Effort to dump income tax gains steam

WorldNetDaily ^ | March 5, 2004 | Ron Strom

[scripter]

An effort to do away with federal income tax and replace it with a national consumption tax is gaining steam, as activists strive to get at least 100 members of the House of Representatives on board by Independence Day.

"We think we'll be at 100 co-sponsors by July 4," Tom Wright, executive director of Americans for Fair Taxation, told WND.

Wright noted the House bill, H.R. 25, added its latest co-sponsor this week – Republican Rep. Barbara Cubin of Wyoming – bringing the total to 44.

"We're working with our grass-roots people across the country" to get to the goal, Wright said. H.R. 25, the Fair Tax Act, is sponsored by Rep. John Linder, R-Ga., who has sponsored similar legislation for the last several years. The latest version of the bill was introduced Jan. 7, 2003.

"The current federal income tax system is broken. Patching up the existing code is pointless. It's time for a fresh approach, a fair approach. It's time for the FairTax," says the group's website.

"From its humble beginnings, the income tax has grown like a cancer by taxing our hard work and discouraging savings and investment."

H.R. 25 would eliminate the federal income tax and replace it with a 23 percent consumption tax paid by the end user. That means business-to-business purchases for the production of goods and services would not be taxed. The organization estimates consumer prices will drop by an estimated 20-30 percent as a result of the change.

The group's website describes how the bill's rebate function works. It assures that those living in poverty would not pay any tax.

"Under the FairTax, no American will pay taxes on necessities. The rebate will be equivalent to the tax paid on essential goods and services. The rebate will be mailed before the tax is actually paid [and] will be paid in equal installments at the beginning of the month. The size of the monthly rebate will be determined by the federal poverty level for a particular household size."

Wright touted the support of the American Farm Bureau. The organization has been educating its membership on the bill, and many state chapters have given the bill legislative priority.

Dumping the income tax has become a campaign issue in many political races this year, Wright says.

"All over Texas, House candidates are supporting it," he said, mentioning races in other states as well.

Wright noted the bill's cause is helped every time Social Security reform is discussed, since, under the plan, the entitlement program would be supported by the consumption tax instead of what he calls the "regressive" Social Security tax.

Americans for Fair Taxation says the first year the plan goes into effect, revenue to the federal government would remain the same. From there, the group claims, revenue will grow due to increased economic activity.

H.R. 25 is pending in the House Ways and Means Committee and has not had a hearing. Once the sponsorship level grows to 100, however, Wright thinks Chairman Bill Thomas, R-Calif., will take action on the bill.

The bill's Senate version is S.1493, sponsored by Sen. Saxby Chambliss, R-Ga., which was introduced in July.

WND columnist Neal Boortz is a supporter of the plan. In an August column, he addressed the issue of why the idea hasn't been enacted already.

"And just why hasn't it passed?" he wrote. "Because the idea is so bold that many politicians, while personally praising the concept, just assume it can't pass.

"It can pass, my friends. It can pass if the people of America learn the details and then let their elected officials know that they want some action."

Previous stories:

Income tax to end within few years?

National sales tax gains momentum

Group plans 'fair tax' convention

Congress to consider 'fair tax'

Tax reform drive builds steam

[scripter]

One time ping.

[Paul C. Jesup]

If Bush got rid of the IRS, he could open the borders wide open and grant amensty to ALL illegal immigrants and he would still WIN by a land slide.

I wonder if anyone in the Federal Republican Party realizes that.

[FairOpinion]

The sooner, the better.

[scott7278]

I'm in.

[sixmil]

Good news, but don't be surprised if the compromise that makes this pass is that overall, the federal government will end up siphoning more money off the economy than it already does.

[Hostage]

I have supported an NST and abolishment of Income Tax for years now but I just saw a piece on Frontline that made me very angry at those who evade taxes and helped me to understand how and why the IRS and Congress have gone bonkers with the tax code .

One example is KPMG. KPMG was/is involved in selling bogus tax shelters to corporations and wealthy individuals that enable them to pay very little if not zero tax. The shelter schemes are so dubious and blatant that it is easy to see that they are criminal.

