Where the Flat Tax Goes from Here

The Hoover Institution ^ | 5/20/02 | Alvin Rabushka

[donozark]

On RUSH today, Roger Hedgecock said Russian SBEs were now paying a mere 6% Flat Tax. Amazing. Meanwhile, we STILL have the IRS and all that it implies...

[LarryLied]

The infuriating part is those who block progress darn well know what creates a prosperous society. We're not in 1932 anymore. We have empirical proof of what socialism and high taxes do.

[Future Useless Eater]

I don't see much chance of killing the income tax and replacing it with flat tax (or VAT, or national sales tax) unless the income tax is under serious threat in our courts.

IT IS POSSIBLE, however, that an association of taxpayers could challenge the income tax law. They could charge we are being DENIED EQUAL REPRESENTATION. After all, 10% of our taxpayers are paying 90% of our taxes, but they're NOT getting matching representation.

To add insult to injury, they are even limited to a FLAT DOLLAR AMOUNT they can donate to their representatives!!!

Taxpayers are assessed higher and higher PERCENTAGES of taxes, but denied EQUAL PERCENTAGE DONATIONS to their representatives!

By fairness alone, people who are forced to pay higher percentages in taxes should be allowed to donate higher percentages to their representatives!
If that is refused by the courts then the NEXT MOST FAIR REMEDY would be for those who pay 3 TIMES higher percentages in tax, get 3 VOTES at election time!

Another great challenge to the income-tax should be the assertion that the constitutional amendment was mis-handled and never legally ratified in the required number of states!

Would some adventurous legal group please come forward on , lets say a contingency basis, in support of a taxpayer's union?

[Fish out of Water]

*Index Bump

[LarryLied]

Has anyone ever won a tax case based upon equal protection?

[RJCogburn]

A true flat tax means fewer favored (by virtue of special treatment) payers, which means less power (and thus percs) for members of government, which means the chances are slim

[Future Useless Eater]

Has anyone ever won a tax case based upon equal protection?

I don't know, but I said EQUAL REPRESENTATION. I know they are almost the same thing. Its just that one class of americans is taxed 3 or 4 times higher percentages than another class of americans, and yet they don't get equal representation for their relative amounts of taxation.

Yet when it comes time to supporting your representative with donations, the one class is restricted from donating more than a tiny percentage of their incomes to their representative.

If the income tax were stuck down, the federal government could immediately revert back to billing each state a relative dollar amount based on their Census numbers.

States could use any method allowed in their own constitutions, but then you'd see some heavy-duty emmigrations from places like Minnesota or New York!
...(FreedomLoving_Engineer)

[LarryLied]

Yes we would see people move. They are moving now to avoid state income taxes. It seems most professional atheletics now live in Orlando Florida. Here in the Palm Beaches, I see no sign of an economic slow down. 10,000 new homes are going in two miles from me.

[Action-America]

Nonetheless, since 1991, the U.S. tax code has regressed; three new higher rates were added, with the top rate increased from 28.0 to 39.6 percent.

And, therein lies the giant trap that makes the flat income tax unworkable.

Remember that when the income tax was created it was essentially a flat income tax.  The concept of a flat income tax sounds intriguing, at first glance.  But, unless it is specifically required by an amendment to the Constitution to remain flat, it will soon become progressive again.  And even if supported by an amendment, the flat income tax is still not a workable solution here in the United States.

In fact, the flat income tax is nothing more than a ruse, to keep an income tax in place and along with it, a club to hold over the heads of citizens, in the form of the IRS.

The flat income tax will still require an IRS or another agency of a different name, but same function, to monitor compliance and generally keep the people in fear of their government.  These flat income tax pushers would have us buy their snake oil and think that the only problem is the level and inequality of taxation.  Granted that those are significant issues, but to act like they are the only issues is specious, at best and a sham at worst.

Ask any person that you know, what government agency they fear most, if any.  You will find that every person (except maybe the occasional gun collector) will answer without hesitation, "The IRS."  Any attempt at reforming our tax system, that leaves the IRS (or similar functioning agency by another name) intact, will not stop the massive level of capital flight that has been building up over the last decade.  Any such attempt would therefore be nothing more than a temporary placebo, to take the public's mind off of taxes for a few years, while they continue to beat the public into submission with the IRS bludgeon.

By now, everyone has heard about Stanley Tools, Cooper Industries and other major companies that are reincorporating offshore, as a result of our oppressive tax system.  There are at least 8 or 10 such articles on FR right now.  They are moving their legal home offshore, not only to save on taxes, but to lower their risk of IRS interference or even confiscation of assets.   But, those are just companies.

Action America has been reporting on individual expatriation for years and the one fact that stands out is that the principle driving factor behind this expatriation and capital flight is the IRS.  The wealthy don't just pick up and leave their established life for a few percentage points in taxes.  If you have to pay 20 million in taxes or 30 million, what difference does it make, if your gross is 100 million?  The problem is NOT the level of taxation, as the flat income tax schemers would have us believe.  The problem is that they are afraid of the IRS.  After all, the United States is the ONLY country in the whole world, where an unelected bureaucrat can sign a piece of paper and you can lose every asset that you have, regardless of where in the world it is.  See "Tick-Tick-Tick - The Economy Bomb" for more on IRS induced wealth flight and the serious threat it represents.

