Posted on 05/20/2002 4:11:01 PM PDT by LarryLied
In 1981 Robert Hall and I proposed a comprehensive 19 percent flat tax to replace the U.S. personal and corporate income taxes. The idea resulted in numerous congressional bills during the 1980s. It underpinned President Reagan's Tax Reform Act of 1986, which resulted in two rates, 15 and 28 percent, down from a top rate of 70 percent when Reagan took office in 1981.In 1992 presidential candidate Jerry Brown, followed by Steve Forbes in 1996, reinvigorated the flat tax. Congressional Republican leaders chimed in with their support. 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.
Despite regression in the United States, the flat tax has been successful in several new countries that emerged from the breakup of the Soviet Union. Estonia enacted a 26 percent flat tax beginning in 1994. Latvia followed suit with a 25 percent flat tax in 1995.
The biggest flat tax success story comes from Russia. In 2001 a 13 percent flat tax took effect, replacing three brackets with a top rate of 30 percent. The new code improved incentives and compliance. In 2001 revenue increased 28 percent in real, inflation-adjusted terms.
Effective January 1, 2002, the government reduced the corporate rate from 35 to 24 percent and recently proposed a major reform for small business enterprises (SBEs). SBEs with no more than twenty employees and turnover below $320,000 will be able to pay the lesser of a flat 20 percent tax on profits or a flat 8 percent tax on revenues. SBEs will be exempt from value-added tax, sales tax, property tax, and social insurance tax. Other former Soviet bloc countries may follow in Russia's footsteps.
In April 2002 Singapore proposed a major restructuring of its tax system. The centerpiece is a reduction in corporate and personal income tax rates. In the next three years, corporate rates will fall from 24.5 to 20.0 percent, and the top personal income tax rate, from 26 to 20 percent. With this measure, Singapore extends a process of marginal tax-rate reductions that cut the top personal rate from a high of 55 percent in 1961 to 40 percent in 1978, 34 percent in 1980, 30 percent in 1982, and 26 percent in 1985. During this period, the threshold at which the top rate bites increased from S$90,000 to S$750,000 (US$1=S$1.80).
To fill out the story, Hong Kong maintains a flat tax of 15 percent on personal income. The Channel Islands of Jersey and Guernsey impose a 20 percent flat tax. The Freedom Party in Austria proposed a flat tax during the 1999 national election and became part of Austria's governing coalition for the first time in modern history. Other European parties are considering the flat tax in their economic platforms.
All in all, the flat tax is alive and well overseas. Now if only in the United States!
We'll just shift the burden of compliance to business instead of wage earners.
The burden is upon wage earners regardless. Every dollar that is remitted by business as a tax to government comes out of sales revenues(i.e passed down in products ultimately purchased by wage earners) Every dollar that it costs to, plan for, comply with, and fight in the courts over comes out of sales revenues.
In short business never pays the tax it is merely collected from you and transfered to government along with the high overhead costs associated with the tax system.
Every man woman and child in the nation, pays federal taxes through that tax system.
DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation
Seems to me one would like to know just how much their government is ripping them off for, instead of letting it remain in hiding behind the veil of inflation.
The full impact of the federal tax system(taxes in gross wage/salaries & other compensation + business income/payroll taxes) added onto the base(taxfree) price of retail consumption goods and services is 36% for federal taxes alone.
All wages and the taxes on them are paid for out of sales receipts to business,(i.e. consumption expenditure).
Federal tax revenues collected as % of current family expenditure = fed/(1-state-fed-savings) =
23.5/(1-.235-0.102-0.012) = 36.09%
If we add in the cost of federal tax compliance, planning, litigation & enforcement, the percentage that truely represents the burden on the family due to the Federal income/payroll tax system, product prices are increased by more than 55% over taxfree prices.
Where Have All the Dollars Gone?
How the government robs Peter to pay him back.
By economist James L. Payne, Reason Magazine February '94When the overhead costs are added together, (24 percent compliance costs, 33 percent disincentive costs, and 8 percent other costs), they total 65 percent of tax revenue.
Current total Federal tax revenues are about $1900billion, more than $1,000 billion additional dollars are added on onto consumption prices due to the business costs of complying with the federal income/payroll tax laws.
