White House Floats Idea of Dropping Income Tax (altogether)

I like President Bush, but he really shouldn't start making grandiose promises he has no intention of keeping.

I don'tunderstand what you're asking....

I'm not sure why you chose to address your post to me... perhaps it was an error.

I have no desire to label you or anyone. Further, I am not trying to "sell" any idea to anyone. I am, however, debating the well-researched and widely published effects of removing all income taxes and replacing them with a single-stage, single rate sales tax.

From your post, I see that you don't believe that removing a cost component - industry wide - would affect prices.

Can you supply any research, documentation, etc. buttressing your assertion?

WG, assume for a moment that every one of your arguments have merit; assume further the total tax burden doesn't change; and moreso, the NRST is not a panacea. Assuming all these things, what value do you place on getting the federal government out of your financial life? - the dread of the IRS is gone - no filing, no audits, no receipt keeping, none of the compliance aggravations and expenses, the very intrusion into just about every aspect of your private life - ALL GONE.

Even if, (and that's a very big if), nothing else changed, wouldn't that be worth dumping the current slave tax system?

also it should help our large trade deficit when we aren't buying as many products.

A revenue tariff serves that purpose better than a sales tax, simultaneously raising revenue and encouraging domestic lower-taxed production and employment.

Why is the NRST rate so high?

The current income/payroll tax is 22.4% of gross family income.

The NRST is 23% of gross family expenditure (gross family income less investment, used goods purchases and poverty threshold)

The NRST rate is set at the revenue neutral level of the current tax law it replaces to overcome the potential points of order that will be raised by opposition to prevent enactment.

Sequestration Process:CRS Rules 98-20006
Refer 2 USC 900-909

"The 1990 BEA created a separate sequestration procedure to enforce PAYGO rules that apply to direct spending and revenues. The PAYGO rules apply to legislation through FY2002, but the PAYGO sequestration procedure applies to the net deficit effects of that legislation through FY2006. PAYGO rules require that an increase in direct spending or a decrease in revenues must be offset by an equal amount of spending reductions, revenue increases, or a combination of the two so that the budgetary effect of new legislation is not projected to increase the deficit, or reduce the surplus, for any fiscal year through FY2006.

PAYGO RULES: CRS Rules 98-20006
Refer 2 USC 900-909
House: auto sequestration if Receipts or Appropriations legislation in deficit increase,
House Point of order waivable by unanimous consent
Senate Point of order waivable by 3/5ths vote.
May be waived under Sequestration Rules on declaration of War or
conditions of <1% real economic growth for 2qtrs.

"CBA points of order, like most others, are not self-enforcing. In order to enforce a congressional budget rule, a Member must raise a point of order against the legislation violating it. When a point of order is raised against legislation that may violate a substantive provision of a budget resolution, a determination of whether the legislation would cause spending or revenue levels to be breached is based on estimates supplied by the Budget Committee of the appropriate house, under section 312(a) of the CBA. Generally, when a point of order is sustained, the violating bill or amendment fails and is not considered or the violating provision of a bill or amendment is stricken. "

I'm not ready to concede them that rate as long as we're trying to make taxes more fair.

"Fairness" has nothing to do with the issue of taxrate. Meeting current funding levels of current tax law is. To place the NRST in place is the first goal. It is up to the electorate, in response to the visibility of tax burden the NRST provides, to curtail the growth of government.

Milton Friedman as quoted by Northwest Florida Daily News, 10-16-2000:

"If we're to have an income tax, it's a good thing for everyone to pay at least a nominal amount," he said. "If non-taxpayers become a majority in society, what would restrain them from voting for ever higher taxes on others?"

Government keeps getting bigger and more socialistic.

Once taxpayers are the clear majority in society, then another course becomes possible:

23%........... HR2525 (NRST) rate on consumption expenditure

14.91% ..... rate if Social Security and Medicare were eliminated
14% .......... rate if Nat'l Endowment for the Arts were eliminated
11.9%........ rate if Dept. of Education were eliminated
10% .......... rate if welfare were eliminated
9.8%.......... rate if foreign aid were eliminated
etc.

