Posted on 02/14/2003 8:02:16 AM PST by conservativecorner
The Bush administration supports a fundamental tax reform that would move the federal tax system away from taxing income toward taxing consumption. This is a highly desirable goal, because it will raise growth and living standards for most Americans. Nevertheless, liberals are opposing it because it would benefit the rich too much.
Traditionally, consumption taxation has meant taxing goods directly, with services generally exempted. Such taxes are common at the state and local level, where we are accustomed to paying as much as 10 percent at the checkout. According to the Federation of Tax Administrators, 45 states currently have general sales taxes, varying between 2.9 percent in Colorado and 7 percent in Mississippi and Rhode Island. Local sales taxes can raise the total tax as high as 9.75 percent (in Oklahoma), with excise taxes on some specific goods on top. The Federal Government also has many excise taxes as well, especially on gasoline, alcohol and tobacco.
Consumption taxes are less burdensome than income taxes because of the way they treat saving. Under an income tax, all returns to saving and investment -- interest, dividends, rent and capital gains -- are fully taxed. Under a consumption tax, they would be exempt. Consequently, saving and investment are much higher with a consumption tax than an income tax. That is why European countries, which all have tax burdens much higher than ours but also raise more of their revenue by taxing consumption, are still able to grow.
If it were just a matter of economics, there would be no contest between taxing income or consumption. Unfortunately, ideology and politics have prevented reductions in taxes on saving and investment that would move the United States toward a consumption-based tax system.
Keep in mind that it is not necessary to tax consumption directly, through sales or excise taxes, to have a consumption tax system. Since there are only two things that can be done with income -- either save it or spend it -- eliminating taxes on saving necessarily shifts the tax burden onto consumption. If there were no taxes at all on saving, we would per se have a consumption tax system, even if there were no direct taxes on sales.
Unfortunately, it is the case that most saving and investment are done by the wealthy. How could it be otherwise? Therefore, reducing taxes on saving necessarily involves a reduction in taxes on the well to do. Consequently, liberals strenuously fight efforts to lower taxes on saving even though the ultimate beneficiaries would be the working class. Higher saving and capital formation will lead to more investment, which will raise productivity and, ultimately, wages and living standards.
Liberals also make the mistake of assuming that a consumption-based tax system is regressive -- taking more out of the pockets of the poor than the rich. In fact, over one's lifetime, consumption is roughly proportional to income, because over a lifetime we eventually consume all our income. Thus, a tax on consumption will also be roughly proportional -- taking the same percentage from all taxpayers.
Furthermore, liberals make the mistake of assuming that those who are poor today will always be poor and those who are rich will always be rich. This is really their principal justification for income and wealth redistribution policies. However, new data reported in the latest Economic Report of the President show that there is substantial mobility up and down the income ladder.
The Council of Economic Advisers looked at what rate taxpayers faced in 1987 and again in 1996. Two-thirds of those in the lowest tax bracket the first year were in a higher bracket 10 years later, and more than half of those in the top tax bracket were in a lower bracket. In other words, the bulk of those who would be considered poor in the first instance were much better off a decade later -- a few even became rich, going all the way from the bottom tax bracket to the top bracket. Simultaneously, most of those who would be considered rich weren't after a few years -- 5 percent fell all the way from the top tax bracket to the bottom bracket.
The high degree of income mobility in American society is a key reason why many of the poor and middle class oppose high taxes on the rich -- 70 percent of Americans favor abolishing the estate tax, for example, even though it affects just 2 percent of the population. Implicitly, they know that they or their children might one day be rich and have to pay this tax. They also know that poor people don't create jobs; rich people do.
Adopting a consumption-based tax system will help more Americans become rich. That is another reason why liberals oppose it.
As with any other mode of taxation, I believe that a fixed, flat rate is most equitable.
This holds true whether one is discussing income tax, tariffs or excise taxes.
So what "flat" rate are you proposing on tariffs, and what federal taxes do you expect to replace with them?
Nobody is forcing foreigners to ship their goods here,
One: Foreigners don't pay tariffs, the american people pay the tariff embedded in the priceon goods imported.
Two: If foreigners can't be forced to ship their goods here, how will this tariff you intend to levy to fund the government be collected?
Downsizing the bloated federal bureaucracy is never an option that you'd even consider, is it?
Seems you missed something in my comment #8 above:
Removing programs is key to tax rate reductions:
"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.Hmmmmmm....... It's do able, with time and effort, once the blinders are removed from the electorate and every one participates proportionately in the tax system."
You still have not answered the question of rates you would impose on tariffs:
"Just what rate do you figure such a tariff to replace income and payroll taxes should be?"
Nor what taxes you expect to repeal while doing so.
They'll be collected from those who freely choose to ship their goods here anyway.
One: Foreigners don't pay tariffs, the american people pay the tariff embedded in the priceon goods imported.
That's fine. Americans will still have the free choice to purchase the import items (which includes the tariff) or domestic equivalents (which do not).
So you are advocating an income tax? A direct tax?
