Posted on 08/03/2005 5:55:07 AM PDT by Tumbleweed_Connection
President Bush says he wants to reform the tax system and has appointed a tax-reform commission that will issue a report in September. It was originally supposed to have reported by July 31, but the White House asked the commission to delay its report so that it would not interfere with the Social Security-reform effort, which needs a few more months before it can be declared legally dead.
I've long thought that the White House had made a very serious error in attempting to do both Social Security reform and tax reform at the same time. The issues were too big and it would be lucky if it could do one or the other. Trying to do both ran the risk of accomplishing neither. The delay in the tax-reform report shows that the White House has finally started to figure this out.
We still don't know what the commission will recommend. The assumption has been that it would endorse one or more comprehensive reform options, such as the flat tax or national retail-sales tax. However, indications now are that the commission's report may be more targeted and less comprehensive.
The other week, the tax commission's cochairmen, former senators Connie Mack (R., Fla.) and John Breaux (D., La.), said that abolition of the Alternative Minimum Tax would definitely be one recommendation sent to the Treasury department. (Technically, the commission reports to the secretary of the Treasury, who will then decide what recommendations to forward to the president.)
The AMT unquestionably is a very bad part of the tax system and ought to be abolished. But by making this isolated recommendation, it suggests that the commission's report will be less comprehensive than previously thought. After all, if the commission were to recommend, say, a flat-tax system, then there would be no need to make abolition of the AMT a separate recommendation. It would be abolished automatically.
Therefore, I think we may be more likely to get a laundry list of specific recommendations for improving the tax system than a master plan for complete overhaul. The problem with this is that there are any number of reports that have already detailed specific failings of the tax system from the point of view of fairness, efficiency and administrability. They are all gathering dust on library shelves.
Secondly, trying to do tax reform this way means that the commission must necessarily come up with a list of tax increases to pay for the reforms. The commission is under a mandate to makes its recommendations "revenue-neutral." This means that the package must raise the same revenue as currently projected by the current tax system-no more, no less.
It is certain, therefore, that the vast bulk of the public attention will be on the revenue raisers. For example, people are already assuming that the AMT repeal will be paid for by abolishing the deduction for state and local taxes. Naturally, this has high-tax states like New York and California up in arms. In 1986, then-New York Governor Mario Cuomo, a Democrat, virtually killed this idea single-handedly. This time it could be California Governor Arnold Schwarzenegger, a Republican.
The high tax states like the federal deduction because it lowers their tax burden by the amount of one's federal tax bracket. If one itemizes and is in the 33-percent federal tax bracket, then this is like getting a one-third discount on your state and local taxes. Elimination of the deduction, therefore, would constitute a significant tax increase for many people even if they no longer have to pay the AMT.
In my opinion, these kinds of trade-offs are politically impossible. People will fight much harder to keep a current tax benefit than those who would benefit from a new one will fight for that. Consequently, the only way you can even hope to eliminate "sacred cow" deductions like that for state and local taxes is in a complete overhaul of the tax code. Trying to do it incrementally, as it appears the tax commission is suggesting, is simply doomed to failure.
Unfortunately, President Bush has never articulated a vision of tax reform, which explains why he is supporting a long list of new tax gimmicks — I mean incentives — for energy production and conservation, none of which have any place in a properly designed tax system, from either a liberal or conservative point of view. They just clutter up the tax code and make reform all the more difficult, because they create new constituencies in support of the status quo.
In his new book, Flat Tax Revolution, magazine publisher Steve Forbes again explains the virtues of fundamental tax reform. I hope someone at the tax commission is reading it.
Fairtax++
www.fairtax.org
Never happen! Rats would not allow such a thing to take place.
about freakin time- he has only been president for 5 years.
I like a flat tax. 10% across the board for everyone.