The IRS uses repressive force on taxpayers.

States tax services, most of which already administer retail sales taxes will take over the job of enforcement and administration. No IRS, just a department of treasury office to receive NRST revenue from the states.

What will the government do to sole proprietors and other small business owners who fail to report or pay their consumption tax returns?

When they are retailers, (i.e. not selling product or services to other businesses which are not taxed):

Refer HR25: `SECTION 1. PRINCIPLES OF INTERPRETATION.

`(a) IN GENERAL- Any court, the Secretary, and any sales tax administering authority shall consider the purposes of this subtitle (as set forth in subsection (b)) as the primary aid in statutory construction.

`(b) PURPOSES- The purposes of this subtitle are as follows:

`(1) To raise revenue needed by the Federal Government in a manner consistent with the other purposes of this subtitle.
`(2) To tax all consumption of goods and services in the United States once, without exception, but only once.
`(3) To prevent double, multiple, or cascading taxation.
`(4) To simplify the tax law and reduce the administration costs of, and the costs of compliance with, the tax law.
`(5) To provide for the administration of the tax law in a manner that respects privacy, due process, individual rights when interacting with the government, the presumption of innocence in criminal proceedings, and the presumption of lawful behavior in civil proceedings.
`(6) To increase the role of State governments in Federal tax administration because of State government expertise in sales tax administration.
`(7) To enhance generally cooperation and coordination among State tax administrators; and to enhance cooperation and coordination among Federal and State tax administrators, consistent with the principle of intergovernmental tax immunity.

`(c) SECONDARY AIDS TO STATUTORY CONSTRUCTION- As a secondary aid in statutory construction, any court, the Secretary, and any sales tax administering authority shall consider--

`(1) the common law canons of statutory construction;
`(2) the meaning and construction of concepts and terms used in the Internal Revenue Code of 1986 as in effect before the effective date of this subtitle; and
`(3) construe any ambiguities in this Act in favor of reserving powers to the States respectively, or to the people.

And yes government does intend to enforce tax law, do you really expect a tax law to not be enforced?

Refer: HR25: 'SEC. 505. PENALTIES.

No one can guarantee how this bill would turn out once the legislature enacts it into law. No one can say with any certainty the political-economic effects this proposed form of tax will have because no one really knows. Our politicians represent a variable that could drastically affect the consequences of this proposal.

Same is true of the current system. "Eternal Vigilence" and electorate involvement is the key to any solution. Your statement provides no reason not to enact an NRST to get the ball rolling for change.

I need to know all of the risks associated with this proposal.

You seem to have laid them out well enough. The problems are not with the NRST, they lay with the electorate's propensity to demand largess, and sit back an let someone else to the heavy lifting:

“Our constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.” John Adams

Sir Alex Fraser Tytler (1742-1813). Scottish jurist and historian:

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

The NRST merely provides visibility of tax burden and relief from government intrusion into the family, that "Eternal Vigilence" may operate. The current system fails in those regard. The rest is up to the people.

I believe it is inaccurate to assume that the prices on all products will be affected the same.

How does that make the claim of decline in prices inaccurate on the whole. Some products will have greater price declines others will have less, they will on average result in the gains claimed for them.

The normal person buys many products and services not just one, on average they will see the advantage of a 20-30% decline in shelf price of goods and services over a period of time comensurate with competive markets.

The following is the claim of NRST proponents:

http://www.freerepublic.com/forum/a388d0748789d.htm

[38] While the relative ratio of how much is pulled back or pushed forward depends on market forces, it is a safe assumption that some business taxes find their way into goods and services purchased by consumers.

[39] Dr. Dale Jorgenson, Chairman of Harvard University's Economics Department, believes that the price of goods and services are inflated by about 20 percent or more by upstream taxes consumers ultimately bear. In a recent paper Dr. Jorgenson estimated the built-in taxes contained in the price of goods and services. /22/ In the chart above, he quantified the hidden component of tax, estimating that producer prices would fall on repeal of upstream taxes an average of about 22 percent.

