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Top Ten Civil Liberties Abuses of the IRS
CATO Institute ^ | April 11, 2002 | by Chris Edwards

Posted on 04/16/2002 1:44:06 PM PDT by vannrox

Top Ten Civil Liberties Abuses of the Income Tax


by Chris Edwards
Chris Edwards is director of fiscal policy studies at the Cato Institute.




Any tax system creates a threat to individual liberty because "the power to tax involves the power to destroy," as Chief Justice John Marshall observed.[1] But the federal income tax and its enforcement harm civil liberties much more than necessary to raise needed funds for the government. Certainly, the IRS performs poorly and too easily abuses the rights of citizens. But ultimately Congress is to blame for creating an excessively complex and high-rate tax system. New laws to increase taxpayer protections and replacement of the income tax with a simpler, flatter consumption-based tax could greatly reduce the following 10 areas of civil liberties abuse.


1. "Vertical" Inequality. Although equality under the law is a bedrock American principle, the income tax treats citizens unequally. "Vertical" inequality is created by hugely different tax burdens on citizens at different income levels. For example, households earning between $30,000 and $75,000 pay an average 10 percent of their income in federal income taxes, compared to 27 percent for households earning more than $200,000.[2] Fully 36 percent of U.S. households pay no income tax.[3] Besides violating the spirit of equal protection guarantees of the Constitution, such unequal burdens distort perceptions about the costs and benefits of government because programs appear to be free of cost to many.


2. "Horizontal" Inequality. Even people with similar incomes are treated unequally by the many exemptions, deductions, credits, and other intricacies of the income tax. For example, there are 59 income tax provisions that vary depending on marital status.[4] Likewise, the tax differences between homeowners and renters with the same incomes can be thousands of dollars because of itemized deductions for property taxes and mortgage interest. Another disparity is the unequal access to savings vehicles in the tax code depending on individuals' work situations and other factors. If all individual savings were exempt from tax, as under a consumption-based system, individuals would be treated more equally.


3. Complexity, Ambiguity, and Uncertainty. Certainty in the law is a bulwark against arbitrary and abusive government. But there is no certainty under the income tax because it rests on an inherently difficult-to-measure tax base, uses no consistent definition of "income" or other concepts, and is a labyrinth of narrow and limited provisions created by politicians intent on social engineering.[5] The current IRS commissioner concedes that the income tax has become too complex for accurate administration, which is evident in the 28 percent IRS error rate on phone inquiries and 60 percent error rate on audits.[6] Business tax rules are so ambiguous that many disputes drag on for years and are valued in the hundreds of millions of dollars.[7] Individuals are baffled by the complex rules on capital gains, pension and savings plans, and a growing list of targeted incentives. Those complexities would be eliminated under a flat consumption-based tax system.


4. Huge Size and Instability of Tax Law. Citizens are required to know the nation's laws and comply with them. Yet federal tax rules are massive in scope and constantly changing. Tax laws, regulations, and related documentation span 45,662 pages.[8] There were 441 changes to tax rules in last year's tax-cut law alone.[9] That law guaranteed a decade of tax instability with phased-in changes lasting until 2010. Income tax instability is typified by changes in taxes on capital. There have been 25 substantial changes in the treatment of long-term capital gains since 1922.[10] Pension tax laws have been substantially changed nearly every year since the early 1980s, creating regulatory backlogs and leaving employers unsure about how to comply.[11] Last year's tax-cut law alone had 64 separate rule changes for pension and saving plans.[12]


5. Lack of Financial Privacy. The broad-based income tax necessitates a large invasion of financial privacy that a low-rate consumption-based tax could avoid. The IRS regularly gains access to a myriad of personal records, such as mortgage records, credit card data, phone records, banking and investment records, real property transaction data, and personal correspondence. This broad IRS authority to obtain records without court supervision has been referred to by the Supreme Court as "a power of inquisition."[13]


6. Denial of Due Process. The Fifth Amendment right to due process is ignored in many respects by the federal income tax regime. Due process requires that government provide accused citizens a clear notice of a claim against them and allow the accused a hearing before executing enforcement action. But the IRS engages in many summary judgments, and enforces them prior to any judicial determinations. Moreover, the very complexity and ambiguity of the income tax seems to violate due process. In 1926, the Supreme Court noted that a statute that is "so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application, violates that first essential of due process of law."[14]


