Visions of vaporizing the IRS abound again

sacbee ^ | 11-18-04

[LouAvul]

Think of a world where there is no income tax, where you get to keep everything you earn and you pay the tax man when you buy stuff," said Minnesota Republican Rep. Gil Gutknecht.

That's the basic premise behind a proposed national sales tax, just one of many ideas for overhauling the nation's tax code. Under a bill co-sponsored by Gutknecht and more than 50 others, all federal taxes on income would disappear, but consumers would pay a 23 percent federal sales tax on their consumption - on top of existing state taxes.

Washington is abuzz with ideas after President Bush won a second term and immediately pledged to make "tax reform" a top domestic priority.

Nevertheless, the Senate's top tax-writer is expressing doubts about prospects for a major overhaul, perhaps dealing a blow to its chances. Sen. Chuck Grassley, R-Iowa, chairman of the Senate Finance Committee, told USA Today that comprehensive tax reform would be "difficult" to do.

Grassley said Bush would have to aggressively use his "bully pulpit" to win wider popular support.

[elbucko]

the only thing "deep and grinding" is your willful ignorance on the subject.

To the contrary, I used to be in favor of your simplistic and utopian tax schemes such as a flat tax and a national sales tax. So what you refer to as willful ignorance is actually enlightened opinion. When you finally shed yourself of the wishful thinking and the propaganda of various tax organizations (I belong to Howard Jarvis Tax Assn) then you too, if you have a shred of intelligence will abandoned these "pie in the sky" schemes and promote the possible.

Until then, keep on grinding.

[elbucko]

Do you understand basic economics? Most people do not, and this is why we have a progressive tax?

Yes I do, and without the yucks, I've owned three businesses. All successful. Economics and taxes are a fact of my life. The progressive tax began as a good idea. It has gone bad because people thought they knew better when they didn't, yuck yuck! People like you. Yuck, yuck, LOL, LOL!

[elbucko]

I reject that progressivity is the price for taxation success.

Actually, its like democracy, its a bad way to tax, except for all the others. It is the price of "fairness" in a basically unfair situation. Your "variables" however, have more to do with social policy than as a tax model. Flat and sales taxes can be used to redistribute the wealth just as surely as progressive taxes.

I am concerned that everyone seems to view taxation as a matter of social fairness, when it has historically been abused precisely because of that association.

I agree.

Taxation is for funding the required duties of the government. It is not a legitimate remedy for social injustice, and should not be viewed as such.

I agree.

A big part of the problem with taxes is that nobody will draw a line dividing the responsibility of the government from that of the governed.

That is why progressive taxes are ponderous, onerous and oppressive. Not that they are progressive.

Compare our "poor" with the poor in Indonesia and the concern fizzles.

That's like comparing apples and fish.

[Marine_Uncle]

"You can get more info at http://www.fairtax.org"

Thank you. No response required.

[Marine_Uncle]

"Sorry that I can't agree with you. Our views on the mechanics of economics are different. You could be right, but I don't agree with your assessment."

Like I said. I perhaps should not have started in on this post because I am far from being up on economics whether macro or micro etc..

Thanks for your views. No response required.

[elbucko]

Do you have some inside information?

No. but if a moron like me can think it up, just think what a group of Democrat lawyers and CPA's could do. There will be "penalties" of some kind, if you don't spend enough under a national sales tax. When the income tax first started in the "teens", do you think that congress would have voted for the 16th. Amendment if they knew that employers were going to be compelled by the government to withhold a workers pay for income taxes? Do you think the US public would have approved? Think about it.

Do you think that someone in the year 1900, would have paid anyone a fee to keep a dog? I don't think so. These things creep and without sunshine and sunset provisions in any law, they will be abused. That's why the assault weapon ban expired, someone finally got smart to the fact that government will abuse, whatever it can abuse, unless government is restrained by something like a sunset provision.

When the 16th. Amendment was passed, no one thought of restraints.

[LPM1888]

If you can point out to me a corporation that is neither owned nor staffed by individuals, it'll help me to understand the objection.

What if a Corporation is owned by individuals who live in another country? Since the owners would not make purchases in the U.S. they would not pay any taxes at all. It also would be very difficult to monitor whether items purchased by Corporations were diverted to the personal use of the owners. Keeping track of the purchases of Corporations would require a Bureaucracy as large as the IRS. The only fair and practical way to implement a sales tax is have it apply to all purchases other than food, medical or a home.

[LPM1888]

You are ignoring the fact that your paycheck will not be reduced 25%-40% by state and federal income tax withheld. So you will have more money to spend and some of it will go to pay the sales tax.

What about the retired living on a fixed income from savings? They would suddenly be faced with a 23% increase in the cost of living with no proportionate increase in income reduced taxes.

[LPM1888]

However, there was a check and balance -- if half the people in a congressional district got pissed off enough to punch their red button on their computer, a small explosive charge would go off in the back of the head of their congressman. :)

That should be a Constitutional Amendment!