It opened my eyes as to why the tax code has become more and more complex. It is the result of chasing after these criminals who change their schemes from one year to the next. When they get caught, the penalties are miniscule compared to the fees KPMG takes in with the bogus shelters. The schemes become more and more byzantine and the tax code complexity increases in an effort to stop the abuses.

It's a losing battle from the IRS perspective because Congress will not simplify laws to crackdown on the tax deadbeats. Why? Because there are powerful lobbyists who tie up such legislation to ensure it never gets passed.

If these large tax evaders paid their fair share, the federal deficit would be wiped out. It is feasible to quantify the amount of tax evasion by examining the records of the big accounting firms. They are e.g. KPMG the ones that are designing and selling the schemes. It is truly shameful what the big audit accounting firms like KPMG are doing. There appears to be a complete abandonment of ethics in the once of honorable profession of corporate auditing.

All that said, I still think the NST would be preferable as it would be easier to interpret and enforce than the current system.

[scripter]

The sooner, the better.

Indeed. I wish we could make it retroactive to 2001 - when I was making a lot more money!

[scripter]

I'm in.

I like it.

[scott7278]

A 23% tax on a major purchase like a new car or home could be a major burden, BUT they say that prices will also drop 20 - 30% because of the hidden income taxes that are already built into the products.

[Fledermaus]

What "hidden income taxes" are in automobiles? No income taxes are "hidden". Excise taxes, sales taxes, VAT taxes, etc., they are sometimes hidden.

But income taxes buying a car?

[scott7278]

What "hidden income taxes" are in automobiles? No income taxes are "hidden". Excise taxes, sales taxes, VAT taxes, etc., they are sometimes hidden.

But income taxes buying a car?

Don't shoot the messenger!  I'm simply relaying the information provided by the Thumbnail Sketch of the FairTax page.

 

I'm assuming they mean that the income taxes that the producer pays is added into the cost of the product.  So if there is an elimination of the Federal Income Tax, prices are predicted to drop 20 - 30% (according to the site).

 

I would need to see more evidence than one Harvard professor, because if prices did not drop as they say, the 23% would be very costly -- indeed, crippling.

[Fledermaus]

Wasn't shooting at you, just asking. Thanks for the info.

[scott7278]

I was just joking. I have trouble with the argument, to tell you the truth, because even if the automakers do add extra costs to an automobile, they just wind up paying more in taxes, do they not?

I would need to know exactly what they mean by "hidden income taxes" and how guaranteed prices are to drop. Could you imagine having a 23% tax added to the present cost of everything?

[scott7278]

I sent an e-mail to the FairTax people asking for clarification about the "hidden tax." I'm concerned about that 23% being added to products that don't drop in price as they predicted.

[goldstategop]

Bump! It was no less than Jimmy Carter who described the tax code as a disgrace to the human race. He's been wrong about many things but correct about the income tax. The sooner its dumped, the better off America will be as a nation.

[Fledermaus]

I figured you were joking.

Another thing the FairTax people don't bother to think about is that it's a Utopian idea that's just as good as any other if it was a perfect world, but we are Americans and have freedom and thus trillions of decisions a day happening.

Let's go back to the idea of cars. How exactly will that extra tax be marketed? Car sellers will NOT want to slap that tax on TOP of the price and all the other crap they sell you. So they'll play the game again...higher trade in, longer payment, lower interest rate, etc. All the tricks they use to keep the price the same.

So most Americans are now going to be financing a sales tax on automobiles. That puts them more in debt and they are now paying interest on a tax.

Bet the FairTax folks never thought of that one. So, of course, automobile purchases will have to be exempt or curtailed. The Michigan Congressional delegation will see to that.

As a matter of fact, most states with sales taxes cap the purchase of an automobile to keep their own state tax from keeping sales down. Car dealerships are everywhere and pay taxes too.

Now, I've just wasted cyberspace on just the concept of the NRST on cars. Want to start a thread to discuss the gazillion other products and services that every Congressman isn't going to want to influence?

