Tax package Bush will sign guts middle class {"Fair" Tax replaced by VAT in "Tax Reduction" Bill}

WorldNetDaily / Commentary ^ | Posted: May 26, 2003 | By Joan Veon

[scripter]

There's a small part of me that says we could "phase" in national sales tax.

I often think the same thing. Start the NRST at 1% or lower and have the income tax drop at a proportionate level. For some reason I can't see us every going to a NRST without some similar plan. Eliminating the income tax one day to swap with the NRST would be difficult as I see it if the NRST wasn't already in place.

But then I remember that I'm talking about politicians remaining honorable.

Same here and I would imagine other folks feel the same way. I can imagine the NRST at X% and the income tax almost eliminated, and somebody coming along and saying we just can't eliminate the income tax and the income tax rates slowly increase.

[Munson]

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

its being under consideration by the treasury department, but if we have a vat then tax rates should be flat and capped like russia.

[snooker]

" ... I'm surprised Farah would actually publish this "

Farah must be on vacation. This whole rant is incomprehensible.

[George Frm Br00klyn Park]

"For an even better sampling of hysterical class-warfare arguments go to homepage of the author of this piece."

NF, Where exactly at the "homepage of the author of this piece." do you see this "class-warfare arguement" stuff?? All I see is a bunch of well researched articles about the coming NWO. Of course, the NWO is just a figment of imagination of the tinfoil hatters. Exactly WHO do you think initiated the "class-warfare" anyway?? If writing articles about meetings and folks who are running them that she chronicles is "class-warfare" to you, the problem is not Joan's. Nothing to see here. Just move along. Peace and love, George.

[HatSteel]

I agree completely. If it could be introduced slowly people would get used to it and would appreciate the steady reduction of the income tax rate.

I like the idea, and an honorable group of people could make it work. But that's the problem.

Maybe signing legislation that required an irrevocable phase in/phase out period would be the answer. But I think it's unconstitutional to dictate policy to a future Congress.

[Sci Fi Guy]

Where in the tax package is a VAT tax included? I think the writter of the original piece is having a bad day.

Is there anyone else who thinks that the tax cut is a hidden VAT tax? I remember another thread on this a few months ago, but I am pretty sure it's the same writer.

[tort_feasor]

What we need to implement a NRST:

1. A constitutional amendment that repelas the income tax in 10 -30 years and strictly forbidden in the future(so future Supremes can't vreate the "right" of the government). Caps the NRST at a certain percentage (25%).
2. Legislation that reduces the income tax over the 10-30 year period towards 0%.
3. Legislation that implements the NRST increasing it to the level at the end of the 10-30 year period.

If there is serious talk of an NRST everyobne will go out and spend as much as they could to avoid it, with the easy credit of today you could have 2 to 3 years of spending occur if you don't gradually implement.

[kylaka]

80% of WND is utter garbage

Maybe so.... I haven't been there in awhile. It wasn't that way 5 years ago.

[ancient_geezer]

Maybe Russia today is a better place to raise your children.
They now have a flat tax based on income that works.

Coupled with a VAT. Be careful what you ask for, you may get it.

RUSSIA:  PART TWO OF THE RUSSIAN FEDERATION TAX CODE

August 10, 2000

 

Alexander Chmelev and Evgeny Astakhov

Baker & McKenzie, Moscow Office

 

Sent by BISNIS, U.S. Department of Commerce, http://www.bisnis.doc.gov

Judith_Robinson@ita.doc.gov, Tel: 202-482-2293.  BISNIS sends this report as a courtesy to the U.S. business community. This is not to be construed as endorsement or sponsorship of any information or group.

On August 5, 2000, Russian Federation President Vladimir Putin signed into law four chapters of Part Two of the Russian Federation Tax Code and Federal Law No. 118-FZ ôOn the Implementation of Part Two of the Russian Federation Tax Code and Amendments to Certain Federal Laws on Taxationö (the "Implementation Law").  The chapters of the Tax Code signed into law by the President are Chapter 21 - VAT, Chapter 22 - Excise Taxes, Chapter 23 - Personal Income Tax, and Chapter 24 - Unified Social Tax.  These four Chapters and the Implementation Law were officially published in Rossijskaya Gazeta on August 10, 2000, and, with few exceptions, will become effective on January 1, 2001.

