Shock and awe not only for Iraqis {The "Fair" tax cometh}

WorldNetDaily ^ | 4/16/2003 | By Joan Veon

[George Frm Br00klyn Park]

WorldNetDaily / Commentary

Shock and awe not only for Iraqis

Posted: April 16, 2003
1:00 a.m. Eastern

By Joan Veon
© 2003 WorldNetDaily.com

While jubilant Americans can't help but be fixated on "revolutionary" military operations they have witnessed on television for the past two weeks – called "Shock and Awe" – most are not aware that Americans are about to receive their own economic "Shock and Awe."

Many forget that while Rome burned, Nero was busy deflecting attention away from the real center of action. For example, the front page of the March 8 Washington Post featured a huge picture showing the burning of Baghdad with all but 5 percent of the front page devoted to the war in Iraq. However, at the bottom was the "bunker buster" which will shatter our own field of dreams here in America.

While the house voted well past midnight several weeks ago to approve the full tax plan of $726 billion, the Senate cut it by half when they voted several days later. While you may think this is not a sure thing, a recent editorial, entitled "Lay off the Tax Candy," in the Washington Post explained the deceptive game now being played. They said that there is some fine print in the Senate version that provides for some fancy footwork which gives them the ability to vote for the full amount, while making it look like they are against it.

Unfortunately, our government has not really made clear what this tax law is all about. From the extensive research I have done, I consider this proposal to be the most heinous change as it will destroy the ability of the middle class to sustain their economic power while enhancing the upper classes.

If enacted, this legislation, will deliver the final blow to the ability of "Joe and Jane Average" to get ahead. It should be pointed out that its title is a misnomer. This plan will not stimulate the economy but will cause much larger deficits, which will be borne by Americans as a result of the war, which is being waged.

Recently at the G7 finance ministers meeting, Secretary Snow, who likes to snow people, basically said that this increased deficit spending could be seen as a type of "capital spending" that most companies do when they want to expand. If it does not work, it is not the shareholder who has lost out, it is the entire populace of America. After the $4 to 6 trillion Nasdaq crash, most Americans who suffered any type of substantial loss are not looking to the market for answers.

The proposed legislation will, instead, change the entire tax code of America from a tax on income to a tax on consumption over a 10-year period. At this point in history, we are the only developed country not to have this form of taxation – which means Bush is globalizing our tax laws. In other words, he is harmonizing our tax laws and system to conform to what the major European industrial countries have. In my opinion, this basically will set the platform for a global IRS. By the way, the United Nations has been working on these kinds of ideas for the last 30 years.

Under this VAT (value-added tax), every time a purchase is made, there will be up to a possible 27 percent tax on it. This tax could replace the tax on income, making only consumption taxable while all forms of income are tax-free. There are some countries that have a value-added tax plus a tax on income while America is the only country without a VAT, but has a tax on income.

For those who have enough savings to live off of their income, this is a windfall, but for those who have only debt with little or no savings, this will create a financial burden equal to the Israelites having to make bricks without straw.

At the heart of this plan is the elimination of tax on corporate dividends. Again, if you obtain your living from stock dividends, this will be like going to heaven. No tax on income – only a tax on what you buy. Let's look at three different sets of individuals.

First we have Old Money Harry. He has never had to have a real job because he gets his living from the family trust. All of the family assets – the fabulous house, the cars, the summer homes, the yacht, the Mercedes and Rolls are held by the family trust, along with title to three large commercial pieces of real estate. Harry made several killings buying and selling real estate because the gains were tax-free since they were inside the family trust. The only downside is that the income from the trust is taxed.

However, under the proposal to reduce tax brackets – which is necessary in order to make the rates flat – from 38 percent to 21 percent, it won't hurt as much. Harry will have 17 percent more to spend. Only what you buy will be taxed – however, if you have it in a trust, no tax. Old Money Harry will achieve growth unsurpassed under the proposed tax-stimulus plan, just like the Kennedys, the Rockefellers, the Mellons and anyone else with this arrangement.

Next are John and Jane Middleclass. Both have reasonably good jobs with attractive incomes. They both have advanced degrees and live in the "executive home" to match their rising social status. They lease a Lexus and Jaguar and think nothing of packing up and going to Vale or to the Bahamas at a moment's notice. They have re-financed the house several times to add a new wing, exceptional landscaping and a pool.