The percent total current federal burden (taxes + compliance costs) of consumption dollars = 36*(1900+1000)/1900 = 54.95% economic burden added on to base retail(i.e. taxfree) prices.
Too bad that citizens don't get a receipt detailing those "hidden sales taxes" buried in their consumption purchases. If they ever did, some of those 70% of the public clamoring for more from government, thinking someone else foots the bill, might be tempted to change their mind.
The income tax will not be repealed and we will have both systems with the NRST becoming a VAT tax.
Perhaps you can explain in what way we do not a VAT plus income tax already.
The NRST proposal intends to remove the inplace VAT component of taxation in this country as well as repeal the income tax.
H.R.2525
SPONSOR: Rep Linder, John (introduced 07/17/2001)
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.
Refer: http://www.fairtax.org & http://www.salestax.org
See Also: Fairtax FAQ (National Small Business Union)
I really hate to be the one to inform you but for all practical purposes, our current corporate tax system is a VAT.(as a matter fo fact so is the Flat tax proposed by H&R in the article above, which they gleefully point out, in their book and congessional testimony, as a selling point of their flat tax to politicians.)
http://www.taxfoundation.org/foundationmessage03-00.html
"The economic equivalence of an European-style VAT and a subtraction-method VAT is well-established. A subtraction-method VAT is essentially identical to a business income tax except that all purchases of plant and equipment may be expensed, rather than depreciated as under current U.S. law."
And every man woman and child in the nation, pays federal taxes through that VAT, both on wage and earnings components of value added, even if at different rates.
The Individual Income Tax return(1040) that captures everyone's attention each April, is merely a partial VAT accounting sheet the government cons individuals, held at ransom, into filling out. Its misdirection puts blinders on the eyes of the electorate, and totally distorts their perceptions as to the real impact of taxation in their lives.
As regards the Hall/Rabushka/Armey/Spector/Forbes ... Flat Tax, Robert Hall of Stanford University (along with Alvin Rabushka), in his 1995 Ways and Means Committee testimony said, "The Hall-Rabushka flat tax is a value-added tax."
Which was pointed out again in additional hearings in April of 2000:
http://waysandmeans.house.gov/fullcomm/106cong/4-11-00/4-11kotl.htm
"Robert Hall, one of the originators of the proposal(Flat Tax), who describes his Flat Tax as, effectively, a Value Added Tax. A value added tax taxes output less investment (because firms get to deduct their investment.)"
"The Flat Tax differs from a VAT in only two respects. First, it asks workers, rather than firm managers, to mail in the check for the tax payment on that portion of output paid to them as wages. Second, it provides a subsidy to workers with low wages."
The Flat Tax; Chapter 3, by Robert Hall and Alvin Rabushka
In our system, all income is classified as either business income or wages (including salaries and retirement benefits). The system is airtight. Taxes on both types of income are equal. The wage tax has features to make the overall system progressive. Both taxes have postcard forms. The low tax rate of 19 percent is enough to match the revenue of the federal tax system as it existed in 1993, the last full year of data available as we write. Here is the logic of our system, stripped to basics: We want to tax consumption. The public does one of two things with its incomespends it or invests it. We can measure consumption as income minus investment. A really simple tax would just have each firm pay tax on the total amount of income generated by the firm less that firms investment in plant and equipment. The value-added tax works just that way. But a value-added tax is unfair because it is not progressive. Thats why we break the tax in two. The firm pays tax on all the income generated at the firm except the income paid to its workers. The workers pay tax on what they earn, and the tax they pay is progressive. To measure the total amount of income generated at a business, the best approach is to take the total receipts of the firm over the year and subtract the payments the firm has made to its workers and suppliers. This approach guarantees a comprehensive tax base. The successful value-added taxes in Europe work this way. The base for the business tax is the following: Total revenue from sales of goods and services less purchases of inputs from other firms less wages, salaries, and pensions paid to workers less purchases of plant and equipment The other piece is the wage tax. Each family pays 19 percent of its wage, salary, and pension income over a family allowance (the allowance makes the system progressive). The base for the compensation tax is total wages, salaries, and retirement benefits less the total amount of family allowances. |
FLAT TAX, VAT TAX, ANYTHING BUT THAT TAX; Duke Law Magazine, Spring 96:
The Democrats who are for a NRST are salivating over the social engineering aspects of the plan. They can eliminate entire classes of products and push others. There will be a zillion exemptions and a zillion products taxed at a higher rate. It will also drive small businesses out which has always been a Democrat dream.