The most sweeping changes introduced into the Russian tax system by this new legislation are as follows:

1.         VAT (Chapter 21 of the Tax Code)

Although Chapter 21 of the Tax Code does not change VAT rates or the general VAT structure, it contains numerous provisions, which will significantly affect most businesses in Russia.  Most notably, Chapter 21 substantially modifies the "place of service" rules, which generally determine whether for VAT purposes a particular transaction has occurred in Russia and is, therefore, subject to Russian VAT.  Effective from July 1, 2001, Chapter 21 also will treat export sales to CIS countries in the same way as sales to all other foreign countries, and will exempt them from VAT.  On the downside, Chapter 21 will repeal a number of long-standing and important VAT exemptions, including an exemption for license fees for the use of intellectual property (such as, patents, copyrights, and trademarks), and will significantly narrow the VAT exemption for pharmaceuticals.

2.         Personal Income Tax (Chapter 23 of the Tax Code)

 

Chapter 23 of the Tax Code will replace the current progressive tax rates ranging from 12% to 30% with a flat tax rate of 13%.  This 13% rate will apply to almost all categories of income earned by individuals who are Russian tax resident.  A 30% rate will apply to dividends, and to any Russian source income received by individuals who are not Russian tax resident.  A 35% rate will apply to income from gambling, lottery prizes, deemed income from low-interest or interest-free loans, certain insurance payments, and excessive bank interest.

3.         Unified Social Tax (Chapter 24 of the Tax Code)

Chapter 24 of the Tax Code will replace the existing employersÆ contributions to four separate social benefit funds (which currently are imposed at an over-all rate of 38.5%) with one unified social tax.  This unified social tax will have a regressive tax scale from 35.6% to 2% of an employee's salary with the lowest rate applicable to the portion of an employeeÆs annual salary in excess of 600,000 Rubles (approximately US$22,000 at the current exchange rate). It should be noted that under the Implementation Law, as a transition rule, the lower rate of this tax will be 5% rather than 2% during 2001.

4.         Excise Taxes (Chapter 22 of the Tax Code)

As a countermeasure to reducing rates of other federal taxes, Chapter 22 of the Tax Code provides for an increase in excise tax rates for gasoline and other oil products by almost 300%.  It also provides for a less dramatic increase of excise tax rates for tobacco products and certain passenger cars.

5.         The Implementation Law

a.         Turnover Taxes

Effective from January 1, 2001, the Implementation Law repeals the Housing Fund Tax of 1.5% and reduces the Road Users Tax from 2.5% down to 1% and completely repeals the Road Users Tax effective January 1, 2003.   These taxes are imposed on gross sales and have been among the most onerous taxes on business in Russia. 

b.         Regional Tax Concessions

The Implementation Law reconfirms the right of regional authorities to provide tax exemptions for the regional portion of federal taxes retroactive to April 1, 1999. This reconfirmation resolves an issue that arose in 1999 as to whether the regional portion of profits taxes could be reduced pursuant to regional incentive laws.

c.         Profits Tax Rate

Apparently in compensation to local budgets for the cancellation of turnover taxes, the Implementation Law authorizes municipal governments to introduce an additional "municipal" profits tax of up to 5% of a taxpayer's taxable profits.  Thus the maximum overall profits tax rate may be increased from 30% to 35%.

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)

 

Just like all FLAT INCOME TAXES ARE:

 

The flat tax is a VAT. None other than the father of the flat tax, Robert Hall of Stanford University (along with Alvin Rabushka), in his 1995 Ways and Means Committee testimony said, "The Hall-Rabushka flat tax is a value-added tax."

Which was pointed out again in additional hearings in April of 2000:

http://waysandmeans.house.gov/fullcomm/106cong/4-11-00/4-11kotl.htm

"Robert Hall, one of the originators of the proposal(Flat Tax), who describes his Flat Tax as, effectively, a Value Added Tax. A value added tax taxes output less investment (because firms get to deduct their investment.)"

"The Flat Tax differs from a VAT in only two respects. First, it asks workers, rather than firm managers, to mail in the check for the tax payment on that portion of output paid to them as wages. Second, it provides a subsidy to workers with low wages."

