Abolish the IRS with National Sales Tax?

Fox News ^ | 11/3/04 | tgusa

[tgusa]

"I'm not exactly sure how big the national sales tax is going to have to be, but it's kind of an interesting idea that we ought to explore seriously," the president said. The next day administration officials said Bush was not considering such a reform.

John Kerry's campaign quickly condemned a national sales tax, and Bush for potentially supporting it.

“If [Bush] has his way, every trip to the supermarket will feel like a visit to H&R Block and every day will be April 15. And now that this plan has been exposed, George W. Bush is trying to mislead the public into thinking it was just an off-the-cuff comment," Kerry spokesman Phil Singer said in an Aug. 12 statement.

[Radioactive]

“If [Bush] has his way, every trip to the supermarket will feel like a visit to H&R Block and every day will be April 15."

So what he is saying is that everyone dreads April 15th and everyone hate H&R Block.

If what he says is true, then we already have April 15th every day and we already are paying at the stores....we just aren't aware of it because the Socialist Communists in this country have cleverly disguised the income tax so not many people realize how much they are paying.

I say make April 15th tax day... and pay with one check that you write. Then have the election on April 16th.

I guaratee that people will then make the changes needed to get rid of the IRS and the parasites that live off the tax system.

[tpaine]

HR 25 does allow everyone with valid SSN to receive the prebate.
318 Principled

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tgusa wrote:
I have been reminded that HR 25 would prebate everyone with a valid SSN. That is, everyone with a valid SSN,regardless of income level, would receive a check each month equal to one-twelfth of the annual prebate for poverty level income. I apologize for the confusion.
320

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A little side bonus of the prebate idea... -- Illegal aliens would not get a prebate, yet they would be paying the Fair Tax on every thing they bought.
-- Leveling the 'playing field' a bit..

[Principled]

And imports....

[Principled]

and our exports would be produced for 20-25% less for sale overseas

[Cooltouch]

It is foolish to discuss implementation of a national sales tax without a concommitant repeal of the 16th Amendment. While I support the idea of a national sales tax, I do so only if the 16th Amendment is done away with. Otherwise, we will be taxed at a higher rate, not a lower one.

[Zon]

And many of us privacy-minded people and wealthy people wouldn't sign up for the prebate checks.

[Principled]

AFFT's FAQ, which is incomplete, IMO.

HR 25 makes taxing income illegal (not yet unconstitutional), erases the income tax code, and defunds the IRS.

As we sit today, we have zero protection against getting taxed by the income/payroll tax AND the sales tax.

At least implementing the sales tax provides protection against the income tax while the amendment is passed.

It would be hard to convince people & pols that withholding should start again. It would be hard to re-write and pass an income tax code.

[Your Nightmare]

Are the millions of small business owners that don't pay themselves wages, are their incomes reported to the government?

Yes.

If they don't they won't get their full Social Security benefits. The SSA won't know how much to give them without their wages.

`SEC. 903. WAGES TO BE REPORTED TO SOCIAL SECURITY ADMINISTRATION.

`(a) IN GENERAL- Employers shall submit such information to the Social Security Administration as is required by the Social Security Administration to calculate Social Security benefits under title II of the Social Security Act, including wages paid, in a form prescribed by the Secretary. A copy of the employer submission to the Social Security Administration relating to each employee shall be provided to each employee by the employer.

`(b) WAGES- For purposes of this section, the term `wages' means all cash remuneration for employment (including tips to an employee by third parties provided that the employer or employee maintains records documenting such tips) including self-employment income; except that such term shall not include--

`(1) any insurance benefits received (including death benefits);

`(2) pension or annuity benefits received;

`(3) tips received by an employee over $5,000 per year; and

`(4) benefits received under a government entitlement program (including Social Security benefits and unemployment compensation benefits).

`(c) SELF-EMPLOYMENT INCOME- For purposes of subsection (b), the term `self-employment income' means gross payments received for taxable property or services minus the sum of--

`(1) gross payments made for taxable property or services (without regard to whether tax was paid pursuant to section 101 on such taxable property or services), and

`(2) wages paid by the self-employed person to employees of the self-employed person.