The reply I get from that argument is usually, "read the Act...it's Iron Clad...it's Set in Stone...It has no deviations, etc." Right. Like that would make it out of a sub-committee much less get onto the floor for a vote.

I'd love a perfect world too. And I wish I could beam myself to the Enterprise and tell Mr. Scott to hit warp 9!

[Fenris6]

I still can't figure out why the Dems think that people who don't pay taxes should get a refund when the governemnt takes in too much money.

From now on, whenever my liberal friends pay for dinner (ahem!) I will demand half the change :)

[scott7278]

Everything you said is true, and I'll add this -- I don't trust the Federal Government to not slap an income tax on top of the NRST if it were to ever pass. They wouldn't do it at first, but I could easily see double taxation down the pike.

I am for the elimination of the income tax -- I just want to make sure that the alternative makes good economic sense and it's good for the people, not the government.

[CWOJackson]

I'm sure a President Kerry would make eliminating the income tax his first priority.

[Fledermaus]

And you'd be correct. Many states went down the same road...the promise of eliminating or "lowering" one tax to add another.

Years later both are up and the original tax is higher than ever along with the new tax.

It never stops.

I moved to TN in 1990 just after they voted FOR a "temporary" increase in the state sales tax that took most county rates from 7.75 to 8.25% (we don't have a state income tax). It's now 2004 and guess what? Yep! We still pay that tax. Of course, as usual, in 1989 it was "for the children" and going to be earmarked for education! HA HA HA HA! And people bought it.

And what's worse is they added another "temporary" sales tax increase of 1% to, yes I'm not kidding, spend on "education for the children". On top of that, they pushed through a vote and created a lottery to raise money to give our Georgia style "Hope Grants" to college while campaining only on education. The idiot sheep thought the lottery money was going to all education spending. SUCKERS! We tried to warn them but they are idiots and think they know everything.

So I'm still paying 1.5% in sales taxes that are temporary. Uh huh. But I'll still take the 9.25% overall rate with NO income tax, a good economy, lower cost of living and a higher level of income. I just wish they'd quit lying and get down to reality.

[Taxman]

Good article bump -- thanks for the ping.

[Taxman]

It has been said that politicians, like diapers, need to be changed often, and generally, for the same reasons!

Get involved in grass roots politics in TN, and vote the tax raising scumbags out of office!

I have followed with some interest the attempts by your last governor and legislature to implement an income tax in TN -- which was defeated by a couple of talk radio show hosts and strong grass roots activism.

Unfortunately, the fine people of TN elected a DemonRat as governor in the last go-around. Bad move, that.

OTOH, the previous Republican governor surely did not enhance the stature of the Republican Party in TN, did he?

[Fledermaus]

He sure didn't. I was at those protest downtown. I remember when our Republican Gov. Sundquist sent out the State Police in riot gear to "confront us".

All we were doing was peacefully walking around public grounds, driving on the streets honking our horns, and legaly demonstrating against an idea.

Families and children came out.

But the pricks in office wanted to portray us first as rich folks in a "Lexus brigade" and then as "rioters" and "thugs" because some liberal plant hurled a rock and blamed it on us.

I voted against our current Dem governor, Phil Bredesen. But so far, he's done more to curb spending, cut the budget (okay, slowing the increase) and hasn't brought up new taxes and is serious about "reforming" (I hate that term) TennCare.

But Sundquist was a good first term governor. He lost it in his second term and Bredesen won't but up again until 2006 I think.

[Badray]

"Everything you said is true, and I'll add this -- I don't trust the Federal Government to not slap an income tax on top of the NRST if it were to ever pass. They wouldn't do it at first, but I could easily see double taxation down the pike."

Part of the process of implementing the Fair Tax is the revocation of the 16th Amendment killing the Federal Income tax.

I don't know all of the details yet, but this has been in the works for 10 years already and while it may not be perfect, (what is?) if it gets rid of the IRS anal exams and the manipulation and control by Congress, then it's the way to go. The Social Security tax will also be gone. One tax on items purchased. You keep your whole paycheck.

