AMERICAN CONSERVATISM IN 2008 AND BEYOND

@okie,

Okie
Most of the American conservatives are disillusioned after this long 8 years ruinous rule.
My request to the conservatives in USA is
DONT HAVE ILLUSION

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@parados,

parados wrote:

The normal usage of "republic" is any government not headed by a monarch. See your definition.

OK! If it pleases you, I shall for this post agree republics include all true democracies, representative democracies, oligarchies, and dictatorships.

Now let's get back to the actual claim I've been making. I'll be more specific. The time when a country ceased being headed by a monarch is not the time line relevant to what I've been discussing. What is relevant, is the time line when a progressive income tax was established in a representative democracy (e.g., the USA in 1913). That time line is the time from which one should start measuring the devolution of a representative democracy into an olgarchy or dictatorship after a progressive tax is adopted.

By the way, some representative democracies (e.g., in eastern europe) have stopped their decline by ending their progressive taxes and adopting flat uniform taxes.

1 Reply

@ican711nm,

ican711nm wrote:

By the way, some representative democracies (e.g., in eastern europe) have stopped their decline by ending their progressive taxes and adopting flat uniform taxes.

Hmm, the largest country is Rusia:

Countries with flat tax, worldwide (source: wikipedia)

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I think we should explore more carefully what we actually mean by 'uniform tax', 'flat tax', etc. Here is a rather technical discussion from the CATO Institute, which though libertarian, is certainly conservative in what it promotes fiscally:

Quote:

The technocratic answer to the problem of financing public expenditure on public goods, at least economic cost, was given by public economics. This is the system of taxes recommended by Frank Ramsey (Keynes' young Cambridge colleague). It involves the taxing of goods with the most inelastic demand most heavily. Any tax (which is not lump sum, like a poll tax) involves a loss of what economists call "consumer surplus." This loss will be greater for any given tax rate, the more elastic the demand curve (the more sensitive consumers are to price in the quantity of the good they buy). For, the rise in the price facing a consumer from the tax will lead to a larger reduction in quantity purchased than if demand were more inelastic. Hence the Ramsey Rule for optimal taxation.

But, this rule assumes that the government is benevolent. Suppose instead it is predatory, and not merely interested in raising a given revenue but in maximizing it, at least cost. What taxes would it choose? As Geoffrey Brenann and James Buchanan showed, it would choose Ramsey taxes! This has led to a search for a system of taxation which limits the ubiquitous fiscal predatoriness of governments. The flat tax, first advocated by Robert Hall and Alvin Rabushka, is the answer.

In its pure version a flat tax replaces multiple marginal tax rates with a single marginal tax rate, and abolishes the complex systems of allowances and reliefs, which governments use for social engineering, or for buying votes. A high personal tax-free allowance allows the poor to be taken out of the tax net and imparts progressivity to the system. All taxes"corporate, personal income, and commodity taxes (e.g. VAT)"are set at the same rate, amounting in effect to a consumption tax which abolishes any double taxation such as taxation of dividends.

The advantages of a flat tax are its simplicity and transparency (as Steve Forbes notes, everyone needs just a postcard for their tax return), leading to faster economic growth, due to greater incentives to work, and the removal of various disincentives and distortions caused by existing tax distortions, including the creation of large black markets through tax avoidance and evasion. These advantages have been apparent in the many East European countries (including Russia, Estonia, Latvia, Ukraine, Georgia, and Romania), which, whilst moving from the plan to the market, have adopted flat taxes, and induced consideration of flat taxes in others (Poland, the Czech Republic, and Slovenia).

But, unlike the new East European tax systems, which were replacing a defunct ancien regime, in most developed countries with mature tax systems which are the result of the past political (zero sum) redistributive game over many generations, the most likely losers from a flat tax are likely to be the past beneficiaries"the middle classes"who will use the democratic process to resist it. The back tracking on the proposal in the US, Germany and probably in the UK suggests a full-blooded flat tax, may be infeasible in these mature tax systems. Thus, the future of the flat tax number might lie in countries which, like the East Europeans, are moving from the plan to the market. The Chinese are said to be considering its adoption. If the Kelkar Commission's tax reform recommendations were fully adopted in India, it would only be a small step to move to a full-scale system of flat taxes in India. This would curb the traditional fiscal predation of the state and its associated ills like the black economy, and have a favorable impact on the country's growth rate.

Whole article here:
http://www.cato.org/pub_display.php?pub_id=6009

Note how CATO describes a flat tax and also the countries listed using or considering various forms of this kind of taxation.

