Posted on 03/31/2005 4:42:13 AM PST by CSM
WASHINGTON -- The power to tax involves, as Chief Justice John Marshall said, the power to destroy. So does the power of tax reform, which is one reason why Rep. John Linder, a Georgia Republican, has a 133-page bill to replace 55,000 pages of tax rules.
His bill would abolish the IRS and the many billions of tax forms it sends out and receives. He would erase the federal income tax system -- personal and corporate income taxes, the regressive payroll tax and self-employment tax, capital gains, gift and estate taxes, the alternative minimum tax and the earned income tax credit -- and replace all that with a 23 percent national sales tax on personal consumption. That would not only sensitize consumers to the cost of government with every purchase, it would destroy K Street.
``K Street'' is shorthand for Washington's lawyer-lobbyist complex. It exists to continually complicate and defend the tax code, which is a cornucopia from which the political class pours benefits on constituencies. By replacing the income tax -- Linder had better repeal the 16th Amendment, to make sure the income tax stays gone -- everyone and all businesses would pay their taxes through economic choices, and K Street's intellectual capital, which consists of knowing how to game the tax code, would be radically depreciated.
Under his bill, he says, all goods, imported and domestic, would be treated equally at the checkout counter, and all taxpayers -- including upward of 50 million foreign visitors annually -- would pay ``as much as they choose, when they choose, by how they choose to spend.'' And his bill untaxes the poor by including an advanced monthly rebate, for every household, equal to the sales tax on consumption of essential goods and services, as calculated by the government, up to the annually adjusted poverty level.
Today the percentage of taxpayers who rely on professional tax preparers is at an all-time high. The 67 percent of tax filers who do not itemize may think they avoid compliance costs, which include nagging uncertainty about whether one has properly complied with a tax code about the meaning of which experts differ. But everyone pays the cost of the tax system's vast drag on the economy.
Linder says Americans spend 7 billion hours a year filling out IRS forms and at least that much calculating the tax implications of business decisions. Economic growth suffers because corporate boards waste huge amounts of time on such calculations rather than making economically rational allocations of resources. Money saved on compliance costs would fund job creation.
Corporations do not pay payroll and income taxes and compliance costs, they collect them from consumers through prices. So the 23 percent consumption tax would allow taxpayers to stop paying the huge embedded cost of corporate taxation. Linder says the director of the Congressional Budget Office told him it costs individuals and businesses about $500 billion to remit $2 trillion to Washington. And studies show that it costs the average small business $724 to collect and remit $100.
In 1945, corporations paid more than one-third of the government's revenues. Now they pay only 11 percent because corporations, especially multinationals, are voluntary taxpayers. In a world increasingly without borders that block capital movements, corporations pay where the burden is lowest. Linder says $6 trillion in offshore accounts would have an incentive to come home under his plan.
Furthermore, by ending payroll and corporate taxes, America would become the only nation selling goods with no tax component -- such as Europe's value added tax -- in their prices. With no taxes on capital and labor, multinationals would, Linder thinks, stampede to locate here, which would be an incentive for other nations to emulate America. ``This,'' Linder says, ``would unleash freedom around the globe.''
Critics argue that ending the income tax, with its deductibility of charitable contributions, would depress giving. Linder says: Piffle. In 1980, when the top personal income tax rate was 70 percent, a huge incentive for giving, individual charitable contributions were $40.7 billion. In 1986 the top rate was reduced to 28 percent, and by 1988 charitable giving was $86.7 billion. The lesson, says Linder, is that we give more money when we have more money.
When Speaker Dennis Hastert published a book last year, he was startled that interviewers were most interested in talking about Linder's bill, which then had 54 co-sponsors. This year Hastert added Linder to the Ways and Means Committee. Linder cheerfully says his bill would reduce Ways and Means to ``a B committee'' by ending the political fun of making the tax code ever more baroque for the benefit of K Street's clients. Bliss.
For your ping list.
This idea is very intriguing. It never seems to catch on however. I don't know much about it, what are the downsides? It seems like it would save us billions, and allow us to control, to some exstent, how much we are taxed.
I support this.
Forget Social Security for now.
Tax reform can make the GOP the majority party for decades to come.
Right up your alley. Are you going to be able to make it to DC on April 7?
What happens to all the accountants, tax attorneys and other people working in the financial industry that have to deal with taxes?
Guess they will have to do somthing differant.
gee to bad.
The way that I think of government is that they are good at national defense and building roads. Everything else they screw up, especially education, social security, and health care. Just realize that whatever money they suck out of us WILL be wasted and spent inefficeintly.
Final thought. I caught the statement about giving some kind of break to low income people. One could argue that corporations will also realize a tax break and pass it along to consumers in the form of lower prices.
There is no need for new legislation. Just abolish the IRS and return to tariffs. Tariffs are a sales tax on imports. Tariffs hamper globalism.
I think the downside is that the 23 percent could easily be raised. Also people would start to barter to avoid paying the sales tax.
The down side is that it probably puts lots of tax lawyers out of business!
A NRST allows the federal government to take money from state citizens and redistribute it back to the states in exchange for control.
