CAVUTO REPORTS THAT BUSH CONSIDERING SCRAPPING THE IRS CODE!!!

Fox News Channel | November 6, 2002 | n/a

[Tree of Liberty]

Neil Cavuto just interviewed Mitchell E. Daniels, Jr., the director of the OMB, and Neil let it be known that he's hearing rumblings that Pres. Bush is considering a total re-write of the tax code and that SecTreas O'Neill is strongly pushing a national retail sales tax!

[ancient_geezer]

This looks like double counting unless I'm missing something.

You are missing something. Government pays taxes to itself via consumption spending under the current system.

If I am right, a 26% (tax inclusive)/35% tax exclusive rate would be needed for neutrality

Only thing is, you are not correct in your analysis, The tax government pays is embedded in current shelf price, Under the NRST, the tax is explicitly stated, separated out leaving a lower shelf price(about 22-23% lower from the difference in embedded taxes), plus tax, for essentially the same total actual expenditure overall.

Actually, because the costs of tax compliance are much lower for retail sales tax accounting and payment(less than 10% of the income/payroll tax scheme), as opposed to income tax accounting, planning and litigation costs. The overall price of consumption goods and services plus NRST should actually trend lower. Government costs in interest rates on national debt and for consuption expenditure would thus be lower allowing more bang for the buck of revenue received.

Your concerns are of no impact in the final result. And in fact the overall picture is marketedly improved as far as advances in standard of living arising from greater economic/commercial efficiencies under an NRST vs the current income/payroll tax system.

[lewislynn]

. I now realize that the tax is actually a 30% tax

That's not exactly true either. The phony 23% is the teaser rate for the first year only.

Here is the copy and paste from the bill.(HR2525)

`SEC. 101. IMPOSITION OF SALES TAX.

`(a) IN GENERAL- There is hereby imposed a tax on the use or consumption in the United States of taxable property or services.

`(b) RATE-

`(1) FOR 2003- In the calendar year 2003, the rate of tax is 23 percent of the gross payments for the taxable property or service.

`(2) FOR YEARS AFTER 2003- For years after the calendar year 2003, the rate of tax is the combined Federal tax rate percentage (as defined in paragraph (3) of the gross payments for the taxable property or service.

`(3) COMBINED FEDERAL TAX RATE PERCENTAGE- The combined Federal tax rate percentage is the sum of--

`(A) the general revenue rate (as defined in paragraph (4), and

`(B) the old-age, survivors and disability insurance rate, and

`(C) the hospital insurance rate.

`(4) GENERAL REVENUE RATE- The general revenue rate shall be 14.91 percent.

You'll notice they defined the general revenue rate but what are the other rates?

`(d) OLD-AGE, SURVIVORS AND DISABILITY INSURANCE RATE- The old-age, survivors and disability insurance rate shall be determined by the Social Security Administration. The old-age, survivors and disability insurance rate shall be that sales tax rate which is necessary to raise the same amount of revenue that would have been raised by imposing a 12.4 percent tax on the Social Security wage base (including self-employment income) as determined in accordance with chapter 21 of the Internal Revenue Code most recently in effect prior to the enactment of this Act. The rate shall be determined using actuarially sound methodology and announced at least 6 months prior to the beginning of the calendar year for which it applies.

`(e) HOSPITAL INSURANCE RATE- The hospital insurance rate shall be determined by the Social Security Administration. The hospital insurance rate shall be that sales tax rate which is necessary to raise the same amount of revenue that would have been raised by imposing a 2.9 percent tax on the Medicare wage base (including self-employment income) as determined in accordance with chapter 21 of the Internal Revenue Code most recently in effect prior to the enactment of this Act. The rate shall be determined using actuarially sound methodology and announced at least 6 months prior to the beginning of the calendar year for which it applies.

`(f) ASSISTANCE- The Secretary shall provide such technical assistance as the Social Security Administration shall require to determine the old-age, survivors and disability insurance rate and the hospital insurance rate.