[40] The higher marginal rates of an income tax system may actually exacerbate the burden of the hidden taxes that are pushed forward under our income tax system. Some leading economists believe that hidden taxes increase prices charged at the counter even beyond the effective rate of the tax as a function of the price because of the higher marginal tax rates imposed under a progressive income tax regime. Consider this: another postulate of economics is that no profitable business will sell a product below its marginal cost. The marginal cost is determined partly by the marginal tax rates. Hence, if a business is in a high marginal tax rate bracket, the goods and service prices will reflect the cost of covering that marginal tax rate.

[41] If proponents of an income tax structure believe that these taxes are "pushed forward," then they must conclude the poor bear these hidden taxes in the form of higher-priced goods and services at the highest marginal rate of the producer. A portion of the income tax, therefore, is already partly a very regressive sales tax hidden from the consumer. If proponents of an income tax do not like a sales tax, why do they not find it troubling that the income tax is partly a consumption tax at a rate of more than 20 percent without a rebate? This is particularly perplexing when the leading sales tax plan, the FairTax, contains a rebate mechanism that exempts the poor entirely from tax on necessities through a demogrant equivalent to the sales tax rate times the poverty level.

[42] The point income tax proponents miss is this: If the hidden tax is taken out of the price structure of goods and services as in a properly structured retail sales tax, then why shouldn't the prices of goods and services fall when the tax is removed? If we want to cause consumer prices to fall the furthest, we would have a tax system with the largest base and the lowest marginal rates. A pure consumption tax base is almost twice the size of the existing income tax base. The Fair Tax base is much larger than the current income tax base. Moreover, by definition, one cannot have lower marginal tax rates than a system with single rates, like a sales tax, which levels the peaks and valleys of different brackets. Since the poor spend a disproportionate amount of their income on consumption, why then are they not the ones to disproportionately benefit from falling prices caused by zero implicit embedded taxes?

Lets hear an "Amen" from the VRWM!!

Thanks for posting-

also it should help our large trade deficit when we aren't buying as many products.

A revenue tariff serves that purpose better than a sales tax, simultaneously raising revenue and encouraging domestic lower-taxed production and employment.

How is that?

A revenue tariff does not do anything to reduce the reduce cost of goods produced for export from this nation, removing the income/payroll tax structure and replacing it with a retail sales tax does.

Secondly a revenue tariff rate set to produce revenue of just the current corporate income/payroll tax structure would do nothing more than suppress import purchases to the point that virtually no revenue would be realized do to loss of import sales, and still does nothing to relieve us of the oppressive inequities of the individual income tax, and would serve to merely push individual income tax rates upward for loss of revenues from the attempt to tax imports and not local products thus acting to inhibit import sales. Ad a consequence a "revenue tariff" is an imaginary construct that can never be realized.

The retail sales tax is a revenue tariff equal to the general tax on general retail commerce, but does not get invisibly embedded into export sales as income/payroll taxes do.

Secondly a revenue tariff rate set to produce revenue of just the current corporate income/payroll tax structure would do nothing more than suppress import purchases to the point that virtually no revenue would be realized do to loss of import sales,

At extremely low tariff rates, there is little inhibition of imports, and marginal increases of the tariff rate would produce a corresponding increas in revenue. There comes a point, however, when elevated tariff rates would indeed begin to supress imports sufficiently that total revenues would begin to decline. Revenue tariffs are therefor "self capping" at whatever rate that maximizes revenue.

I doubt that you flying monkeys understand this. You're more adept at disparaging sound economic principles with irrational slurs about marxism, communism, etc. etc.

, the USA under the old Articles of Confederation seems pretty appealing!

Depends on what one expects to achieve by such a situation, I would guess:

Alexander Hamilton, Federalist #21:

The principle of regulating the contributions of the States to the common treasury by QUOTAS is another fundamental error in the Confederation. Its repugnancy to an adequate supply of the national exigencies has been already pointed out, and has sufficiently appeared from the trial which has been made of it.

James Madison, Elliots Debates Vol 3 p128:

"If a government depends on other governments for its revenues -- if it must depend on the voluntary contributions of its members -- its [*129] existence must be precarious."