The downside is the high percentage, but that is more of an indictment on the current scope of the government. The upside is that everyone will be forced to face the fact of the cost of our government.
"Tariffs hamper globalism."
Are you supportive of protectionism? Are you advocating a reduction in our participation in the global market?
Not necessarily. A national sales tax, depending on the rate, could create a vast underground network of products and services.
That said, I could support a national sales tax IF the legislation was coupled with either an elimination of the federal income tax or a reduction to a flat rate of around 5 percent.
Well, they already do that.
Simple. Instead of wasting all their (and the companies) valuable time screwing around with the complicated and endless IRS code, they can devote their time and talents to the company. No wonder so many companies in this Country fail or are forced to depart to other countries. The IRS is the is the biggest destroyer of incentive and the work force of these united States.
Oh no. I weep for all those pure liars lawyers. NOT.
Are you sure that would be a downside?
I agree, of course your point only applies to the half of us directly carrying a portion of the burden. The other half doesn't see the burden they carry and they think they are getting the free ride. Keeping taxation hidden from the public is a great tool for increasing the scope of government.
That's being done now. The difference: Now we tax the creation of wealth (income) making it very difficult to create personal wealth. Under a NRST we free up the creation of wealth and collect taxes when some of that wealth is spent (at the option of the individual).
This will not ever happen. Too regressive for one. Number two, I think all of us know that people aren't just going to pay the tax and be happy. This will create the most intricate black market that the world has ever seen. The IRS will have to be expanded to include its own army to collect the tax. We will have basement shops, no knock searches, wire taps, and spies all over the internet trying to see who is cheating the tax. The drug war has taught us what kind of fun that will bring.
Excellent job of describing the current system.
This will happen, and it will go into effect in 2007, or '08 if it doesn't pass next year and becomes the election issue I expect it to.
Care to amplify, maybe by giving an example or two, with your take on why George Will is gullible?
Done properly, the NRST receipts will be collected by the several States (most already have a State Sales Tax in place), and politicians being what they are, I'm sure that the state pols will figure out how to keep most of the funds allocated to their states without ever letting them transfer out of their control.
No no no! If an income tax remains at any level after the NRST is imposed, the day will come that we have a 30% income tax AND a 26% NRST. I support the NRST but ONLY on the condition that the income tax is revoked entirely, and the only mechanism the government has to increase tax burden is to increase the NRST rate.
Yeah, you're right. Don't know what I was thinking.
I just want to be assured that some people (there's always some) don't get over by, for instance, buying every single item then need in say, Canada or the Bahamas, and then flying it to their estate in Florida, for example.
The govt. has to impose some minimal safeguards.
And thats a downside how?
And that doesn't happen with current federal sales taxes and the income tax?
Only the repeal of the 16th amendment would be acceptable with the adoption of the NRST.
Remember, the original income tax was a flat tax and at 1%. When the amendment was being debated several wanted to include language that would cap the rate at no more than 2%. It was not included because of fears that with such language the government would immediately raise the rate to the maximum allowed.
And look where we are now.
PING!
Well, point them out and correct them.
Well maybe they will have to get real jobs. Amen.
You already have to pay a tax when you do that if the value of the items exceed a certain amount.
BTTT
If you would like to be added to this ping list let me know.
John Linder in the House(HR25) & Saxby Chambliss Senate(S25), offer a comprehensive bill to kill all income and SS/Medicare payroll taxes outright, and provide a IRS free replacement in the form of a retail sales tax:
H.R.25,S.25
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 for additional information:
Would the 14% social security tax be included in the 23% or has Linder forgotten about that? I would be for it but 37% sales tax would be nutty.
We'll find honest work.
Don't cry for us. Some of us have seen this coming for more than a decade and have diversified our practices or taken steps to retrain. I'm just about to complete law school....that should allow me to chase ambulances instead of chasing deductions.
The Founders never envisioned a system whereby our incomes would be the subject of government expropriation, but the fact that the government reaches into EVERY paycheck before we've seen a dime, would be positively abhorent to the Framers. We've got to abolish the whole mess in favor of taxes on consumption.
Rep. John Linder
Bumping Rep. Linder!!!!!!!!!!!!!!!
Tariffs may have been appropriate 200 years ago, but today, when capital can transverse sectors and borders in a nanosecond, import tariffs would be terribly misguided.
"His bill would abolish the IRS and the many billions of tax forms it sends out and receives"
Oh sure. I subscribe to FairTax.org but can anybody remember when any large government agency was abolished? Congress as a whole exists simply to deliver pork barrel projects, many of which rely on targeted tax breaks and other forms of social engineering. I just cannot see congress or the IRS giving up that power.
Not forgotten! The Fairtax would replace ALL of the following federal taxes:
income taxes, both corporate and personal, social security tax, medicare tax, and gift and estate taxes
with a point of retail sale sales tax on new goods and services only but that isn't really what it's about.
It's really all just about FREEDOM!
It must run in the billions annually (underground economy) of unreported income such as prostitution, gambling, drugs and many jobs (illegal day labor), just to name a few.
Just because is hasn't been done, does not mean it CAN'T be done. It isn't the IRS's power. It's OURS. We need to take it back.
They will have to learn to do something productive.
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