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@Foxfyre,

Foxfyre, here is a simple definition of a flat tax:

A system that taxes everyone at the same rate, regardless of their income bracket.

http://www.google.com/search?hl=en&defl=en&q=define:Flat+Tax&sa=X&oi=glossary_definition&ct=title

In my simple mind, that takes any margins out of the tax, as if you only tax above a margin, such as $6,000, that essentially means a non-flat tax, 0% from 0 to 6,000, and higher rate above $6,000. It is a two tiered system, instead of a 3, 4, or 5 tiered system or more, and so it isn't flat.

1 Reply

@okie,

okie wrote:

Foxfyre, here is a simple definition of a flat tax:

A system that taxes everyone at the same rate, regardless of their income bracket.

http://www.google.com/search?hl=en&defl=en&q=define:Flat+Tax&sa=X&oi=glossary_definition&ct=title

In my simple mind, that takes any margins out of the tax, as if you only tax above a margin, such as $6,000, that essentially means a non-flat tax, 0% from 0 to 6,000, and higher rate above $6,000. It is a two tiered system, instead of a 3, 4, or 5 tiered system or more, and so it isn't flat.

I know that your definition of a flat tax is that everybody pays exactly the same percentage no matter what level of income. I just don't believe it can ever be that simple and still be practical and fair, and, as described in the CATO article I posted, there are other definitions of a flat tax.

I do understand what you've been saying about that and accept your definition as a valid definition. I just don't accept it as the ONLY definition. Smile

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@Foxfyre,

I guess I am surprised the Cato Institute describes it otherwise. I did read your link, the part about the margins.

I am not arguing with you, Foxfyre, and I accept you are apparently more correct than I thought in terms of the definitions as used, but I do find it surprising that the Cato Institute would describe a marginal tax rate as a flat tax, as I thought a marginal tax rate would by defintion not be flat. All it does is describe a tax with one margin or two brackets as flat, but a tax with 3 or more brackets as non-flat. I still prefer the definition of a flat tax as one with no margins or brackets at all, where all taxpayers, regardless of income, from $1 to a million dollars as paying the same tax rate.

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@Foxfyre,

Foxfyre, why do you think no flat tax as okie defines it, "can ever be that simple and still be practical and fair.?"

Okie's definition: "a flat tax [is] one with no margins or brackets at all, where all taxpayers, regardless of income, from $1 to a million dollars as paying the same tax rate."

I would amend okie's definition to only change his phrase "a million dollars" to the phrase "a trillion dollars."

For example, with a 10% income tax, someone whose total annual income were one dollar would pay an annual income tax of ten cents. Someone whose total income were one-trillion dollars would pay an annual income tax of one-hundred-billion dollars.

Then every tax payer would have an equal interest in getting our government to avoid waste and spend taxes only on national necessities.

What is unfair about that?

1 Reply

@ican711nm,

I noticed that comment about fairness and practical as well, icann. With all due respect to Foxfyre, I agree with her almost all the time, but the term, "fairness," is a commonly used excuse to tax people with higher incomes with higher tax rates, thus the income tax code has continued to grow into a myriad of exceptions, brackets, deductions, incentives, etc., all in the interest of supposed fairness and taxing people that are the most able to pay it.

I hate to bring the sales tax in again, and I openly disagree that progressive tax provisions are necessarily unconstitutional, so one of my reasons for being intriqued with the sales tax, everyone would pay sales tax, but I would exempt housing up to a threshold (marginal tax rate hello) and exempt food, and I would cash back to the lowest wage earners, making it a progressive system, but still every citizen regardless of income would pay the same tax on most retail items, and so I agree it is important for every citizen to feel they have a vested interest in paying the taxes. But rich people buy alot more stuff, especially non-essentials, so they would still pay the most tax, and if the cash back provision would be used, this would result into an approximation of our current system, but we would instead be extracting our tax at a different point in the economic cycle. We would be taxing spending instead of productivity, which I think is healthier and would greatly stimulate domestic economic activity, making a more even playing field with foreign imports.

1 Reply

@okie,

Okie, I'd like to explore your sales tax provisions alittle more, but not to debate them, just to understand them..

Do you advocate that all "things" (please define) purchased be taxed at the same rate?

Do you advocate that all "services" (please define) purchased be taxed at the same rate?

Do you advocate that all "commodities" (please define) purchased be taxed at the same rate?

Do you advocate that all things, services, and commodities purchased be taxed at the same rate?

Do you advocate that the sales taxes on all taxed things, services, and commodities purchased be collected by government on the basis of the sellers gross sales revenue received from them?