7. Shifting of the Burden of Proof. For non-criminal tax cases -- the vast majority of cases -- the tax code reverses the centuries-old common law principle that the burden of proof rests with the accuser. Except in some narrow circumstances, the IRS does not have to prove the correctness of its determinations. When the IRS makes erroneous assessments, as it often does, citizens carry the burden to prove that they are wrong. Efforts to shift the burden of proof to the IRS in the 1998 IRS Restructuring and Reform Act did not accomplish that goal. In addition, the new rules do not apply to the 97 percent of IRS actions that are deemed administrative in nature.[15]


8. No Trial by Jury in Tax Court. Despite Sixth and Seventh Amendment guarantees of trial by jury, the federal tax system carefully sidesteps such protections. To contest an IRS tax calculation prior to assessment, one must file a petition in the U.S. Tax Court. But since this is an administrative court, not an Article III court, no jury trial is required. To obtain a jury trial and related rights for civil tax cases, one must file suit in a U.S. District Court. But before that can happen, the alleged tax, penalties, and interest must be paid in full. And if the citizen wins, there is a burdensome route to retrieving the disputed money. For most people, those rules effectively eliminate the right to trial by jury in tax cases.


9. Unreasonable Searches and Seizures. In most situations, the Fourth Amendment guarantees that, before the government can search private property and seize records, it must demonstrate to a court that there is "probable cause" to believe that lawless conduct exists. However, the IRS's summons authority under tax code section 7602 allows it to obtain records of every description from any person without showing probable cause and without a court order. There has also been an explosion in information reporting required by the IRS and a big expansion in its computer searching for personal records. Recently, the IRS won the power to access financial data on Visa cards issued by foreign banks. Many examples of abusive IRS searches and seizures were revealed in U.S. Senate hearings in 1997.[16]


10. Forced Self-Incrimination. The requirement to file tax returns sworn to under penalty of perjury operates to invalidate the Fifth Amendment protection against self-incrimination. Citizens face a legal dilemma. On the one hand, refusing to file a return would expose a citizen to prosecution for failure to file. On the other hand, disclosing information sought in tax returns constitutes a waiver of Fifth Amendment protections. The IRS can and does release that information to federal, state, and local agencies for both tax and non-tax law enforcement purposes.


Notes

1. McCulloch v. Maryland, 17 U.S. 316 (1819).

2. IRS, Statistics of Income Bulletin, Fall 2001. Data are for 1999. Income concept is adjusted gross income.

3. Joint Committee on Taxation, JCS-1-02, January 17, 2002, www.house.gov/jct. Data are for 2001. 4. Daniel J. Pilla, "A Monument of Deficient Wisdom," Report no. 165, Institute for Policy Innovation, 2001, p. 15. 5. Chris Edwards, "Simplifying Federal Taxes: The Advantages of Consumption-Based Taxation," Cato Institute, October 2001.

6. Pilla, p. 4.

7. For example, in 1997 Columbia/HCA Corp. fought the IRS over a tax item worth $267 million. The IRS ended up accepting $71 million. Tax Notes, December 8, 1997, p. 1098.

8. CCH, Inc., news release, January 14, 2000. This is the page count of the Standard Federal Tax Reporter, www.cch.com.

9. "Tax Report," Wall Street Journal, May 30, 2001, p. 1. Based on information from CCH, Inc.

10. Edwards, p. 10.

11. Joint Committee on Taxation, Study of the Overall State of the Federal Tax System, vol. 2, p. 150, www.house.gov/jct.

12. Author's count.

13. United States v. Powell, 379 U.S. 48, 57 (1964).

14. Connally v. General Construction Co., 269 U.S. 385 (1926).

15. Pilla, p. 23.

16. "Washington in Brief," Washington Post, March 29, 2002, p. A11.



TOPICS: Constitution/Conservatism; Culture/Society; Front Page News; Government; News/Current Events; Politics/Elections
KEYWORDS: budget; democrat; dnc; finance; greed; irs; money; tax; taxreform; taxreformthreads
A good read. Sad but true. Unfortunately NOTHING will ever get done. It's just plain hopeless. HOPELESS!
1 posted on 04/16/2002 1:44:06 PM PDT by vannrox
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To: vannrox

2 posted on 04/16/2002 1:49:07 PM PDT by vannrox
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To: vannrox
And yet more tables. These pictures tell quite a story!



