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Jolie Rouge
12-24-2004, 03:03 PM
Walter E. Williams

Rep. John Linder (R-Ga.) has authored H.R. 25 "To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States." Before we look at whether a national sales tax is a good idea, how about a little Economics 101 just to convince you that government spending, not government taxation, is the true measure of governmental impact on our lives?

Keeping the numbers small, suppose the annual value of what Americans produce, our gross domestic product, is $100. If government spends $40 of it, of necessity the government must force us to spend $40 less. There are several ways this can be done. Government could tax us $40. Government could borrow, thereby driving up interest rates and reducing private spending. Government could simply print money, which would cause inflation and reduce our purchasing power. Finally, government could employ some combination of the three.

The bottom line is that if government spends $40 of our GDP, we can't spend that same $40. There's no question that tax reform is needed, but tax reform is secondary to a much larger issue -- federal spending. From 1787 to 1920, except during war, federal spending was a mere 3 percent of GDP, compared to today's 20 percent. If the federal government takes only 3 percent of the GDP, just about any tax system is relatively non-oppressive. However, if government were to take 50 percent, 60 percent or 70 percent of the GDP, you tell me what tax system would be non-oppressive.


There's no question that some forms of taxation are worse than others. In addition to its economic disincentive effects and intrusions on personal privacy, our income tax has huge compliance costs estimated to be between $250 billion and $500 billion each year.

Abolition of the IRS and the income tax code it enforces, replaced by a national sales, would create greater economic incentives, enhance personal privacy, and lower tax compliance cost by an estimated 90 percent. There'd also be greater faith and allegiance to our founders' constitutional vision, expressed in Article I, Section 9, which says, "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken." The founders feared the abuse and the government power inherent in an income tax. Another benefit of a national sales tax is that being taxed 23 percent to 30 percent with every purchase we become more aware of the cost of government. Income taxes and corporate taxes conceal that cost.

Before we accept a national sales tax, there are two minimal requirements. First, there must be a repeal of the 16th Amendment so Congress can't hit us with both an income and sales tax. Second, there must be a constitutional amendment fixing the national sales tax at a certain percentage that can only be increased by a three-fourths vote of the House of Representatives.

People have advocated a national sales tax or a flat income tax for years, and I don't want to rain on their parade. But here's my prediction: Congress will never enact a sales tax or a flat tax. Why? The two most powerful congressional committees are the House Ways and Means Committee and the
Senate Finance Committee. Both dispense tax favors to different Americans that come at the expense of other Americans. With a sales or flat tax, their Santa Claus roles, not to mention campaign contributions, would be diminished. On top of that, they'd have restricted opportunities for social engineering through fiddling around with the tax code.

My personal preference is a constitutional amendment limiting federal spending to a fixed percentage, say 10 percent, of the GDP. You say, "Williams, why 10 percent?"

My answer is that if 10 percent is good enough for the Baptist Church, it ought to be good enough for the U.S. Congress.

Jolie Rouge
12-28-2004, 03:57 PM
SAVE SOCIAL SECURITY WITH THE FLAT TAX
Unlike Iraq (news - web sites), a Crisis Easily Resolved
Tue Dec 21, 2004
By Ted Rall

NEW YORK--Think back to the 2000 election campaign. Was anyone talking about Iraq? No way. Yet by fall 2002 we'd gotten so riled up--although nothing had changed--that millions thought Saddam was an imminent threat that had to be taken out. You have to hand it to George W. Bush: he can conjure a crisis from a vacuum.


Now the same team that brought you "Iraq on $200 Million a Day" is pimping a preemptive strike on Social Security, seizing on Generation X doubts that the program will still be around when they retire and excessively rosy Democratic assurances to drive a stake in the biggest New Deal-era program.