So there you have it. After the first year of the teaser rate, bureaucrats at SS will be trusted to "determine" the tax rate(s) without any votes by elected representatives.

I'll bet you didn't know that "any government" is a "taxable employer" and that "any government" employees wages, salaries and benefits are subject to the 30% tax as well.

`For rules relating to collection and remittance of tax on wages by taxable employers, see section 103(b)(2)

`(2) CERTAIN WAGES OR SALARY- In the case of wages or salary paid by a taxable employer which are taxable services, the employer shall remit the tax imposed by section 101.

`(17) WAGES AND SALARY- The terms `wage' and `salary' mean all compensation paid for employment service including cash compensation, employee benefits, disability insurance, or wage replacement insurance payments, unemployment compensation insurance, workers' compensation insurance, and the fair market value of any other consideration paid by an employer to an employee in consideration for employment services rendered.

If we're going to have a sales gross payment tax, fine, but at least sell it for what it is. AG didn't inform you of the tax because he , like the other sales tax shills don't want you to know the truth...,I've gone past their rhetoric and read the bill...something most of the nst shills have never done, which is why they don't like me.

Oh yea, and how does SS know what to base the rate on?

`SEC. 903. WAGES TO BE REPORTED TO SOCIAL SECURITY ADMINISTRATION.

`(a) IN GENERAL- Employers shall submit such information to the Social Security Administration as is required by the Social Security Administration to calculate social security benefits under title II of the Social Security Act, including wages paid, in a form prescribed by the Secretary. A copy of the employer submission to the Social Security Administration relating to each employee shall be provided to each employee by the employer.

`(b) WAGES- For purposes of this section, the term `wages' means all cash remuneration for employment (including tips to an employee by third parties provided that the employer or employee maintains records documenting such tips) including self-employment income; except that such term shall not include--

`(1) any insurance benefits received (including death benefits);

`(2) pension or annuity benefits received;

`(3) tips received by an employee over $5,000 per year; and

`(4) benefits received under a government entitlement program (including social security benefits and unemployment compensation benefits).

`(c) SELF-EMPLOYMENT INCOME- For purposes of subsection (b), the term `self-employment income' means gross payments received for taxable property or services minus the sum of--

`(1) gross payments made for taxable property or services (without regard to whether tax was paid pursuant to section 101 on such taxable property or services), and

`(2) wages paid by the self-employed person to employees of the self-employed person.

[lewislynn]

If this is true, then the NRST won't reduce prices but will increase wages, which is effectively the same thing.

Or increase profits...which do you think is most likely?...Higher wages for you after your withholding is eliminated giving you the perception of increased pay or higher profits for the company?

[ancient_geezer]

That's not exactly true either. The phony 23% is the teaser rate for the first year only.

You don't want Social Security benefits calculated for your earned income and force a tax rate decrease? Don't tell em what what your earned income for the year is.

`(d) OLD-AGE, SURVIVORS AND DISABILITY INSURANCE RATE- The old-age, survivors and disability insurance rate shall be determined by the Social Security Administration. The old-age, survivors and disability insurance rate shall be that sales tax rate which is necessary to raise the same amount of revenue that would have been raised by imposing a 12.4 percent tax on the Social Security wage base ... The rate shall be determined using actuarially sound methodology

`(e) HOSPITAL INSURANCE RATE- The hospital insurance rate shall be determined by the Social Security Administration. The hospital insurance rate shall be that sales tax rate which is necessary to raise the same amount of revenue that would have been raised by imposing a 2.9 percent tax on the Medicare wage base ... The rate shall be determined using actuarially sound methodology

SEC. 903. WAGES TO BE REPORTED TO SOCIAL SECURITY ADMINISTRATION.

a) IN GENERAL- Employers shall submit such information to the Social Security Administration as is required by the Social Security Administration to calculate social security benefits.

I'm sure the government will be more than happy to not pay you SS benefits. And reduce the tax rate, thank you very much.

