Inching Away From Income Tax

Washington Post ^ | 10/31/02 | Jonathan Weisman

[Tumbleweed_Connection]

In the heart of the Treasury Department, their work deeply under wraps, tax-policy experts are hatching policy options for what could be the Bush economic team's first big idea: shifting the U.S. tax system away from taxing income, toward taxing consumption.

But taking what has long been an academic ideal and translating it into real-world tax policy would take a dramatic commitment of presidential leadership, a long education and political campaign, and a bipartisan convergence of political interests, tax-policy experts say. Few of them are holding their breath.

"It's true that you can write down a simpler tax system on paper than the one we have," said William G. Gale, a tax expert at the Brookings Institution and a critic of consumption-tax proposals. "But it's not necessarily true that you could get that tax system through the legislative system, or ensure it would stay that way once you did."

Officially, a year-long tax policy project at Treasury will merely present President Bush with tax-reform options, probably early next year. But economists and tax lobbyists close to the effort believe that Treasury Secretary Paul H. O'Neill is serious about elevating tax reform on Washington's agenda. If Congress is not prepared to act yet, at least the issue could underpin Bush's reelection campaign, they say...

[Taxman]

Ignore Willie Green. He is a committed Liberal/Socialist/Marxist and throws monkey wrenchs at any and all plans to eliminate the progressive income tax system (2nd Plank of the Communist Manifesto).

As has been established, the income tax is not a revenue colecting system -- it is a people control system. Committed Liberal/Socialist/Marxists recognize that if the progressive income tax system is eliminated, they lose control of the people. That is why Willie is so hard-over against any fundamental tax reform system which proposes to eliminate the income tax and the IRS.

He'll eventually go away, and then we can have an intelligent discussion about fundamental tax reform without having to respond to his tripe.

He misses the boat, BTW, in respect of real estate, because a person or a company engaged in the business of purchasing buildings for rental purposes is a business. Under the NRST, no business would be taxed on its iputs or outputs. Taxes would be collected on retail sales to the final consumer only, and the sale of a house or building to a business is, by definition, not a retail sale.

[ancient_geezer]

From what I've read about European politics, every country that tried a NRST-type plan plan eventually switched to a VAT system.

None have tried a retail sales tax only plan, which is what the NRST is, ever. Though you are welcome to go try to find one.

 

The unique thing about a VAT tax is that the tax is built into the sale price. In Britain, a McDonalds value meal that costs 2.99 (in pounds) means you hand over three pound coins and you get a pence back.

The bad thing about a VAT is that you have no means to determine the actual cost of the product is and how much tax you are actually paying when you buy that burger. As a consequence government is able to increase the tax much more easily and blame it on "inflation" and greedy business trying to make evil profits, instead of being held accountable to the electorate.

can't tell you how emotionally satisfying it is finding items actually costing you what the sign says they do. But then, I'm pretty shallow. :O)

If the tax is not perceived by the voters, how can they possibly be motivated to hold government accountable for excess.

"Let virtue, honor, the love of liberty ... be ... the soul of this constitution, and it will become the source of great and extensive happiness to this and future generations. Vice, ignorance, and want of vigilance, will be the only enemies able to destroy it."
-- John Jay, co-author of the Federalist Papers and, later, Chief Justice of the supreme Court

"Knowledge will forever govern ignorance; and a people who mean to be their own governors must arm themselves with the power which knowledge gives."
-- James Madison (Letter to W.T. Barry, August 4, 1822)

Early in the 19th century Professor Alexander Tytler described the dilemma of democracy in the following comments about ancient Athens:

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policies, always followed by a dictatorship."

"In general the art of government consists in taking as much money as possible from one class of citizens to give to the other."
--Voltaire

A government which robs Peter to pay Paul can always depend on the support of Paul.
-George Bernard Shaw

As long as you insist on the governed remaining ignorant of the piper's bill, Government will continue to grow and not be held accountable.

[Willie Green]

He'll eventually go away, and then we can have an intelligent discussion about fundamental tax reform without having to respond to his tripe.

No. I learned long ago that it is impossible to have an intelligent discussion about any form of taxation: income tax, flat tax, tariffs, social security tax, property tax, etc. etc. without the thread being hijacked with NRST spam.

"A home is NOT an investment, W/G, but merely a place to live."

