats in maintaining the essential element of the vote buying democracy we live in...the progressive income tax.

4 posted on 07/26/2002 10:22:30 PM PDT by Jesse
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To: BradyLS
is there a danger that inflation would explode to eat up all the dollars that would return to us?

The above will be used as an argument against lower taxation by socialist types. One of Clinton's economic advisors (I think it Was Dr. Andrea Tyson - she is now at Berkeley, I think) used it in 1999/2000 when critisizing President Bush's (then a candidate) tax reduction ideas. However, this is countered by the argument that the central bank will be available to ensure (let's hope so, the last few years have not been ideal!) price stability. Naturally, any "supply-side" tax reduction will generate investments that will demand any excess liquidity as well.

What does everyone think of this (too) short explanation?
5 posted on 07/26/2002 10:28:48 PM PDT by Lee_Atwater
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To: BradyLS
fair question. let me take a stab at answering it.

a flat tax by itself will not cause inflation. if anything, deflation is more likely. remember, if we cut taxes to 10%, then at least half the people in government who are beaurocrats who watch over others will actually have to go out and be productive. also, the number of lawyers who litigate because of the overabundance of laws will be scaled back, and they too will have to do something productive -- like write will, trusts, deeds, etc. with more people producing goods or providing necessary services, our gdp will increase and we will have more goods to buy with the more purchasing power that we have. hence no inflation

another side effect is that some people will spend their new found wealth and others will invest it. some will investement will be done here in the united states to provide jobs for people, while some will be done overseas. overseas investments will increase other nations' standard of living and enable them to make goods that we will want to buy -- so everyone wins.

before you say that we then become imperialists and we will alienate nations, let me remind you that imperialism occurs when nations political power follows its economic power, or when its political power is used to foster its economic power. history dictates that nations do not have to be imperialistic to successfully invest overseas. besides, with less dollars going to the government, we will not have the requisite money to be imperialistic. in this case the market will be the final arbiter, not governments. another win-win situation.

we all win except the democrats/socialists/communists whose sole goal is having the power to dictate your life.

6 posted on 07/26/2002 10:48:59 PM PDT by mlocher
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To: BradyLS
How about deflation because a National retail sales tax will discourage consumption and encourage investment. Less dollars chasing the same number of goods will result in a price decrease.
7 posted on 07/26/2002 11:10:19 PM PDT by Libertarianize the GOP
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To: Libertarianize the GOP
How about deflation because a National retail sales tax will discourage consumption and encourage investment.

None of the sales tax proposals are "retail sales tax". The national sales tax proposals are a tax " of the gross payment" (including itself) and NOTHING is exempt. A 23% "sales tax" would increase prices by 30% ....That means rent, leases (including vehicle leases) haircuts, lawyers fees, insurance, government services, public utilities, tolls, lawn maintenance, even (beleive it or not) interest paid and interest earned is taxed as well as taxes and fees imposed/included in the gross payment...There's a tax on gambling and the REAL bugaboo is a tax ON the "wages, salaries and benefits of "ANY" (local, state, federal) government employees....

You may think it will "encourage investment" but the "revenue neutral" sales tax proposals would leave little disposable income for investing. Your earnings would be nothing more than taxes yet to pay.

8 posted on 07/26/2002 11:36:21 PM PDT by lewislynn
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To: Jesse
you are correct. We need to throw both republicans and democrats out before we can have a significant reduction in tax rates or a similar re-ordering of priorities. I think we can do it if we really work at it.

We've had 3 large income tax cuts in our history. early 20's, early 60's and early 80's. all 3 benefited both the economy and the federal coffers.

Since 1985 we've sustained several tax hikes. We've also sustained large new restrictions on industries that were manifestly of no advantage to the environment, but only destroyed jobs. We've seen private industry flee our country in part because of things like the 500 million dollar court-ordered cleanup that GE is doing in connecticut that isn't really going to clean anything up because it's clean already. There are countless other complaints by business that american law and policy discourate domestic business.

Remember how clinton made the deal with the indonesian and took the utah mine out of commission. If that mine were open now, there'd be less than 1000 or so acres devoted to the mine. It would've provided huge tax revenue to utah and to US, it would've provided effectively tens of thousands of high paying jobs between miners and suppliers. Bush could free this land. That would help us economically. we could export coal instead of import it.

