Posted on 07/24/2008 4:35:22 PM PDT by djsherin
Just curious what people think the best way to collect taxes is. I have my own opinions, but I'd like to know what you all think. Consumption vs. Income; Flat vs. Progressive (or even Regressive); Many small taxes or few large taxes? Weigh in.
Below is from George Washington’s Farewell Address!
On stable public credit.
“...cherish public credit.
One method of preserving it is to use it as
sparingly as possible...
avoiding likewise the accumulation of debt....
it is essential that you...bear in mind, that towards
the payments of debts there must be Revenue,
that to have Revenue there must be taxes;
that no taxes can be devised, which are not..
.inconvenient and unpleasant...”
Here’s my idea, which Dick Armey called radical when I told him about many years ago:
Eliminate federal with holding - for corporations, individuals, everybody.
Determine the share of the federal budget owed by each state based on the percentage of congress (both houses) each state occupies.
The federal gummint bills each state quarterly.
Each state has to figure out how to raise money to pay the bill.
People focus more attention on the state houses. State legislators exert pressure on their federal counterparts to cut spending, because lynching ropes are being prepared back home.
Oh - and repeal the 17th Amendment so U.S. Senators are elected by state legislatures.
Another program, that would greatly support this:
Eliminate retirement programs for federal lawmakers.
Recognize the inherent conflict of interest in having lawyers serve as law makers and forbid it.
Mark incumbents on the ballot.
Have tax filing day (having eliminated with holding of taxes) to one week before elections.
Take the prior year's total federal expenditures, divide by two. Divide this amount by the first the number of Senators and then divide the same amount by the number of representatives. This gives you a per Senator and per Representative cost.
For each state or territory or district that has representation in Congress receives a monthly bill equal to 1/12th the sum of the costs for their Senator's and Representatives.
Failure by the state to pay that bill would then prevent the representatives from having their votes count. The individual states then have to figure out how they are going to pay their bill.
Now, what type of taxes on income. My criteria: Taxes should be distribution neutral. That is, they should not affect how resources are allocated to their most efficient use (as determined in a free market). The current progressive income taxes fails miserably here. The Fair Tax is better, but scares me because of the "prebate" component. You just know that people living in NYC are going to argue for a larger prebate than those living in Eastbutt, Arkasas. Open that door, and the politicians are back in the picture...not good.
The Flat Tax is allocation neutral since all income sources are taxed equally and there is no wiggle room for politicians. Also, I'm tired of low income people getting a free ride on the backs of the more productive people in the system. On balance, the rich do more for this system than the poor (I'm a retired teacher, and not rich). This romanticizing the poor and denigrating the rich makes absolutely no sense to me. I think everyone should pay equally, regardless of income. Indeed, with a flat tax, you wouldn't even need to file a tax return since ever income source would be required to withhold the required amount. (Friedman suggested 17%.) A huge bureaucracy would disappear.
Yep, I know nothing will change, other than Obama raising taxes if he's elected. Politicians simply won't give up the power that goes with be able to influence how resources are allocated.
It seems you and I think alike. See my post #4
A “carbon tax” (or more accurately a “BTU tax”) is essentially a consumption tax, and since units of energy consumed is a relatively accurate measure of wealth, that is one way to mare fairly assess the contribution each should make to the support of the common good. Not made progressive in any way, just a flat assessment like the electric meter spinning on the side of your house. Use more, pay more. If you think your tax bill is too high, go for personal economies. As you grow wealthy through the magic of conversion of energy, you end up contributing more and more to the revenue of the governing body. But this requires responsible stewardship of resources on many, many levels.
By sticking to a “BTU tax”, rather than a “carbon tax”, this oppressive baloney about taking energy from the “wrong” source is obviated. Carbon is carbon, whether it comes out of limestone that was laid down in the Cambrian era, or from a seam of coal, or from a crystal of sugar or a molecule of methane. And it is the nature of carbon to move from elemental as graphite, or charcoal, or diamonds, to carbon dioxide, to a form of sugar, to carbon dioxide again, to combine with a metallic oxide and form a carbonate mineral.
All energy, not just that from the consumption of carbon-based substances, may be converted to BTUs or some equivalent measure (horsepower, kilowatt-hours, joules, whatever), and a pretty accurate account may be kept.
