Reply
Sat 4 Sep, 2004 04:01 pm
Dear friends,
Can you imagine a day when the intimate details of our financial lives are no longer subject to the scrutiny of a faceless bureaucracy with an abysmal record of bungling inefficiency, inaccuracy and abuse of taxpayer rights? DARE TO DREAM! If HR 25 / S1493 becomes the law of the land, the abolition of the IRS will be a dream will come true. Some say this will never come to pass, but I believe there is reason for hope. Not only has the proposal been in the news a great deal, but Treasury Secretary Snow has said that in a Bush second term, Tax Reform will be "BOLD!" Please see:
http://quote.bloomberg.com/apps/news?pid=10000087&sid=a7CUqFGlG648&refer=top_world_news
Even though I have a lot invested in the study of this Rube Goldberg like device, there are a number of reasons why I support the sales tax proposal. First, a sales tax is really a return to the vision of the Founding Fathers who believed in taxes on consumption only. Please see Federalist Paper No. 21, found at
http://federalistpatriot.us/fedpapers/fed_21.html. Second, recent retaliatory actions and rulings of the World Trade Organization would be nullified by the repeal of Title 26 and the concomitant imposition of a national sales tax. Because a sales tax is easily border adjusted, our goods would be better able to compete in the world market which would lead to rapid economic expansion---an expansion that should help ALL Americans. Third, The sales tax would be pay-as-you-go for virtually all, meaning that the vast majority of taxpayers would no longer be subject to audit, lien and levy of their private property in satisfaction of tax debt. This proposal would be a boon for private property rights and privacy rights. Fourth, this is the only plan which will solve the looming Social Security and Medicare crises.
Many have unfairly criticized this proposal. Rebuttals of recent criticisms can be found at:
http://www.fairtaxvolunteer.org/smart/rebuttals.html. I feel I must address one of the oft repeated criticisms........that the sales tax will be REGRESSIVE. Let's be clear, the current proposal IS NOT REGRESSIVE, as many who are ignorant of the specifics of the bill suggest. In fact, when the net effect of all changes are considered, the current sales tax proposal is MORE PROGRESSIVE than our current system because the FairTax: 1. Prebates the sales tax charged on povertly level expenditures, 2. Removes the cost of embedded taxation from the price of goods by repealing the corporate tax, and 3. It eliminates the cruelly regressive payroll tax. The payroll tax is openly acknowledged by all to hit low income workers the hardest, yet critics of the sales tax plan conveniently omit the repeal of said from their "analysis," and many refuse to acknowledge what every armchair economist knows......corporations don't pay taxes, people do...often in the form of higher prices. A graph of the effective FairTax rates can be found at:
http://www.pafairtax.org/resrcs/taxrates.pdf
We must act in concert if this is to become a reality. Please spread the word and help to dispel the popular myths about the sales tax. Please visit
http://www.fairtaxvolunteer.org/opinion/elec_petition.html and sign the electronic petition. Please write to your Congressional Representative, Secretary Snow and the President. Let them know of your support for the bill and ask for their support of HR 25/S 1493, The Fair Tax Act of 2003. Additional information can be found at
www.pafairtax.org. Please feel free to forward this e-mail to your friends. Together, we can make April 15th just another beautiful spring day!
Many Thanks.
[email protected]
First, may I point out that your screen name seems somehow appropriate for this type of post.
Second, there are many reasons that the mis-named "fair" tax is unfair. Saying taxing corporations hurts low income workers more than a graduated tax system where lower income families pay a smaller percentage is beyond ridiculous.
Third, there are scant few people who support a flat income tax. This is a very extreme position. Most of us support a variation of the graduated income tax that is in place now.
I don't know why I wasted my time responding to this. There's five minutes I will never recover.
ebrown-- It wasn't a complete waste. I needed another laugh. I owe you five minutes.
I don't think the wealthy are paying a proportionately higher rate with the so-called progressive income tax. Most wealthy people got that way the old fashioned way, they inherited it. They don't have enormous payroll income that would be subject to income tax. These trust fund babies get most of their income from investments generating income that is only subject to capital gains taxes, currently only 15%. This is less than the poor and middle class are paying.