The 'fairtax' reminds me of a liberal tactic of giving somethig a good name in the hopes of convincing people it is a 'fair tax'
I would not even mind if we eliminated income tax and just taxed all the evil corporations- most liberals are too stupid to know that corporate taxes are paid by the comsumers, not the corporation- they just tack them onto the 'cost of good sold'. (that is a techinal accounting term)
And if one more person tries to explain how 'tax inclusive' rate makes sense I swear I will jump through their computer screen and throttle them. You have been warned. All I want is ONE OF THEM to admit that a 27% 'tax inclusive' rate is really 35% of the price ADDED to the final bill.
I'd like a flat tax, too, if it were just 10%. Trouble is, I've been hearing that it will be closer to 20%. That is a heck of a lot more than I'm paying right now, which is next to nothing. I have the national average income, but because of the generous deductions the present tax code offers I pay next to nothing in federal income taxes. Guess it's unpatriotic of me, but when I have a hard time making ends meet I'm glad we don't have a flat tax right now! I'd hate to give up more of my income to the federal government. Even 10% would be an increase.
dont forget the flat tax is 20% but the first 40 (or was it 60) thousand was tax exempt.
I would prefer to see no exemptions and flat tax of 10% on everyone (evewn the poor). Once their money is taken away they will think twice who they vote for
The amount of the tax is not the main problem.
The real outrage is the onerous, burdensome, expensive, privacy-invading reporting requirements that the tax law place upon us.
I think it both the repubs and rats together. Just think of how many govt employees, private accountants, tax advisors, and horrors! ;^) tax attorneys who would have to find another occupation. I think the current tax system is so embedded in our govt that it won't be torn apart just to make taxes simplier.
You need to educate yourself on HR25.
The ONLY fair tax is a consumption tax. I would much rather pay a 23% consumption tax on what I spend after necessities, as opposed to even a 10% tax on my income.
The beauty of the Fair Tax is it creates a tax haven in the western world, that being the good 'ole USA. It also catches folks who earn their money illegally, such as drug dealers, folks who work for cash, illegal aliens, etc. As it is right now those folks ride you and me. Think about it.
FairTax ping!! Love it! Lets get to it! Abolish the IRS. Get your ENTIRE paycheck. Become a true voluntary tax payer.
I understand your point, I guess my main objection is the fair tax people insisting on talking in 'tax inclusive' rates.
If they would just agree to talking % added (like your current sales tax works ) I would be more agreeable with them.
NRST Bump!
There was a realistic shot at meaningful reform in 1994-1995; it was killed by a Republican Senator, Packwood, from Oregon.
The new Boortz book on it sounds like a great book.
The thing about it is you get ALL of your paycheck and pay only when you buy things. But it is not like you are going to pay 123% of what you pay now. You will pay the same 100% of the purchase price and the tax payment will come from the seller. The seller is saving about 22% on the taxes they would normally pay. So it comes out to just about even for the retailer or seller of new goods.
The other point is that it is only paid on sale of a NEW item or house.
The basic thing is all other taxes will disappear.
No Income Tax
No social security tax
No death tax
No inheritance tax
No employee related taxes
No Capital gains tax (you keep all that you earn in investing)
This being a consuption tax. Anytime someone buys something new this will be paid by the seller. This means when someone buys something with drug money, illeagaly gotten gains, money paid to illeagal aliens 23% of that purchase will be paid as a tax, again by the seller. So the tax will be virtually transparent.
I am sure that there are somethings that would need to be addressed but I like what I heard about it on Hannity last night.
Also the Po' people will be getting a check for 23% of what they should be spending on living costs like food, and clothing. Thus the tax will have zero impact on them as far as life's needs goes.
I would recommend taking a few hours to read it before you jump to conclusions. You will still have 47 hours to do your taxes. They say the average person takes 51 hours to do their taxes. Guess what? It will take 0 hours to do you taxes after this was in place. That fact alone should be reason enough to at least give this a good look.
I am ordering the book but live overseas and it may take a week or so to get here.
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.