While they know they are basically spending everything they are bringing in, they rationalize by thinking about the rising equity in their home and how much they will be able to cash out when they retire. Unfortunately their 401ks got zapped during the NASDAQ crash.

Donnie and Susie Squeeze are 25 years old. Donnie served in the military and works as a mechanic for the local Honda dealer. They have three small children and Susie works part-time at the local grocery store. They are saving for a down payment on a home and hope to send their kids to college if they can afford it. Right now they are just barely making ends meet.
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In order to explain the proposed tax stimulus program, let us take a look at who will come out like a bandit. Old Money Harry will be able to double his assets because he has the right tools: a pile of money and a trust. He will basically pay very little tax considering his income and assets. The stock dividends will be tax free, and other sources of income may be tax free, depending on if he takes advantage of the new Lifetime Savings Accounts.

Joe and Jane Middleclass will experience some drop in tax on income. However, once the proposed stealth tax is in full force, they probably will not have any tax break from the mortgage interest expense because it had to be sacrificed in order to pay for the other parts of the tax package. Since they have no savings outside of their 401ks, they won't have any benefit from the tax-free sources of income.

But because they like to spend, they will pay 21 to 27 percent every time they make a purchase. There is no doubt their spending habits will change. If the economy tanks and one of them gets laid off, they might have to sell the house. If the economy is not doing well, who will buy their house and at what price?

Donnie and Susie Squeeze are about to be squished. Their tax bracket will have to rise in order to help pay for the new tax law, but since they have very little savings they really won't feel the benefit of tax free dividends and investment income. Since they are still accumulating, every time they buy a car, a dishwasher, etc., they will pay a hefty consumption tax.

Unfortunately, the thought of buying a house might be out of the picture since it too will have a 21 to 27 percent tax. Depending on whether the U.S. can stimulate the economy enough to pay for the war, they may be on the hook for the cost of war.

Lastly, it's time to examine what George Bush stands for, because it appears he is trying to harmonize our tax laws with the other countries of the world. There has been no clarification – let alone an announcement – that the Bush administration is changing the tax code. Why keep truth from the American people? What happened to the country that the colonists fled to from the British and European feudalistic systems?

THIS article at WorldNetDaily

[George Frm Br00klyn Park]

All, Joan has written well about the coming tax system. Except, if it IS a "VAT", the "21 to 27 percent" paid on purchases WILL be many times more. The "value added" for each transaction from producer through many government mandated middlemen will HAVE to be added on to the final purchase price. That is how a VAT works. Peace and love, George.

[Black Bart]

the full tax plan of $726 billion

What does this mean? Our federal government is going to operate on a paltry $726 billion? Am I dreaming?

Or did the author mean the plan to CUT taxes by $726 billion? Shoddy, shoddy writing. I am disappointed in WorldNet for publishing this low quality article.

[JohnGalt]

Joe and Jane Sixpack are hooked on cheap credit; why would a self-proclaimed anti-gloablist not hold them accountable and merely blame the leasure class for essentially, holding stock in American companies?

[George Frm Br00klyn Park]

Lastly, it's time to examine what George Bush stands for, because it appears he is trying to harmonize our tax laws with the other countries of the world. There has been no clarification – let alone an announcement – that the Bush administration is changing the tax code. Why keep truth from the American people? What happened to the country that the colonists fled to from the British and European feudalistic systems?
---------------------

Guys, I have written many times that the "fair" tax is a system designed by the wealthy for the wealthy and their moneyhandlers. I have also written that the NRST is DESIGNED to destroy the middle class in this country, and that "step on the ladder" from "rags" to riches that has been a hallmark of what the U.S. of A. has done so well over the last two hundred plus years.

It is DESIGNED to put the onus on those who are starting out, and must buy EVERYTHING in order to JUST get by. It is EVIL!!

What WAS the "popularity" rating of Bush the senior after the first Iraq war?? Peace and love, George.

[Enduring Freedom]

The current tax system makes slaves of Americans who work.

The fair tax is just that, fair. I encourage all of you to support it.

Lefties will shriek, whine and cry, of course.

Let them howl.

[Polybius]

Our current tax system does not necessarilly tax the "wealthy" such as the the Kennedy Trustafarians. It taxes the "earners" that are busting their butts to earn enough money to become wealthy.

Yesterday, 15 April 2003, I mailed off the final payment for $103,000.00 that the U.S. Government taxed me for the priviledge of earning money during Tax Year 2002.