Now tell us a reason not to not support an NRST, seeing that any change decreasing its taxbase either results in lower taxes for everyone(which is a positive), or a higher tax rate on whatever is left to tax(which they get to explain how good it is their constitutents get to pay more too).
The concept behind a RETAIL sales tax is that it is whole visible to everyone. It touches everyone and anything that affects rates affects everyone similarly.
Today, over half the electorate do not perceive the real tax burden imposed on them for much of it is hidden behind a veil of inflation, as a concequence, there is a builtin constituency for spending, the 70% of the public clamoring for more from government someone else foots the bill.
The Original Intent of the individual income tax is for political and social control not revenue collection. The Individual Income tax is maintained to establish and hold every person in the country perpetual legal jeopardy. That is a situation that must end with the repeal of the income tax from the statutes, and the prohibition of its use by Constitutional amendment that future generations will not face the same manner of manipulation and interference in their lives.
The only route to accomplish that in an orderly manner is through an NRST or similar kind of tax with the same qualities of visibility and broad base engaging the opone participation of all sectors of society. Anything less is just a perpetuation of the same old games.
At least once in place, it becomes a fight again to hold the line and slow em down abit. That is more than can be said for any other plan with even a pretense of viability out there.
My point is the game is to make a majority happy because they don't have to fill out IRS forms.
And just what is good about having the government into your personal finances?
Don't be making that choice for me my friend. I have very little desire to continue with the income tax scheme of tell all to uncle. That required report to the government is one of the most pernicious aspects of the entire income tax system and the progenitor of all its most oppressive characteristics.
It is apparent by that statement that you have no idea of what the phrase "divide and conquer" means.
But for the record, I am a uniter, not a divider. And since the NRST treats each person exactly the same at the checkout counter (by applying the same tax rate to each purchase) rather than extorting "from each according to their ability" as the income tax does, it is a uniting tax, not a dividing tax:
Every consumer in the United States will be treated exactly alike, in respect of tax rate, thereby removing class warfare from the tax code!
"We'll just shift the burden of compliance to business instead of wage earners and life will be wonderful."
Show your evidence for that statement. Cite the source.
The evidence is that the business compliance burden under the NRST will, in fact, be reduced. The NRST will lower business compliance costs by 90% (Source: Tax Foundation Special Brief -- Testimony by Arthur P. Hall, Ph.D., before the House Ways and Means Committee on March 20, 1996) and individual compliance costs by 100% (to $0.00!) for individuals. Yours is a bogus argument that simply does not hold up under scrutiny.
"You will kill small business and create an underground economy vastly larger than the one we have today."
Mere supposition. Please cite the evidence to sustain your position.
"There will be a demand to extend the tax to all levels to stop the cheating."
More supposition. Please cite the evidence to sustain your position.
"The income tax will not be repealed and we will have both systems. . . ."
Both NRST bills, H.R. 2525 and H.R. 4717 legislate the repeal of the income tax. That is the purpose of the legislation! They both call for repeal of the 16th Amendment. Please read the legislation before you make unsustainable accusations.
". . . with the NRST becoming a VAT tax."
Oh? And why do you say that? What evidence do you have that the NRST will become a VAT? Cite the source.
"The key is the government take of GDP.
Here, we are in agreement. The government spends too much money.
"The NRST is as much social engineering as a graduated income tax is.
Please explain what you mean. How can a tax that taxes everyone's personal consumption at the same rate POSSIBLY be considered as "Social engineering?"
"A flat tax will have a far less impact on individual decision making."
Best read H.R. 1040 before you make such assertions.
