Posted on 08/01/2004 6:08:53 PM PDT by NeoCaveman
A domestic centerpiece of the Bush/GOP agenda for a second Bush term is getting rid of the Internal Revenue Service, the DRUDGE REPORT has learned.
The Speaker of the House will push for replacing the nation's current tax system with a national sales tax or a value added tax, Hill sources tell DRUDGE.
"People ask me if I’m really calling for the elimination of the IRS, and I say I think that’s a great thing to do for future generations of Americans," Speaker of the House Dennis Hastert explains in his new book, to be released on Wednesday.
"Pushing reform legislation will be difficult. Change of any sort seldom comes easy. But these changes are critical to our economic vitality and our economic security abroad," Hastert declares in SPEAKER: LESSONS FROM FORTY YEARS IN COACHING AND POLITICS.
"“If you own property, stock, or, say, one hundred acres of farmland and tax time is approaching, you don’t want to make a mistake, so you’re almost obliged to go to a certified public accountant, tax preparer, or tax attorney to help you file a correct return. That costs a lot of money. Now multiply the amount you have to pay by the total number of people who are in the same boat. You can’t. No one can because precise numbers don’t exist. But we can stipulate that we’re talking about a huge amount. Now consider that a flat tax, national sales tax, or VAT would not only eliminate the need to do this, it could also eliminate the Internal Revenue Service (IRS) itself and make the process of paying taxes much easier."
"By adopting a VAT, sales tax, or some other alternative, we could begin to change productivity. If you can do that, you can change gross national product and start growing the economy. You could double the economy over the next fifteen years. All of a sudden, the problem of what future generations owe in Social Security and Medicare won’t be so daunting anymore. The answer is to grow the economy, and the key to doing that is making sure we have a tax system that attracts capital and builds incentives to keep it here instead of forcing it out to other nations."
For more information about how a national sales tax would work, visit http://www.fairtax.org/
How Galveston Opted Out of Social Security
By Ed Myers
In south Texas, along the windswept Gulf Coast where multitudes of hurricanes have made landfall over the centuries, there are three history-filled, ahead-of-their-time counties: Galveston, Brazoria, and Matagorda.
Until the early 1980s government entities, such as cities and counties, had the right of opting out of Social Security and establishing their own retirement system. This option had been provided when the Social Security Act was passed in the thirties.
Galveston County in 1979 looked into this idea when then - County Attorney Bill Decker contacted Don Kebodeaux, highly successful Houston businessman, and asked him if he could devise a plan so that Galveston County could opt out of Social Security. At that time Social Security was on the verge of bankruptcy and no one knew what the future held. Don pondered the problem and called in his friend Rick Gornto, a leading financial expert, who was later to become his partner. These two hard-driving and foresighted businessmen, realizing the coming problems in Social Security, designed a new program for political subdivisions that would provide a retirement plan for employees that was many times better than the existing Social Security program. Satisfied with the new program, and in order to properly present and handle this program, these two Texas entrepreneurs organized several companies that became the First Financial Group.
The men from First Financial took their ideas, which they called The Alternate Plan, to Galveston County and presented them to County Judge Ray Holbrook and the Commissioners Court in 1980. When Judge Holbrook, a quiet, soft-spoken Texan, and County Attorney Bill Decker, a man dedicated to the betterment of his county, saw the wisdom and foresight of this concept they took charge and shepherded the plan through its various stages.
The beauty of the plan was simplicity itself. The 6.13 percent rate that the government had been taking out for Social Security in 1981 now would go into the pension fund for employees and would be matched by the county. Life and disability insurance were included at first to match exactly the Social Security benefits. In recent years the county increased its participation to 7.65 percent, which included payment of all premiums for life and disability insurance. The life insurance benefit for those under age 70 is 300 percent of one's annual earnings with the minimum benefit of $50,000 and a maximum of $150,000.
Many spirited debates were held throughout the county between Social Security representatives and the men from First Financial for the benefit of the county employment of 78 percent to 22 percent, the Galveston County employees endorsed the idea and the county opted out of Social Security.