3 posted on 04/16/2002 1:51:20 PM PDT by vannrox
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To: vannrox
Nothing to see here!!! This is just another flawed study by the hopelessly Libertarian Cato Intitute!!!! /sarcasm

This is out of control. Support the National Sales Tax!!!

EBUCK

4 posted on 04/16/2002 1:54:30 PM PDT by EBUCK
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To: *TaxReform

5 posted on 04/16/2002 2:10:08 PM PDT by Libertarianize the GOP
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To: Libertarianize the GOP;Taxman
Bumping and bookmarking
6 posted on 04/16/2002 3:30:39 PM PDT by TruthNtegrity
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To: EBUCK
Agreed.

And stockpile ammo.

7 posted on 04/16/2002 6:25:55 PM PDT by BenR2
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To: EBUCK; vannrox
It occurs to me that since so many people dislike the income tax and the IRS, we ought have much difficulty generating support for fundamental tax reform.

What do you think?

8 posted on 04/17/2002 6:40:29 PM PDT by Taxman
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To: Taxman; EBUCK; vannrox
One could only wish!!

Unfortunately a few folks'll have to get off there duffs if we are to see some action.

There seems to be abit of a perception problem out there with most focusing on just the individual income tax as representative of the world. That creates alot of inertia and a requirement to educate alot of folks.

Even the icons of the conservative world tend to have and foster that tunnel vision.

Walter Williams, World Net Daily, 10-25-2000

According to the most recent U.S. Treasury Department figures, ... the top 50 percent ($36,000 and over) paid 96 percent of income taxes. Guess what the bottom 50 percent of income earners paid?

If you're among those who pay little or no federal income taxes, what do you care about tax cuts? Moreover, if you think tax cuts pose a threat to government handout programs, you might be openly hostile and support Al Gore's silly "risky scheme" talk. So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?

It is no wonder that 70% of the public clamors for more from government believing someone else to foots the bill.

That is alot of inertia to overcome, we cannot be satisfied with just writing the Congress Critter and hoping for the best. We must take an active roll in learning about the advantages in the alternatives to the current system, and educating our families, neighbors, and associates across all the paths of our lives to reach those willing to work for changes.

We can do it, but we must reach out to everyone, trying to reach a substantive portion of those who vote, and especially those who contribute to the campaigns.

Less than 50% of the voting age population votes. Of that 50% we need only a substantial plurality waking up and desiring change enough to work at it and push on their representatives. 26% of adults can change the makeup of the entire congress and presidency. A much smaller number can effect a tilt into that 26% & hit hard where it counts, the Congress Critter's war chest.

Convince just some of the voters, and reach the contributers it will and can happen.

9 posted on 04/17/2002 10:33:13 PM PDT by ancient_geezer
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To: ancient_geezer
Thanks for the pep talk! I agree with everything you wrote or quoted.

The problem is that less than the required 26% even voted for Bush, the semi-tax-cut guy!! (something like 24.999999999999% I'd imagine)

EBUCK

10 posted on 04/18/2002 9:45:14 AM PDT by EBUCK
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To: EBUCK
That's why it takes a real effort on all our parts to educate our selves first and formost, then reach those we know with our knowledge. That is the way to multiply beyond the limits of the 1 man 1 vote cliche.

One thing is for certain, it isn't going to happen waiting for someone else to to do the job.

11 posted on 04/18/2002 10:48:02 AM PDT by ancient_geezer
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To: ancient_geezer
So long as we are separated by moral issues we will never have the clout to implement tax reform. So long as rats and pubs are separated on abortion, homo-rights, gun-control and drugs there just won't be enough to get it done. We need to stop basing our choices for elected officials on private/local/moral issues and start picking them on the basis of fiscal policy and adherance to the Constitution. Further, until we get the fed out of the regulation of these moral issues most folks won't pay enough attention to what the gubment is susposed to be doing to even notice that we are paying 50%. The moral issues are sideshows, distractions and devious mis-direction polys to keep the populace consumed to the point of apathy.

In the meantime I will be taking your advise and spread the word.

EBUCK

12 posted on 04/18/2002 11:40:42 AM PDT by EBUCK
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To: EBUCK
There is certainly no disagreement here on the points you bring up, there represent our greates danger, and Achille's Heel.