You don't spend, you don't pay tax. Period.

And what you have to remember is that EVERYONE - whores, drug dealers, foreign tourists - EVERYONE will pay tax.

[Badray]

I think that you bought the party line hook, line, and sinker. Yeah, there are cheaters and scammers. But if the tax burden were lower - not as crushing, punishing, and confiscatory - then the incentive to 'cheat' is not as great. The essence of the Federal Income Tax is control. It is a slave tax and the tax code is an abomination.

[Badray]

"Let's go back to the idea of cars. How exactly will that extra tax be marketed? Car sellers will NOT want to slap that tax on TOP of the price and all the other crap they sell you. So they'll play the game again...higher trade in, longer payment, lower interest rate, etc. All the tricks they use to keep the price the same."

It seems that in reading prior posts from you that you are a sane and rational person so I'm a little perplexed at this bit of rambling.

There will be no 'marketing' of the tax. You buy, you pay. Period. From 25 years in the car business, I can tell you that (Unless you buy your car from Crooked Motors) the car business has never ben more transparent. Disclosure is almost to the point of being ridiculous.

I ask you to put aside your fear. Read up on the plan. Look at all the good that will be done by driving a stake thru the heart of the IRS and the tax code.

Okay?

[Taxman]

Thanks for jumping in here, Ray. Your posts add to the debate and are most welcome.

[ovrtaxt]

Someone beat you to this article! I guess even geezers have to sleep...

[Taxman]

"Taxquist." Ahhhhhhh -- now there was a politician.

You folks did a good job shouting down his proposed income tax, and it does not suprise me that Beredsen is being cautious in his first term of office.

You have correctly identified the 14,000 pound gorilla in Tennessee -- TennCare. That program (Hitlery! Health Care Lite, BTW) is eating the people of TN alive. It is an excellent example of "If you build it, they will come." TennCare attracts FReeloaders FRom all over the country, as I understand it.

Hope you will be able to get control of that monster and put it on the "Big Diet," and soon.

[SERE_DOC]

Sorry to be a wet rag on the subject... but The clowns in DC (no matter what side of the isle they are on) are never going to limit their power and the IRS will be unabated in their ability to destroy.

I will be happy to eat my words but I don't think I will need to.

[ovrtaxt]

products that don't drop in price as they predicted.

The only products that won't drop in price are products insulated from competetive market forces. Like anything having to do with the government, for example, or any other de facto monopolies.

[Principled]

BUMP A BUMPETY-BUMP NO-IRS A-BUMPA-LOOEY!

[ancient_geezer]

A Taxreform bump for you all.

If you would like to be added to this ping list let me know.

[ovrtaxt]

Car sellers will NOT want to slap that tax on TOP of the price and all the other crap they sell you. So they'll play the game again...higher trade in, longer payment, lower interest rate, etc. All the tricks they use to keep the price the same.

Try this out-- the manufacturers no longer have to comply with the IRS. No more employee withholding. Their steel, paint, robot repairs, oil, everything you can think of, becomes subject to competition at lower levels. Their cost drops.

When the car makes to the showroom, it's cheaper, and the sales tax puts it right back where it is now, more or less.

The difference is--- now you have a choice. If you buy it, you pay taxes. If you don't, you don't pay.

The politicians no longer have control, you do. They no longer hold you in a perpetual state of economic jeopardy, with the threat of an audit.

Beyond that, the concept of taxing productivity and success goes away, and the concept of taxing expenditures by individual choice comes about. The first is Marxist, the second is just and fair.

[ancient_geezer]

But income taxes buying a car?

DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation

The full impact of the federal tax system(taxes in gross wage/salaries & other compensation + business income/payroll taxes) added onto the base(taxfree) price of retail consumption goods and services is 36% for federal taxes alone.

[ovrtaxt]

I just wish they'd quit lying and get down to reality.

Here's another good reason to support a NRST-- you are extremely aware, as everyone in TN is, of your tax rate. You are reminded of it everytime you make a purchase.