The Flat Tax; Chapter 3, by Robert Hall and Alvin Rabushka

In our system, all income is classified as either business income or wages (including salaries and retirement benefits). The system is airtight. Taxes on both types of income are equal. The wage tax has features to make the overall system progressive. Both taxes have postcard forms. The low tax rate of 19 percent is enough to match the revenue of the federal tax system as it existed in 1993, the last full year of data available as we write.

Here is the logic of our system, stripped to basics: We want to tax consumption. The public does one of two things with its income—spends it or invests it. We can measure consumption as income minus investment. A really simple tax would just have each firm pay tax on the total amount of income generated by the firm less that firm’s investment in plant and equipment. The value-added tax works just that way. But a value-added tax is unfair because it is not progressive. That’s why we break the tax in two. The firm pays tax on all the income generated at the firm except the income paid to its workers. The workers pay tax on what they earn, and the tax they pay is progressive.

To measure the total amount of income generated at a business, the best approach is to take the total receipts of the firm over the year and subtract the payments the firm has made to its workers and suppliers. This approach guarantees a comprehensive tax base. The successful value-added taxes in Europe work this way. The base for the business tax is the following:

Total revenue from sales of goods and services

less

purchases of inputs from other firms

less

wages, salaries, and pensions paid to workers

less

purchases of plant and equipment

The other piece is the wage tax. Each family pays 19 percent of its wage, salary, and pension income over a family allowance (the allowance makes the system progressive). The base for the compensation tax is total wages, salaries, and retirement benefits less the total amount of family allowances.

FLAT TAX, VAT TAX, ANYTHING BUT THAT TAX; Duke Law Magazine, Spring 96:

• "The flat tax is essentially a VAT, with a personalized element for wages. Thus, the business tax allows deduction of all purchases -- as does a VAT -- but also allows deduction of wages. The wage income that is taken out of the VAT base, however, is also taxed, but is assessed against the individual wage-earner, not against the business."

 

Concerning Proposals for a Flat-Rate Consumption Tax
Before the Joint Economic Committee, Statement of Robert S. McIntyre
Director, Citizens for Tax Justice May 17, 1995

• The Hall-Rabushka flat tax, and its Armey and Specter variants, would replace the current personal and corporate income taxes with a new tax that is conceptually identical to a "subtraction-method" value-added tax, a version of a national sales tax, with two major modifications: First, imports would be exempt from the flat tax, while exports would be subject to tax. Second, to mitigate the regressivity of the VAT, cash wages, pensions received and other cash earned income would be taken out of the VAT base (i.e., deducted by businesses) and taxed directly to individuals, with exemptions. Thus, structurally, the flat tax is exactly equal to a value-added tax with an import incentive, an export disincentive and a personal rebate based on a percentage of a capped amount of cash wages, pensions and other earned income.Businesses compute a typical "subtraction-method" value-added tax by adding up their taxable gross receipts and subtracting the cost of previously taxed items. Thus, in computing the VAT, businesses deduct their purchases from other businesses, whether for supplies, services, machines, land or whatever. (In another, more common form of a value-added tax, known as a "credit-invoice" VAT, businesses get a tax credit for taxes paid on purchased items. In general, this produces the same result as a "subtraction-method" VAT.) Ultimately, the total tax base for a VAT is equal to retail sales of taxable items, and a VAT is thus equivalent to a retail sales tax. As noted, however, the flat tax base differs from a usual VAT, however, in that wages are deducted by businesses, and taxed at the personal level

CONSUMPTION TAX PROPOSALS; 1996 Deloitte & Touche LLP

• One concern associated with the flat tax is whether the low advertised rates will produce the same amounts of revenue as the current income tax. A June 7, 1995, Treasury Department analysis of a flat-tax plan similar to the Armey proposal, concluded that a rate of at least 22.9 percent would be needed to make the plan revenue neutral, that is, it would allow the government to raise as much revenue as is currently raised. Although the proposal is designed to raise less revenue than present law, the extent of the shortfall will concern policymakers.

• The Armey bill, H.R. 2060, would replace the current corporate income tax with a tax on business activities equal to 20 percent (17 percent after 1997) of business taxable income. The tax would apply to every person engaged in a business activity, whether an individual, partnership, corporation, or otherwise. Taxable business income would be gross active income (that is, income other than investment income) reduced by an array of business deductions.