Until conservatives quit cutting their own throats in there search for immediate and total perfection, its is indeed going to be an uphill battle.

13 posted on 04/18/2002 12:16:58 PM PDT by ancient_geezer
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To: ancient_geezer
Until conservatives quit cutting their own throats

I'm glad you agree. Republicans and the rest of the fractured Right (LibTars/Const-ists ect) are really only separated by a few moral issues. The same is true for a lot of the middle-of-the-roaders/would be fiscal conservatives that turn out to be liberal voters because they don't want the fed running their personal lives. Without the issue of abortion or gay rights being the front and center campaign issues they would be voting conservative. If the heart of federal level conservative politicians would leave the moral issues to the People/States (as it should be and as is mandated by the Constitution) and concentrate on fiscal/Constitutional issues the IRS would be through.

Now that we know that, how do we get there from here?

EBUCK

14 posted on 04/18/2002 12:52:08 PM PDT by EBUCK
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To: EBUCK
Unfortunately, I don't have alot of time right now to get into specifics. (I will be available later)

But Here's what I see as a potential bills to support to actually address the problems inherent in the current income/payroll system we are all saddled with.

 

Billy Tauzin offers one solution, a 15% retail sales tax on family consumption that replaces all income taxes but doesn't touch payroll taxes(SS/Mediscare etc.), that comes close to meeting the essentials of what it takes to reverse trends:

H.R.2717
Sponsor: Rep Tauzin, W. J. (Billy)(introduced 8/2/2001)
Title: To promote freedom, fairness, and economic opportunity for families by repealing the income tax, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.

John Linder (R Texas) offers a more comprehensive bill to kill all income and payroll taxes outright, and provide a revenue neutral replacement 23% retail sales tax on family consumption:

H.R.2525
SPONSOR: Rep Linder, John (introduced 07/17/2001)
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

Other bills, moving in the proper direction are:

To get the ball rolling and focus Congress Critter's attention:

H.R.2714
Sponsor: Rep Largent, Steve(introduced 8/2/2001)
Title: To terminate the Internal Revenue Code of 1986.
A bill to prohibit he imposition of any tax by the Internal Revenue Code: (1) for any taxable year beginning after December 31, 2005.

the modification then enactment and ratification of:

H.J.RES.45
Sponsor: (introduced 4/25/2001)
Latest Major Action: 5/9/2001 Referred to House subcommitte.
Title: Proposing an amendment to the Constitution of the United States relative to abolishing personal income, estate, and gift taxes and prohibiting the Untied States Government from engaging in the business in competition with its citizens.

(Modified to prohibit all income, payroll, gift estate taxes as HR2525 calls for, or we will see European VAT style hidden taxes along with payroll excises to take over in the place of the of the current individual income tax(i.e. personal income tax) that Ron Paul amendment prohibits.)

And to keep em reminded that there is indeed a Constitution to pay attention to:

H.R.175
Sponsor: (introduced 1/3/2001)
Latest Major Action: 2/12/2001 Referred to House subcommittee
Title: To require Congress to specify the source of authority under the United States Constitution for the enactment of laws, and for other purposes.


15 posted on 04/18/2002 1:35:21 PM PDT by ancient_geezer
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To: ancient_geezer;Tax Reform Threads;Taxreform
Ping, Bump for later read.

Thanks a_g. I'll read up on this stuff so that we can really talk about it.

EBUCK

16 posted on 04/18/2002 1:49:45 PM PDT by EBUCK
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To: ancient_geezer
`Each Act of Congress shall contain a concise and definite statement of the constitutional authority relied upon for the enactment of each portion of that Act. The failure to comply with this section shall give rise to a point of order in either House of Congress. The availability of this point of order does not affect any other available relief.'

Now that's what I'm talking about!!

Now, add another bill that makes them go back and run all previous laws thru the same ringer!!

EBUCK

17 posted on 04/18/2002 2:56:03 PM PDT by EBUCK
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To: EBUCK
The interesting thing about that one, is that it could be adopted into House and/or Senate rules. Under that circumstance, there is no excuse of well the Senate won't pass it, or the President won't sign it, or .....

As a rule, it can be adopted unilaterally by either body independant of the others, and serve the function intended. That would place the provision into action until such time as it could be reasonably enacted into a full law.