The lying is evident.

Politicians have no room to deceive you with a single sales tax rate.

A tax code book more complicated than an ACME atom smasher owner's manual leaves lots of room to hide and obfuscate.

Again, less control to DC, more control to you.

[SeeRushToldU_So]

I am all for it!

[ovrtaxt]

Call your congressman and force him to support it. I did. We're a step closer than we were before.

[ancient_geezer]

I would need to see more evidence than one Harvard professor, because if prices did not drop as they say, the 23% would be very costly -- indeed, crippling.

Here you go Scott:

The following article covers the mechanism on how the current Federal tax system propagates and is embedded into consumption expenditure.

DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation

The 24% in the article considers only those factors actually paid to government out of imposititions on business in complying with the income, payroll, excise & tariff tax laws.

I refer you to the section of the following article about the Income/Payroll tax system and its impact on our economy "A. Hidden Upstream Taxes. " paragraph 39.

"[39] Dr. Dale Jorgenson, Chairman of Harvard University's Economics Department, believes that the price of goods and services are inflated by about 20 percent or more by upstream taxes consumers ultimately bear. In a recent paper Dr. Jorgenson estimated the built-in taxes contained in the price of goods and services. /22/ In the chart above, he quantified the hidden component of tax, estimating that producer prices would fall on repeal of upstream taxes an average of about 22 percent."

Looking at the accompanying chart, the range of values from industry to industry appears to be about 12-25%.

Economists Gary and Aldonna Robbins of the Texas-based Institute for Public Policy examined the case of dry cleaning a shirt, with a particular eye toward uncovering the hidden costs of taxes in price.

The Robbin's attributed over 33.6% of "consumer prices" to be due to federal taxation passed on to the customer.

The Federal Tax System
http://www.cbo.gov/showdoc.cfm?index=2125&sequence=0&from=1#pt1

From the Table 1 we may extract the proportionate contributions of each sector of taxes as they contribute to consumer price for the year 2000.

• Total revenues collected by Feds in '00 = $1945billion ( 33.6% of consumer price)

Those tax components which will not change prices as a consequence of enactment of HR2525

• Individual Income Tax(Labor) = 945billions,
• Employee half of Social Insurance = 653/2 = 326.5billions,
• Excises = $68billion
• Customs Duties = $19Billion
• Miscellaneous = $40Billion

============================

• Total constant price factors = $1358.5 billion

• Remainder federal tax components affecting price = (1945-1358.5) = $586.5billions

Adjust for a conservative $800 billion cost of tax compliance, (Payne '95 estimates 65cents for each dollar of revenue collected, $1264billion) reductions .

• Total tax related factors affecting consumption price = (800 + 586.5) = $1386.5billions

Estimated change in consumption prices as consequence of enactment of a National Retail Sales Tax, repealing all business income and payroll taxes:

33.6*(1386.5/1945) = 23.9% reduction in consumption prices

Which more than verifies the Jorgenson empirical study of 22% fall in producer prices.

The two sources are in reasonable agreement, and I see 20-25% a reasonable value to expect retail prices to fall, not only for customers here in the United States, but in our exports as well making them far more competitive on international markets.

[mo]

They will....they got what they need with the Patriot Act-as soon as certain provisions that are "temporary" become "fully enhanced" we'll get rid of the IRS. Had we gotten Hillarycare in '94 we'd have been rid of the IRS by now for the same reasons. Basically what the Feds got with the PA they tried for with Hillarycare.

[ancient_geezer]

So most Americans are now going to be financing a sales tax on automobiles. That puts them more in debt and they are now paying interest on a tax.

Lets see, 20-25% fall in prices + a 23% tax == OMG the same as now.

The total price of any item is set by supply and demand, the supply and demand payment for anything with the NRST will be exactly the same as it today with all federal and income payroll taxes embedded.

Or do you figure that the laws of supply and demand are magically repealed just by changing how we are taxed. If so, I suggest you show us any economic textbook that tells us how that can happen.