Of course, there are some individuals making large incomes. The vast majority of these own their own businesses. And for these folks, there is no limit to the loopholes available to avoid taxes. Most of these people usem their business to generate business expenses to reduce their income. Take a look at the best selling book, "Inc. and Grow Rich". It explains how to deduct almost everything. In addition, the rich business owners have other favors given them by our generous Congress. One on the most egregious loopholes given to business owners is something called the 412i plan. Look it up. It allows business owners to put hundreds of thousands of pre-tax dollars into retirement investments.
No, I think the most regressive tax is the one we currently have. You see, the current system insures a person cannot "earn" themselves rich. The only way to get rich is by investments. But, the income tax insures that we can't keep enough of what we make to make substantial investments. If a middle class person is lucky enough to get a higher paying job, the higher income tax hit will take it before they can invest it. It is a trap.
I think what most of us want is a simple system that the rich can't beat. I think that the rich will pay far more taxes with the sales tax than they do now. We want a system that is fair. Maybe it's not perfect, but the sales tax seems more fair than what we have now. We want something simple that does not require a bureaucracy to administer and cannot be manipulated by special interests. The sales tax accomplishes that.
Is it perfect? No. But it's so much better than the mess we have now. The poor are virtually untaxed. The rich will pay no matter what favors they court with politicians. And, finally, the middle-class will have an opportunity to save and invest far more dollars than they can now. If they have the self-discipline, they can rise above the class they're trapped in now.
Is that so bad?
E Brown is right, this post is unworthy of a response.
It will never make it past the circular file much less to the floor.
Here's a very COMMON MISCONCEPTION:
I have talked to a few people about the Fair Tax and when I
mention the taxes embedded in products that will go away, thus
reducing the prices of products, I hear things like, "Yeah, right.
Their taxes may go down but there's no way companies will pass the
savings on to the consumer who is already used to paying the higher
price."
In a market where there is no barrier to entry, when a firm or a
group of firms make a [economic] profit that goes beyond the normal
operating cost (normal profit which includes salaries, dividends,
etc.), it creates incentive for other firms to enter the market.
All things being equal, the demand for the product being constant,
larger the number of new firms entering the market, lower the prices
that can be charged by the new firms (assuming no product
differentiation). If the newer firms are offering less for the same
product, older firms already in the market need to lower their
prices accordingly or it will lose market share.
One more thing ---- price gouging is actually a positive thing since
it creates stimulus for other firms to enter the market to take
advantage of the large profit (price gouging). But larger the
number of new firms entering the market, lower the long term prices,
and larger the supply.
People who doesn't understand economics think that price gouging in
vaccines or oil was wrong, when in fact, that was the best thing to
happen because if it was allowed to continue, supply would have
increased.
Here's a simple intuitive example. Suppose there was a disaster
which destroyed all the electrical circuits in your area, and
there's only one electrician in town. There would be large demand
for his services, which would drive his hourly wages up. If the
incident was isolated to this particular area and electricians in
other town realized that they could make several times more offering
services at one-electrician-only town, they would start offering
services there (from nearby town), driving up the supply of
available electricians. In the long term, prices would drop and
equalize at normal equilibrium.
CHug,
Stop this pointless multiple posting.
Please.
Cycloptichorn
I live in a state that has a sales tax and no income tax. It's an absurd way to run a gov't, but we'll never change it. But talk about regressive...
Tax Hypocrisy: Kerry Makes the Case for Fundamental Tax Reform
by Richard W. Rahn
WebMemo #600
October 28, 2004 | printer-friendly format |
Senator John Kerry keeps telling us that "the rich" need to pay more in taxes, and he proposes to raise the marginal tax rate that Americans with earnings in the two top tax brackets would pay. But the small amount that Kerry and his wife paid last year in taxes demonstrates the error of this approach. Under Kerry's own plan to "tax the rich," his and his wife's average tax rate would increase to only 15.2 percent, far less than many small-business owners and middle-class earners would pay. This discrepancy is an artifact of today's convoluted tax code. In short, the Kerrys' own tax return makes the case for fundamental tax reform.
The Senator, for Example
Senator Kerry and his wife are among the 400 richest Americans. Last year, they paid only 13.4 percent of their declared $5.5 million income in federal taxes.
Estimates of the Kerrys' worth range from a low of $700 million to a high of $3.2 billion. How much income would you expect a billion dollars to produce? The Kerrys reported $5 million in income, which is a return of only about one-half of 1 percent, which is far lower than the return on even U.S. government securities.