18 posted on 04/18/2002 3:20:03 PM PDT by ancient_geezer
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To: vannrox
Well, other than those points, what's wrong with the income tax?
19 posted on 04/18/2002 3:27:37 PM PDT by Eagle Eye
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To: ancient_geezer
I'd be surprised to see it come to a vote though.
Especially since fiat tactics are so pervasive up there. Having to explain themselves Constitutionaly would only hamper them in their quest to help us.

I really enjoyed Ron Pauls bill too.

Do you have any information as to where these bills are in the process?

EBUCK

20 posted on 04/18/2002 3:41:25 PM PDT by EBUCK
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To: EBUCK
If you hit the hyperlinks provided,(i.e. the Bill number) it will take you to the bill's language text page on Thomas.

From there you can select Bill Status hyperlink at the top of the page. to get to the main page and from there go onto actual status page.

All are in committee pending action at the present time. Ron Paul's amendment proposal, and the Constitution check bill have been assigned to subcommittees.

21 posted on 04/18/2002 5:12:57 PM PDT by ancient_geezer
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To: EBUCK

I'd be surprised to see it come to a vote though.

So would I under present conditions.

Without exciting the public into pushing for action on any of these bills, they will simply languish away as a nice thought to be put off, to address the louder squeaky doors like 70% of the public clamoring for more from government.

22 posted on 04/18/2002 5:19:43 PM PDT by ancient_geezer
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To: vannrox
Hey, along these same lines.. Did anyone see the tax protestor on Hannity and Combs the other night?

I couldn't help but wonder if the guy made it out to his car after the show without being body tackled by the IRS.

23 posted on 04/18/2002 5:23:21 PM PDT by Jhoffa_
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To: vannrox
PS: I would like to see a flat tax in place.

The idea being that when Government get's too greedy it hurts everyone (proportionally) the same ammount and prompts a unified outcry.

As opposed to the divide and conquer system we have now, where the rich scream and no one listens because their ox is being left alone.

As far as consumption taxes go, look at Australia and their "tampon" tax for a good example of what will happen the day after a Consumption tax is implemented.

Some group will come in and try to use the tax cde to price "incorrect" products out of reach and reward "correct" purchases with lower tax rates.

24 posted on 04/18/2002 5:28:05 PM PDT by Jhoffa_
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To: Jhoffa_

The idea being that when Government get's too greedy it hurts everyone (proportionally) the same ammount and prompts a unified outcry.

Problem is the only proposed flat tax

H.R.1040 Sponsor: Rep Armey, Richard K. (introduced 3/15/2001).

doesn't do that.

It has an $13,600 adult personal exemption and despite rhetoric to the contrary is retains a standard & itemize deductions.

The net result is to increase the number of folks forming the larger government spending constituency that Walter Williams warns of:

 

Walter Williams, World Net Daily, 10-25-2000

According to the most recent U.S. Treasury Department figures, ... the top 50 percent ($36,000 and over) paid 96 percent of income taxes. Guess what the bottom 50 percent of income earners paid?

If you're among those who pay little or no federal income taxes, what do you care about tax cuts? Moreover, if you think tax cuts pose a threat to government handout programs, you might be openly hostile and support Al Gore's silly "risky scheme" talk. So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?

It still maintains the plethora of business deductions, necessary to the calculation of taxable income and increases the tax base of businesses to make up for lost revenues on the individual income tax side.

It treats the individual proprietor as both a business and and individual who is taxed on both business earnings, and as an individual for individual income.

It does nothing to replace the multitude of payroll taxes, including SS/Mediscare taxes.

It does nothing to remove specialized excises on product sales and manufacture.

Those who are able to live off of savings, bonds, and investment income(dividends and capital gains) pay no taxes. Whether they are business or individual.

Complexity is in the details of how taxable income is figured, not in the size of the reportcard or number of tax brackets. The costs of tax planning, accountion, litigation and enforcement do not just go away, for individuals or for businesses. For the bottom line on that I recommend reading:

Flat Tax as Seen by a Tax Preparer
by Vern Hoven

It's quite an eye opener.

 

The IRS is still around, and the tax maintains every individual in legal jeopardy to prove there income on challenge whether they may qualify to file or not. Businesses still jump throught the same old hoops and the total overhead costs to business in complying with the tax remains generally the same, (65cents for every revenue dollar collected) and gets included in the price of goods and services for us all same as any other business cost.