If you were to agree to that last, wouldn't it be simpler to just tax the sales revenue of all businesses (corporate and private) at a uniform rate and not tax any other income?

By the way, what about rentals?

I like discussing this tax issue with you and foxfyre because your arguments are not based on semantic manipulations, but rather on the real substance of the issues. I'm confident I'll learn much more as a result.

1 Reply

@ican711nm,

First of all, I am no expert on this, nor am I the one to ask necessarily about the details. I am tentatively, I say tentatively, in favor of the concept, based on hearing people talk about it, such as Neal Boortz, and his Fair Tax Book. I have read columns about this, plus I have heard Neal discuss this on radio at some length. I admit I have not read his book. I have only a general philosophy about the concept, but I would not know just exactly the details I would favor until I had studied the idea in much greater detail, akin to doing a research paper on it for my MBA or something, which I don't have the time to do.

As to your questions, I will try to answer:
As is now done with state and local sales tax, for simplicity, all items should be taxed at the same rate, except for my two exemptions, housing up to a threshold, and food. In some states, groceries are exempt now, and it works well, it is simple to do with the universal barcoding system. Restaurant food would not be exempt.
Services I am not sure, I would need much more information in regard to what the rates would be without it or with it, and the problems associated with it. I don't think though that services would be taxed, as they are not now in regard to state taxes, etc.
Commodities, I'm not sure what you mean, only retail items will be taxed, the middle man buying commodities for resale is not the end user, so no tax if that is what you are asking.
Your question about taxing gross revenues, no, the tax would be applied and collected pretty much like it is now for state and local, tax is collected for taxable retail items at the retail level as the taxes are collected by the retailer, that would be part of the beauty of the tax, the infrastructure is already in place.
Rentals, I'm not sure, probably so, to avoid the tax dodge that would be used, but more study would be needed on this issue.
There are things to be worked out, but the system we have now has how many thousand pages of tax code, ican, and it is so complex that people make a living studying this stuff.

Some of the things I like in theory are: Everybody would be aware of what percentage the feds are taking from them, rich and poor alike, it taxes at the point of spending instead of productivity which I think is a healthier way to do it, it would free businesses from income tax, etc., which would bring the price of products down significantly, and would make every product sold in America subject to the same sales tax rate regardless of where the product is made, which would unleash a very powerful competitive surge in the ability of domestic business to compete, and a sales tax would make every drug dealer and tax cheater pay taxes, which is a huge chunk of economic activity now escaping notice. And it would put alot more money into the peoples pockets, before they go out and buy stuff, stuff that will be cheaper, before tax, when they buy it, but when they buy it, they pay the tax right then and there and it is done with.

Finally, I want to see a serious debate with the experts laying out what would happen, the tax rates, how it would work, and an agreement that the IRS income tax would be eliminated at the very same time, before I would possibly endorse it. I am endorsing the idea for serious consideration, not for sure the implementation yet.

1 Reply

@okie,

ican, here is a summary from Fairtax.org:

Allows you to keep 100 percent of your paycheck, pension, and Social Security check.
Is pro-growth and creates jobs by making American-made or American-grown products more competitive at home and for export.
Eliminates taxation of income and urges a repeal of the 16th Amendment through HJR 16.
Ensures that everyone in the United States pays their fair share of taxes.
Is progressive by exempting all legal, resident, American taxpayers from federal taxation up to the poverty level, through a monthly rebate.
Dramatically lowers tax rates for low-income and middle-income Americans.
Reduces the cost of goods and services by eliminating hidden taxes.
Allows families to save more for home ownership, education, and retirement.
Frees up the time and money wasted on record keeping for the IRS and filling out cumbersome IRS forms.
Protects and ensures the funding of Social Security and Medicare.
Leaves unchanged the amount of money raised by the federal government.

http://www.fairtax.org/site/PageServer?pagename=action_contactcongress

1 Reply

@okie,

Quote:

Is progressive by exempting all legal, resident, American taxpayers from federal taxation up to the poverty level, through a monthly rebate.

This provision of the fair tax (i.e., sales tax) scares me! It is too easily corrupted by politicians repeatedly redefining the so-called "poverty level," to help buy their re-elections with taxes paid to government.

Also, it is too easily manipulated by individual citizens claiming their incomes are at or below the poverty level, when there would no longer any federal record of what individual incomes actually were.

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@ican711nm,

We will still have to keep record of incomes because of one big reason, that includes Social Security and Medicare deductions from payroll. Such a cash back program could be combined together into that program. And if people tried to cheat on it to get the rebate, it would severely affect their social security fund. And you don't get a rebate unless you work. Welfare recipients I think would get nothing, as they are already getting assistance. Retirees get nothing I think. Its only if you work, I think. So wage earners or self employed earning their own pay would be qualified. I need to study that aspect of how it would work.