[tm22721]

This will never pass because of fear that a consumption tax would destroy consumption.

Consumerism is the basis of our modern (<20 years) economy and conservatives especially would be afraid to tamper with success even at the prospect of eliminating the income tax.

BUMP

[Tuscaloosa Goldfinch]

I didn't notice any representatives from my state in the list of sponsors. Time to contact them.

On the subject of tax loopholes:

The way the whole system is structured just invites people to explore loopholes. For instance, we operated under the "sole proprietorship" heading and got hammered year after year. Since changing to a sub-s "corporation", we've saved a good bit. Instead of sending half our income, we're sending a third. I guess that makes us one of those "EEEE-vil" corporations. With two employees. Sheesh.

[ancient_geezer]

Part of the process of implementing the Fair Tax is the revocation of the 16th Amendment killing the Federal Income tax.

Two bills of necessity, proposed amendments go through a different process and require 2/3rds approval of both House and Senate, as well a 3/4th ratification by the states.

The first calls for the Constitution to be amended to prohibit all income taxes (merely repealing the 16th would be insufficient),

H.R.25, S.1493
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.

Refer: http://www.fairtax.org & http://www.salestax.org

So the second, Sam Johnson's amendment to the constitution has a chance at enactment & ratification:

H.J.RES.61
Title: Proposing an amendment to the Constitution of the United States to abolish the Federal income tax.
Sponsor: Rep Johnson, Sam [TX-3] (introduced 6/24/2003)      Cosponsors: 5
Latest Major Action: 9/4/2003 Referred to House subcommittee. Status: Referred to the Subcommittee on the Constitution.

[TN4Liberty]

A 23% tax on a major purchase like a new car or home could be a major burden, BUT they say that prices will also drop 20 - 30% because of the hidden income taxes that are already built into the products.

I'll grant you that argument for the moment. However, I have a $130,000 investment in my house that I bought prior to this proposed tax plan. If I decide to sell it, after such a tax is inacted, I will have to discount it 20% or more just to be competitive with a NEW house that was built under the new tax rules.

What about land? Land will not benefit from lower imbedded taxes because land is not manufactured. In essence, land prices will go up 23% to cover the new taxes, but there will be no offsetting decrease in production costs.

This policy will depreciate every real asset an indivudual has prior to passage of this tax. That is an issue I haven't seen any plan try to deal with.

I think the concept is fine, but the transition will hurt some people a lot, and will play havoc on the economy for several years while it settles out.

[ancient_geezer]

Ahhh! Yah, they sleep until the dog jumps on their belly to wake em up at the break of dawn anyway. LOL

[ovrtaxt]

This will never pass because of fear that a consumption tax would destroy consumption.

So an income tax has prevented people from making income?

This would encourage savings, no doubt, or investment. This is good. A nation of investors. Not a bad position to take in the world.

[WhiteGuy]

Fair Tax Bump

[ancient_geezer]

but The clowns in DC (no matter what side of the isle they are on) are never going to limit their power and the IRS will be unabated in their ability to destroy.

So you are satifisfied to keep things as they are without trying to change?

It's a good thing that not every one thinks the same way, for an ever-increasing number of members of Congress are actually trying to make it happen because some folks are willing to make it an issue in elections.

Congress Critter's In the News

(43) HR25 Co-Sponsors and

FairTax - Congressional Score Card

Has modified his stand to favoring the NRST over the "Armey/Shelby" Flat Tax which he promoted in the Senate for many years.

Primary races for Senate

Steve Rauschenberger (Illinois)

Herman Cain for United States Senate, state of Georgia 2004

 

and in the House races

Dennis Umphress, libertarian (California 16th District)

Dr. Paul DeWeese, (Michigan 7th District)

Vernon Robinson, (North Carolina's 5th District)

Ben Streusand, (Texas 10th District)

Michael McCaul, (Texas 10th District)

Dave Phillips, (Texas 10th District)

John Devine, (Texas 10th District)

Pat Elliot, (Texas 10th District)

Bill Lester (Texas 11th Congressional District)