[Taxman]

"Filling out a 1040 may be mandatory now, but under a national sales tax, if you don't spend enough, you will be fined."

Oh? Please point out to me that particular provision of H.R. 25.

[kevkrom]

There will be "penalties" of some kind, if you don't spend enough under a national sales tax.

Seriously... how? One of the biggest benefits of going to a sales tax system isn't economic, it's the personal freedom in getting the government out of individuals' finances. There would be no mechanism for the government to track how much "kevkrom" or "elbucko" spends, since the government only sees the gross receipts of the seller.

[kevkrom]

What about the retired living on a fixed income from savings? They would suddenly be faced with a 23% increase in the cost of living with no proportionate increase in income reduced taxes.

Not really. Prices are currently inflated due to income taxes (the income tax acts like a VAT on production and sales), all of their savings (and capital gains) will be tax-free, and they are also eligible for the FCA, which will make their effective tax rate much, much lower than 23% (unless they're spending a lot of money...)

[CSM]

"If I buy a bottle of Coke for $1 and the government immediately extracts 23% in “sales tax”, that is the same as an income tax."

Except that everyone is subject to the tax. Thereby educating the public as to the cost of their demands of government. Without this the largesse will only grow, with this education the number of citizens screaming for less government intrusion in their lives will grow.

[CSM]

"Corporations pay tax on profits, individuals pay tax on income.."

Corporations don't pay taxes. Their customers do in higher prices.

[Sprite518]

I knew you just made that up. You really need to study the fundamental of economics. That way you would better understand the fair tax.

Now I will expose how flawed your argument is in the most basic way I can say it. The more money people have the more they spend. For instance, if a person receives $400 more a month. They are not going to say, "I have $400 more dollars more a month, but I am not going to spend one cent more of it". You can rest assure they will spend it.

If people spend more, then that translates more earnings, jobs, and tax revenue. Please study supply side economics.

Deficits are not created by the lack of tax revenue, they are created by spending.

[Sprite518]

Sir,

I am sorry, but you really do not know what you are talking about. I am perplexed, that you have the audacity to support such a tax. Especially, if you own three businesses. However, that is what you say....

[M. Dodge Thomas]

According to what study? I could rip you very easy by everything you just wrote. However, I am not going to be sophomoric. You are swimming in the sea of gullibility. You need to understand that governments take from the people who earn their money, and redistribute for votes and power. Just by what your writing its is quite obvious you have never read the fair tax. It covers all the nonsense you are talking about. Please read it. Instead of repeating clueless Karl Marx theories out of text books.

IMO, the "fair tax" proposal is likely unworkable as a full replacement for the current system.

This belief isn’t based on theory - there are a lot of features of such proposals I find theoretically attractive - it's based on the likely levels of taxation required to fund US requirements and the actual operation of existing NST and VAT taxes: it appears to me (and more important, to many economists) that this proposal likely significantly understates the required tax rate and that it's unrealistic about the difficulties involved in collecting such taxes.

Most often debate centers on the former, but the later too is important. especially as much of the appeal of such proposals lies in the appeal to their simplicity and their expected reduction in reporting requirmetns "Getting the IRS off our backs".

In a number of countries where there is reasonably transparently in the reporting of their results and a decades long track record, attempts to impose such taxes at rates above the mid teens have generally been found to increase tax avoidance and embed such behavior in the culture. There's nothing controversial about this observation, it's accepted as fact based on experience, and it influences the design of tax structures in much of Western Europe and Canada..

Similarly, their experience suggests that it's unreasonable to suppose that such a tax would be easy to apply equitably and unobtrusively – that the IRS would just wither away as Americans cheerfully paid such taxes without attempt at evasion – in fact, the sorts of cross checking required to insure that such taxes were collected would likely require as much or more surveillance as today's system, search for example on:

> "Would tax evasion and tax avoidance undermine a national retail sales tax?"

at

http://ntj.tax.org/

For a discussion of the sorts of evasion possible, and the sorts of steps necessary to control it.

It's this kind of real world expereience, not too much Marx (or Smith), that's at the root are my reasons for skepticism that a NST could operate as a "simple" replacement for all other Federal individual and business taxation.

[elbucko]

There would be no mechanism for the government to track how much "kevkrom" or "elbucko" spends, since the government only sees the gross receipts of the seller.

Do you honestly belive that the government will not know how much you are paid by your employer? Are you really that naive? The government will compare how much you have been paid, with how much you have spent. If you have not spent enough, you will get a bill for the taxes due.

[TChris]

Are you really that naive?

You're right, you're right. I should be wearing my tin foil hat! ...and I need to have that last filling removed; I think the dentist is a Nazi spy. ;-)

[kevkrom]

Do you honestly belive that the government will not know how much you are paid by your employer? Are you really that naive? The government will compare how much you have been paid, with how much you have spent.

Actually, under the NRST bill, the government would certainly know my employment income, because that information is required for Social Security benefits (unless and until Social Security is seriously reformed or elimintaed). What they will not know is how much I spent on retail goods and services.