• This business activity tax resembles a VAT computed by subtracting the costs of inputs from gross receipts, except that H.R. 2060 allows a deduction for cash wage expenses. Note that, under the bill, cash wages are subject to tax at the individual level at the same flat rate applicable to business profits. Thus, the combination of the business activities tax and the individual tax is roughly equivalent to a VAT. In addition, taxing wages at the individual level allows a generous personal exemption that makes the personal tax more progressive. To ensure that compensation is taxed once, tax-exempt entities that pay compensation other than as cash or retirement plan contributions would be subject to an excise tax.

The Flat Tax is a VAT even as the current income/payroll tax structure now in place is a subtraction method VAT, in that it is a levy imposed on businesses at all levels of production, it is passed on to the consumer hidden in the price of goods and services.

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.

[ancient_geezer]

Is there some legal double-speak that would conjure up VAT?

Yep, something that has been in the works for years now:

http://www.taxfoundation.org/foundationmessage03-00.html

"Under the WTO definition of the term, a sales tax is an indirect tax, as is an European-style VAT. The economic equivalence of an European-style VAT and a subtraction-method VAT is well-established. A subtraction-method VAT is essentially identical to a business income tax except that all purchases of plant and equipment may be expensed, rather than depreciated as under current U.S. law."

And every man woman and child in the nation, pays federal taxes through that VAT.

DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation

The full impact of the federal tax system(taxes in gross wage/salaries & other compensation + business income/payroll taxes) added onto the base(taxfree) price of retail consumption goods and services is 36% for federal taxes alone.

Its other variant is called the Flat Income Tax:

 

http://waysandmeans.house.gov/fullcomm/106cong/4-11-00/4-11kotl.htm

"Robert Hall, one of the originators of the proposal(Flat Tax), who describes his Flat Tax as, effectively, a Value Added Tax. A value added tax taxes output less investment (because firms get to deduct their investment.)"

"The Flat Tax differs from a VAT in only two respects. First, it asks workers, rather than firm managers, to mail in the check for the tax payment on that portion of output paid to them as wages. Second, it provides a subsidy to workers with low wages."

The Flat Tax; Chapter 3, by Robert Hall and Alvin Rabushka

In our system, all income is classified as either business income or wages (including salaries and retirement benefits). The system is airtight. Taxes on both types of income are equal. The wage tax has features to make the overall system progressive. Both taxes have postcard forms. The low tax rate of 19 percent is enough to match the revenue of the federal tax system as it existed in 1993, the last full year of data available as we write.

Here is the logic of our system, stripped to basics: We want to tax consumption. The public does one of two things with its income—spends it or invests it. We can measure consumption as income minus investment. A really simple tax would just have each firm pay tax on the total amount of income generated by the firm less that firm’s investment in plant and equipment. The value-added tax works just that way. But a value-added tax is unfair because it is not progressive. That’s why we break the tax in two. The firm pays tax on all the income generated at the firm except the income paid to its workers. The workers pay tax on what they earn, and the tax they pay is progressive.

To measure the total amount of income generated at a business, the best approach is to take the total receipts of the firm over the year and subtract the payments the firm has made to its workers and suppliers. This approach guarantees a comprehensive tax base. The successful value-added taxes in Europe work this way. The base for the business tax is the following:

Total revenue from sales of goods and services

less

purchases of inputs from other firms

less

wages, salaries, and pensions paid to workers

less

purchases of plant and equipment

The other piece is the wage tax. Each family pays 19 percent of its wage, salary, and pension income over a family allowance (the allowance makes the system progressive). The base for the compensation tax is total wages, salaries, and retirement benefits less the total amount of family allowances.

[GoreNoMore]

How is this tax any different than the current system, each level of the production chain is currently paying an income tax. That income tax is paid on assets purchased to make the businees more profitable. Each level is taxed and the taxes are incorporated into the cost to the end user. Currently the end user is not taxed on the sale, but taxed on the money used to purchase. If we equated the VAT tax to the current system, for every dollar you earn and spend, you are currently taxed at, 38%, 27% 15%. For the most part, it looks like the VAT would reduce my tax liability.

[ancient_geezer]

. For the most part, it looks like the VAT would reduce my tax liability.

Only problem is a VAT adds to the the price of goods and services that you pay as a consumer, by both the amount of tax remitted and the costs to business of planning, accounting, reporting, and litigating, not counting the cost of government administratation of the system and economic distortions introduced.