It's at least a novel way to end Social Security, go for it:

23%........... HR2525 (NRST) rate

14.91% ..... rate if Social Security and Medicare were privatized
14% .......... rate if Nat'l Endowment for the Arts were eliminated
11.9%........ rate if Dept. of Education were eliminated
10% .......... rate if welfare were eliminated
9.8%.......... rate if foreign aid were eliminated
etc.

Hmmmmmm....... It's do able, with time and effort, once the blinders are removed from the electorate.

[ancient_geezer]

Higher wages for you after your withholding is eliminated giving you the perception of increased pay or higher profits for the company?

Since your gross wage on which that witholding id based is a matter of record, it sure won't be greater profits for the company.

[RaceBannon]

That is still bogus and expensive. If you still have to write the check, then you still need minions to work and run the machine that puts the signature on the check.

We need to make it lean, and that is why I am in favor of a flat 10% tax instead, simple arithmatic to check returns, simple arithmatic to teach people what they owe and pay.

Graduated taxes are wrong in any sense.

[YankeeReb]

This would be HUGE!!! If it were true (I don't think it is) it would cement the repubs in power for decades to come

[Deuce]

I don’t think any of your responses address my observation regarding the adding of government consumption and purchases to the tax base. Even the Cato Institute study acknowledges that its treatment of these items is controversial:

Under the sales tax system outlined in this study, government output would not be exempted from the sales tax. Hence, government output is included in the tax base. Since this is an issue of some controversy, the following is a brief explanation of the logic for this tax treatment.

Burton and Mastromarco explain the basis of their position in the 6 paragraphs immediately following the above excerpt. I understand their reasoning---I just think the reasoning is flawed. They justify their inclusion of government purchases as being necessary to not unduly favor government over private. Their actions actually create the opposite bias. They claim they are merely taxing government as they do in the current system. But they are already taxing the purchases of government employees. This double whammy penalizes government vs. private expenditures while claiming to remove a bias in favor of government service. In the final analysis, of course, whatever is included in the tax base is arbitrary. Therefore, I’ll use their base for now to see the ramifications they have on the distribution of the tax burden.

Do you know where I can get recent data for the items in Table 1 of the Burton Mastromarco report?

[ancient_geezer]

All I have seen is the Mastromarco infor provided. The NRST has not gone through any level markup in committee or challenge to require further analysis.

As far as revenue neutrality is concerned, the ultimate say is analysis of CBO which will come when request by House Ways and Means. That is the only analysis that will mean anything as regards the legal requirement for such.

You must realize HR2525 is not a highly funded project, it is a grassroots effort being done on a very tight budget from person contributions and individual support. Most of the economic and statistical work was done back in 1997 with the writing of the bill for introduction into the House. This is not some party effort, it received its initial kick off from a group of small businessmen from Huston.

[ancient_geezer]

A few more studies on the topic of NRST and its economic impact on the individual as well as the economy as a whole. All are studies that use revenue neutrality as the basis for analysing NRST v Flat Tax v Current tax system rates, and the respective effects on the economy and benefit to individual standards of living.

These are all PDF files, not HTML.

The Effects of Fundamental Tax Reform and the Feasability of Dynamic Revenue Estimation, in Joint Committee on Taxation, Congress of the United States, The Modeling Project and 1997 Tax Symposium Papers, Washington, U.S. Government Printing Office, November 20, 1997 (with P.J. Wilcoxen), pp. 130-151.

The Economic Impact of Fundamental Tax Reform, in M. Boskin (ed.), Frontiers of Tax Reform, Stanford, Hoover Institution, 1996, pp. 181-196; reprinted in Joint Economic Committee, Congress of the United States, Roundtable Discussion on Tax Reform and Economic Growth, One Hundred Fourth Congress, First Session, 1996, pp 98-112.