Posted on 03/26/2001 16:27:50 PST by pigdog

To: pigdog, Willie Green

It's amazing how many people view a home as an "asset," as well. It's a frickin' LIABILITY.

90 Posted on 06/29/2001 09:45:01 PDT by Poohbah

[ancient_geezer]

Isn't the simple solution to make them both pay.

Actually they do, everyone pays tax on the home they purchase to live in whether it be owned or a rental and no one pays tax on a house that is property for business purpose.

Thus an NRST is a tax once but only once situation, collectede at retail sales of a home as opposed to hidden cascading of taxes down the chain of delivering a home to the final owner thereof.

A businessman owns or rents the home he lives in pays tax the same as every other person.

One does not pay NRST on items he that are used, i.e. tax previously payed. That means if you buy a used (i.e. older home) under the NRST you pay no sales tax. Something Willie Green fails to mention.

[ancient_geezer]

At which point, why not also bring in the $150+Trillion in financial transactions and get the rate way down.

You end up paying taxes on taxes in such a situation and the effective rate becomes much higher. There may be $150Trillion in financial transactions going on, there is still only $7 Trillion in goods and services moving. The true rate you pay is based on the $7 trillion in goods and services not the $150 Trillion in paper moving in circles hand to hand.

In fact such a transaction tax has been proposed by the UN (called the Tobin Tax,) to fund all government including the UN. That way taxation occurs out of sight of the electorate with no one to be held accountable.

Out of sight Out of mind:

A government which robs Peter to pay Paul can always depend on the support of Paul.
-George Bernard Shaw

As long as you insist on the governed remaining ignorant of the piper's bill, Government will continue to grow and not be held accountable.

[Poohbah]

I stand by that statement. Assets generate income; liabilities generate expenses. The only way a home is an "asset" is if you have a rent-paying tenant.

Absent that circumstance...it's a liability. Assuming you're 100% paid off on your mortgage, you still have a largish sum payable each year in property taxes, and then there's the maintenance costs.

And the income tax is a singularly stupid way of gaining revenue in a free republic. Enforcement of the income tax requires an intrusive inspection of each and every taxpayer's financial records. Once that breach of individual liberty is commonplace, successive breaches become easier to rationalize.

[Dick Bachert]

IF YOU WANT THIS MAN – AND MEN LIKE HIM – TO REMAIN IN CONTROL OF YOUR ECONOMIC AND PERSONAL DESTINY, CONTINUE TO TOLERATE THE CURRENT MARXIST INCOME TAX SYSTEM.

ONE MORE TIME:

IT’S ABOUT

P O W E R AND C O N T R O L!!

SIGN THE PETITION AT HTTP://WWW.VOTR.ORG. Then find out how you can do more to end America’s peculiar SPRING MADNESS.

[ancient_geezer]

Posing as "tax reform", the NRST (HR 2525) also represents a "land grab" where business interests are favored over individuals purchasing for their own use:

Posing?

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

Sure looks like tax reform to me.

Willy, how many years you going to continue with the same wornout irrational diatribe? You never change it or try even to clean it up to present a more coherent and rational argument for your postition. Just through it out there to bump a thread because you don't like seeing the NRST touted as a alternative to the income tax.

You continually throw it out inspite of the fact it has been totally refuted everytime you have posted it.

Now to answer your specific allegations:

• Landlord/investors enjoy a 23% discount compared to the individual personal home buyer.

• Individual personal home buyers must pay 29.87% more than landlord/investors.

This a significant inequity between individuals trying to buy their own new homes and landord/investors looking to buy the same single family dwelling as a rental investment.

ROTFLM(_|_)O!

Still playing rich man against poor man aren't you Willy.

You do know of course, that investors are home buyers and renters too, don't you?

Why don't you mention:

• The base prices for building or renting a home are expected to drop by at least 22%.

• The takehome pay(from which one purchases a home) of the home buyer will rise by more than 30%.

• The mortgage interest rates that the homebuyer's pay will fall to 75% of their current levels making payments much more affordable and allowing much lower total payment for houses.

These factors more than overcomes any imagined advantage of investor over the homebuyer so that all homebuyers can become investors too.

But then good socialists never consider becoming investors themselves now do they W.G.