The price tag for government is effectively hidden hidden from the view of the electorate.

How does one exercise "Eternal Vigilence" with blinders on?

 

We must . . . End Tax Slavery Now; Nov '97
by Jarret B. Wollstein

HOW MUCH DO YOU REALLY PAY?

     According to the Tax Foundation, in 1994 the average American paid 22.4% of his or her income in federal taxes, plus 11.8% in state and local taxes - 34.2% total.

     But that's just the beginning! Dr. James Payne of the University of California found that in addition to direct taxes we also pay huge, hidden taxes including:

• Compliance costs - record keeping, monies spent on tax planning, computers and software purchased to fulfill IRS requirements, etc.
• Enforcement costs - IRS audits, field investigations, service center corrections, criminal investigations, litigation, and forced collections.
• Emotional, moral and cultural costs - families forced onto welfare, time and creative energy lost figuring out how to avoid taxes, etc.

     For every $1 we pay in direct taxes, we spend an additional $0.65 in compliance costs. And even that figure doesn't include the cost of import duties, license fees and other government regulations.

---

 

The full impact of the federal tax system(taxes in gross wage/salaries & other compensation + business income/payroll taxes) added onto the base(taxfree) price of retail consumption goods and services is 36% for federal taxes alone.

All wages and the taxes on them are paid for out of sales receipts to business,(i.e. consumption expenditure).

• Total fed taxes as reflected through gross family income is 23.5% (taxfoundation)
• Total state taxes reflected through gross family income is about 10.2% (taxfoundation)
• The current net personal savings/investment rate is about 1.2%.(BEA)

Federal tax revenues collected as % of current family expenditure = fed/(1-state-fed-savings) =

23.5/(1-.235-0.102-0.012) = 36.09%

If we add in the cost of federal tax compliance, planning, litigation & enforcement, the percentage that truely represents the burden on the family due to the Federal income/payroll tax system, product prices are increased by more than 55% over taxfree prices.

Where Have All the Dollars Gone?
How the government robs Peter to pay him back.
By economist James L. Payne, Reason Magazine February '94

When the overhead costs are added together, (24 percent compliance costs, 33 percent disincentive costs, and 8 percent other costs), they total 65 percent of tax revenue.

Current total Federal tax revenues are about $1900billion, more than $1,000 billion additional dollars are added on onto consumption prices due to the business costs of complying with the federal income/payroll tax laws.

(Payne '97, Pilla '95, AGCCA 2000, Williams 2000)

The percent total current federal burden (taxes + compliance costs) of consumption dollars = 36*(1900+1000)/1900 = 54.95% economic burden added on to base retail(i.e. taxfree) prices.

Too bad that citizens don't get a receipt detailing those "hidden sales taxes" buried in their consumption purchases. If they ever did, some of those 70% of the public clamoring for more from government, thinking someone else foots the bill, might be tempted to change their mind.

[John Lenin]

It's inevitable that tax rates are going way up. When boomers start retiring companies and governments are going to be paying phantom workers and the new hires who will replace them. I look for many big companies to go bankrupt which is going to make the problem even worse. You cannot get something for nothing so theres no way around it, we will have effective tax rates of 70% or more in the next 10 years. Bet on it.

[Rodney King]

George -

If this were true, I woudl agree 100%. However, this is all foregin to me. I see the dividened rate cut, the cap gains rate cut, and the income tax rate cut. I just don't see the VAT in the bill. Where is it?

[Rodney King]

IIt's inevitable that tax rates are going way up. When boomers start retiring companies and governments are going to be paying phantom workers and the new hires who will replace them. I look for many big companies to go bankrupt which is going to make the problem even worse. You cannot get something for nothing so theres no way around it, we will have effective tax rates of 70% or more in the next 10 years. Bet on it.

Depends on the industry, very few have such pension plans anymore.

[Timesink]

I find it VERY hard to believe that WND would be the first - if not only - news organization to discover that a giant VAT was hidden in this bill.

[rwfromkansas]

I want some proof that a VAT is in this tax package. Not one, except some nut from WND, has mentioned this.

[rwfromkansas]

Also, where is this guy's proof that the President pushed for this lower plan; he ended up giving in to it, but he pushed for a bigger plan?

Where is his proof that Bush is determined to introduce a VAT (or even a NRST, which I would like in place of the income tax)?