Lifting the Burden: Tax Reform and US Economic Growth; Dale Jorgensen, Harvard University; Office of Tax Analysis U.S. Department of Treasury, Aug 2 2002

[CliffC]

Here's the "Prebate" Chart had the FairTax been in effect this year...
Family Consumption Allowance for 2002!

Cliff Cofer - State Director, AFFT Volunteer Iowa Team

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* * * Bye, bye... Income Tax (and IRS)! We won't miss ya' at all! * * *

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[ancient_geezer]

This double whammy penalizes government vs. private expenditures

Obviously, but is what is happening in the current system. The Budget enforcement act is what demands the revenue neutrality, not considerations of efficiency of government. If we took efficiency into account, federal workers would not be taxed but would receive lower pay instead, EITC would not be necessary to offset FICA which could be done away with. We would be using point of sale taxes instead of individual and corporate taxes and exempt the government from paying those taxes. The national budget would be lower for lower costs of doing business and so would the tax rates necessary for funding government.

The reality is that government expends more than it should simply because there is no means to separate tax payments from the price structure of goods and services other than using a single stage Retail Tax that could allow government exempt purchases. Todate, social/political goals have been driving the tax code not logic or efficiency of the tax code.

The political situation is, without dynamic scoring of the budget and forced use of static analysis, such inefficiencies are demanded by the politics of the tax system debate. A sad commentary on the state of politics in this nation.

However, because we have an income/payroll/corporate tax system such penalties are the rule of the day, and are among many reasons why doing anything through the government is inefficient with regard to doing the same thing through private enterprise. Revenue neutrality demands we tax government to sustain the revenue take even in the face of "potential" reduction in the budget under dynamic considerations. The current political climate requires static analysis and no consideration of dynamic forces reducing the cost of government. Irrational, but that is what adherence to pre-existant law and the more liberal forces in the Congress demand.

[Green Knight]

Just thought I'd bump this to finish reading it, later. Also wanted to comment on this, as well as ping a friend to see what he thinks of my logic, here.

Suffice to say that I agree with you. The sooner we pass HR 2525 the better. And for those of you who fear getting BOTH a sales tax and an income tax, let me paint you a picture.

Spring 2003, President Bush pushes HR 2525 through the Republican controlled Congress and it passes. As a result, the IRS is defunded, all records are destroyed, and the tax code is erased. Yes, it's POSSIBLE that the Income Tax can be reinstated, but it'd take a while for it to reconstitute itself. And it'd only happen under Democratic control, which would mean not for at least 2 years.

So for the next 2 years Americans are living with a NRST rather than an Income Tax. Americans take home ALL of their pay, while buying products that are cheaper. The economy improves, and the American people as a whole get wealthier.

Then Election 2004 comes around. The American people have now lived for 2 years free of the IRS and are happy with the new system. They certainly wouldn't want the OLD system to come back. And that, my friends, is when the Republicans POUNCE!

Amendment XVI becames a campaign issue. The Republicans POUND the Democrats, telling the American people that if Democrats regain control of the Presidency and/or Congress that they'll reinstate the IRS and the Income Tax, and therefore it's important that a Republican majority be elected in order to REPEAL the 16th Amendment.

So Americans go to the polls, vote Republican, and the Republicans gain the super majority necessary to repeal the 16th Amendment.

President Bush these past couple of months successfully nationalized the elections and gave us a stunnning victory as a result. The War on Terror may not be as potent an issue in 2004 as it was this year, but that doesn't mean we won't be able to nationalize the 2004 elections. Only this time, it'll be with the Tax issue rather than the Terror issue.

So anyway, that's my logic. Passing HR 2525 will effectively DOOM Amendment 16, as once people spend a year or 2 living under HR 2525 they'll prefer it immensely and will NEVER want to go back to Income Tax, much less an Income Tax ON TOP OF a National Sales Tax, and will vote for any candidate who'll assure them that that'll never happen.

So can anyone point out to me where my logic is flawed?

