Posted on 10/01/2009 10:33:14 AM PDT by cc2k
Please, Read and Comment!!!
| A quick note from the author. First, I want comments. Make a comment, please. Even you just say “it’ll never work,” or “Sounds good to me.” However, I make one other request. For this discussion, I ask you to acknowledge that we currently have an income tax system with various allowances for deductions and credits. This proposal works within that system. I understand that many people wish to reform or replace that entire system. And that there are many opinions on these other reform and replacment proposals. Like most FReepers, I support some of these proposals and am skeptical of others. But for this thread, those other proposals are irrelevant. I repsectfully request that discussion on this thread be limited to this proposal. I'm open to suggestions for improvements to this proposal, or legitimate, constructive criticism of this proposal. However, I ask that everyone please take any discussion of other topics not related to this proposal to other threads that are more appropriate. Thanks in advance for respecting this request. |
| For the initial discussion, I am putting this in “conceptual language.” I’m open to suggestions whether we, the proponents of this measure should write the actual legislative language, or whether we should take this conceptual language to congressional Representative(s) and allow them and their staffers to develop the final language. |
Again, thanks for reading this, and I welcome all comments related to this proposal.
And a note of explanation. The section about the Sales Tax Allowances is an area where I really want some feedback. The intention is that you won’t have to keep all of your receipts to claim something for your sales taxes. This allowance mechanism allows you to get 3/4ths of the “average” amount of sales taxes paid with no record keeping requirements.
And it applies to county and municipal sales taxes (often called Local Option Sales Taxes) as well as states. The concept is that every jurisdiction that collects sales taxes can report the total collections, and the IRS computes the “average amount” and the allowance amount (3/4ths of the average) based on the number of taxpayers and dependents in the jurisdiction where the taxes are collected. It isn’t intended to be perfect, but it is intended to allow some credit for sales taxes paid when you choose not to keep all your receipts.
| From the desk of cc2k: |
It’s interesting. I have never thought of it from this perspective before.
The only provision I’d take a second look at is the provision where average sales tax expenditures are calculated. You mention the IRS doing this. I would rather have Municipal/County/State treasuries generate this information and furnish it to the IRS — have the IRS bound to use the number the states provide.
Didn't GWB let that genie out of the bottle in 2008? and Obama followed in 2009 again. ‘Hard working Americans’ don't pay income taxes by definition and deserve a tax cut anyway, right??? No, This is a disaster created by both parties for votes. You got people who pay little or no federal taxes yet demand more and more services and entitlements.
Also, any chance your “redistribution ping list” might be helpful with this? In some ways, this addresses redistribution at the state and locality level. The practice of taking from one state and giving that money to other states and cities.
Crolis wrote:
The only provision I’d take a second look at is the provision where average sales tax expenditures are calculated. You mention the IRS doing this. I would rather have Municipal/County/State treasuries generate this information and furnish it to the IRS — have the IRS bound to use the number the states provide.
I gave some thought to this. And I appreciate your comment.
My reasons for proposing it the way I did are:
| From the desk of cc2k: |
My general comment is negative as usual (not about you) that until there is an awareness of a national economic collapse being the result of current democrats policies nothing dramatic can get passed. Reagan had that political advantage to work with, GWB did not, nor GB senior. Sadly it will take a while given republicans being in power recently not working well.
New tax systems are regularly proposed by republican candidates from time to time. Unfortunately it's like any national reform , easy to shoot down.
Am I missing something ? (I feel crappy today.) The first issue is “unfunded mandates”. Dont see that addressed. That was actually a ‘contract with america’ promise that GWB broke big time to get elected,
sickoflibs wrote:
Am I missing something ? (I feel crappy today.) The first issue is “unfunded mandates”. Dont see that addressed. That was actually a ‘contract with america’ promise that GWB broke big time to get elected,
This is an indirect way to address unfunded mandates. There is no prohibition on unfunded mandates in this. Rather, what this does is make tax dollars paid to states to fund those mandates eligible for direct tax credits on federal tax returns.
If this were the law, and Congress places a mandate on a state, and the State collects taxes to fund that mandate, the total federal income taxes paid by people in that State will be reduced, possibly up to the amount of the state taxes. If you are in that state, up to half of your federal tax liability could be offset entirely by state and local taxes.
