A Consumption Tax or an Income Tax?

LewRockwell.com ^ | 11/13/2002 | Llewellyn H. Rockwell, Jr.

[ThinkDifferent]

The amendment must go, otherwise, we ALL get screwed!

I agree the 16th Amendment should be repealed, but that can't happen until a proven alternate revenue source is in place. Even without repeal of the 16th, if the IRS is defunded and its records destroyed, it would be very difficult for a future Congress to reinstate the income tax on a whim. Yes, it is a risk, but IMO the greater risk is to allow the income tax to continue to exist, given the historical trend of ever-increasing rates.

[EternalVigilance]

I dislike Rockwell for reasons other than his stance vis a vis taxation, but this gives me yet another reason to question his judgement, his lack of vision, and his failure to study matters deeper than surface lies and deceptions.

On the critical issue of taxation, there is now a line drawn in the sand...on one side are those who:

A) Actively or passively support the current stupid, intrusive, inefficient, unfair, liberty-robbing income tax.

On the other are:

B) Those who have studied this issue in depth and have realized that the only viable alternative is a consumption-based retail sales tax.

If you think you fall into some other classification, rest assured, you are in reality firmly in category A.

The only question left is when will you come to your senses and join group B...which is where you will find every cutting edge Conservative in the USA.

EV

[sheltonmac]

"The only question left is when will you come to your senses and join group B...which is where you will find every cutting edge Conservative in the USA."

"Cutting edge"? Why not repeal the 16th Amendment and get rid of the income tax? Why do believe in simply replacing one tax with another? Don't you want to see government shrink? You are living in a fantasy world if you think a consumption tax will magically fix things. A sales tax can be raised just as easily and be just as lop-sided as an income tax. Like many others on this thread, you seem to miss Rockwell's point. Re-read the last paragraph.

[Triple]

Thank you for a great reply - #33.

Regards,

[Movemout]

A consumption tax seems to be a poor path to select. It reminds me of the value added tax (VAT) in Europe which was a miserable failure in so many ways.

A flat tax is a better choice until it gets to be so onerous as to cause rebellion. The root problem is as described. Government wants so badly to spend our money to get votes, to get promoted, and in rare cases to do good. I, for one, am tired of forwarding 50%+ of my earnings to these bandits. It wears you down to a nub.

[Teacher317]

Cutting that amount gives us a budget equal to the federal budget of 1987. Was the government intolerably small back then?

Good line for the masses.

[sheltonmac]

I think the very first step we need to take is ending the practice of having employers withold taxes from an employee's paycheck. Make the taxpayer write out a check to Uncle Sam every year. A repeal of the 16th Amendment wouldn't be far behind.

[Movemout]

I cannot remember how many times that I have made the same assertion.

[Principled]

A sales tax can be raised just as easily and be just as lop-sided as an income tax.

No, it can't.

Read Alexander Hamilton Federalist Papers #21. Look it up someitme.

[EternalVigilance]

"Cutting edge"?

Yes. This is the cutting edge position---historically, economically, in terms of liberty, and (this is the most salient point in this particular conversation)---POLITICALLY!

Why not repeal the 16th Amendment and get rid of the income tax?

I'm game. Where do I sign? That is a key provision of what we have to accomplish...but is a second track towards the same goal.

Why do believe in simply replacing one tax with another? Don't you want to see government shrink?

Spending outside the enumerated powers granted constitutionally is a separate issue...one which will be impossible to remedy first. Before you can attack that leviathan successfully (politically speaking) you have to get the tax system out in the open where everyone can see it in all it's hideous glory. The vast majority of the current load is hidden carefully from public view...but a single tax, collected at one rate at the cash register would lay the tax burden open for all to see.

You are living in a fantasy world if you think a consumption tax will magically fix things.

It won't 'magically fix things'. But it will create a transparent collection system; one that is fair and collected from all equally. It will end the competitive advantage now held by goods produced outside our borders. It will remove the tax burden for our producers who want to sell our products in the world market. It will force over a hundred thousand IRS bureaucrats to go find productive work. It will put tax collection back into the hands of the States where it belongs. It will prevent the federal government from knowing every scrap of my personal business information. It will stop penalizing thrift and productivity, and rewarding cheaters and black marketeers. I could go on...the list of other benefits is extremely long. But hopefully you get my point...IMO you are making the perfect the enemy of the good.

Once we have all Americans with a clear view of the current tax burden, and united in the only tax debate that would remain---the rate---we can then go whole hog, together as a people, in the task of putting the spending monster back within its constitutional limits.

A sales tax can be raised just as easily and be just as lop-sided as an income tax.

I'm sorry, my friend...but you're just plain wrong.

Like many others on this thread, you seem to miss Rockwell's point. Re-read the last paragraph.

I read it in detail the first time, and understand it perfectly. Rockwell is speaking from ignorance and a lack of political vision.