---

Now, lets take a look at some of your points and see how they hold up:

A family purchasing their own new home house(residential land is not taxed) for $200,000 pays NRST at a tax-included 23% rate. This means that of the $200,000 paid, $154,000 goes to the seller, and the Gov't receives $46,000 in tax.

A typical family purchasing their own new house today has 25% or more of their gross income extracted by the Federal government before they even think about buying a new or even an older house. That is not even counting the tax costs and costs of compliance placed on businesses of an additional 20 to 30% and embedded in the price of the new house.  

A landlord/investor can exploit the business exemption of NRST and purchase the same new single family dwelling tax free as a rental investment for only $154,000. Tenants pay NRST on rent and Landlords act as tax collectors for the government

Of course that landlord/investor also pays the same tax on the house he lives in or rents before he can ever become an "investor/landlord" in the first place. Or do you figure such folks live in NY allies and sleep on park benches.

Additionally, a buyer of an older home, is not charged the NRST, which is the case of most first time buyers of homes.

The $154,000 vs. $200,000 purchase price advantage that landlord/investors enjoy over individual personal homebuyers can be expressed two ways:

• Landlord/investors enjoy a 23% discount compared to the individual personal home buyer.

Actually not, as the Landlord/invester pays the 23% tax on the home he lives in whether rented or purchased, the same manner as any other individual.

• Individual personal home buyers must pay 29.87% more than landlord/investors.

Again untrue, the landlord/investor pays the same tax on the home he rents or buys new for his personal use. All individuals are treated the same under the NRST. Infact, because the individual receives the full benefit and control of his gross income, as opposed to merely after tax income under the current system. That plus the NRST prebate paid to ALL households provides an enhanced opportunity for everyone to become investors.

Under the current Income/Payroll tax system, the total contribution of the federal tax system(including taxes in gross wage/salaries) to the price of retail consumption goods and services is 36% for taxes alone. Including cost of compliance at around $600billion/year, increases that percentage to about a 47% total burden with respect to current family consumption expenditure caused by the federal tax system as it exists today.

 

---

Frankly, I'll be happy to pay 23% of the total payment for new goods and services, or as you would put it (30% added on) to the tax free price any day. Considering that I have available my full gross pay from which to accrue tax free growth of my savings and investments.

Compared to what we are hit with now:

We must . . . End Tax Slavery Now; Nov '97
by Jarret B. Wollstein

HOW MUCH DO YOU REALLY PAY?

     According to the Tax Foundation, in 1994 the average American paid 22.4% of his or her income in federal taxes, plus 11.8% in state and local taxes - 34.2% total.

     But that's just the beginning! Dr. James Payne of the University of California found that in addition to direct taxes we also pay huge, hidden taxes including:

• Compliance costs - record keeping, monies spent on tax planning, computers and software purchased to fulfill IRS requirements, etc.
• Enforcement costs - IRS audits, field investigations, service center corrections, criminal investigations, litigation, and forced collections.
• Emotional, moral and cultural costs - families forced onto welfare, time and creative energy lost figuring out how to avoid taxes, etc.

     For every $1 we pay in direct taxes, we spend an additional $0.65 in compliance costs. 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 is at least:

Federal taxes              22.4% of income
State & local taxes      11.8%
Compliance costs        22.2%
Regulatory costs         12.7%

70.1% of your income is now consumed by government

[Willie Green]

I stand by that statement.

Fine by me.
It's always nice to have confirmation.

[Zon]

Honest tax
Moral tax
Ethical tax
Freedom tax
Shrinking tax

Abolish the IRS and replace the graduated income tax with a consumption tax such as the NRST -- national retail sales tax where, if you don't want to pay the tax don't buy the item.

Replacing the graduated income tax with a NRST would set off a chain reaction of benefits.

1. Boom the economy because productivity is not taxed; no tax on profits or hidden taxes/fees.
2. IRS threats and coercion eliminated and replaced with, if you don't want to pay the tax, don't buy the item.
3. 20% decrease in retail prices facilitates spending and partally offsets the retail tax.
4. People will know how much leviathan government is really costing them, resulting in...
5. Shrinking government to it's constitutional function to protect synonymous private-property rights and individual rights from domestic and foreign criminals while upholding the sanctity of private contracts.
6. Freedom in United States leads to other countries doing similar or risk its citizens fleeing to United States to increase productivity here while enjoying the fruits/prosperity of their labor.