But that would involve rational people making rational decisions, always a huge flaw in any “Utopia” I may personally design.
WAY too many cuffing ignorant or stupid people in the world, and all the compromises have to be made to accommodate them.
Purely voluntary—Ancient Greece used to tap their wealthiest citizens to pay for major public works. In the old American west a rich landowner, merchant, or mineowner would pay to bring in a town lawman. Roads and railroads to mining communities were built by the succesfull mine owners. Roads were maintained as community work projects.
Whoo-hoo! We have a movement! There’s no stoppin’ us. What shall we call it?
To this other-wordly question
those are some ingenious and interesting replies.
The root problem, however, is that any taxation is a taking by force.
Simply because you may believe that it is both practical and just to take by force
for the LIMITED - of course! - purposes you may approve ...
does not make it any less a taking by force.
If the producer of wealth is morally entitled to dispose of that wealth
... which i believe is the first principle here ...
then SOCIETY easily can be shown to produce wealth
(via the division of labor, the transmission of knowledge, and a handful of similar factors).
Before you may take by force, however, you have a tough job ahead of you
trying to show that GOVERNMENT - not diffuse Society - produces any wealth whatsoever.
I’ve been in favor of consumption taxes, for some time, but ONLY in conjunction with aggressive spending reform and a return to Constitutionally mandated areas of Federal authority.
Removing social engineering from tax collection means taxes must be flat — both in their rate and in the sense that nobody and no activity is exempt from the tax. The rates must not be high enough to encourage evasion, so this means multiple small taxes rather than a single large tax.
I would advocate replacing the current Federal Income Tax with a flat tax on income of 7% and a flat retail sales tax of 5%. No income exempted other than SS income. No products or services exempted, including groceries, medicine, and education.
I would make a clear distinction between “taxes” that pay for general spending and the “mandatory contributions” which pay for benefit payments from the social insurance programs. Separate budgets and separate funding sources. I would leave the SS/M funding as the mandatory contribution scheme as a percentage of wages rather than income, including a cap on the wages taxed because the benefits are capped. I would give people the option of directing a portion into private accounts. I would require the Treasury to sell new T-Bills to pay off the SSTF IOUs, and have the SSTF invested as a pension would be — in open, liquid, markets to up the average investment return above the 5% the IOUs currently average.
What items or services would be taxed. What would this look like?
Thank you,
wintertime
I would agree if the Social Security and Medicare taxes were included in the 17% ... if not then the 17% is too high, and should be cut to 7-10% max. Also, the rate of tax must be fixed, otherwise Congress critters will be in the mix yearly raising the rate for their own purposes (entitlements and buying votes).
Hell, I'd do away with both. I might require you to have a private IRA type investment vehicle and that you put some fixed percent into it each year. In my mind, the gov't has no business being in the annuity or insurance business.
Just before I retired a few months ago, I figure out what I've paid into SS and MC over my working life. I also factored in my employers' contributions. If I had that money in a private CD earning 5%, I'd have a little more than $840,000 set aside for retirement. At current payout rates, I'd have to live to 113 to break even. If I die before then, I can't even pass along what's mine to my heirs. And one wonders why Congress has opted out of the SS system. I'm more than just a little miffed...
Good idea. But to really work Federal expenditures would have to be cut drastically. The Feds would have to stop delegating mandates to the States and really let them take care of it themselves. Only those duties in the Constitution should be funded at the federal level. Congress needs to get its fingers out of every pie.
I could live with that. If it were to stay it must be included in a lower rate dedicated to it purpose and not general revenue.
Consumptive is the only fair way to do it without the guvmint poking its nose in our business.
An excise tax to my understanding is just a tax on certain items, like a sales tax but not applied everywhere. It could be anything. The whiskey tax is an excise tax. The gas tax is an excise tax. The cigarette tax is an excise tax. Often excise taxes are used to “punish” bad behavior so in the case of smoking, higher taxes means higher prices in the hope that less people will smoke. Although an excise tax doesn’t HAVE to be a means to punish “bad” behavior. Up until the 30’s, excise taxes were the bulk of the federal revenue. Now I believe they make up about $60 billion, which is relatively insignificant.
So with an excise tax, no specific item will be taxed; it’s at the discretion of the government, or through propositions at the state and local level.(For instance Prop. X will place a 4% excise tax on bottled drinking water).
