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.
Smart man.
Since from the concerns you offer you show yourself to prefer the existing tax structure, that qualifies you as being one of the SQL crowd.
All or nothing? That'll bring in the converts for sure, huh?
If not, then do some serious research about the FairTax before starting the hipshooting. You can do it in these places:
I've read the bill. What's more, I understand it. That explains why I believe it to be a giant crock of bullsh!t and a short-term cash cow for politicos that will wreck the entire US economy for good.
But I guess that is the liberal game plan.
Everbody gets lucky once in a while.
Those who cannot properly argue are soon reduced to calling the Infidels "trolls" and such.
If I listened to "advice" from people like you I deserve what I get.
Excellant post.
My assertion is backed only by the evidence that the ability to handle huge volumes of data has been increasing at a far faster rate than the tax codes. Computr capacity is doubling every year or so. Tracking almost any transaction is easy.
Compliance costs are substantial but should also be falling for the same reason. And a lot of them consist of costs such as a "cost" of having a wife which no one can really afford. In other words, for the vast majority of individuals, it is a cost derived from attributing a monetary equivalent to time which would not be being reimbursed. Kinda like the "cost" of sleep.
Ironically it is precisely to reduce those costs that the withholding system was created.
Obviously not. Small businesses illustrate many aspects of the model very well. Can't you argue without making unprincipled charges with no merit? I was discussing the MARKET in which a particular small business might be facing.
Geeez.
No it is not the subject but you misrepresented/misunderstood my comments with regard to exports.
The company does not set out not to make a profit but can continue for many years without making one. Look at the old American Motors. In fact, one could continue indefinitely without making money or paying income taxes.
Income taxes of businesses are paid ONLY out of profits gross revenues are only one variable. You could pay zero income taxes with revenues of 10 billion or zero income taxes with revenues of 10 thousand. Or you could pay a Million on revenues of 4 million or a Thousand on revenues of a Billion.
"Small" businesses may be paying BIGGER income tazes than BIG businesses. You may have paid more than GM last year.
So forget "revenues."
No you are paying your income tax with profits which are RESIDUALS from revenues. They are not the same. Income taxes are NOT "revenue taxes."
Factors of Production is hardly a new concept and has been accepted as a valid one by economists of every stripe for hundreds of years now. It is a fundamental building block to the understanding of capitalism and the taxation history of capitalism. You should examine it if you want to understand taxation. Ricardo's "Principles of Political Economy and Taxation" is one of the first sytemic analyses which defines the field.
Ignorance can never help. Ignoring medical science can leave you dead. Ignoring science will destroy technology. Ignoring Economic Principles will also produce miscarriages.
I am ignorant of automobile mechanics but I don't rant and rail against those who have studied to learn how to fix cars. To do that regarding Economics is equally unwise.
The simple unavoidable fact is that taxes will ALWAYS be paid by those with incomes. And almost always those with higher incomes will pay higher taxes. This is true of EVERY tax system known to man.
The problem is that this system will result in unacceptable difficulties for the economy and for individuals and bring few of the alleged benefits touted by its advocates.
You are quite the hypocrite, you complain about me not properly argueing with you, then you put words in my mouth and accuse me of calling you an 'Infidel' which I have not done.
You should quit digging yourself deeper into the hole your in.
If tracking transactions is so easy than it should cost almost nothing to put a nation sales tax (Fairtax) in place and run, unlike the $240 billion dollars a years wasted for U.S. citizens to be in compliance with the Federal Income Tax Code.
Thank you, this is the best arguement I have heard in support of the Fairtax in the last couple of day.