Mark Weisbrot and Dean Baker, coauthors of "Social Security: The Phony Crisis" point out that Social Security can continue to pay out full benefits through at least 2042, and 75 to 80 percent of that after that. So you're OK if you're now 65, but not so OK if you're 18. But don't-worry-be-happy types aren't telling you that Americans born after 1963 have already lost four years of benefits. (The Social Security retirement age rises from age 65 to 69 in 2028.) That fact, coupled with pseudoliberal pundits' evil "even the youngest Baby Boomers will get their full Social Security checks" mantra, creates a generational wedge issue ripe for GOP exploitation. (Believe it or not, John, not everyone is a Boomer.) "It's very important for seniors to understand nothing will change," Bush says. "In other words, nobody is going to take away your check." Gen X response: yeah, we read Tweenlinese.


Old-school liberals are far closer to the truth than the reform crowd: there won't be any Social Security "crisis" for at least three decades. Still, given that it'll be 125 degrees in the shade because of global warming, there's no reason not to save spare our kids another headache. Is privatization a good idea? Maybe, maybe not. But let's get one thing straight: the Bush reform plan certainly isn't necessary to make the system, which is currently projected to see negative cash flow beginning in 2018, solvent.


Unless something changes, the system's trustees project that Social Security will run up a total shortfall of $3.7 trillion (in 2004 dollars) through 2080. But that could easily be fixed by overhauling the current 12.4 percent Social Security payroll tax, a highly regressive burden that falls only on people who earn less than $87,500 a year.


The U.S. workforce is made up of 228 million employees who earned a total of $6.7 trillion last year. The richest one percent took away a whopping $1.8 trillion, or over 26 percent of America's national income. Wanna guess where the one percent-99 percent divide is? Interesting coincidence: at $87,500 a year. Slap the same 12.4 percent FICA payroll tax on the over-$87,500 crowd--the kind of "flat tax" that makes Steve Forbes' cheeks flush--and you bring in $219 billion a year. That puts the system into the black starting in 2037 and as far beyond that as a CPA can see.


Whereas elimination of the payroll tax cap would increase the system's revenues, others are looking to cut expenses. Charles Schwab, CEO of his prominent discount brokerage firm, favors "means testing"--i.e., he doesn't believe that rich people like him, Bill Gates and George W. Bush should receive Social Security benefits when they retire. "If you're above $50,000, you can't apply, because you have adequate income," he says about his proposal. But $50,000 isn't that much. And, as the American Academy of Actuaries points out, Social Security's political popularity relies on the fact that everyone who pays in gets to take out, period: "A much broader loss of public support could result if a means test caused Social Security to be viewed as a government-mandated income redistribution program rather than an earned right."


A third alternative would address corporations, entities whose tax burden--between 15 and 20 percent of revenues collected by the IRS--is at a record low compared to individuals. A Social Security tax on corporate earnings would help compensate for the fact that corporate America has shifted the burden of providing retired workers with security in the form of defined-benefit pensions to the federal government.


To their credit, key Bushies including Treasury chief John Snow say they won't rule out raising the payroll tax cap. But don't be fooled. Republicans come not to save Social Security but to loot it. Wall Street investment banks want to charge, as their counterparts robbing the newly-privatized UK retirement system do now, 20 percent fees on your Social Security account. (The British parliament imposed a 20 percent limit on fees, which were often even more outrageous.) Personal retirement accounts, proponents promise, will be strictly voluntary. And they will--for now. Once the system has been partly privatized, it will only take the stroke of a president's pen to transform Social Security into another 401(k) subject to the giddy booms and shattering crashes of the stock market...exactly the problem Social Security was created to avoid.


http://story.news.yahoo.com/news?tmpl=story&cid=127&ncid=742&e=8&u=/ucru/20041222/cm_ucru/savesocialsecuritywiththeflattax

Jolie Rouge
03-15-2005, 08:44 PM
Imagine -- no IRS

Ideas on how to fix the tax code are plentiful. A look at life without the dreaded income tax.

March 15, 2005
By Krysten Crawford, CNN/Money staff writer

NEW YORK (CNN/Money) - Imagine a world where April 15 is just another spring day.

In this new world there would be no income taxes and no Internal Revenue Service. Instead, there would be a national sales tax on everything you buy.

Sound far-fetched? It's not.