The local unions fought the idea at first, and several Galveston County officials also opposed the action. As time went on and they learned more about the program, nearly all of them saw the sound judgment in this course of action. Years later Decker, by then retired, told the story of how a number of unionized county workers thanked him for his wisdom and guidance. They said at first they had serious doubts about giving up the fixed income of Social Security, but now that they were getting ready to retire they were very happy they did.
"The Alternate Plan has been a godsend for Galveston County and clearly improved employee benefits," said Judge Holbrook recently. He continued, "The 22 percent who voted against it in 1980 are all supportive now and see the many benefits of having a retirement program other than Social Security, which most employees under age forty believe will not be existing when they retire because there will not be enough workers to contribute to this pay-as-you-go system. And now no one objects to the mandatory feature which was made part of The Plan a few years after it started." Judge Holbrook, who retired in 1994 after 28 years of distinguished service, concluded his narrative by saying, "Of all the things I accomplished while county judge, setting up this retirement system for Galveston County employees is one of my proudest achievements." Now in retirement, Judge Holbrook also pointed out that after just 12 years of service under The Alternate Plan he is now receiving twice as much as he would have under Social Security.
Seeing this tremendous potential in 1982 Brazoria County followed suit and opted out of Social Security in favor of The Alternate Plan. A year later Matagorda County climbed on board.
Tolbert Newman, operations manager for the First Financial Group who handles the overall responsibility for these plans for the three counties, cites the following example of the growth that can be achieved in this Alternate Plan pension fund. If an individual is 25 years old and makes a $2,000 annual contribution for just ten years, assuming an 8 percent earnings rate, this individual will have $314,870 when he or she retires at age 65. If he works continuously for 40 years, he may well have accumulated a million dollars, depending on his contributions.
This idea began taking hold in a big way. The entrepreneurial spirit was alive and well. In a short period of time the idea spread and some 200 other counties, as well as many cities, in Texas and throughout the entire country, saw the latent possibilities of the program and were ready to become candidates to opt out and join the plan that First Financial Group had devised.
Then as these other political subdivisions began to set the wheels in motion for this farsighted change, up jumped the devil, Congress. Social Security had gone broke the year before and our legislators were now looking for ways to bail out the system. Capitol Hill had already decided to include the federal employees and then got a rude shock when it looked as though all employees of the various counties in Texas, and others throughout the country, were about to opt out of Social Security. That was a calamity it could not allow, so Congress canceled the opt-out clause in 1983. Fortunately Galveston, Brazoria, and Matagorda counties had their systems up and running and so the grandfather clause applied, and they were allowed to continue their Alternate Plan, much to the chagrin of all these other Texas counties.
The Alternate Plan that began as a fledgling, upstart employee benefit plan has stood the test of time and has shown that it can and does outperform Social Security. The plan that started in Galveston County ended the first year with a modest balance. Today, with over 5,000 employees from these three counties The Alternate Plan has grown to a very healthy and sizable portfolio. Those who retire after 20 years will receive three to four times the rate as under Social Security. This Alternate Plan is not just an isolated act of a group of responsible and dedicated Texans. There are countless other examples of other local and state government entities showing the same responsibility and initiative throughout the United States. There are now five states that are not under Social Security and have their own plans: California, Nevada, Maine, Ohio, and Colorado. In the Colorado plan they now have over $14 billion in assets. Local government entities such as police and fire departments have long handled their own retirement plans.
These plans clearly demonstrate that if left alone enterprising Americans can set up retirement systems, second to none.
The private sector, including the self--employed, will benefit from privatizing Social Security as never before. Phasing out the employer's share of the Social Security tax will, over time, return to the business community more than $169.2 billion per year. Not having to pay these FICA taxes in future years will be a tremendous boon to the business climate and the creation of untold new jobs.
Larry N. Forehand, president of the Texas Restaurant Association and founder of Casa Olé Mexican Restaurants, a fast-growing Texas restaurant chain, had this to say: "We currently pay over $1.3 million in matching Social Security taxes annually. If our company had that $1.3 million a year to invest in new locations, we could build six additional restaurants, employ an additional four hundred fifty people and add $7.2 million to the economy every year. Based on current figures it is estimated that all restaurants in Texas will save $1.2 billion per year."
Privatization will bring a win-win situation for all.