An excise tax is a form of a consumption tax, whereas something like the FairTax is also a consumption tax, but applied across the board and equally, a quality an excise tax doesn’t have to have. With our current expenditures, it would be very difficult to fund the government through excises, and if it were to happen it would end up looking something like the FairTax, only certain items may have a higher tax than others. You’re also assuming however that there would be no income, payroll, capital gains, corporate, estate, etc. taxes so people would have more money to spend.
Anyway I hope that helps.
As far as with holding goes, the government used to collect all it’s taxes on one day, March 15 (later got changed to April 15). They passed it during the war (WWII) effort saying that the government needed money now and would do away with with holding after the war. Government tends to not follow through with a lot of its promises.
Amen, amen, amen to that!
I think we should return to the way taxes were done before the 16th amendment. That means the government would have to rely on excises, duties, and imposts for their revenue, and if there is a budget shortfall, the deficit should be paid for through direct taxes which would be apportioned among the states. It would be a great way to keep government accountable because the only reason you would have to pay a direct tax is if government spent more money than it should have. And if the bastards did it a couple of years in a row, vote their sorry butts out of office. The amount of money the government collects from the citizens has a direct relation to the size of government. Ours was supposed to be a small and limited one, but then we passed the 16th amendment and also created the Federal Reserve, so then the government had an unlimited supply of money. And now look where we are. Approaching ten trillion dollars of DEBT.
I couldn’t agree with you more. We absolutely need to scale down the size and spending of the federal government and I am all for ending the 16th Amendment and using excise, duties, and imposts.
Thank you **very** much!
YOUR COMMENT
You just know that people living in NYC are going to argue for a larger prebate than those living in Eastbutt, Arkasas. Open that door, and the politicians are back in the picture...not good.
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The Rebate will be administered by the Social Security Administration in the same manner that they administer Social Security checks. There will be no regional adjustment of rebates in the same manner that there is no adjustment of Social Security check amounts.
Furthermore, the FairTax legislation will be revised to include a link to repealing the 16th Amendment. This is relevant to your comment above as I will get to in a moment. The leaders in Congress of the FairTax legislation recognize that abolishing the Income Tax Code without repealing the amendment that legalizes it leaves the door open to reviving it in some future society. For example, a revival to tax the income of only the most wealthy 1% (this was how the original Income tax code was applied in 1913 through a 7% flat tax on less than 2% of income receivers).
Therefore, they are working towards ‘memorializing’ Congress to draft a Constitutional Convention for the sole and exclusive purpose of repealing the 16th. Current Congress members of course will not draft such a convention on their own but they will be forced to do it by a Constitutional clause that 2/3’s of the states can force them to do it. To that end, FairTax leaders are working with a bipartisan group of state legislators known as the American Legislative Exchange Council.
It is interesting to note that many democrats also want the FairTax, democrat business leaders and democrat union members. Where the hang up is resides with some Democrat leaders in Congress who are in the pockets of Tax lobbyists inside the Beltway. There are about 23,000 Beltway tax lobbyists. They are comprised of former Senators and Representatives, former IRS commissioners and many of their former staff members. In other words a revolving door exists there. Union members are in favor of the FairTax but their Union leaders who are lawyers will not endorse it for the same reason that tax lobbyists will not endorse it. It forces them to change their business model.
Getting back to the repeal of the 16th and your comment about the Rebate. Repeal of the 16th will not allow any direct tax without apportionment. Legally therefore in the same manner that Social Security is a regressive excise tax on incomes (the same percentage is applied to everyone) and forces it distributions to be independent of regional differences, the Rebate will fall under the same legal basis.
It is important to note that a tax on incomes is still legal without a 16th Amendment. The difference is that it must be done with apportionment if it is a direct tax. If it is an indirect tax, then it must be the same everywhere such as an excise tax.
The problem with the pre-1913 excise tax America is not that society was not prosperous (in fact it was a wonder of the world at the time), it was that the different income classes that grew also caused a ‘disproportionate tax burden’ on lower classes, thereby inhibiting upward mobility (this was used as the main argument for taxing incomes). And in fact some wealthy landowners paid no taxes at all via rents received from tenant farmers. Coupled with Marxist populous political movements in the 19th century (Marx was not seen as evil at the time, only a novelty philosophy) led to questioning the fairness of the Constitution with respect to taxation.