Honesty outlives the lie. It always has. It always will.

[tpaine]

Zon wrote:

And many of us privacy-minded people and wealthy people wouldn't sign up for the prebate checks.

Exactly. -- I'd bet that in time it would become declasse/unfashionable to take the prebate.

[Zon]

With the flood of businesses, small, medium and big setting up operations and headquarters here there will be high demand for workers.

The train is rounding the crest. The momentum will be insurmountable. And increasingly welcomed as more and more people jump aboard..

As you know, government and the status quo are not the solution. Nor is the welfare state. They're the problem.

Increasing jobs. prosperity and health is the solution.

The government has one and only one purpose -- to protect life and private property rights as well as free-choice contracts from force and fraud.

[Your Nightmare]

Yes wages are still reported - note that it is wages that are reported, not income.

That's all I said. Although self-employement income does have to be reported.

[tpaine]

Again, -- it would be entirely voluntary to report your income. Granted, no reported income, no SS benefits later on.

Honesty outlives the lie. It always has. It always will.

[Your Nightmare]

Again, -- it would be entirely voluntary to report your income. Granted, no reported income, no SS benefits later on.

Employers shall submit such information to the Social Security Administration as is required by the Social Security Administration to calculate Social Security benefits under title II of the Social Security Act, including wages paid, in a form prescribed by the Secretary.

It says "shall," not "may." Doesn't sound like it's voluntary to me.

If you want to be honest, why don't you admit that you didn't realize this was a requirement of the FairTax and we can move on.

[tpaine]

The government has one and only one purpose -- to protect life and private property rights as well as free-choice contracts from force and fraud.
350 Zon

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That's the real problem we're seeing here from the naysayers POV.
-- They WANT government to have more 'purpose', more control.

The Fair Tax threatens that agenda.

[tpaine]

Employers 'shall'. This does not mean that individuals couldn't exempt themselves from the ~proposed~ scheme.

If you want to be honest, why don't you admit that your real objections to the Fair Tax are based on more than such petty [& changeable]
details?

[ancient_geezer]

That leaves a minimum of $1.8 trillion for business tax compliance costs! Most reasonable economists put the number around $100 billion. Let's double that to $200 billion to be fair, that leaves $1.6 trillion.

$1.6 Trillion looks to be about right for the additional burden imposed by the federal tax system, today.

Sorry, your $100 billion of compliance costs is not even close to the full story, that is only the direct labor involved in filing income tax forms, a small component of the total burden

Going onto TaxFoundation to look at what at origins of your $100-$200 billion number:

http://www.taxfoundation.org/compliance2002.html

Overhead Compliance Costs

The complexity generated by the growth and constant change of the tax code creates two general types of economic cost: overhead and opportunity cost. Overhead can be divided into three principal activities: the economically sterile exercises of tax planning, compliance, and litigation, all of which act like tax surcharges on taxpayers.

• The first type of overhead is tax planning, which in this context refers to all the economic decisions that individuals and firms make to maximize their benefits in the tax code.

• The second type of overhead, tax compliance, refers here to the basic actions required to file the federal income tax, including record keeping, education, form preparation and packaging/sending.

• The third type of overhead is tax audits and litigation, referring to the cost of the IRS and the Tax Court, as well as all the legal costs that taxpayers incur while dealing with these two government institutions.

Of these three costs, the second, tax compliance, is the only one estimated in this report. It is for this reason that the data presented here should be viewed as extremely cautious estimates of the federal income tax compliance burden on taxpayers.

*** snip ***

 

The Burden of Compliance Costs

As shown in Table 3, Table 4 and Table 5, the Tax Foundation estimates that in 2002 individuals, businesses and non-profits spent over 5.7 billion hours complying with the federal income tax. Using an hourly cost of $29.98 for individuals and $37.26 for businesses and non-profits, the estimated cost of compliance in 2002 is $194 billion (See Methodology section for details about how the hours and wages were determined)—Individuals bear a cost of $86.1 billion, businesses bear a cost of $102.5 billion and non-profits bear a cost of $5.4 billion. Therefore, the overall compliance cost surcharge alone amounts to nearly 20.4 cents for every $1 collected by the federal income tax.