Here is how the president could accomplish this by himself: I make a national speech and tell the people to stop paying income taxes immediately with the promist that he will reign back the IRS and pardon EVERYONE who is arrested for non-paymen then tell them about the positive things that a national sales tax would do. Congress would howl, of course, but they would have to find an alternative source of income quickly, which just so happens to be sitting in committee right now.
W could become the greatest President ever if he pulls this off, and I know he would love to do so...along with Social Security reform.
W came in with a good look at EVERYTHING that is wrong and asked why we must put up with all this crap. SS can't survice. The IRS is flawed. We can't live with terrorism. Moral values are eroding in this country. Let's START the process to fix it all.
And don't give me any "CAN'T DO" crap. WE run this place, in case you've forgotten.
Gub'ment gonna get that money somewhere.
If this is a trial balloon from members of the administration, using Hastert as a surrogate, I have only one thing to say to President Bush-
BRING IT ON!!
National Sales or flat tax I could live with. Literally.
If G.W. truly committed to this it COULD pass. It would be a fight but he has a shot. He'd need to really drive it home on the stump, though, or it would move nowhere. Just as he did when he fought for the tax cuts.
Just as articulate as he was in freeing two nations, in winning two tax cuts.
It's really the payroll tax taht kills me. I should be allowed to invest my own money if i want to.
VAT scares me, too, because you just KNOW that the politicians will use it to give favortism to big business donors to give them a competitive edge. You'll never be able to keep up with just who is paying how much.
People may have "fallen off the tax rolls" but they still have to pay FICA, they still have to file every year. The NRST would also pay for Social Security, and people would get to keep their entire paychecks. That is a winner.
Sounds like the RNC is trying to round up the defectors.
A national sales tax should have been proposed years ago. It is heartbraking to know that the RNC did not propose this many moons ago in a serious fashion.
This is just the "seed planting" of the idea. It will be tossed back and forth, yelled over, stewed about, but the seed is being planted and that is an important step.
As much as I dislike the current tax system and support the NRST, I am also one of those who is taking a wait and see attitude. It would be great if W can pull it off - but let's not forget what happened to his campaign plan of privatizing a mere 2% of Social Security.
The Dems made sure that that was DOA even BEFORE it got to Congress. With lawyers being such a strong contingent of liberals (see John Edwards, D-AC [Ambulance Chaser]), anything that takes food out of their mouths and money out of their pockets will not be greeted with open arms. Presenting such an issue to the Senate (in particular) will, likely, have the effect of the Republicans declaring war on the Democrats. If tiny tommy thinks he's disappointed now, wait until this one hits the Senate floor. And lawsuits? All those lawyers will keep this tied up in the courts for decades.
Also, we can expect the leftists of every color and stripe to slither out from under their rocks and denounce the NRST as racist and giving more tax breaks to the wealthy and all of their other blather. If such an issue actually comes to pass and makes it out of the House into the Senate, it will take massive demonstrations in the streets across the country to force the Dems to vote . . . . and conservatives aren't known for massive demonstrations in the street . . . . they're too busy earning a living and supporting theirs and three other families.
Great idea except for one problem. The States are alredy gobbling up 8% plus. What's left to tax? If they do get it through, food and clothes and some other necessities should be exempt from sales tax.
The nice thing is that under the FairTax, Social Security and Medicare will continue to be fully funded -- no more Social Security Tax.
The huge burden will be removed from everyone, especially the self-employed. Best yet, prices aren't expected to rise with the FairTax implemented!
The 16th Amendment MUST be repealed for this to work.
My husband, who is a tax accountant has been preaching National Sales Tax as the only solution for years. I read him this story and he freaked. What will he do for a living? Said he would have to vote for Kerry (as a first response). Now, we have to ask ourselves, how many CPAs etc. do we have that might change their vote over this?
The biggest advantage of a VAT is that it can be rebated on foreign sales without violating the WTO rules. The US dollar is currently quite weak because of trade deficits (we buy more abroad than we sell abroad). If we adopted VAT, we could sell more abroad because foreign sales would not be subject to the VAT.
I'm not sure that I can believe this.
If true, this will be great.
However, I must remain skeptic for my own sanity.
Bingo.
I'll go for that! :0)
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