"If the general government is to depend on the voluntary contribution of the states for its support, dismemberment of the United States may be the consequence."

The more I think about income taxes from the standpoint of the Founders' vision for our personal liberties, the madder I get. Income taxes are an outregeous totalitarian affront on freedom, plain and simple.

So true,

However the actual intention of the Founders vision as regards taxation by the federal government is laid out as follows:

James Madison, Federalist #39:

"The difference between a federal and national government, as it relates to the OPERATION OF THE GOVERNMENT, is supposed to consist in this, that in the former the powers operate on the political bodies composing the Confederacy, in their political capacities; in the latter, on the individual citizens composing the nation, in their individual capacities. On trying the Constitution by this criterion, it falls under the NATIONAL, not the FEDERAL character;"

James Madison, Federalist #45:

"The change relating to taxation may be regarded as the most important; and yet the present [Continental] sic Congress have as complete authority to REQUIRE of the States indefinite supplies of money for the common defense and general welfare, as the future [Constitutional] Congress will have to require them of individual citizens;

Montesquieu wrote in Spirit of the Laws, XIII,c.14:]

"A capitation is more natural to slavery; a duty on merchandise is more natural to liberty, by reason it has not so direct a relation to the person."
--Thomas Jefferson: copied into his Commonplace Book.

Patrick Henry, Virginia Ratifying Convention June 12, 1788:

"the oppression arising from taxation, is not from the amount but, from the mode -- a thorough acquaintance with the condition of the people, is necessary to a just distribution of taxes. The whole wisdom of the science of Government, with respect to taxation, consists in selecting the mode of collection which will best accommodate to the convenience of the people."

James Wilson, Pennsylvania Ratifying Convention
4 Dec. 1787 Elliot 2:466--68

No man is obliged to consume more than he pleases, and each buys in proportion only to his consumption. The price of the commodity is blended with the tax, and the person is often not sensible of the payment But would it have been proper to rest the matter there? Suppose this fund should not prove sufficient; ought the public debts to remain unpaid, or the exigencies of government be left unprovided for? should our tranquillity be exposed to the assaults of foreign enemies, or violence among ourselves, because the objects of commerce may not furnish a sufficient revenue to secure tham all? Certainly, Congress should possess the power of raising revenue from their constituents, for the purpose mentioned in the 8th section of the 1st article; that is, "to pay the debts and provide for the common defence and general welfare of the United States."

The Records of the Federal Convention of 1787
(Farrand's Records)
James Mchenry before the Maryland House of Delegates.
Maryland Novr. 29th 1787--
Appendix A, CXLVIa, page 149, S9.

"Convention have also provided against any direct or Capitation Tax but according to an equal proportion among the respective States: This was thought a necessary precaution though it was the idea of every one that government would seldom have recourse to direct Taxation, and that the objects of Commerce would be more than Sufficient to answer the common exigencies of State and should further supplies be necessary, the power of Congress would not be exercised while the respective States would raise those supplies in any other manner more suitable to their own inclinations --"

A LAW DICTIONARY
by John Bouvier, Revised Sixth Edition, 1856:
"COMMERCE, trade, contracts.
The exchange of commodities for commodities; considered in a legal point of view, it consists in the various agreements which have for their object to facilitate the exchange of the products of the earth or industry of man, with an intent to realize a profit. Pard. Dr. Coin. n. 1. In a narrower sense, commerce signifies any reciprocal agreements between two persons, by which one delivers to the other a thing, which the latter accepts, and for which he pays a consideration; if the consideration be money, it is called a sale; if any other thing than money, it is called exchange or barter. Domat, Dr. Pub. liv. 1, tit. 7, s. 1, n. "

Alexander Hamilton, the first Secretary of the Treasury, said it best in Federalist Papers #21 when he stated:

"Imposts, excises, and, in general, all duties upon articles of consumption, may be compared to a fluid, which will, in time, find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions. "

and in the same Federalist Paper he also noted:

"It is a signal advantage of taxes on articles of consumption
that they contain in their own nature a security against excess.
They prescribe their own limit, which cannot be exceeded without
defeating the end proposed - that is, an extension of the revenue.
When applied to this object, the saying is as just as it is witty
that, "in political arithmetic, two and two do not always make four."
If duties are too high, they lessen the consumption; the collection
is eluded; and the product to the treasury is not so great as when
they are confined within proper and moderate bounds.
This forms a complete barrier against any material oppression of the
citizens by taxes of this class, and is itself a natural limitation of
the power of imposing them.
Impositions of this kind usually fall under the denomination of indirect
taxes, and must for a long time constitute the chief part of the revenue
raised in this country." (Emphasis added).

he really shouldn't start making grandiose promises he has no intention of keeping.

Do you have some definite inside knowledge of this assertion? I certainly don't.

So far Bush has been pretty adept at achieving his goals and even using his opposition's knee-jerk responses to his initial announcements towards achieving those goals.

Re-read the article, knowing the opposition to VATs and similar "consumption tax" proposals. I would be willing to pedict that opposition that arises to VATs will be used to swing us into the polar opposite to VATs, (i.e. single stage, single rate, visible retail sales taxes), with the total elimination of income/payroll taxation that everyone rejects as being "unfair", and inequitable to one class of citizens or another everytime the subject comes up.

At extremely low tariff rates, there is little inhibition of imports, and marginal increases of the tariff rate would produce a corresponding increas in revenue.

What is the "extremely low tariff rate" you propose and what current taxes will it take the place of?

You have upheld a 20% tariff to remove corporate income taxes.

To quote you:

I performed the "study" myself. Here is where I did it:

Working with the 1999 figures presented above, a truly revenue-neutral tariff rate would have to supply the same amount of proceeds as current corporate income taxes & tariffs combined: [ (182.4+17.6)/1030.2 = 19.4%]. For sake of simplicity in discussion and calculation, I'll just call it 20%.

That is an extremely low tariff in your opinion? A marginal increase of taxation from that level (with repeal of domestic corporate taxes) is not going to effect a reduction of sales of imports with a turn to domestic sales? You do live in a dream world.

Removing domestic corporate taxation will achieve at least a reduction of 22% in retail prices for domestic goods and service. Imposing a 20% tariff on import goods will increase the retail price of those goods 20%.

That my friend is not a small tariff adjustment resulting in increased or even equal revenues. It is a formula for total collapse of foreign trade and no revenues. While leaving individual income/payroll taxes in place to make up the difference in higher rates their.

Even you recognise the tradeoff in your reply.

There comes a point, however, when elevated tariff rates would indeed begin to supress imports sufficiently that total revenues would begin to decline. Revenue tariffs are therefor "self capping" at whatever rate that maximizes revenue.

So what is that point that "maximizes revenue", what taxes are replaced by that level, what taxes will be increased to compensate for the difference. You don't really believe that Congress will not attempt to make up lost revenues do you?

I doubt that you flying monkeys understand this.

Understanding is something that you appear to have a severe deficit in.

You're more adept at disparaging sound economic principles with irrational slurs about marxism, communism, etc. etc.

Disparaging the individual graduated, progressive income tax is "disparaging sound economic principle with irrational slurs about marxism, communism etc." in your view?

Your populist diatribes regarding "landed gentry" and anti-investor cant become all the more transparent.

Manifesto of the Communist Party, by Karl Marx and Frederick Engels, published in 1848. We should never forget nor overlook the philosophical underpinnings of that choice:

"The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralize all instruments of production in the hands of the state ... . Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property ... . 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. "

One should note that the NRST does not exclude the potential or application of appropriate tariffs and infact leaves current tariffs in place.

The NRST does however replace corporate and individal income and payroll taxes as well as repeal inheritance taxes.

So Willie Green, just where does your rant stand in regards to the NRST and the elimination of the income tax in this nation which the NRST provides for, and your rants only serve to uphold the perpetuation of.

How About---instead of owing the UN for an on going deficit---

Let's Charge the UN with a World War Prevention Peace Keeper Tax-- Make that tax payable to the United States armed forces ---families and their descendants for as long as a muslim terrorist threat lasts.....