If a flat income tax were to be put in place in the United States, there is one thing that you can count on.  It would require the IRS to become even more tyrannical in their auditing efforts, than they are now, since the rich would be paying tax at the same lower percentage as the poorest taxpayer, meaning a lower potential for collection from each individual taxpayer that they audit.  In order to collect the same amount of money under a flat income tax as they do now, they will have to become even more aggressive in their collection efforts.

So, although the flat income tax would solve part of the problem with our tax code, it has two major drawbacks.  It would not only fail to eliminate the IRS, but it would actually give the IRS reason to become even more oppressive than they are today.  NOT a heartwarming thought.  Don't buy into the flat income tax propaganda.  It is still a tax on income..  It would still have all the imbedded (hidden) tax and compliance costs in every product, at every level.  And worst of all, it would still require the IRS to enforce it.  Of course, that is the whole purpose of proposing a flat income tax.

Do NOT buy into their propaganda.  It's a scam.  A flat income tax is nothing but a ruse that gives the illusion of tax reform, but in reality, allows the government to keep the IRS intact, as a bludgeon to hold over the heads of any citizen who dares not bend over for them on command.

The ONLY proposal that is currently on the table, that can solve ALL of the major problems with our tax system, is the National Retail Sales Tax (NRST).  In fact, as major studies have shown, the NRST would likely bring back a lot of previously expatriated wealth as well as foreign capital, which would allow for a lowering of taxes.  It's a win all the way around.

 

[LarryLied]

Of course. People don't watch it, any tax can become oppressive. A National Retail Sales Tax has the potential for becoming the most regressive of all as it would soon become a Value Added tax. In addition, there is no chance of the income tax being repealed when a NRST is passed. We would end up with both. Every country which has tried it has.

[Action-America]

A National Retail Sales Tax has the potential for becoming the most regressive of all as it would soon become a Value Added tax.

Even in the unlikely event that Congress did eventually attempt to turn the NRST into an VAT, I must say that as bad as a VAT is, it is infinitely better than a flat income tax.  After all, the flat income tax is still a tax on income and still requires an IRS to "monitor compliance" and our private financial affairs.

The manner in which tax is collected is important.  But is shrinks to insignificance, when compared to eliminating the single agency responsible for more capital flight than all other branches of government combined.  Don't be fooled by the flat income tax propaganda.  The flat income tax is just a way for Congress to claim tax reform, without having to give up the IRS bludgeon that they hold over the heads of each and every taxpayer.

In addition, there is no chance of the income tax being repealed when a NRST is passed.

Actually, although HR2525 does not repeal the 16th Amendment, it does strike down the enabling legislation that is the income tax.  It also requires the destruction of personal records not currently being used in an investigation and begins immediately phasing the IRS out of existence (they are given time to finish existing prosecutions - which is actually giving them too much time, IMHO).  But, the enabling legislation that is the income tax will cease to exist with the passage of HR2525.

I would like to see the 16th Amendment repealed.  But, short of that, HR2525 provides a great start in that direction and would immediately reverse capital flight.  Remember that without sufficient capital, there is nobody with enough money to pay any kind of tax.  No other tax proposal, including the flat income tax can show how it will stop, let alone reverse capital flight.  So, for that reason alone, the NRST makes sense.

You can find fault with every tax proposal.  But, the NRST is the only proposal currently on the table that does not include a show-stopper, such as continuing capital flight.

Don't be duped by the flat income tax folks.  All they want to do is "claim" tax reform, without having to give up their favorite weapon against us - the IRS.

 

[LarryLied]

We barely got a measly $300 tax rebate through congress. And the NRST people think we can repeal the income tax? Democrats would sell their children before they let that happen. A graduated income tax is written in the Ten Commandments Karl Marx handed to them. They will never give it up.

[goldstategop]

The liberals don't want a flat tax for it would mean less revenue for their government spending schemes. Big business dreads it for it would mean the loss of the corporate tax breaks they get under the current tax structure. And of course the accountants and tax preparers hate it for it means less work for them. No wonder the flat tax hasn't gotten anywhere in the U.S.

[goldstategop]

The objections to a national sales tax are that it would put the income tax bureaucrats out of work and affect the livelihoods of an entire industry built around preparing and filing those 1040 returns. No way these folks are going to vote to put themselves out of work.

[Taxman]

For the naysayers: Quit naysaying and become part of the process, DAMMIT!

If, in the 11 years I had received a promise to help rather than "You'll never get this done because . . . ." type comments, it would be a done deal!

Don't you realize that those of us who hate the income tax outnumber those who love the income tax? The "divide and conquer" politics practiced so well by the Liberal/Socialist/Marxist bastards who would keep us slaves to the State know that all they have to do is keep us squabbling amongst ourselves, and they win!

I am sick and tired of hearing people tell me that "You can't do this, they won't let you, too many people support/make their living off of the complexity of the income tax code and other BS arguments!"