As clearly laid out in AGC W&M committee testimony the overhead burden is much greater than those direct compliance costs alone:

 

American General Contractor's Association
http://www.agc.org/Legislative_Info/Members_Testify/testimony_04-10-00.asp

To this we must add the shear wastefulness of the colossal compliance costs of the current tax system. To administer the tax laws, the IRS directly employs about 112 thousand employees. The IRS budget is about $8 billion. However, direct expenses of the IRS are not the central compliance problem; rather, it is the expenses that are pushed forward on the taxpayer to be tax collector, tax accountant, and record-keeper.

According to the non-partisan Tax Foundation in 1997 Americans spent no less than $225 billion complying with the income tax. The most recent projections made by the IRS of tax returns to be filed in Calendar Year (CY) 1999 indicate that the grand total, or sum of all major tax return filings, will be 228.2 million. This number is then expected to grow at 1.24 percent annually until CY 2005, when the grand total return count is expected to reach 245.2 million. This does not include the 1 billion information returns that will be filed. In addition, more than 8 billion forms and instructions are sent to taxpayers each year, enough to encircle the globe several times. 

Paperwork is the most visible compliance cost, but it is clearly not the only, and perhaps not the largest compliance costs. Return processing, determining liability, recordkeeping and other burdens are an estimated 19 to 33 % of the total revenue raised by the income tax system and 2.0 to 3.5% of the Gross Domestic Product (GDP)[an additional 3% of GDP₁₉₉₉ = $279Billion]. We waste money each year on seeking to avoid taxes, avoid trouble with the IRS, interpret the laws or determining the best course of actions with the laws. 

Who pays these compliance costs? You do. The hardest hit segments of our economy are middle income wage earners and business owner. Small corporations in particular endure compliance costs estimated to be several multiples of the tax actually collected. Although duly included in the National Income Product Accounts (NIPA), payments made to tax lawyers, accountants, IRS agents and other tax professionals do not really improve our collective standard of living. These compliance costs are wasteful expenditures, which absorb so much time and energy of American people that they roughly approximate in costs the assets of the entire building industry. None of this is necessary.

Adding to the costs and to unfairness, our tax laws are so complicated not even the common tax lawyer can understand them. There are a number of ways of measuring complexity; one of which is the number of penalties issued and then abated for reasonable cause. There are more than 34 million civil penalties issued each year; more than a third of all small firms receive payroll tax-related penalties alone. More than 50 percent are abated.

The tax system is now so monstrously complex that it is beyond the ability of any one person to understand it. Understanding the system is certainly beyond the reach of most mere tax lawyers, accountants and tax administrators. A system that is so complex must be administered in an arbitrary and unfair way. If no one really understands what the law is, it is impossible to administer fairly and uniformly - and of course, it is not so administered. 

Our government embroiled its citizens in more than 35,000 litigation actions. Taxpayers sustained more than 3 million levies. As long as we insist upon an income tax system, the system needs to be complex. The system needs to be enforced with a heavy hand. The system needs to have all of the 34 million in civil penalties. The system needs to be intrusive. It is the price we have to pay for an income tax system.

Perhaps most troublesome, we have gotten little in return for this payment because our current tax system has inspired an increasingly lower level of compliance. Despite the costs of enforcing and maintaining our system, tax evasion is at an all time high. Today's income tax system has invited massive noncompliance. According to the IRS own statistics, only about 80 percent of taxes owed are voluntarily paid -- $200 billion are not. In 1992, the tax gap was estimated to be $127 billion. Taxes evaded continue to be in the range of 22 to 23% of income taxes collected. These IRS figures did not include taxes lost on illegal sources of income. Evaded taxes increased by 67% in the decade between 1982 and 1992. As a percentage of Gross Domestic Product (GDP), tax evasion has reached 2.0% compared to 1.6 % in 1991. 