EV

[Principled]

A consumption tax seems to be a poor path to select. It reminds me of the value added tax (VAT) in Europe which was a miserable failure in so many ways.

A flat tax is a better choice...

You are unaware that the consumption tax being proposed in Congress right now, HR2525, is the polar opposite of a VAT. A VAT taxes every step of production of every product sold anywhere. The nrst taxes consumption one time only, at the point of final retail sale.

Further, you seem unaware that a flat income tax is a VAT....

Why don't you take a look around here?

[Principled]

I think the very first step we need to take is ending the practice of having employers withold taxes from an employee's paycheck...

Interesting...this is one of the main reasons I support the nrst - it eliminates withholding.

[EternalVigilance]

I think the very first step we need to take is ending the practice of having employers withold taxes from an employee's paycheck. Make the taxpayer write out a check to Uncle Sam every year. A repeal of the 16th Amendment wouldn't be far behind.

That's simply one more form of rearranging the deck chairs on the Titantic.

Go back and read what the New Dealers who were responsible for the imposition of withholding openly admitted back when they did that dastardly deed in the late Forties...they weren't shy about admitting that their scheme had little to do with revenue collection, and everything to do with social engineering...a phrase they didn't even try to hide back in those days.

You can dress a hog up in frilly clothes, apply makeup and a nice wig, but in the end, it's still a pig.

[EternalVigilance]

You mean I can choose not to buy food, clothing, or shelter?

Under a NRST, you are free to grow your own food, make your own clothing or buy it used, and/or build your own house or buy a used one (only new construction would be taxed). All of those things would keep you completely outside the scope of the retail tax.

Thrift is a virtue, one which would be facilitated greatly under this new form of taxation.

By the way, the other two pluses along these lines would be the fact that we would no longer be taxing savings and investments...the keys to capital formation---the foundation stones of capitalist growth, productivity and living standards.

As is apparent to all, the current system is a direct and constant attack on these bedrock footings for prosperity.

[Movemout]

"You are unaware that the consumption tax being proposed in Congress right now, HR2525, is the polar opposite of a VAT. A VAT taxes every step of production of every product sold anywhere. The nrst taxes consumption one time only, at the point of final retail sale. Further, you seem unaware that a flat income tax is a VAT.... "

I love you guys that want to make the rest of us seem to be unaware. I stated that it reminds me of the VAT tax experiment. I did not say that I thought it was the same.

It is not as polar opposite as you believe. If you think point of sale tax (POS) does not affect the preceding steps then you suffer from a certain amount of naivete. Manufacturers and sellers will defer as much of the cost as possible to the consumer, always.

A flat tax resembles VAT in no way that I can determine. Your referenced link was unhelpful. I think a flat tax is potentially more honest than any other tax. It hurts us all equally. That is what doesn't exist, and has not existed for decades. Sleight of hand, three card monte, three shells and a pea, are the policies that have dictated our tax code since I have been born. If it changes in my lifetime I will be surprised. Your unsubstianted assertions are not welcomed by me.

[Movemout]

unsubstianted =unsubstantiated

[EternalVigilance]

I think a flat tax is potentially more honest than any other tax.

If you go out in the pasture and find a big cow pie--then smash it flat---it's still a cow pie.

Taxing income is fundamentally flawed from it's inception. The original income tax from 90 years ago was flat...but it certainly didn't stay that way. Rates were flattened quite a bit in the eighties...but they didn't stay that way.

Your solution is no solution at all...it doesn't even begin to address the most egregious aspects of what we have right now. It simply does what politicians have been doing for years...make someone like yourself believe they are doing something to reduce the burden, when in fact they are doing nothing of any substance.

[jdege]

One point about Hamilton's view of excise taxes - he envisioned specific amounts attached to specific items, not a flat percentage applied to all items.

If a $5/pound tax on sugar is too high, people will buy corn syrup.

But if a 23% national sales tax is too high, it acts as a brake on the entire economy, rather than a change in particular purchasing patterns.

So the effect of a too-high tax is less directly felt.

[EternalVigilance]

Two points:

1. The rate needed to replace all current revenue is not a cogent argument against this form of taxation. It is simply an argument against current high spending levels.

2. Your argument ignores the fact that a good percentage of every single item you buy now is taxation in its current insidious hidden form.

[jdege]

I'm not arguing about rates.

I'm simply pointing out that Hamilton's observations about the self-levelling effects of consumption taxes are more direct when the amount of tax is levied independently on individual items.

If tax rates or amounts are set for specific items, I can control how much tax I pay by changing which items I buy.

If a single blanket rate is applied to all items, I can only control whether or not I buy.

Which is something I have less latitude to do.

I mean, if certain foods are taxed at too high a rate, I can choose other foods. But if all foods are taxed at the same rate, I have to buy the food, regardless, even if the rate is too high.

This is not to say that some of the self-levelling effect will not remain, but it won't be direct with a blanket rate as with specific rates for specific items.