Bottom line, it's essentially the same thing we have now, they just make cosmetic changes that shift the overall tax burdens around concentrating them on the middle class and really doesn't change the impact on growth of government.

25 posted on 04/18/2002 7:19:48 PM PDT by ancient_geezer
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To: ancient_geezer
Agreed.

It doesn't exactly sound like a brainstorm.. Does it?

26 posted on 04/18/2002 7:26:15 PM PDT by Jhoffa_
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To: Jhoffa_
Unfortunately true.

For all the media and political hype surrounding the "flat tax", it is amazingly lacking in substantive benefit for people of the nation.

Makes for great political campaign rhetoric though, and perpetuation of the great tax shell game.

27 posted on 04/18/2002 7:31:57 PM PDT by ancient_geezer
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To: Jhoffa_

As far as consumption taxes go, look at Australia and their "tampon" tax for a good example of what will happen the day after a Consumption tax is implemented.

Problem is that is exactly what the "Flat Tax" is.

A VAT. is called a consumption tax because ( Consumption = GrossIncome - Investments). And the tax is calculated by multiplying the rate times (Gross sales receipts less production purchases and wages paid)

Folks, that is the essential methodology of the "INCOME TAX."

Labels can be deceptive when one does not look behind the smoke screen.


None other than the father of the flat tax, Robert Hall of Stanford University (along with Alvin Rabushka), in his 1995 Ways and Means Committee testimony said, "The Hall-Rabushka flat tax is a value-added tax."

Which was pointed out again in additional hearings in April of 2000:

http://waysandmeans.house.gov/fullcomm/106cong/4-11-00/4-11kotl.htm

"Robert Hall, one of the originators of the proposal(Flat Tax), who describes his Flat Tax as, effectively, a Value Added Tax. A value added tax taxes output less investment (because firms get to deduct their investment.)"

"The Flat Tax differs from a VAT in only two respects. First, it asks workers, rather than firm managers, to mail in the check for the tax payment on that portion of output paid to them as wages. Second, it provides a subsidy to workers with low wages."

The Flat Tax; Chapter 3, by Robert Hall and Alvin Rabushka

In our system, all income is classified as either business income or wages (including salaries and retirement benefits). The system is airtight. Taxes on both types of income are equal. The wage tax has features to make the overall system progressive. Both taxes have postcard forms. The low tax rate of 19 percent is enough to match the revenue of the federal tax system as it existed in 1993, the last full year of data available as we write.

Here is the logic of our system, stripped to basics: We want to tax consumption. The public does one of two things with its income—spends it or invests it. We can measure consumption as income minus investment. A really simple tax would just have each firm pay tax on the total amount of income generated by the firm less that firm’s investment in plant and equipment. The value-added tax works just that way. But a value-added tax is unfair because it is not progressive. That’s why we break the tax in two. The firm pays tax on all the income generated at the firm except the income paid to its workers. The workers pay tax on what they earn, and the tax they pay is progressive.

To measure the total amount of income generated at a business, the best approach is to take the total receipts of the firm over the year and subtract the payments the firm has made to its workers and suppliers. This approach guarantees a comprehensive tax base. The successful value-added taxes in Europe work this way. The base for the business tax is the following:

Total revenue from sales of goods and services

less

purchases of inputs from other firms

less

wages, salaries, and pensions paid to workers

less

purchases of plant and equipment

The other piece is the wage tax. Each family pays 19 percent of its wage, salary, and pension income over a family allowance (the allowance makes the system progressive). The base for the compensation tax is total wages, salaries, and retirement benefits less the total amount of family allowances.


28 posted on 04/18/2002 7:42:40 PM PDT by ancient_geezer
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To: BenR2

"Agreed.

And stockpile ammo."

Yeah.  But while the poor and middle class are stockpiling ammo, the wealthy are just leaving.  After all, why hang around for the revolution, when you have the means to live in paradise and watch the fireworks from afar?

It's a shame though, that the politicians' (both parties) lust for power and control over wealth that they have not earned, is forcing these people to leave, especially since it will force taxes up for those who cannot or will not leave.

 

29 posted on 04/18/2002 7:57:38 PM PDT by Action-America
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To: Jhoffa_

look at Australia and their "tampon" tax

What happened in Australia as regards the "tampon" tax, was the "tampon" was exempt from taxation at the wholesale level, before introduction of the Australian GST (a European style VAT, othewise known as a Grap And Squeeze Tax on all stages of production among businesses.)