I propose that a wealth tax on the trust funds of the truly wealthy, such as the Kennedys and John Kerry's wife, be instituted so that some of the tax burden can be shifted from the not-yet-wealthy hard workers to the wealthy non-workers.

[Enduring Freedom]

Rank 10 Americans by income.

The top 5 pay more than 96% of the income tax.

The bottom 5 - less than 4%!!!

The current system exists because corrupt politicians can buy votes with someone else's money! That someone is you!

The unfairness is incredible!

People who pay no taxes vote for (or tell pollsters they favor) more taxes. Why not? They don't have to pay them!

Add to that the massive non-productive paperwork and filing of tax returns, and the burden on our best workers rises even more.

Stop the insanity.

A fair tax eliminates the bias, and will unleash our creative talents, unchained by government interference.

A renaissance the likes the world has never seen will spawn innovation, wealth and freedom.

It is worth fighting for.

[lewislynn]

Under this VAT (value-added tax), every time a purchase is made, there will be up to a possible 27 percent tax on it. This tax could replace the tax on income, making only consumption taxable while all forms of income are tax-free.

Just exactly what we all knew. IF a consumption tax was introduced it would be in conjuction with the income tax...The only way it will pass is if the Democrats know it will suck more of our money.

The first Bush Presidency was cancelled because of his lie, "read my lips, no new taxes". This Bush is spending money like a drunken Democrat and not just on war and terror...history repeats itself?

[Jotmo]

Once again the “Static Model” amateur economists have come out to play. This article is so full of holes I hardly know where to begin.

I’ll start with this. He seems to think “Old Money Harry” will get all the benefit because his trust fund wont be taxed, but conveniently forgets that he will be PAYING more when he spends his ”Old Money”. How many people does he think are living off of trust funds and not working? Could it possibly be more than 100,000?

It may be true that peoples spending habits will change, like they’ll SPEND LESS and SAVE/INVEST MORE because it wont be taxed.

Oh the horror.

Taxes on items you purchase will go up, but with businesses freed of their odious tax burden, don’t you think they might lower prices to gain market share? Wouldn’t that help offset the tax and not put such a damper on spending?

Not to mention all of the capital companies would have when everyone realizes there’s no tax on income from capital gains and starts buying stock by the truck load.

I’m highly disappointed in WND. I expect a lot more from them.

[Blood of Tyrants]

I really hate it when morons claim that the deficit is caused by lack of income instead of the real culprit: uncontrolled spending on unconstitutional programs.

Governments like the VAT because it HIDES the tax somewhere in the manufacturing process and the consumer never knows how much he is paying in taxes. A national sales tax paid when you spend your money is fair if you rebate the tax on the first $20,000 or so and you know EVERYTIME YOU BUY SOMETHING how much you are paying in taxes.

[heckler]

I suspect that some people will confuse this with the "Fair Tax" as proposed at the web site http://www.fairtax.org.

There is a huge difference between a national retail sales tax and a "Value Added Tax"

[MalcolmS]

All, Joan has written well about the coming tax system. Except, if it IS a "VAT", the "21 to 27 percent" paid on purchases WILL be many times more. The "value added" for each transaction from producer through many government mandated middlemen will HAVE to be added on to the final purchase price. That is how a VAT works.

I don't believe this to be true. We have business interests in Canada which has a 7% GST (Essentially a VAT). Here's how it works:

Jim cuts down an oak tree from his woodlot and sells it to a mill for $1,000 + $70 GST. He deducts $40 to cover GST he has paid on his truck, chainsaw etc. and remits $30

The mill cuts the lumber and sells the boards to a furniture company for $2,000 + $140 GST. It deducts the $70 GST it has already paid and remits $70

The furniture company manufactures several dining room suites with the wood, and sells it direct to consumers for a total of $4,000 plus $280 GST. It deducts the $140 GST it has paid on the wood, and remits $140.

So the government gets a total of $140 (from furniture mfr) + $70 (from lumber mill) + $30 (from Jim) + $40 (from Jim's suppliers, truck, chainsaw etc) = $280.

So the government gets only the $280 total--it's not multiplied.

There are advantages to this for business if it replaces income tax. Goods coming into the country have VAT applied at the border. So US business can compete on a level playing field with lower taxed foreign competitors.

Remember that US business are burdened by three tax disadvantages.