Folks, there are 120,000,000 + taxpayers, most of whom hate the income tax and the IRS. All we have to do is work together and quit this naysaying, and we can do any damn thing we want to, within Constitutional limitations, of course. It is, after all, our government.

So get off your duffs. Abandon your "Keyboard Kowboy" mentality, join National Retail Sales Tax Alliance or any number of other Tax Reform organizations and help us lead America to a better future.

[Rant complete -- for now!]

[Taxman]

"The liberals don't want a flat tax for it would mean less revenue for their government spending schemes."

Popular misconception, my FRiend. The tax replacement proposals introduced in the Congress have to be "revenue neutral." No loss of "income" to the government. It is a major impediment to fundamental tax reform (FTR).

The truth is that Liberal/Socialist/Marxist bastard crowd are opposed to any form of flat tax (either income or NRST) because it totally negates the class warfare argument "From each according to their ability, to each according to their need" that their entire philosophy is built upon. (Bigun, you are cordially invited to add your comments here to buttress my argument.)

"Big business dreads it for it would mean the loss of the corporate tax breaks they get under the current tax structure."

Not exactly. Big business does not like fundamental tax reform because it disempowers the moguls of big business and empowers small business. Big business is in love with itself as being "power broker wheeler-dealers," and FTR would erase much of "Big Business'" ability to influence the federal and state "public [dis]servants." Add in the empowerment of small business under either FTR proposal (the Flat Income Tax (FIT) or the National Retail Sales Tax (NRST)), and we have a major problem to overcome.

BTW, once big business discovers that FTR will enhance their corporate growth (AND their stock performance!), they will jump on the bandwagon, all the above notwithstanding.

"And of course the accountants and tax preparers hate it for it means less work for them."

Actually, when they take a minute to analyse what FTR would mean, accountants and tax preparers like the concept. Most of them hate the code and fear the IRS. They do what they do to make a living, but don't like it. When they come to understand that with either the FIT or the NRST, they would make more money, have a better sex life and have more fun doing what they were trained to do (improve individual or corporate clients financial position), they will gleefully embrace FTR. It is a process of education.

HSAT, our biggest foes, aside from dedicated Liberal/Socialist/Marxist bastards in and out of government, are the Washington DC lobbyists. They will have to get real jobs when FTR happens, and it is going to happen!

“I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man.” [Thomas Jefferson, letter to Benjamin Rush, 1800.]

Scrap the Code! Scrap the IRS! Abolish the VLWC!

We will never be a truly FRee people so long as we have the income tax and the IRS.

Click here to help us scrap the Code, scrap the IRS and abolish the VLWC!

We will never be a truly FRee people so long as we have the income tax and the IRS.

You can also click here to find out how to help us replace the income tax with a National Retail Sales Tax and abolish the IRS!

We will never be a truly FRee people so long as we have the income tax and the IRS.

[Taxman]

Well said, A-A.

[Bigun]

The truth is that Liberal/Socialist/Marxist bastard crowd are opposed to any form of flat tax (either income or NRST) because it totally negates the class warfare argument "From each according to their ability, to each according to their need" that their entire philosophy is built upon. (Bigun, you are cordially invited to add your comments here to buttress my argument.)

Actually Taxman your argument needs little "butressing" as it is, for anyone willing to look, as plain as the nose on one's face where this EVIL of the income tax comes from!

"These measures will, of course, be different in different countries.

Nevertheless, in most advanced countries, the following will be pretty generally applicable.

1. Abolition of property in land and application of all rents of land to public purposes.

2. A heavy progressive or graduated income tax.

3. Abolition of all rights of inheritance.

4. Confiscation of the property of all emigrants and rebels.

5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.

6. Centralization of the means of communication and transport in he hands of the state.

7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.

8. Equal obligation of all to work. Establishment of industrial armies, especially for agriculture.

9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.

10. Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc.

When, in the course of development, class distinctions have disappeared, and all production has been concentrated in the hands of a vast association of the whole nation, the public power will lose its political character. Political power, properly so called, is merely the organized power of one class for oppressing another. If the proletariat during its contest with the bourgeoisie is compelled, by the force of circumstances, to organize itself as a class; if, by means of a revolution, it makes itself the ruling class, and, as such, sweeps away by force the old conditions of production, then it will, along with these conditions, have swept away the conditions for the existence of class antagonisms and of classes generally, and will thereby have abolished its own supremacy as a class.

In place of the old bourgeois society, with its classes and class antagonisms, we shall have an association in which the free development of each is the condition for the free development of all."

Manifesto of the Communist Party. Read it yourself!

[LarryLied]

You are playing a shell game with exactly the "divide and conquer" tactics you decry. We'll just shift the burden of compliance to business instead of wage earners and life will be wonderful. Well it won't. You will kill small business and create an underground economy vastly larger than the one we have today. There will be a demand to extend the tax to all levels to stop the cheating. The income tax will not be repealed and we will have both systems with the NRST becoming a VAT tax.

The key is the government take of GDP. Get than down to even 15% and life will be much better. Get it down to 10% and people will barely notice they are paying taxes. A NRST is as much social engineering as a graduated income tax is. A flat tax will have a far less impact on individual decision making.