The Australian VAT replaced the Wholsale tax that they orginally had and removed the "Tampon" exemption for the calculation of (Gross Sale Receipts) the result, the shelf Price of Tampons went up, and Australian ladies became revolted(the devil made me doit ;o)

30 posted on 04/18/2002 8:01:38 PM PDT by ancient_geezer
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To: ancient_geezer
Yeah, and they had a point.. (it was a stupid point, but it was a point)

They claimed that since they were the only portion of the population that had to purchase a paticular product that it ammounted to discrimination.

It's not hard for me to imagine PETA, ELF, GREENPEACE you name it to attempt to use the tax code to effect social change.

31 posted on 04/18/2002 8:09:22 PM PDT by Jhoffa_
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To: Jhoffa_

Some group will come in and try to use the tax cde to price "incorrect" products out of reach and reward "correct" purchases with lower tax rates.

Unfortunately for the Australians the GST is not a "Retail" sales tax, it is a Value Added Tax on businesses that the Australian citizen sees only as higher prices, no receipt telling him how much is hidden in what he pays for products at the store.

A general increase in tax rate in a VAT system, like the Aussie GST or the American corporate income tax, is indistiguishable from inflation,

Definition [ http://www.encyclopedia.com/articles/13330.html ]:

value-added tax
levy imposed on businesses at all levels of production of a good or service, and based on the increase in price, or value, added to the good or service by each level. Because all stages of a value-added tax are ultimately passed on to the consumer in the form of higher prices, it has been described as a hidden sales tax. Originally introduced in France (1954), it is now used by most W European countries.

Parliment of Australia: Senate Committee:
GST Main Report:
Chapter 1

[ http://www.aph.gov.au/senate/committee/gst/main/chapter1.htm ]

Changes to indirect taxes


KPMG International is an International Business Consulting firm based in Australia.

http://www.kpmg.com.au/gst/work.html

GST & PROPERTY

What is a GST and how does it work?

The proposed GST is a value-added tax, its basic structure being similar to those in force in New Zealand, Singapore, Canada, South Africa, The United Kingdom and other European Union (EU) countries. Papua New Guinea, Sri Lanka and Vietnam will adopt a value added tax within the next 12-18 months. The terminology Goods and Services Tax or GST is in line with that used in New Zealand and Canada.

Of the Asia Pacific region, Australia, Hong Kong and Malaysia stand out as the only major economies that have not adopted a value-added tax as their main indirect tax system.

How does it work?
The GST is charged every time a business supplies goods or services in the course of its business activity. A purchaser of the goods and services is not able to claim an exemption from the tax on the grounds that the goods or services are to be applied to a particular manufacturing or other business purpose.

The essential design feature of a GST is that tax paid by a business on the purchases of goods and services is credited to the business and, in some cases, can be refunded. The aim is that no part of the tax represents a cost to the business.

The effect of the crediting system is that the tax rolls forward at each transaction to the point of sale to the end consumer.


The current income/payroll tax structure on businesses now in place in this country, and the proposed business half of the "Flat Tax", are subtraction method VAT's, in that they are levies imposed on businesses at all levels of production, passed on to the consumer hidden in the price of goods and services.

OTOH; A Retail Sales Tax is a single stage(Retail), single rate, visible to the consumer tax, on the "retail" sale of products. Such is not a VAT and is expressly paid by the consumer not the business and is completely visible to the customer(e.g. VOTER) by a receipt mandated by the law. The Retail Sales Tax does not tax purchases made for investment or business purposes.

32 posted on 04/18/2002 8:23:46 PM PDT by ancient_geezer
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To: Jhoffa_

It's not hard for me to imagine PETA, ELF, GREENPEACE you name it to attempt to use the tax code to effect social change.

You don't have to imagine it they already do through our corporate/business tax structure. For the most part its called evironmental regulation, excise taxes, and "getting rid of corporate welfare" and "removing tax loopholes for the rich".

33 posted on 04/18/2002 8:29:03 PM PDT by ancient_geezer
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To: ancient_geezer
The flat tax would work if they would just leave it at that, a "flat tax". Everyone pays 10% regardless of income, investments, ect. No loopholes no deductions period. Enfortunately, that's not the way they are presenting it.