This would be a financial disincentive for the Congress with regard to unfunded mandates. Unfunded mandates will reduce federal income tax revenues.
| From the desk of cc2k: |
I just can’t wrap my head around the combination of 3 and 4. Three says you can’t discount your total federal tax liability by more than 50%. Four says you can’t discount your total federal tax liability by more than 100% (which is of course true already by way of three). Perhaps “total federal tax liability” doesn’t include junk like credit for buying a hybrid, while I think it means total after everything.
My first concern with the plan was fairness. If you live in a high tax and spend state and I live in a (mythical) small government state, why should you get to pay less than me at the federal level just because your state is more efficient at wasting your money than mine is at wasting mine?
Then I think about what states will do. They will raise taxes while telling us that it’s okay, because those raises will be offset by giving less to the fed, the only difference being that your tax dollars will stay closer to home.
Sounds great, and I suspect that’s what you’re going for, more of your total tax payments kept locally and away from the critters in DC (I’m not really sure that’s what you’re after, as another poster pointed out the article starts talking about unfunded mandates, then addresses taxation, I’m guessing there is a missing “leap” in between).
However, in a couple years when this is repealed, our state taxes won’t be reduced, and we’ll have new state programs and agencies which do the same things as the existing (you don’t think the fed unfunded anything just because it was getting less money coming in?) federal programs and agencies.
I think the end result would just be encouraging states to take up a bigger role in government (note that this does not imply taking anything away from the fed, the pie gets bigger). It’s not like the federal government is going to stop spending as much as it can get away with. If I send them $1 less next year, they’ll just borrow $1.25 in my name (unless I hurry up and die) in its place.
Like the “Fair” Tax, it sounds pretty good in principle, but I can’t trust the government not to find a way to turn it into a tax increase (and to not just borrow and spend instead of tax and spend).
Darth Reardon wrote:
I just can’t wrap my head around the combination of 3 and 4. Three says you can’t discount your total federal tax liability by more than 50%. Four says you can’t discount your total federal tax liability by more than 100% (which is of course true already by way of three). Perhaps “total federal tax liability” doesn’t include junk like credit for buying a hybrid, while I think it means total after everything.
You have it there. By “total tax liability,” I’m referring to the total tax (line 46 on the 2008 form 1040, or line 28 on 2008 form 1040A), before any credits. The Credit I am proposing could be no more than half of that amount. And no matter how many Hybrid cars, solar panels, child care tax credits, etc. you claim, this Federalism credit won’t decrease your tax below zero or increase the transfer payment you receive.
Darth Reardon wrote:
My first concern with the plan was fairness. If you live in a high tax and spend state and I live in a (mythical) small government state, why should you get to pay less than me at the federal level just because your state is more efficient at wasting your money than mine is at wasting mine?
Thank you, I hadn’t thought about that. You have a valid point. I don’t have an answer for this concern (yet). But I will think about it.
Darth Reardon wrote:
Then I think about what states will do. They will raise taxes while telling us that it’s okay, because those raises will be offset by giving less to the fed, the only difference being that your tax dollars will stay closer to home.
Sounds great, and I suspect that’s what you’re going for, more of your total tax payments kept locally and away from the critters in DC (I’m not really sure that’s what you’re after, as another poster pointed out the article starts talking about unfunded mandates, then addresses taxation, I’m guessing there is a missing “leap” in between).
You have hit on precisely the aim of this proposal. Keep the money closer to home. As for whether States (and localities) will raise taxes, I suspect they will, but mainly to fund services that are probably better delivered at the state or local level.
The voters will have to keep a close eye on their local and state governments, as always, to watch for waste and abuse. But with the dollars closer to home, the waste, fraud and abuse should be more visible and easier to fight.
Post #8 goes into a bit more detail about the effect of this on unfunded mandates. Basically, unfunded mandates reduce federal tax revenues as they increase state and local taxes. This results in a financial disincentive for unfunded mandates that is not in the system we have today. I still favor legislative or constitutional prohibitions on unfunded mandates, but this measure does give some indirect relief.