Bush could also free the forests in the west, that would create jobs and be good for the environment.

The trade deals made under bush 1 and clinton have resulted in a huge loss in manufacturing. If we want low domestic taxes, we should consider modest tariffs on products from china.

some american economists have been saying that if you measure wealth by how much an average wage can buy in a basket of goods, then it seems that americans have been consistently losing wealth since 1965. When the supply side of the economic equation is taxed and regulated and restricted heavily and we wonder why real wealth declines. since the mid-60's we haven't gotten that unemployment rate down under 4.0%. But prior to mid-60's it happened so regularly for over a hundred years, except the 1930's, to get unemploymnet to 3%, 2% or even 1% at least three years out of every 10 years. Our new wealth strategy of taxing heavily, regulating too strongly, restricting unreasonably and spending like crazy inside of government are causing poverty slowly, not wealth.

It is milton friedman's 90's birthday in a few days. supply side economics means, let's put less burdens on production whether it be tax, unreasonable regulations or excessive government spending, so that we produce more in the productive private sector and thus be wealthier. our history and the histories of other nations indicate that this philosophy creates wealth. High taxes and government monopolies engender poverty.

9 posted on 07/26/2002 11:47:18 PM PDT by Red Jones
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To: BradyLS
actually getting rid of the IRS may be the only way out of the deflationary economic spiral....
10 posted on 07/27/2002 5:18:14 AM PDT by mo
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To: BradyLS
"Circular logic" generally results in head being inserted in butt.
11 posted on 07/27/2002 5:30:16 AM PDT by patriot_wes
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To: BradyLS
But how will the elderly get all their free stuff?
12 posted on 07/27/2002 5:40:37 AM PDT by Jim Noble
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To: BradyLS
What we need is a requirement for a balanced budget and a flat tax without a lot of exemptions.

Whenever a new program is proposed the voters would have to decide if it was worth an incremental increase in their taxes.

13 posted on 07/27/2002 8:29:21 AM PDT by reg45
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To: Jim Noble
And how will we pay interest on our 6 trillion dollar public debt?
14 posted on 07/27/2002 1:43:04 PM PDT by majic12
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To: Jesse
There is absolutely zero, zip, nada chance of either a flat tax or sales tax replacing federal income tax.

Right, but this failure isn't even dependent on the motives of party politics as much as it is on simple math and logic.

The issue will never hit the floor unless you had a President running on it, and a candidate never will because it fractures the constituency. Like wall street, the less unknowns the better.

15 posted on 07/27/2002 3:20:38 PM PDT by mindprism.com
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To: lewislynn
fairtax.org
16 posted on 07/27/2002 3:42:12 PM PDT by Libertarianize the GOP
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To: Libertarianize the GOP; *Taxreform
BUMP!
17 posted on 07/27/2002 3:44:44 PM PDT by EternalVigilance
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To: BradyLS
I don't think so.

THe reason why, is because that money is real and the government is spending it in our economy.

So it seems to me, the only thing changing is that instead of the government spending it, people will be spending it.
18 posted on 07/27/2002 3:47:49 PM PDT by NC_Libertarian
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To: Libertarianize the GOP
fairtax.org

That's the one I was referring to alright.

19 posted on 07/27/2002 3:48:46 PM PDT by lewislynn
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To: BradyLS; Taxman
If you go into the pasture and stomp on a cow pie, what do you have?

A flat cow pie.

The income tax is fundamentally flawed, flat or not. The original income tax 90 years ago was flat...and was foisted on the American people as being only a tax on 'the rich'. Of course, obviously we are now all rich, and therefore subject to the slave tax. /sarcasm

Read the Federalist Papers...the founders knew very well the dangers of direct taxation...that's why they made it unconstitutional.

Taxing consumption is the only way to go...and not a value added tax or anything else that can be hidden and therefore manipulated by the ruling class. In other words, there is only one form of taxation that will leave our posterity free and prosperous...a RETAIL sales tax, collected by the States.

Regards,
EV



20 posted on 07/27/2002 3:52:02 PM PDT by EternalVigilance
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