How could this be? Like many wealthy Americans, the Kerrys have at their disposal a variety of legal means to keep income off of their tax returns and to keep the tax rate on their reported income low. Many of these loopholes are the result of tax policies that aim to reward or punish certain behavior with incentives and sanctions.
These policies make the tax code extremely complex, and their interactions and frequent vagueness benefit those with the means to employ extremely sophisticated tax-planning strategies. Conversely, this complexity disadvantages ordinary taxpayers, few of whom have the time or ability to navigate thousands of pages of tax code regulations, up-to-the-minute legal decisions, and administrative explanations and memoranda.
Kerry's running mate, Senator John Edwards, must have the same tax adviser. Last year, Senator and Mrs. Edwards paid an average tax rate of only 5.1 percent on their reported $434,000 of income, or less than one-third of the rate that the average taxpayer pays.
The Senator's Tax Plan
For those concerned about tax equity?-that is, that all Americans pay their fair share in taxes?-working within the confines of the existing tax system is extremely limiting. Raising marginal rates on the rich, for example, will not necessarily result in the super-rich paying markedly higher rates or even as much, as a percentage of actual income, as middle-class taxpayers.
So, in effect, any proposal to raise the top marginal rate is not really a proposal to increase taxes on those who are already rich, whether through inheritance, hard work, luck, or marriage, but a proposal to increase taxes on those who are trying to become rich. Those who have already achieved wealth, by whatever means, can tax shelter much of their income, but those with little in the way of assets find it almost impossible to shelter their earnings from taxes.
Senator Kerry's tax plan exemplifies this difficulty. Kerry proposes to raise the marginal tax rates that apply to income above $200,000. But what effect would this have on the actual taxes paid by the very wealthy? According to an analysis by the Argus Group, a respected tax law and economics firm, the Kerrys' average tax rate would only increase by 1.8 percentage points to 15.2 percent under the senator's plan. At the same time, many small-business owners would see their average rate rise by 4.0 percentage points, resulting in effective rates as high as 35 to 40 percent, including certain deduction phase-outs.
In other words, by proposing to raise the top marginal rates, Senator Kerry implicitly embraces a system of taxation under which he and his wife and other established, wealthy families pay an average tax rate that is less than half of what many young professionals and small-business owners, many of whom may possess few or no assets, have to pay. This fact should give any tax-equity advocate pause.
The Case for Fundamental Reform
No doubt unintentionally, Senator Kerry makes a strong case for fundamental tax reform, and specifically a flat tax or consumption tax.
Under a flat tax, all Americans, regardless of income level, pay the same percentage of their income in taxes. A flat tax minimizes the complexity of the tax code, eliminating the sort of loopholes that are today so valuable to those who can afford sophisticated tax planning.
Another option for tax reform is the consumption tax, under which savings and investment are excluded from income and only consumption is taxed. Economic efficiency would be enhanced because people would be taxed only on what they take out of the economy rather than on what they put into it.
Municipal bonds, a favorite investment tool of the wealthy, are already treated this way under the tax code, but few other investments are. As a result, most Americans investing their money are doubly taxed: once on their income and again on the investments that they make with that income. Just like the wealthy, all investors should be able to avoid double taxation.
In addition to promoting tax equity, a flat or consumption tax would stimulate an additional supply of labor and capital, which would result in much higher economic growth and lower unemployment to the benefit of all Americans.
As Senator Kerry's own experience so aptly demonstrates, today's tax code advantages the wealthy at the expense of those trying to better their lots. And as his proposal to raise taxes on the rich demonstrates, working within the confines of today's tax code is no way to fix the problem. Only a flat rate, whether under a flat income tax or a consumption tax, would ensure that all taxpayers?-even the wealthy and even Senator and Mrs. Kerry?-pay their fair share.
Richard W. Rahn is a Visiting Fellow at The Heritage Foundation.
One copy, one paste chug, this multiple posting is annoying, and nobody reads your posts more than once anyway.
padmasambava wrote:E Brown is right, this post is unworthy of a response.
It will never make it past the circular file much less to the floor.
And yet you felt compelled to respond. Curious.
Stumble It!
Tweet This
Bookmark on Delicious
Share on Facebook
Share on MySpace