As a general statement, I'd say that it might pay you to read some of the fundamental tax reform literature before you post on these tax threads. You have fallen into the trap of repeating, without careful analysis (and without providing sources) the Liberal/Socialist/Marxist bastard line about the NRST, which simply is not true.
And if you attempt to use Dr. William Gale of the Brookings institute as the source for your arguments, you will be making a very serious mistake.
It will also drive small businesses out which has always been a Democrat dream.
Hmmmm, just how does creating essentially tax free opportunities for doing business, removing both business income as well as payroll taxes, going to drive small businesses out.
The NSBU supports the NRST and they certainly do not figure that small business will be anything but helped with such a change.
Any business selling used/antique goods, resale of any sort, sale of goods and services to other businesses are done without an NRST. Looks to me there are all kinds of opportunities for small business with the very clear relief on not dealing in payroll taxes which have provided a substantive hurdle to anyone building a new small business.
LarryLied: "A flat tax will have a far less impact on individual decision making."
Taxman: Best read H.R. 1040 before you make such assertions.
But Larry doesn't like income taxes with VATs so HR1040 (Flat Tax) is out the door too.
Here's how tax rates actually work out for the Hall/Rubushka/Armey/Shelby/Forbes Flat Tax, a flat individual/corporate income tax, leaving all SS/Medicare, Federal Unemployment, excise taxes and tariffs in place and unchanged.
http://www.library.unt.edu/govinfo/subject/vital.html
- "The chart below shows a hypothetical set of flat tax rates and allowances that would result in revenue neutrality. This model, produced by the Congressional Budget Office shows that all federal income tax revenues could be fully replaced by a system with a flat tax rate of 13.1 percent and no deductions. Allowing total deductions for a family of four to reach $36,800 (more than double the amount allowed in 1995) would require a 19.9 percent rate."
Joint Economic Committee
Revenue Neutral Tax Rates for Alternative Allowances and Exemptions Under a Flat Tax Standard Allowances Option 1 Option 2 Option 3 Option 4 Option 5 Single $13,100 $13,100 $ 6,550 $ 6,550 $0 Joint $26,200 $26,200 $13,100 $13,100 $0 Head of Household $17,200 $17,200 $ 8,600 $ 8,600 $0 Dependent Exemption $ 5,300 $ 2,650 $ 5,300 $ 2,650 $0 Revenue Neutral Tax Rate 19.9% 19.4% 16.8% 16.3% 13.1% Source: Congressional Budget Office, 1995.
Under the "flat" tax, as it is currently proposed,(HR1040 introduced 3/15/2001) a single person would pay:
7.65% ---- 7.65%(SS/Medicare) tax on wages/salary income below $13,600,
26.65% --- 19% + 7.65%(SS/Medicare) tax on wages/salary and other taxable income from $13,600-$75,000
20.45% --- 19% + 1.45% Medicare tax on wages/salaries and other taxable income from $75,001 up.
0% -------- on savings & bond income and stock dividends.
And that single person's business/employer pays,
19% ------ on earnings (Gross Receipts less allowed business deductions, exemptions and credits)
13.65% ---- 7.65% on SS/Medicare employment excises + 6% federally mandated unemployement excises levied on each employee's on wages up to $75,000.
7.45% ----- 1.45% on Medicare employment excises + 6% federally mandated unemployement excises levied on each employee's wages greater than $75,000.
Plus additional selective excises and tariffs dependant upon the nature of business engaged in.
Note: The base "Flat Tax Rate" is subject to meet revenue neutrality requirements under the Budget Enforcement act. The 19% rate stated in the Armey/Shelby Flat Tax proposal does not meet these requirements and would of necessity be adjusted upwards, and/or personal exemptions and business deductions be reduced to meet revenue neutrality criteria for enactment.
Sure looks like the same old shell game of tax, tax, who pays the tax to me; only more so.
FReepers, the Flat Income Tax is a Value Added Tax in respect of business taxation. Professor Hall testified to that effect in a Ways and Means Committee Hearing in 1995 as well as in his book on the subject "The Flat Tax" in that same year; And it is an income tax in respect of individual taxation.
So, let us quit wasting bandwidth arguing about the Flat Income Tax. It combines a VAT with an income tax. Those of you who do not like VATs should not like the FIT. And those of you who do not like income taxes should not like the FIT, either.
