[OldFriend]

LOLOL and you call this simple!!! Sheesh........

[ancient_geezer]

LOLOL and you call this simple!!! Sheesh........

A 50 page bill, most of which does not impact the payer of the tax, the consumer, except as a flat 23% collected at the cash register, against the thousands of pages of statute & regulations that comprise the income/payroll tax system now in place or even as would be in place with a "Flat Tax". Remember it is Congress, still defining the exceptions and exemptions of what is business cost under the flat tax.

I'll take broadbased no exceptions flat rate retail sales tax any day.

Read:

FLAT TAX AS SEEN BY A TAX PREPARER
By: Vern Hoven

It's an eye opener.

 

With privatization of SS/Medicare, the NRST of HR2525 would be 14.91% of consumption. Much less than the 20/17% tax ala the Forbes/Armey Flat Tax.

Remember 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.

Collection of Value Added Tax

Issue: What Is the Best Way to Collect a Value Added Tax?

A value-added tax (VAT) generally is a tax imposed and collected on the value added at every stage in the production and distribution process of a good or service. Although a VAT may be computed in any of several ways, the amount of value added generally can be thought of as the difference between the value of sales and purchases of a business. (e.g. Revenues - Costs = Taxable Business Income)

Subtraction-Method VAT. Under the subtraction method, value added is measured as the difference between a business's taxable sales and its purchases of taxable goods and services from other businesses. At the end of the reporting period, a rate of tax is applied to this difference in order to determine the tax liability. The subtraction method is similar to the credit-invoice method in that both methods measure value added by comparing sales to purchases that have borne the tax.

The subtraction method differs from the credit-invoice method principally in that the tax rate is applied to a net amount of value added (sales less purchases) rather than to gross sales with credits for tax on gross purchases. A business's tax liability under the credit-invoice method relies on the business's sales records and purchase invoices, while the tax liability under the subtraction method may rely on records that the taxpayer maintains for income tax or financial accounting purposes.

---

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.