Nobody is forcing foreigners to ship their goods here, and I see no reason to extend them suffrage rights as if they were citizens.
No one has advocated that. It was pointed out that taxing non-citizens is the easiest tax to get away with.
That's fine. Americans will still have the free choice to purchase the import items (which includes the tariff) or domestic equivalents (which do not).
Ok, you still have not told us which taxes you intend to repeal and what the rate will be. Looks like you are just adding tariffs (not paid on domestic goods) just another hidden tax on top of all the others we pay in prices and not removing anything.
As with Alexander Hamiltons very first tax proposal to Congress,
I prefer a flat rate revenue tariff applied to all imported goods.
While this would prove to be insufficient to soley support the vast size of modern government,
it would enable reduction of more onerous modes of taxation that are imposed upon us.
it would enable reduction of more onerous modes of taxation that are imposed upon us.
Which tax rates are those,? If rates are just reduced( how much). If a tax statute is not actually repealed, what's to keep them from turning right around and increasing rates again later, as the history of such things have always shown Congress will always do when people are not looking or the action is hidden in detail such as removal of deductions, changing depreciation schedules, imposing hidden excises or surtaxes or otherwise monkeying around with the taxbase in other esoteric an not so visible way the current code allows ... ?
Sales/Excise taxes don't do that. Tariffs do.
Sales/Excise taxes don't do that. Tariffs do.
How does adding tariffs repeal income and payroll taxes from american businesses, that impose not only the tax per-se on american business but cost of compliance mounting to 65cents for every dollar collect from domestic business taxes paid.
Replacing the income and payroll tax systems in place with a retail sales tax, removes taxes on most businesses entirely, with only retailers collecting taxes from the customer remitting such to a the same state tax authority that state sales taxes are administered by.
Furthermore, a National Retail Sales tax, imposes a 23% tax on import sales as well, with the reduction of compliance costs on domestic businesses, an immediate and visible tax on import sales which is not their now constitutes a nearly ideal trade situation.
Imports are unequivacally taxed, exports are not and the American citizen becomes fully appraised of the full an true burden of government taxes that are imposed upon him.
A 20% revenue tariff could allow American business to flourish tax free.
2001 imports goods & services = 1,167.2 + 215.8 = $1,183.0 billions
Including payroll(1/2 of SS/Medicare) taxes? That 20% only covers corporate income portion of the taxes paid in the nation, assuming the price and volume of imports remained constant on impostion of such taxes. The reality would be about 4% lower prices on domestic goods increasing volume there at the expense of 20% increase in foreign goods an services with decreasing volume.
The net effect would tend towards:
Little in the way of taxes collected from a dwindling import sector.
Exports dwindling for the introduction of trade barriers raised in reaction by other nations.
No taxes collected from business.
Consequent pressure for even heavier burden on individual income and payroll taxes and a perpetuation of an even more aggressive IRS.
Doesn't look like much of a solution for the average citizen to me.
Since when are you concerned with the average citizen anyway?
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:
"... legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children,...But it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small landholders are the most precious part of a state."
-- Thomas Jefferson to James Madison, Oct. 28, 1785 -- PROPERTY AND NATURAL RIGHT
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.25
SPONSOR: Rep Linder, John (introduced 01/7/2003)
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:
These factors more than overcomes any imagined advantage of investor over the homebuyer so that all homebuyers can become an 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 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.
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.
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.
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.
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.
Every man woman and child in the nation, pays federal taxes through that VAT.
DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation
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.
Not necessarily.
Not if it is written so as to expire if any amendments are attempted, and it must be re-debated from scratch.
I propose the only exceptions be genuine medical related expenses, education, housing and food.
Once upon a time the mythical "reasonable" person considered those (and only those) the necessities of life.
"... legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children,...
But it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small landholders are the most precious part of a state."
-- Thomas Jefferson to James Madison, Oct. 28, 1785 -- PROPERTY AND NATURAL RIGHT
He also recommended the following in the same letter as a proper federal tax:
Excerpt from a
Letter To James Madison
Thomas Jefferson (Oct. 28, 1785)
- "Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions or property in geometrical progression as they rise."
Fortunately wiser heads among the Founders of the Constitution prevailed and instead imposed severe restictions on the imposition of such direct taxes.
Much to the consternation of the socialists which love to quote Jefferson's endorsement of graduated and progressive taxes and his apparent discouragement of rights of inherentence.
There was good reason why Karl Marx and the Communist Party makes the progressive/graduated income tax the 2nd plank of the 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. "
It's bad enough we already have excise taxes on Alcohol, Tobacco and Gasoline.
The only thing you dipwads are going to achieve is putting Frist in a corner where he'll have to compromise, negotiate and cave-in. Then we'll still be stuck with the blasted Income Tax on top of even more Excise Taxes on other items.
You extremists should just stuff a sock in it.
Take a look at the liberal 'Rats who will influence the debate and you'd have to be a complete moron to give them the opportunity to impose even more Politically Correct excise taxes.
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