Posted on 05/12/2005 7:46:54 PM PDT by Your Nightmare
Members of the President's Advisory Panel on Federal Tax Reform on May 11 expressed concerns over the FairTax national retail sales tax, a plan that has emerged as an alternative with a major grass-roots push.
Panel chair Connie Mack, vice chair John B. Breaux, and other members worried the plan would be difficult to enforce, would be regressive, and would require a high rate in order to take in enough money to fund the government.
Breaux raised concerns that the proposed 23 percent (tax-inclusive) rate would not be sufficient to raise the revenue necessary to fund the government. The Joint Committee on Taxation estimated that it would take as much as a 57 percent (tax-exclusive) rate to be revenue-neutral. Further, Breaux said he thought exemptions that would be carved out to make the sales tax progressive would also complicate it.
Mack, who raised concerns similar to his fellow panelists', said he was "intrigued" by the plan. "But if it's such a great idea, why haven't other political entities around the world pursued it?" he asked.
Americans for Fair Taxation Executive Director Tom Wright emphasized that the plan emerged after "thorough academic research" and "thorough polling" The strong grass-roots push has resulted in some of the group's 600,000 members appearing at each of the panel's hearings and has inspired a large comment-writing campaign to the panel in support of the plan.
Sales tax advocates were among the 20 witnesses who gathered before the panel for a full day of testimony on tax reform proposals. Although the group has held several other hearings in Washington and around the country, the May 11 meeting was its first hearing on specific reform plans since Bush appointed the panel in January. The panel has been charged with identifying tax reform proposals that are progressive, encourage charitable giving and home purchases, and are revenue-neutral. The proposals are due by July 31.
Among the tax replacement and reform plans presented to the panel were the value added tax, consumption-based tax, and the flat tax, as well as proposals that would use the current income tax as the foundation.
Witnesses generally claimed that theirs was the fairest, simplest, most flexible, most transparent revenue-neutral proposal that would improve economic growth and savings while meeting the president's criteria of encouraging charitable giving and home buying. Witnesses presenting consumption-based plans praised their overhaul as taking millions of low-income taxpayers off the rolls, being easy to transition to on a worldwide basis, and including safeguards to prevent new loopholes that would result in increased complexity down the road.
Tax reform panel members, who agree the current tax system needs to be fixed, grilled witnesses without revealing whether they will ultimately endorse a consumption- or income-based tax or a different mixture of the two.
Happens today.
"They had two on the VAT and four on the flat tax."
Oh, really? And which one of those do you support?
Let me guess: all of them.
Because you guys live in the fantasy world of double counting your benefits, which is the only way your fantasy numbers can exist. First you count taxes as being paid by the wage earner, then you count those same taxes as embedded in the costs of goods. This is the smoke and mirrors that your economists use to falsely promote the benefits of this tax scheme. You can't make both assumptions and have a valid analysis.
"First, it is regressive. And in light of the very progressive nature of our current tax system, it becomes ever more regressive, relatively speaking."
Incorrect. The FairTax is progressive when measured by consumption levels. Second, the current system is more progressive in theory than in actuality. Many Americans are resentful of the huge tax breaks that they truly wealthy avail themselves of.
For example, when Ted Turner and Jane Fonda were getting their divorce a few years ago, his tax returns were entered into evidence. The Atlanta Journal Constitution reported that for the previous tax year, his income was about $125 million and he paid about $5 MM in taxes.
How many of you would like to have an effective tax rate of less than 5%?
Cuz you told me that the embedded taxes that I claim are in prices are also in wages.Uh, are you Squeally?
Of course they would. Anything that allows individualism they are against because it weakens their ability to get elected. The want every dope in America to depend on them from cradle to grave.
"We will always have the IRS and the income tax...."
“I discussed the importance of abolishing the income tax because of its tendency to form a habit of servility in the souls of a people that accept it. Servility of soul is bad not only in itself, it is also an open door through which will soon walk the abuses of ambitious government power. Leaders who find themselves with governmental power over a servile people will be quick to conclude that such a people exist to serve them.”
Alan Keyes “The Power of the Purse”, WorldNet Daily, August 27,1999
Happens today.Really?
The FairTax is getting the most careful scrutiny because it is the clear frontrunner.Oh, yeah, it's the clear frontrunner.
Really? We are talking about businesses here. The overall tax related overhead is greater than the tax revenues collected?
Tax related burdens on prices and sales as represented in retail sales in GDP certainly are greater than revenues by a wide margin. With direct overhead costs connected with minimizing taxes paid making up as much as 50-70% of each revenue dollar collected and secondary effects arising out of a retarded demand do to high pricing levels necessary to maintain business in a non-optimal but profitable status doing even more damage.
Also, are you claiming that everyone of these dollars of overhead is in prices? A business just jacks up their price to cover them?
Nope, I am claiming the combination of direct overhead costs pressuring the price that businesses must recieve upward, retards demand and consequent depression of sales which taken altogether reduce GDP(i.e. total retail sales) by amounts far in excess of the tax revenues collected.