1) A corporate tax rate that is no. 3 in the world, soon to be no. 1 as the two higher european countries are planning on lowering their rates.

2) A tax on worldwide profits. The US is, I believe, the only industrialized nation to do this. US firms operating overseas must pay taxes in the foreign jurisdiction as well as to the IRS. In some cases, tax treaties reduce double taxation.

3) Double taxation on dividends, which halves the attractiveness to investors of companies which have a great ongoing business which is not high-growth (i.e. no capital gains).

Note that this is a simplified example since the furniture company would also get to deduct GST paid on machinery and supplies.

[heckler]

Imagine the effect on the economy if all those people out there in the private sector and in govt. are doing something productive instead of burning resources to adhere to our current tax code.

[George Frm Br00klyn Park]

"People who pay no taxes vote for (or tell pollsters they favor) more taxes. Why not? They don't have to pay them!

Guys, EXACTLY!!! So, In order to "rectify" {I considered rectumfy} that, the "fair" taxers would create a conglomerate of "Old Money Harrys" who pay no taxes and have the wherewithal to pay attention and influence those who make the tax laws to "protect" them better.

I suggest a true flat tax based on income with NO deductions and/or exemptions including tax free "non-profits". NO EXCEPTIONS!! Peace and love, George.

[JohnGalt]

I am in agreement on the flat tax, and my neoconservative 'friends' at the American Spectator are hinting that tax reform will be a major theme for the Bush 2004 run-- keep in mind, after Bush's preformance so far this libertarian conservative's vote is still up for grabs.

My argument was strictly with the author of this article which I found less than satisfying and pandering.

Joe Sixpack's love of cheap credit is a fundamental problem with the culture which I think 'economic conservatives' need to confront, part of which, is "rewarding" the investor class rather than "punish" savings and investments.

[George Frm Br00klyn Park]

"don’t you think they might lower prices to gain market share?"

JM, NO!! I think{?} companies will return more tax free money to investors in order to lure more tax free money into the company. Prices on goods from our foreign "partners" have NOT gone down to benefit consumers. On the contrary, those prices have gone UP to benefit investors. Else, investors would transfer their money to a company that did benefit investors. Peace and love, George.

[Paul C. Jesup]

You seem to forget one thing

THE IRS IS DESTROYING THE MIDDLE CLASS!!

Almost anything would be better than this country's current tax system, so quit bitching about what MIGHT happen and start worrying about what IS happening.

[Principled]

This is all hogwash George. Nothing is subtantiated, claims are made with no factual basis and no research, and the article ignores volumes of research already in the literature.

Steaming pile alert. Not worth my time.

Basic fact #1: the Fair Tax is NOT a vat... our current graduated income tax and the oft proposed flat income tax ARE both VATs. THis guy has his head in his arse.

[Paulus Invictus]

As a small businessman, I spent more than 12 days just preparing my data for the tax accountant who has to help me make some sense of the Tax Code (who can possibly understand that million-pages of sustained idiocy?). The result is that I had to pay additional taxes for some obscure reasons even my accountant could not explain.

We consider ourselves middle-class (should that be spelled clASS?), but very year we seem to lose more purchasing power and savings--all due to the increase in taxes. I recently calculated that I pay at least 16 taxes to various and sundry gummint collectors at every level. That amounts to "taxation without competent representation" and I am near to telling them all it is far too much to ask me to pay over 50% of my income to support so many useless gummint programs. Taxes have just put me out of business. "I'm mad as hell and I won't take it anymore!" Time for a national tea party! How come the Russians were smarter than we are and put in a flat tax that seems to be working well?

[George Frm Br00klyn Park]

"Basic fact #1: the Fair Tax is NOT a vat"

Guys, It doesn't have to be. Just a tax on goods at the final point of purchase, as the article states imposes a much harder bite on the middle class and the "lower" class than it does those who have already bought those things they need. The VAT would simply compound that bite. Deductions and/or exemptions are the MAIN problem with our tax system of today. Why should ANYONE get a break with ANY tax system. Including sellers and manufacturers. Maybe because they are licensed by godgov? If a "common" citizen cannot sell an article without the buyer having to pay a tax {godgov WILL know}, why should godgov's chosen licensed merchants?? This is favoritism, AND, unequal treatment under the "law". Socialism, in a word. So is ANY tax system that encourages one social activity over another. Such as saving and spending. Peace and love, George.