Replacing the graduated income tax with a NRST is not an end all be all. It's but one of five key factors for collapsing a corrupt government while allowing a fair and honest government to rise in its place.

[Zon]

Agreed.

Then you'll have the Democrats and special interest groups demanding that their pet product or service be exempt from the Federal Sales Tax (My proposal).

Exactly. Any exemptions from a NRST is just a way to let the nanny state dictate what is "good" and "bad" for us. No exemptions and a universal rebate is the way to go.

[Taxman]

Note Willie's complaint -- what he calls "spam" are facts about the NRST. Ignore him.

And, Poobah, you are exactly right, on both counts. Well said.

[dixie sass]

Now wait a dog-gone minute, Chocolate Chip cookies are healthy! Check out HR2525.

[dixie sass]

http://www.fairtax.org

http://www.salestax.org

[ovrtaxt]

The President who presides over the abolition of the IRS will be held among the great leaders of our nation. At least among the people. The dirtbags of our society (and the accountants) will hate the idea.

This would be a nice centerpiece for a new Contract with America, along with strong border control and removal of illegals. LANDSLIDE election. Unstoppable. Working class union types would cross over bigtime.

[Bigun]

A Comparison of FairTax^SM, Income Tax, and Flat Tax

August 2001	FairTax, H.R. 2525 Linder-Peterson	Federal Income Tax Pre-2001 Law	Armey Flat Tax H.R. 1040
16th Amendment	Proposes repeal.	No change.	No change.
Complexity	Individuals do not file. Businesses need only to deal with sales tax returns.	Very complex; 20,000 pages of regulations; I.R.S. incorrect over half of the time.	Withholding continues. Individuals and businesses must still track income and file income tax forms.
Home Business	Must record all business expenses and is subject to IRS audit? NO!	Must record all business expenses and is subject to IRS audit? YES!	Must record all business expenses and is subject to IRS audit? YES!
Congressional Action	23% Linder/Peterson Fair Tax Act of 2001 (H.R. 2525). Employees receive 100% of pay. Social Security and Medicare funded from consumption tax revenue, not your paycheck. (H.J.Res45) - Will repeal the 16th Amendment.	Used by lobbyists and the wealthy for tax-breaks and loopholes. Used by bureaucrats for social engineering.	Rep. Armey’s H.R. 1040 has some problems, but is superior to current law.
Cost of Filing	No personal forms are filed. Significant cost savings.	$225 billion in annual compliance costs. 1	Simplified. ­ costs are somewhat reduced.
Economy	Un-taxes wages, savings, and investment. Increases productivity. Produces significant economic growth.	Taxes savings, labor, investment, and productivity multiple times.	Imposes a tax burden some of which is still hidden in the price of goods and services.
Equality	Taxpayers pay the same rate and control their liability. Tax paid depends on life style. All taxes are rebated on spending up to the poverty level.	Current tax code violates principle of equality. Special rates for special circumstances violate original Constitution and are unfair.	The flat tax is an improvement over the current income tax, but it is still open to manipulation by special interests.
Foreign Companies	Foreign companies are forced to compete on even terms with U.S. companies for the first time in over 80 years.	Current tax code places unfair tax burden on U.S. exports and fails to neutralize tax advantages for imports.	Taxes U.S. exported goods, but not foreign imports to the U.S., creating unfair competition for U.S. manufacturers and businesses.
Government Intrusion	As the Founding Fathers intended, the FairTax does not directly tax individuals.	Current tax code requires massive files, dossiers, audits, and collection activities.	A flat tax still requires personal files, dossiers, audits, and collection activities.
History	45 states now use a retail sales tax.	The 1913 income tax has evolved into an antiquated, unenforceable morass, with annual tax returns long enough to circle Earth 28 times.	A flat tax just won’t stay flat. Starting out nearly flat in 1913, the income tax grew out of control with top rates over 90% until Kennedy administration.
Interest Rates	Reduces rates by an estimated 25-35 percent. Savings and investment increase.	Pushes rates up. Biased against savings and investment.	Reduces rates 25-35 percent. Neutral toward savings and investment.
Investment	Increases investment by U.S. citizens, attracts foreign investment.	Biased against savings and investment.	Neutral toward savings and investment.
IRS	Abolished!	Retained.	Retained. Reduced role.
Jobs	Makes U.S. manufacturers more competitive against overseas companies. Escalates creation of jobs by attracting foreign investment and reducing tax bias against savings and investment.	Hurts U.S. companies and decreases available jobs. Payroll tax a direct tax on labor.	Positive impact on jobs. Does not repeal payroll tax on jobs.
Man-hours required for compliance	Zero hours for individuals. Greatly reduced hours for businesses.	Over 5.4 billion hours per year.	Reduced.
Non-filers	Reduced tax rates and fewer filers will increase compliance.	High tax rates, unfairness and high complexity harm compliance	Reduced tax rates and improved simplicity will improve compliance.
Personal and Corporate Income Taxes	Both are abolished.	Retained.	Retained in a different form.
Productivity	Increases.	Inhibits productivity.	Increases.
Savings	Increases savings.	Decreases savings.	Increases savings.
Visibility	The FairTax is highly visible and easy to understand. No tax is withheld from paychecks.	The current tax code is hidden, embedded in prices, complex, and incomprehensible. Taxes are withheld from paychecks.	Business component of flat tax and payroll taxes are hidden. Would be embedded in prices. Taxes withheld from paychecks.