With relief of taxation on the producer level, that there is more than sufficient, in the whole to account for a change in 20-25% of current pricing at the producer level where the price decreases occur.
Net with the NRST, total payment of a 23% NRST pretty much come out a wash as far as what is seen by the consumer. After all what we are doing is removing the tax related burdens from the producer, and moving the tax payment to the bottom of the chain of production, the retail level. The advantages of cost reductions accrue through out the production chain and the accelerates the growth of the economy as a whole as a consequence of increased productivity and efficiency of business level operations.
Direct cost on business are accounted for in three elements of overhead costs, direct compliance cost being only a small portion of the total:
| http://www.taxfoundation.org/compliance2002.html |
Overhead Compliance CostsThe 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. *** snip ***
The Burden of Compliance CostsAs shown in , and , 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. |
Taken altogether, the true tax burden impressed upon us all through higher prices and loss of productivity exceeds the mere revenue collected by the govenment by substantially more even than the $593 billion estimate of James Payne in 1995:
Town Crier Staff Writer
Clyde Noel : http://www.losaltosonline.com/latc/arch/9528/"In a book titled "Costly Returns," economist James Payne estimates the nation's bill for tax record-keeping, audits, filing tax attorneys and accountants totals an astonishing $593 billion. To put it another way, that's more than twice as much as last year's entire defense budget and $240 billion more than all 1996 Social Security outlays."
Broader estimates for example like that of Daniel Pilla centered again on 1995:
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. Only a sales tax can eliminate the invasiveness of the IRS, since one's income and lifestyle are irrelevant."
And higher yet, another 1995 estimate:
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-hours 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.
Not to mention the even greater losses on the economy that result from depessed sales(deadweight losses) that are relieved at the producer and intermediate buinsess levels in the chain of production as a consequence of tax system inflated prices. Burden on sales, much of which would be relieved by removing the more direct tax related overhead costs accounted for above allowing more optimal prices at producer level.
http://www.heritage.org/Research/Taxes/hl565.cfm
An American Economic Review study found that every dollar of taxes could impose as much as $4 of lost output on the economy, with the probable harm ranging between $1.32 and $1.47
Edgar K. Browning, "On the Marginal Welfare Cost of Taxation," American Economic Review, Vol. 77, No. 1 (March 1987), pp. 11-23."Another study in the Journal of Political Economy estimated that the corporate income tax costs more in lost output than it raises for the government."
Jane G. Gravelle and Laurence J. Kotlikoff, "The Incidence and Efficiency Costs of Corporate Taxation When Corporate and Noncorporate Firms Produce the Same Good," Journal of Political Economy, Vol. 97, No. 4 (1989), pp. 749-780.
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.
Economic Burden of Taxation
William A. Niskanen
Presented October 2003
Friedman Conference
Federal Reserve Bank Dallas page 6.
www.dallasfed.org/news/research/2003/03ftc_niskanen.pdf
"Given that the elasticity c implicit in recent U.S. fiscal conditions is about 0.8 and the average tax rate is about 0.3, the marginal cost of government spending and taxes in the United States may be about $2.75 per additional dollar of tax revenue. One wonders whether there are any government programs for which the marginal value is that high. Given the estimate of the long-term elasticity c from the U.S. time-series data, the marginal cost of government spending and taxes may be as high as $4.50 at the current average tax rate. "
Outstanding copy and paste. BTW, who wrote that for you?
I certainly am impressed. How do you do it? Let's see, right click, ah, highlight...... man, this is too tough.
"BIG (basic income guaranty) a world wide communist group proposal that has linked its future to the success of the so-called farttax."
I followed the links on a previous thread. Your characterization is inaccurate and misleading.
"Have you ever read the Communist Manifesto?"
I seem to recall that it contains (second plank, I think) the following:
"From each according to his means, to each according to his needs."
What better way to implement that than with a steeply progressive income tax?
No it's not. Wages are very difficult to change en masse (see "sticky wages"). If nominal wages can't fall, for "purchasing power" to remain constant, consumer prices must rise.
Certainly wages are very difficult to change en masse, However the second part, "for "purchasing power" to remain constant" is a restriction that simple cannot be held true.
Purchasing power, is also a function of productivity, more or the same amount of goods produced at lower cost, is not a situation where purchasing power remains constant for fixed or climbing wages. Under such conditions purchasing power climb even as nominal wages remain constant.
With relief of tax relate burdens on producers, as a consequence of repeal of business income and payroll tax system, overhead costs fall, producer prices fall under market competition leveraging those cost reductions and overall consumer purchasing power increases as result of increasingly more efficient production of goods and services.
Which taxes do you say are being counted twice? That's what you can't answer. Never have, fantasy boy.
"If you are against progressive taxation then why are you not a supporter of the flat tax?"
Every flat tax proposal that I am aware of has an exclusion up to a certain amount that adds an element of progressivity to it. It is similar in that respect to the FairTax's rebate.
Which flat tax proposal do you support which does not excude income up to a certain amount?
That question and answer has been explained so many times. You are just too friggin ignorant to comprehend it.
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