If tracking transactions is so easy than it should cost almost nothing to put a nation sales tax (Fairtax) in place and run,
Statement of Billy Hamilton, Deputy Comptroller,
Office of the Texas Comptroller of Public Accounts,
on behalf of Honorable Carole Keeton Rylander, Texas State Comptroller of Public Accounts
Testimony Before the House Committee on Ways and Means
Hearing on Fundamental Tax Reform
April 11, 2000
My name is Billy Hamilton, and I am the Deputy Comptroller for the State of Texas. Carole Keeton Rylander, the Texas Comptroller of Public Accounts, was delighted to receive an invitation to testify before this committee regarding the Fundamental Tax Reform measures under consideration today. Unfortunately, Comptroller Rylander's schedule did not permit her attendance, and she has asked me to testify here on her behalf.My comments today are directed only to the feasibility of state administration of the Fair Tax proposed by H.R. 2525. I do not intend to comment on the economics or any other aspects of the proposal.
The Texas Comptroller's office has administered a sales and use tax since the 1960's, and I have been involved with administration of the tax since 1982. Last year, the Texas Comptroller collected $13 billion in sales tax revenue from more than 600,000 businesses. I offer my own experience with sales tax administration, as well as the size of Texas' sales tax program, as the basis of my qualification to speak to you about the administerability of H.R. 2525.
As you know, H.R. 2525 would permit states to collect and administer the Fair Tax on behalf of the federal government. In my opinion, Texas would be well-equipped to administer the Fair Tax based on our experience in administering our own sales tax. Even though the base, rate and other characteristics of the Fair Tax are significantly different from the Texas sales tax, it would be feasible for our office to collect the Fair Tax by expanding and enhancing the systems we currently have in place. For example, we would:
· Expand our current system for registering Texas retailers to include registration of sellers under the Fair Tax (615,000 businesses are currently registered as sellers in Texas; under the Fair Tax, 1.5 million Texas businesses would have to be registered);
· Expand our taxpayer assistance efforts to respond to a larger volume of telephone, letter and e-mail inquiries from sellers who collect the Fair Tax and individuals who pay it;
· Expand our Revenue Processing Division to process more returns and tax payments on a more frequent basis and to remit tax collections to the federal government on an almost-daily basis;
· Expand our current audit team and train all auditors to examine businesses for both the Fair Tax and the Texas sales tax; and
· Expand our information technology systems to collect and maintain the computerized records critical to effective administration of a consumption tax like the Fair Tax.
The expansion of our systems to administer the Fair Tax, in the manner I've just described, would be sizable. Under the Fair Tax,we would serve approximately 900,000 more filers than we do currently. We estimate that serving that many additional taxpayers would require 1,100 to 1,600 more full-time employees. The Texas Comptroller currently employs about 2,700 people on a full-time basis.
In spite of this large expansion, the compensation for collecting the Fair Tax that would be provided to states under H.R. 2525 would likely cover our projected costs. As a first approximation, we estimate that the cost to the Texas Comptroller's office for collecting the Fair Tax at full implementation would be $100 to $150 million per year. (times 50 states) I emphasize, however, that there would be significant costs to begin collection, including the cost of facilities to house the additional processing facilities, the capital costs of information technology and revenue processing equipment, and the costs of notifying, registering and educating taxpayers on the new tax.
In closing, I believe that if the Fair Tax is to become a reality, the U.S. government would be well-served to make use of the existing expertise of the states. Many states have administered consumption taxes since the 1930s and have developed particular capabilities in this area. We also have extensive experience in dealing with the affected businesses. As long as the administrative fee paid to the state is adequate in relation to the costs of collection, I see no reason that the State of Texas could not effectively administer the Fair Tax.
we would serve approximately 900,000 more filers than we do currently. We estimate that serving that many additional taxpayers would require 1,100 to 1,600 more full-time employees. The Texas Comptroller currently employs about 2,700 people on a full-time basis.
Let's see, 2700 people for 600,000 "filers". The "filers" would increase by 150% therefore bureaucratic logic says the 2700 employee workforce would have to grow by at least 150% to over 4,000 NEW employees who would need computers, programs, training, desks, a few MORE buildings with new roads, sewer and water systems, parking lots, greeen belt, some of the new employees/auditors would need new cars.
4,000 employees at $24,000 a year would be $96 million a year alone....Not counting all the infrastructure.
Multiplied times 50 states...that shouldn't cost much. < /sarcasm >
You're arguement forgets that many states have a sales tax in place, plus those would be state workers, not federal workers.