Darth Reardon wrote:
However, in a couple years when this is repealed, our state taxes won’t be reduced, and we’ll have new state programs and agencies which do the same things as the existing (you don’t think the fed unfunded anything just because it was getting less money coming in?) federal programs and agencies.
I think the end result would just be encouraging states to take up a bigger role in government (note that this does not imply taking anything away from the fed, the pie gets bigger). It’s not like the federal government is going to stop spending as much as it can get away with. If I send them $1 less next year, they’ll just borrow $1.25 in my name (unless I hurry up and die) in its place.
It is my belief that part of our problem today with an overgrown federal government is that we allowed the state governments to become weak. This created a vacuum and an opportunity for the usurpers in DC.
While it doesn’t directly reduce federal spending, in theory, if the states and localities start paying for their own projects locally, there will be less demand for federal grant programs, and real reductions could follow. There is some anecdotal evidence to support this. Back in the Clinton era, there was a program called Community Oriented Policing Services (COPS). The goal was to put 100,000 new police officers on the streets. But cities were skeptical, especially when they read the fine print on the grants. They had to commit to the positions for many years (7 or 10? I don’t remember exactly), but the federal grant to pay the officers’ salaries was only for a couple years (again I don’t remember the exact number it started at, 1 to 3 maybe?). The result was, almost no takers for the “free money” from the feds. It seemed like every year they were tweaking the program to make it more attractive. Ultimately, I think they got around 50,000 officers on the street (and allowed some of the funds to be used for administrative and “desk jobs”). I’m posting this from (probably faulty) memory, so don’t take the figures as absolute facts. But the principle is valid and matched the observed behavior. “Free money” with too many restrictions isn’t so popular with local governments.
If this federalism credit I'm proposing was the law, I think many cities and states would not be so interested in federal grants from many programs. Why jump through all the hoops and beg for “funds.” You have the cover to tax locally, keep the money out of Washington DC altogether, and retain more control, like not having to pay Davis Bacon wages because there are federal dollars in the project.
And, assuming that a Congress was conservative enough to actually pass this measure, they would probably be conservative enough to trim things back with the decrease in demand.
As always, much relies on the voters. This won’t pass in the current Congress. But getting it in the hopper and watching the cosponsor list might give us some clues as to which critters are truly “smaller government” supporters. If/when it passes, it won’t be repealed unless the voters go back to sleep and allow another gang of socialists to have the keys to the capitol.
Thanks again for your feedback.
| From the desk of cc2k: |
Is there an equivalent place where federal revenues are increased to compensate for the loss in revenue due to the credit? That would be the argument against it (not here LOL,). This sounds like a federal gov tax starving plan, but you still have the deficits and devaluation problem. (Congress wont cut spending anytime soon. Maybe if the economy gets much worse under Obama in the next few years sadly the public may wake up.)
I definitely like the idea.
That’s interesting, thanks. I think I may have let my experience of living in a strong federal environment bias me into overlooking the greed (money/power/control) at the state level. Kind of funny that I would do that, since I’m the guy who believes that the county flag should be flown on top, then the state flag, then the union (I wouldn’t actually do that today, I’m just describing the world I’d prefer to live in). I’m gonna have to go think on that one for awhile. Thanks.
Kind of reminds me of a thought experiment I did awhile back (I didn’t care for the results). If every single state government did not accept the “stimulus” package, would the federal government try to take them all on? IMO, when the states are unanimous, that IS the federal government’s position, as the fed is nothing more than the union of the states. My opinion has nothing to do with reality, just what I think should be.
BTW, in your last sentence, you misspelled “until” as “unless”.
I have read every thing submitted so far. What I like about the plan is that it puts us in a transitional position for Congress to eventually take away their Constitutional mandate to coin money and regulate its value. Which brings up of course the degree of control the Federal Reserve has over the Congress...but that is another subject.
The other thing I like about the plan is that it encourages economic growth. Though I am not going to sit here and type what is juicing my head right now, that too, can be saved for another discussion. Suffice to say, deducting sales from federal liability will spur a spending spree in the beginning.
Lastly, I think the concerns for greed at home should be balanced with the idea that as the money itself may stay more local, WE are as local as the money. There is little distance from the PEOPLE to the Statehouse, if you dig my meaning.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.