[CliffC]

You wrote: Got that right!. I won't hold my breath though, the Dems will figure out a way to demonize it and fillibuster

Not all Democrats fit the category you describe. The leading cosponsor of the FairTax (HR 2525) is Collin Peterson (D-MN). The primary sponsor is John Linder (R-GA).

Linder and Peterson were both re-elected Nov 5th by a huge majority!

Cliff Cofer - State Director, AFFT Volunteer Iowa Team

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* * Bye, bye... Income Tax (and IRS)! We won't miss ya' at all! * *

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[MadIvan]

If Bush gets rid of the IRS, I will be sorely tempted to move to the United States.

Regards, Ivan

[CliffC]

You wrote: However, I'm very glad you linked me to the article because it cleared up a mystery for me. I have been trying to reconstruct a calculation that demonstrated that a 23% tax would raise sufficient revenues and I kept falling short. I now realize that the tax is actually a 30% tax not a 23% tax. NRST supporters should acknowledge that their proposal is a 30% tax (rather than calling it a 23% tax through mathematical subterfuge) and let it stand or fall on its actual merits.

Okie, dokie. I acknowledge that 23% (tax inclusive) is 29.9% (tax exclusive). Please note that 23% (or 29.9%, whichever way you cite it) is the maximum rate.

Will you acknowledge that the present Income tax maximum rate of 39.6% (tax inclusive) is 65.5% (tax exclusive)?

IOW, 23% compares to 39.6% as maximums (tax inclusive basis)
29.9% compares to 65.5% as maximums (tax exclusive basis)

Here's a website that discusses six(6) misconceptions about the FairTax. BTW, the info was supplied to me by the late CHIEF negotiator. He furnished me extensive info about the FairTax (and taxation) which I incorporated into my FairTax Facts! website.

SIX MISCONCEPTIONS! ...and... FAIRTAX FACTS!

Cliff Cofer - State Director, AFFT Volunteer Iowa Team

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* * Bye, bye... Income Tax (and IRS)! We won't miss ya' at all! * *

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[William Terrell]

So, you don't understand the arguments. You just like the notion of being relieved of paperwork once a year.

Minority? I don't think so. Only a tiny fraction of the people registered to post on FR have posted on this thread, so your statement is without merit. But, even if the is a majority here, since when have a majority, if there is one in this case, ipso facto been right? That seems to be what you are relying on, a "majority" is in favor of a NRST therefore it must be a good system.

Ask around, see how many people (not on FR) have even heard of a NRST. The issue has been argued before on FR. People on FR tend to have larger than average incomes, exactly the ones that can tolerate a sales tax and still be able to buy most of what they have in the past, or at least for a little while if the NRST passes.

Wait until the majority of retail businessmen, wage earners and people on fixed incomes weigh in. "Minority" indeed.

[Intimidator]

Not all Democrats fit the category you describe. The leading cosponsor of the FairTax (HR 2525) is Collin Peterson (D-MN). The primary sponsor is John Linder (R-GA).

I hope you are right but I still won't hold my breath

[Principled]

Ask around, see how many people (not on FR) have even heard of a NRST.

Yes, do this. You'll find overwhleming support and curiosity about eliminating the income tax.

People on FR tend to have larger than average incomes,

Supporting data please? I wholeheartedly disagree. I believe FR is a complete cross-section.

...exactly the ones that can tolerate a sales tax and still be able to buy most of what they have in the past

Oops, Will. You forgot that poor folks have negative or zero tax rates under nrst. Who you tryin' to fool?

[Principled]

Not all Democrats fit the category you describe. The leading cosponsor of the FairTax (HR 2525) is Collin Peterson (D-MN). The primary sponsor is John Linder (R-GA).

I hope you are right but I still won't hold my breath.

There are Dems like Zell Miller and Colin Peterson that know how to keep their jobs and simultaneously serve our Nation. Hopefully, those whose interests lie in job security rather than improving our Nation will continue to be weeded out. It's our job to to the weeding.