CAVUTO REPORTS THAT BUSH CONSIDERING SCRAPPING THE IRS CODE!!!

Fox News Channel | November 6, 2002 | n/a

[LincolnLover]

NRST, eh?

Looks like Billy Tauzin will be getting plenty of face time over the next two years.

Unfortunately, Dems will likely muck up the waters with stalking-horse alternatives (remember Gephardt's old "flat tax" proposal?) and it'll never happen.

Today, more than most days, is a good one for daydreamin', so have at it!

[section9]

I believe the Constitution only calls for tariffs, non?

Be Seeing You,

Chris

[hchutch]

Total re-write, yes.

Sales tax? No. A flat tax is better, preferably if we can keep the 401(k) and mortgage interest deductions to go with the personal exemptions.

[Stefan Stackhouse]

Before you all get TOO excited about this, let me remind you that to totally replace the income tax with a national sales tax would require a rate of around 20% or so, maybe more. Be aware that at those rates, the incentive to evade the tax through smuggling and black marketeering starts to become pretty significant, especially with high-value/low-bulk goods. The only reason why tobacco smuggling is not already a bigger problem in this country in spite of the high tax rates on it is because most tobacco products are relatively low-value/high-bulk.

If a national retail sales tax (NRST) goes into effect, I can confidently predict that very quickly a black market will develop for most high-value/low-bulk goods. What would be some examples? Here's a few I could think of: jewelry; watches; most electronic goods; software; rare coins & stamps; most smaller art works and antiques; some high-end silver, china, or crystal tableware; some high-end garments and accessories, especially if made of leather or fur; some musical instruments. It is interesting that many of the things on this list, except for the modern technology electronic goods, are the same ones that were subject to the old WWI-era "Luxury Tax."

Why be concerned about the likelihood of smuggling and black-marketeering. Well, do you like what is going on with the war on drugs -- the SWAT teams barging into homes day and night, sometimes mistakenly into the WRONG homes? Imagine this activity scaled up by a factor of ten or a hundred or so. Still sure this is what you want?

[Pushi]

I have been advocating a national sales tax since 1978. I may be the person who gave the idea to Congressman Bill Archer. To make it pallatable to all, I think there should be a rebate for every man woman and child which people have to apply for to get. This would cover the tax paid for the necessities of life, such as a basic level of clothing, housing, transportation to work or school, etc. (Medical expenses and food should be exempt as they are in Texas.) So that charities don't miss out, a person should be able to assign his rebate to an approved charity, if he does not want to go to the trouble of filing for it. The rebate idea would keep people from saying that the tax is too regressive and taxes the poor an inordinate amount. This would work.

[MrB]

I hope this doesn't apply to home sales though

From what I've seen of the NRST, it only applies to sales of new items.
Buying a used car or home would have no sales tax.

This will affect new home sales, but I'm not sure how much. I'm sure an analysis of this has been done.

[EarlyBird]

If Bush does this now, it will INSURE a second term and an even greater majority in congress.

The problem is that it is untried and uncertain, and therefore it could backfire.

[Naspino]

Why be concerned about the likelihood of smuggling and black-marketeering.

Technology provides a solution to this -- plus it'll serve to remove more DNC voters from society and put them behind bars where they belong.

[lodwick]

National sales tax bttt!

[tomahawk]

This is how a party gets long-term majority status. Kill the hated Tax Code and 1040. Kill it dead! We would control Congress for at least a generation.

[GPBurdell]

This can be directly attributed to Congressman John Linder(Ga - 7) who campaigned on the "Fair Tax" bill that he has proposed and won big. In addition, Phil Gingrey, who upset the Dems in Georgia 11 has signed on to the idea as has newly elected GOP Senator Saxby Chambliss. This movement is gaining steam and if the President pushes it, it will happen

Buzz

[ThinkDifferent]

A national sales tax will be as bad or worse, in terms of lost income, as the IRS - what we need is a flat tax of no more than 10%

The amount of government spending and how it collects the money that it spends are separate issues. I entirely agree that government needs to be smaller and less expensive, but as long as it exists it needs to be funded. The current income tax is about the worst system imaginable; it's complex, invasive, riddled with loopholes for special interests, it has huge compliance and enforcement costs, and it's biased against saving and investment. Regardless of how much of our money the government spends, the income tax needs to die.

[Saundra Duffy]

Oh, my God! I hope this is true. Revolutionary news! For victory & freedom!!!

[agitator]

As I understand it, and Hamilton spoke to this issue although I can't pull the cite off the top of my head, excises at the time of the adoption were never intended to be as broad-based as a tax on almost everything and he spoke to the avoidablility of an excise tax in relation to the intent of that provision. If Congress were to enact a 10,000% percent tax on tires, gasoline, cigs, and luxury boats, that would be one thing. IMHO, enacting a 30% tax on virtually everything makes the tax unavoidable taking it out the class of excises.

[Lizavetta]

but not if Mr Rich Guy That Can Pay a Lawyer gets off w/o paying a dime.