A bipartisan panel convened by President Bush earlier this year is studying ways to reform the federal income tax code. The panel has until July 31 to issue what is expected to be a few ideas, one of which could be a radical sales-tax proposal. (Other ideas may focus on reducing the complexity of the current income tax code and instituting a combination of income and sales taxes.)

Bush on the campaign trail last year said the idea of a sales tax is worth considering. Powerful Republicans, including House Majority Leader Tom DeLay and Speaker of the House Dennis Hastert, support the concept.

DeLay, along with 27 other Republicans, have so far signed onto a bill, dubbed the "Fair Tax" by its backers, that would institute a national sales tax on all retail purchases and get rid not just of federal income taxes for individuals but also corporate income, capital gains, payroll and estate taxes.

Proponents argue it's possible to set up a sales tax that would generate the $2 trillion in tax receipts the government collects every year while also achieving the two other key criteria that Bush wants: not shifting the tax burden and stimulating economic growth.

So what would life in a sales tax-only regime look like?

But what does it mean?

Here are key components of a sales tax-only scheme:

One tax rate The bill pending in Congress that would establish a sales tax-only system sets a single nationwide rate of 23 percent which, including existing state and local sale taxes, would actually come to about 30 percent. Critics counter that the rate would have to be closer to 60 percent in order to keep government tax coffers full. So the new $99 iPod Shuffle that costs about $105 in Michigan today? It would cost an additional $23 to $59, depending on the federal sales tax rate used.


No withholding.... Though each purchase would cost more, you wouldn't have money taken out of every paycheck for Social Security, Medicare and federal income tax.


What gets taxed? It wouldn't be just clothes and cars. The services provided by doctors, lawyers, barbers and others comprise a big part of consumer spending. To keep the government funded at current levels, hospital visits and hair cuts would be taxed. Not taxed: existing home sales and other second-hand items as well as corporate purchases.


Provisions for the poor To protect low-wage earners who are excluded from income taxes today, a national sales tax would have an exemption for all taxpayers to offset the taxes on spending equal to or higher than the federal poverty level, now about $9,800 for an individual and $19,500 for a family of four. How would consumers get the rebate? The "Fair Tax" legislation envisions monthly rebate checks, about $188 for a single taxpayer or $375 for the family of four.


Bye-bye IRS A world without income taxes means no more Internal Revenue Service. Ensuring tax collection would fall instead to the states, a new federal agency or some combination of the two.


Speaking of states Forty-three states levy income taxes -- including four that don't collect sales tax at all. Since most rely on the federal code to work, these states would have to make some choices. Most likely they would abolish their own income tax code and institute a sales tax. For those that don't, April 15 would live on.

There are plenty of other issues to figure out in a sale tax-exclusive world. Among them: President Bush has said he wants a revamped income tax system that preserves charitable giving and home ownership incentives, both of which are now embedded in the current code.

As Mark Luscombe, the principal federal tax analyst for CCH Incorporated, points out: "The devil is always in the details."


Critics say the national sales tax proposal is doomed.

Retailers oppose the idea because they don't want to become the nation's tax collectors. Democrats don't like it because they say it hurts lower-income workers.

Low-wage earners spend most, if not all, of their income on basic necessities and a few nonessential items and so most, if not all, of their income would effectively be taxed under a sales tax-only scheme. The rich, on the hand, arguably buy more and so would pay more taxes in absolute dollars, but not as a percentage of their overall income.

Despite the heavy opposition, even skeptics are loathe to underestimate the "Fair Tax" -- or some variation of it.

After all, notes Chris Edwards, the director of tax policy studies at the Cato Institute, the libertarian think tank: "Social Security reform started off 20 years ago as a radical, loony idea."

http://money.cnn.com/2005/03/14/news/economy/tax_consumption/index.htm

Jolie Rouge
03-31-2008, 09:33 PM
To those who wish to abolish the IRS :

What do you think is the best approach ?

Abolish IRS - institute flat tax 5 (29.41%)

Leave the current system in place 3 (17.65%)

Abolish IRS - institute flat tax on incomes and national sales tax 7 (41.18%)

Abolish ALL taxes -- everyman for him ( or her ) self ! 2 (11.76%)

Voters: 17