The Rebate completely eliminates the ‘disproportionate tax burden’ argument that historically underscored the 16th Amendment passage. What it boils down to is the society of that era got it wrong. But were they so dense as to not see that can of worms they opened? They thought, as is recorded in the Congressional Record as well as newspaper editorials of the day, that the 16th would close the loopholes that the wealty who escaped taxation and that it would be such a modest amount and applicable to such a small group, that it would be benign in its effects. They were dead wrong.
What were their alternatives? Was it a FairTax? No, they could never hope to administer a Rebate component of FairTax law because the technology was not there. What was in place was property and business legal decriptions. That’s what they could get at. They could never hope to develop what took decades for the Social Security Administration to develop.
This why the FairTax (Excise component plus Rebate component) makes sense today because it is possible to implement today, but was not possible one hundred years ago.
The Flat Tax is an income tax and it needs the 16th Amendment to exist in its present form. It has very little support in Congress whereas the FairTax has very strong support. Passage of a Flat Tax leaving the 16th in place would allow for the Tax Code to metastacize again at some later date (likely within two decades). The Tax Code started out as a Flat Tax, it has been reformed five times since 1913 each time making it flatter and it always fails to stay flat. This is because the 16th allows for the code to become ‘unflat’. Coupled with tax lobbyists and their ability to write and sheperd the passage of hundreds of tax code amendments yearly (there have been more than 16,000 tax amendments since the last tax reform in 1986 under Ronald Reagan), it is certain that any Flat Tax will be short lived. Then there is the argument over limiting deductions under a Flat Tax. This is why it has such poor support in Congress. Under the FairTax there is no need for any deductions as there is no tax on income.
I understand how the Fair Tax is supposed to work, it just seems that the prebate offers an avenue to mess around with it. You know how Congress likes to make things "fair". I also think getting rid of the 16th Amendment is a fairly difficult thing to do, especially when it means Congress must give up a huge chunk of its power. I just don't see that happening.
BTW, your statement that a regressive tax is where "the same percentage is applied to everyone" is incorrect. That defines a proportional tax. A regressive tax is one that varies inversely with income (i.e., the poor pay a higher percentage of their income than the rich).
True on the regressive tax but I said a regressive excise tax, there’s a difference.
The main point is that Social Security is not geographically adjusted, neither are tax credits or the recent tax rebates, etc.
I was drawing attention to the canard that the FairTax Rebate will be abused by adjusting to cost-of-living differences. Ain’t gonna happen.
As for difficulty in repealing the 16th, it was considerably harder getting it passed. It took 52 years to pass it. For those passionate and serious about tax reform, repeal of the 16th is not at all daunting. In fact, with an average 800 people joining the FairTax movement every day of the year, they have no problem with scrapping the 16th. They know it must end and are glad to say so.
Taxation with representation, eh? Does that mean, come Election Day, I get one vote for each dollar of taxes paid? Seems fair to me, even if I’d get outvoted by some ‘Rats (Soros, Gates, Buffett). One’s influence on the pie ought to be related to one’s contribution to it.
And another thing in addition to the previous post. Never did I say Congress would give up power willingly (repeal of the 16th).
Don’t you think the Founders knew and anticipated that? That’s why they crafted into the Constitution an ability for the States to take power from the Federal government via drafting a Constitutional Convention.
If you review my original post to you (which I took pains to elaborate) you will hopefully be reminded where it was stated that FairTax leaders are working with the American Legislative Exchange Council, a bipartisan group of state legislators, to ‘memorialize’ Congress to draft a Constitutional Convention for the SOLE and EXCLUSIVE PURPOSE of repealing the 16th. And there is substantial progress on that front.
The fact is the FairTax movement is not pie-in-the-sky. It has 75 sponsors in Congress right now and more that want to join, about 40. That is SUBSTANTIAL. It is larger than any other tax reform movement by far. It has more sponsors in Congress than the 1986 reforms had. The FairTax movement is adding an average 800 supporters each and every day. And then there are substantial real material State FairTax movements. For example Michigan, yes Michigan. A poll of independent small businesses taken recently showed a swing from the previous year of 37% support for a State FairTax to 57% support this year.
The movement has momentum.
At some point YOU have to decide whether you are serious or not.
I hope you're right...
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