And since you say my income taxes on my business aren't a factor of producton, then golly the income taxes that I pay are not a cost somehow.
Well Alice, I hate to tell you that your book does't model the real world.
I do pay my income taxes from my sales revenues and I do make my price higher due to the obvious and trivial fact that they are one of my costs.
Book formulas are intended to model and explain the real world. But when the real world is obviously different, it is easy to conclude that the model needs to be fixed.
Why are you so invested in a book model that is obviously not working?
"...then god help us, the federal government will then have two taxes in which to tax us to death, one on our incomes and another in the stuff we buy." -lewislynn
"They already have that. HR 25 would prevent it." - Principled.
Principled. No, HR25 would not accomplish this. It is, after all, only a law. As such, any future legislature could repleal HR25 by simple majority vote. Only the repleal of the 16th Amendment would strip the power of congress to levy income taxes. I agree with lewislyn, until the 16th is repealed, you run the very great risk of having both a national sales tax and an income tax.
HR 25 does some things that will prevent an income tax from returning so quickly.
First, it eliminates ALL federal withholding. How easy would it be to convince voters that their paycchecks need to be reduced again? How easy would it be to convinve employers to begin paying their "contribution" to FICA? This would be a significant obstacle to having both systems...an obstacle we currently do NOT enjoy.
Second, all exports will be leaving our shores at a price 25% less than under an income tax. Would these companies be willing to allow their market share to drop again. Hell, it's hard enough to compete agianst countries that rebate tax costs and have practically zero labor cost. This would be a significant obstacle to having both systems...an obstacle we currently do NOT enjoy.
Third and maybe most compelling, the entire income tax code is erased from law - poof - gone. How easy would it be to re-write, negotiate, and pass an entire income tax code? Hell just look at how long it's been trying to negotiate a retail sales tax - 10 yrs at least now. This would be a significant obstacle to having both systems...an obstacle we currently do NOT enjoy.
Repealing the 16th is not sufficient to prevent an income tax - only how it's collected. That's why the amendment that the fair tax people wrote includes language to not only repeal the 16th, but to affirmatively state that the taxing of income is actually unconstitutional.
I must stress that we do not currently have ANY protection against having both taxes... NONE. If you are truly concerned about this horrendous possibility (as I am), you'd be wise to look at HR 25. .
"HR 25 does some things that will prevent an income tax from returning so quickly."
You do raise some isssues that would make the resurrection of the income tax more difficult.
"First, it eliminates ALL federal withholding."
Did you ever pause to think that this step might be sufficient to completely revamp our entire system of taxation and spending? Far too many people believe that they do not pay taxes because of witholding. Just imagine the effect of having everyone having to write a check to the government each and every payday. Don't you think that would bring the point home to every one that they do pay taxes and that the cost of the federal government should be immediately reduced?
This brings me to my principle objection to the 'fair tax'. It is designed to be revenue neutral. It does nothing to reduce federal spending. The problem is not how to collect taxes but how to reduce spending. Elination of income tax witholding is an excellent start on that. Also, elemination of FICA witholding would jump start the desire for privitiztion of social secuirity.
"Second, all exports will be leaving our shores at a price 25% less than under an income tax."
But, if and only if, the 16th is repealed. Otherwise, the price would be increased.
"Third and maybe most compelling, the entire income tax code is erased from law - poof - gone. How easy would it be to re-write, negotiate, and pass an entire income tax code?"
Much too easy to accomplish until the repeal of the 16th. Besides, HR25 would result in a new code defining what is taxed and what is not. In time, one would find that one set of onerous regulations are merely replaced with another.
"Repealing the 16th is not sufficient to prevent an income tax - only how it's collected."
The 16th removed the constitutional prohibition on the ability of the federal government to levy taxes on individuals. Prior to the 16th, taxes could only be levied against the states and had to allocated purely on the basis of the relative populations of the state.
No, just repleal the ability to do paycheck witholding and I think you'll acheive your real objective of reducing the size, scope, and cost of the federal government.
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