Pay 20% or more in sales tax when you purchase an item
You already do, with an immense overhead besides:
DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation
As I pointed out in reply # 22 above.
and the government is into your personal finances as much as ever.
Really, and just how are they digging out knowledge of my personal finances as they do with an income tax return? Especially considering the individual makes the choice of when, where, and how much to buy that is taxable, and does so on an item by item basis anonymously. Just what information is that federal govenment extracting about one's personal finances when the buy retail.
The black market will be huge. I see it at even with a 6% state sales tax.
Yah, and most of it to evade filing and paying income and payroll taxes not sales taxes.
More than 80% of retail business dollars flow through 10% of the largest businesses. Those large business are not going to put their businesses on the line by taking that kind of risk. The total payment for goods and service under the NRST, is less than it is now under the income/payroll tax system.
I'm not too worried about a black market. Especially considering that the business takes all the all the legal risks for not collecting and remitting a tax from the customer that it is paid to collect and the customer walks away with all the gain. Besides black markets, when they are substantial is just an indicator that government has gotten to big and it is time to trim back anyway.
Sure hope that business stays on the good side of the customer it allows to set it up for extortion :O) As well as the ex-girl friend, jeolous neighbor, ...........
I see it all now, everyone meeting down at the warehouse to trade porterhouse stakes. Go for it guy.
If I want to make money and avoid the tax hassel under the NRST, there are plenty of options to do so, sell resale used or antique, resale property or any property for business purpose, sell to goods and service to businesses. Only limited by one's imagination.
Show your evidence for that statement. Cite the source.
Huh? Have I missed something? Isn't one of the selling points of the NRST the fact that individuals will not have to put up with the IRS and business will collect the tax?
Aside from that, I'll leave it to the NRST people to cite sources and copy and paste endless metaphysical postulations of what will happen. They are very good at pretending theoretical arguments will translate into reality exactly as they theorized.
The votes aren't there. It is not even close.
Oh well, no problem then, just more of the same ole taxes.
Too bad it going to stay just like it is,
Happy Tax Day. May you have many returns ;o|
According to the Tax Foundation, in 2001 the tax burdent on the average American was 23.6% of his or her income in federal taxes, plus 10.2% in state and local taxes - 33.8% total.
Unfortunately that is just the beginning, The burden of government in this nation is much more than the federal revenue collected each year.
Dr. James Payne of the University of California, Reason Magazine '94; found that in addition to direct taxes we also pay huge, hidden taxes including:
- Tax compliance costs: record keeping, reporting, filling out forms, and learning about tax regulations.
- Costs of tax enforcement: resources expended in responding to the tax authority. Each act of tax enforcement--each audit, each notice, each levy--entails a burden for the citizen subject to it.
- Tax disincentive costs: the loss of production because of the discouraging effect of taxes on investment and labor.
"When the overhead costs are added together, (24 percent compliance costs, 33 percent disincentive costs, and 8 percent other costs), they total 65 percent of tax revenue."
And even that figure doesn't include the cost of import duties, license fees and other government regulations. For a typical U.S. family, the real cost of taxes and regulations as a percent of gross income is at least:
Federal taxes 23.6%(taxfoundation)
State & local taxes 10.2%(taxfoundation)
Overhead costs 21.9%(James L. Payne)
Regulatory costs 13.0%(M.W. Hodges)
More than 68% of one's income is now consumed by government through tax collections, compliance costs & regulation.
Rather than engaging us in a reasoned debate, he is using lise, half-truths and disinformation, much like LurkeyLiarLooneyLou used to do. Suppose this is LurkeyLiarLooneyLou, redux?
DISRUPTOR ALERT! DISRUPTER ALERT!
The American people are stupid and gutless when it comes to taxes. Our Founding Fathers went to war against the greatest army of their time over 11% taxes. We on the other hand, continue to pay the extortionists money that we don't owe them, and occasionally whine about it.
The sting of paying the tax man has faded. John and Jane Q. Public have settled back into their routine of buying six packs, and renting videos. Your message falls on deaf ears.
Stop making sense Wolfie!
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