I don't particularly like the idea based upon principle, and yes your concerns are valid, no system would be without problems, but practically speaking that is the only possible way for this idea to ever see daylight in terms of even being considered. And for people actually working at low pay, they are working, and they still pay into Social Security and Medicare funds. And even with the rebate, they would still all pay sales tax, and so they would see how much it is costing to run government on a personal up close basis every time they bought something.

Again, even though a hefty sales tax would be charged, the retail cost of items should be noticeably lower before tax, because of an unfettered productive business and manufacturing sector, unfettered from income tax at all levels.

1 Reply

@ican711nm,

Quote:

Foxfyre, why do you think no flat tax as okie defines it, "can ever be that simple and still be practical and fair.?"

Sorry, got distracted there for a few days and trying to catch up here. I probably should have used a different word than 'fair' but my intent was that some would have ability to manipulate definition of that 'first dollar' of income; especially people like me who are self employed. My 'income' is whatever is left over after expenses allowing me use of all my gross receipts as I choose to manage them until my taxes are eventually filed. The person working for wages would not have that option. (Of course it isn't much different from that on our current system either, so that all may be moot.)

Then there is the logistical nightmare of paperwork necessary to track those 'first dollars' and how that would probably cost far more than any tax revenues generated. Therefore, as I see it, some kind of personal exemption on the first X amount of earnings seems the most practical and reasonable way to handle a 'flat tax'.

I agree that a VAT or sales tax has major problems too when it is politicians who will still want to curry favor with their constituents who would be deciding what is 'essential' (exempt from the tax) and what is not. And I've mentioned before, that quarter cent is so easy to tack on to raise revenue and is scarcely noticed at the time so it receives little scrutiny or criticism. Several quarter cents later, however, and the government is taking a substantial chunk of your money. Its kind of like that frog started out in cold water in the pot and gets used to increasingly warmer water so that he doesn't jump out before he boils to death.

1 Reply

@Foxfyre,

Setting aside my argument over the meaning of "uniform" in the Constitution, I think a uniform tax on all dollars earned above a uniform exemption for all tax payers wouild be a great improvement over the current income tax laws. Further I would advocate a 100% tax exemption for all income earned by businesses, but not for that income owners or share holders of businesses receive from businesses.

However, this approach is corruptible too by politicians seeking to buy votes by transfering tax revenue to those who pay no taxes or pay a lower average tax per dollar of income because of their exemption than the rest of us..

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@okie,

So, you aren't really proposing a flat tax then if you keep SS and Medicare in the mix.

A flat tax would remove all other forms of taxation and just leave the one tax. Otherwise it isn't flat.

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@parados,

I've never really thought that a true flat tax would fly, and I have accepted to some extent the need for a limited amount of redistribution to the bottom group of wage earners.

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@okie,

What does it cost to try to make a true flat tax fly?

1 Reply

@ican711nm,

ican711nm wrote:

Setting aside my argument over the meaning of "uniform" in the Constitution, I think a uniform tax on all dollars earned above a uniform exemption for all tax payers wouild be a great improvement over the current income tax laws. Further I would advocate a 100% tax exemption for all income earned by businesses, but not for that income owners or share holders of businesses receive from businesses.

However, this approach is corruptible too by politicians seeking to buy votes by transfering tax revenue to those who pay no taxes or pay a lower average tax per dollar of income because of their exemption than the rest of us..

Probably if you removed all federal taxes from corporations and small business, except perhaps licensing fees to pay for necessary regulation, our unemployment rate would drop to zero almost immediately. I can't think of a better plan to create jobs and generate wealth. We both know that ain't gonna happen, but it sure is nice to imagine.

I think the other part of your comment could be addressed by my conviction that it is inappropriate for the Federal government to extend charity from the public treasury to either individuals, groups, or any foreign entity. It hasn't been all that long ago that this was the rule. We should have a Constitutional amendment making it a rule again.

I don't have a big problem with government backed loans to small business, students, etc. so long as there is clear understanding and enforcement in place to collect on those loans along with reasonable interest.

And I certainly think the Federal government could be the clearing house to receive and distribute voluntary charitable contributions for relief in large scale disasters, foreign and domestic, though I continue to think that private enterprise is usually the more efficient/effective way to go there too.

1 Reply

AMERICAN CONSERVATISM IN 2008 AND BEYOND

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