Our current system is also problematic because much of the burden of the current system is hidden from the American taxpayers. Most taxpayers have been taught that an amorphous entity - business -- must pay its fair share. However, they do not understand that businesses are merely a collection of individuals engaged in a productive enterprise. When businesses are taxed, the taxes result in fewer businesses, lower wages or higher priced goods and services if the taxes can be pushed forward. In some businesses, taxes cannot be pushed forward and the owner must endure these taxes. Businesses don't pay taxes, people do; however, the corporate income tax and the employer share of payroll taxes perpetuate this myth.

It is not a harmless myth. The hidden cost of our tax system ensures that Americans remain ever ignorant of the increasing proportion of federal taxes they pay. Taxes are now more than 20 percent of Gross Domestic Product, and despite the claims of tax cuts, Americans pay more now than we have in the history of our nation, including the height of World War II. Upstream taxes only ensure that taxpayers cannot see the true cost of our government, raise the costs of goods and services and ensure more taxes in the future.

There is another problem with hidden taxes. Apart from ensuring the system lacks integrity, hidden taxes buried in goods and services reduce exports, and result in lower profits, lost productivity and a competitive advantage to foreign commodities. 

 

Daniel Pilla puts the burden at 70 cents for each federal dollar collected in '95

Killing the IRS, By Daniel J. Pilla, Reason Magazine July 1995

"There is little about a flat-tax system that will trim the staggering cost of tax law compliance. At present, this burden is estimated at $700 billion annually. Much of the cost is associated with recordkeeping and tax law enforcement, neither of which is reduced by a flat tax. A flat tax certainly involves a simpler tax return, but return preparation is the smallest component of tax law compliance.

The solution to our tax problem is to adopt a national retail sales tax in place of the personal and corporate income tax.

 

Earnest Christian Junior confirms that '95 figure seeing close to $1 Trillion burden in addition to tax out of $1.4 Trillion in total tax federal tax revenues collected.

Chief Executive, The New directions in tax reform -
May 1995.

Tax expert Ernest Christian Jr., a partner with Washington's Patton, Boggs & Blow, reckons these are low estimates or at best incomplete. Citing a U.S. Treasury study which indicates that 6 billion man-ours are consumed each year just in the record keeping for income and payroll tax returns alone, Christian says the true burden on the U.S. economy is probably closer to $1 trillion. For example, Jane Gravelle of the Congressional Research Service estimates that economic loss from the corporate income tax is equal to about 97 percent of the corporate tax revenue collected.

a sales tax can eliminate the invasiveness of the IRS, since one's income and lifestyle are irrelevant."

 

Dale Jorgens put the impact at $1.39 for every $1 of federal revenue collected in '97.

Again confirmed by studies by Jane Gravelle and Larry Kotlikoff.

 

STATEMENT OF REPRESENTATIVE DICK ARMEY
HEARING ON THE IMPACT ON
INDIVIDUALS AND FAMILIES OF REPLACING THE FEDERAL INCOME TAX
Committee on Ways and Means, Full Committee, 4-15-97 Testimony

Hinders Economic Opportunity

According to a study by Jane Gravelle, an economist with the Congressional Research Service, and Larry Kotlikoff, an economist at Boston University, the corporate income tax costs the economy more in lost production than it raises in revenue for the Treasury. Dale Jorgenson, the chairman of the Economics Department at Harvard University, found that each extra dollar the government raises in revenue through the current system costs the economy $1.39.

[ancient_geezer]

So I'm gonna take your word for it over the research of dozens of published experts... PhDs in economics, LLMs in taxation?

See post #356 above.

[ancient_geezer]

Ain't no lawyer, but hashing away, LOL.

[phil_will1]

"If the Fair tax is too difficult to implement by repealing the 16th Amendment, we should pass a flat income tax. It is VITAL that the IRS be eliminated with either plan!"

So which is it that you want - elimination of the IRS or implementation of a flat (income) tax? You do understand that those two are mutually exclusive, don't you?

[tgusa]

Absolutely!