[1] Testimony by the Arthur Hall, Tax Foundation and before the House Ways and Means Committee, 1998.

[Deuce]

I view all taxes as arbitrary. Some people seem to have a rigid belief on what is "proper." To me the only issue is a practical one: the distribution of tax burden. Based on a study by the Joint Commission on Taxation, on page 3 they report numbers that allow me to calculate calculate that the top 1% pays 28% of income, the top 5% pays 27% of income, the top 10% pays 26% of income, etc.

Over the last thirty years or so, the portion paid by the higher income/wealthier segment has been declining. Some feel that it should continue to decline. I feel strongly that it should reverse directions. I feel that the richer groups that have benefited most should pay the most. Don't interpret this as, "from each according to his abilities, to each according to his needs". Interpret it, instead, as he who benefits most from anything, should pay the most.

Therfore, I will support any tax of any kind that moves the distribution of tax burden in the direction that I think it has to go. Can someone give me an estimate of what the NRST percetages are likely to be and how such estimate was made. I know that if real estate, corporate mergers, and financial transactions were taxed (a la the Tobin Tax) it would move in the direction I favor. I doubt NRST will---but I could be wrong.

[Willie Green]

Hey stooge... In your fraudulent comparison chart, under "cost of filing", you make a bogus claim that "No personal forms are filed."

Please explain how you intend to achieve this and still implement a "fair" monthly rebate through the Social Security System.
And how do you manage to distinguish between monthly Sales Tax "rebates" and regular Social Security disbursements for retirees, widows, orphans, women with children, etc. etc. etc.

Oh, and while your at it, please explain how you're gonna determine what regular Social Security payments are going to be when there's no longer any individually tracked Social Security accounts keeping tabs on individual contributions during working careers.

Heck that sure sounds like full-blown communist redistribution to me!
You even wipe out Dubya's proposal for Social Security privatization! And IRAs and 401-Ks!
Sheesh! A full-blown, open-ended-distribution, Kommunistic, retirement distribution that has absolutely no connection to individual contribution during productive younger years!

[dixie sass]

Hidden in the the article is one little sentence that really bothers me and it is this "The United States is the only developed Western nation without a value-added tax." After reading the article twice, I don't think there is any question as to what type of taxation is waiting for us. I think that sentence says it all.

[ancient_geezer]

. I feel that the richer groups that have benefited most should pay the most.

Both rate & amount? A fixed rate assures more paid by higher income brackets.

I will support any tax of any kind that moves the distribution of tax burden in the direction that I think it has to go.

Under the proposed NRST, everyone pays a lower rate than currently. If that doesn't suit you, well I guess you can go out and vote socialist, they will be happy to accomodate your desires to punish those who earn more. Refer Democrats Planning for Rise of Total Federal Tax Rate to 37% from current 23%.

OTOH the NRST fixes the maximum rate of taxation at 23% of expenditure as compared to the combinded marginal tax rates on payroll & personal income of the 1997 tax law,

refer: What's so fair about a tax on income? by Dan Mastromarco LLM:

 

or the Effective total federal tax rate as a function of expenditure under the NRST

 

Go which ever way you want, I see the NRST as being superior no matter how one slices it.