I personally know three "Mr. Rich Guys" and I'm here to tell you that they are paying through the nose. And don't say that they need better accountants....one goes through Price Waterhouse, another through a business manager in Los Angeles who handles Nicholas Cage and Clint Eastwood, and the third, well I don't know who he uses.

I think the "rich aren't paying" is and always has been sheer Barbra Streisand, designed to outrage the average American Joe. I know millionaires who are being screwed, my husband makes a 6-figure income and he's getting screwed (48% income tax), and the middle classes are getting screwed.

[Atlas Sneezed]

BEWARE! Here is an article you must read:

---

Bruce Bartlett
October 29, 2002

The value-added tax

On Saturday, Oct. 26, The Washington Post reported that the Treasury Department is studying plans to impose a value-added tax (VAT) to replace the corporate income tax and finance other tax reforms. This is a dangerous road for the Bush administration to travel, both politically and economically.
The idea of replacing the corporate income tax with a VAT is not a new one. On a technical economic level, it has much to recommend it. The corporate tax is a bad tax because it is a double tax on corporate profits since dividends are also taxed. The result is a higher cost of capital that lowers investment, productivity and wages. Most economists think it should be abolished.

The problem is that the corporate tax raises a significant amount of revenue. This year, it will bring in about $150 billion to the Treasury, approximately 1.5 percent of the gross domestic product. It is simply unrealistic, in a time of budget deficits, for the government to give up this much revenue without replacing it somehow.

A VAT, sometimes called a business transfer tax, could easily make up the revenue lost by abolishing the corporate income tax. On a broad base, it might raise $50 billion per year for each percentage point. Thus, a 3 percent VAT could replace the corporate tax.

The VAT works like a sales tax. The difference is that it is not imposed directly on consumers at the checkout, as state and local sales taxes are, but rather on producers. The tax is built in to the prices of goods and services.

One big advantage of the VAT is that it can be rebated on exports at the border, according to world trade law. U.S. exporters have complained for years that they are at a competitive disadvantage relative to countries with VATs for this reason.

Another advantage of the VAT is that it does not fall on savings or investment. Therefore, a switch from a corporate income tax to a VAT would lead to a sharp drop in the cost of capital, which would raise investment and productivity.

Against these advantages, however, are some very powerful disadvantages with a VAT. To begin, it really wouldn't make much sense to impose a VAT at just a 3 percent rate. The startup and compliance costs would eat up a high percentage of the revenue. Therefore, the rate would probably have to be at least 5 percent to justify the cost of imposing it.

A second problem is that a comprehensive VAT would be very regressive. That is, it would take proportionally more out of the pockets of the poor than out of the pockets of the rich. Although over one's lifetime, the tax would be proportional to income, there is no question that under a VAT the poor would pay more taxes than they do now.

In most countries, efforts to relieve the poor have involved exemptions in the VAT. Usually, food and medical services are exempted, but in different places, there can be a large number of other goods and services exempted as well. The problem is that this erodes the tax base, requiring higher rates to achieve the needed revenue, and it greatly increases the complexity of the tax, thereby raising the compliance cost.

Now, we are up to probably a 10 percent rate for the VAT to compensate for the compliance cost and exemptions for the poor. So, we already see the biggest problem with a VAT -- its tendency to ratchet up. When European countries first imposed VATs in the 1960s, they mostly had rates around 10 percent. Today, the average rate is about 18 percent, according to the Organisation for Economic Co-operation and Development.

It has proven too easy for governments to piggyback on inflation and raise VAT rates as prices were rising anyway. People did not notice the tax increases because they were hidden in the prices of goods and services. Consequently, the VAT proved to be a massive money machine that fueled a vast increase in taxation in every country that has adopted it.

The latest OECD report shows that the overall tax burden in Europe has reached 42 percent of the gross domestic product, compared to 30 percent in the United States. By contrast, before the VAT came along, U.S. and European tax burdens were comparable: 28 percent of GDP in Europe and 25 percent in the United States in 1965. Much of the tax growth came from the VAT, which averaged 4 percent of GDP in Europe in 1965 and is twice that today.

In 1984, the Treasury Department published a comprehensive study of the VAT that recommended against its adoption. The reasons laid out in that report are still valid today. Adopting a VAT, however it is termed, would put the United States on a slippery slope toward European levels of taxation and government. The Bush administration will be making a terrible mistake if it starts down that road.

http://www.townhall.com/columnists/brucebartlett/bb20021029.shtml

[Tree of Liberty]

To quote the venerable SAS, "Who dares, wins"

[El Sordo]

Whoa, bad deal....

[alnick]

The president actually spoke of this before 9/11, hinting that that would be his platform for a 2004 run. Then when 9/11 happened, no more was said about it until recently. I'm glad that this idea hasn't fallen through the cracks.

[weikel]

If this happens I apologize to all of you for questioning the Presidents intentions scrapping the income tax and replacing it with a NRST is the single most important reform towards getting our huge socialist state down to its legitimate functions.