EBUCK

34 posted on 04/19/2002 9:40:54 AM PDT by EBUCK
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To: EBUCK

The flat tax would work if they would just leave it at that, a "flat tax".

Work? to what end?

Definitely not to keep government growth in bounds. Not while it allows taxation to be hidden behind a veil of inflation by taxing business and corportions, or otherwise disguise taxes with labels pretending to be something other than what they are, A burden on every citizen.

It definitely does not work to preserve or increase personal liberty, or privacy of the citizen. Any income tax no matter how cleverly contrived must of necessity demand proof of the financial state and earnings of all citizens to be enforcible.

Income taxes are especially onerous for they lay an affirmative burden to report and prove creating a legal jeopardy that can be exploited at whim by the unscrupulous.

The fundmental issues of taxation have been known for hundreds of years and income taxes, capitations and property taxes imposed on individual owners have always been the worst of all mechanisms for the job of raising revenues "to pay the debts and provide for the common defense and general welfare of the United States;"

Adam Smith in, The Wealth of Nations (Book V, Chapter II), laid out four things to be considered as guiding principles in designing an appropriate tax system -

I. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state . . . .

II. The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person . . . .

III. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it . . . .

IV. Every tax ought to be so contrived as both to take out and keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state . . . ."

An Income tax(i.e. Flat Tax), no matter how carefully constucted, falls short on all counts.

Furtheremore , in Wealth of Nations pp. 561-64, he had this to say about bad taxes:

1. A tax was bad that required a large bureaucracy for administration.

2. A tax was bad that "may obstruct the industry of the people, and discouraged them form applying to certain branches which might give maintenance and employment to great multitudes. While it obliges the people to pay, it may thus diminish, or perhaps destroy, some of the funds which might enable them more easily to do so."

3. A tax was bad that encouraged evasion. "The law, contrary all the ordinary principals of justice, first creates the temptation, and then punishes those who yield to it. "Evasion is also bad, says Smith, because it tends to "put an end to the benefits which the community might have received from the employment of their capitals."

4. A tax is bad that put the people through "odious examinations of the tax-gatherers, and exposes them to much unnecessary trouble, vexation, and oppression...It is in one or other of these four different ways that taxes are frequently so much more burdensome to the people than they are beneficial to the sovereign"

Unfortunately, Income Taxes, whether they be flat round or otherwise meet these conditions all to readily.

The Intent of the individual income tax is for political and social control not revenue collection. The Individual Income tax is maintained to establish and hold every person in the country perpetual legal jeopardy.

That is a situation that must end with the repeal of the income tax from the statutes, and the prohibition of its use by Constitutional amendment that future generations will not face the same manner of manipulation and interference in their lives.

You cannot do that and maintain any income tax on the books, Flat or otherwise.

35 posted on 04/19/2002 11:14:11 AM PDT by ancient_geezer
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To: EBUCK

Everyone pays 10% regardless of income, investments, ect. No loopholes no deductions period.

A single stage, single rate, comprensive sales tax can do that.

In fact HR2525 is designed to achieve that kind of goal.

Total fed taxes as reflected through gross family income is 23.5% (taxfoundation)

H.R.2525 imposes a 23% retail sales tax on the total expenditure for all retail goods and services no exceptions, but only once at first retail sale.

Since it is a replacement for 94% of the current federal taxes we can measure the effect of removing programs from the federal budget.

23%........... 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
etc.

Hmmmmmm.......

That is how to achieve a real 10% flat tax, with no exemptions, no deductions, no exceptions, at the lowest overhead cost possible, and most importantly with the least intrusion into our privacy and liberties.

36 posted on 04/19/2002 12:15:47 PM PDT by ancient_geezer
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To: ancient_geezer
I. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state . . . .

I don't see how a simple (I'm going to call it "simple" to separate it from the contorted one you posted details to earlier) flat tax wouldn't fit into this container. For example, I made from all sources of income say 50K last year. I then have to pay 5K on November 1st (Nov 1st so that we're fresh out of paying before voting), That's it. No deductions, exemptions, write offs or entitlements. Sounds "sound" to me.

II. The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person . . . .

See above. Seems to pretty clear cut and simple to me.

III. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it . . . .

Is there ever a convenient time to pay taxes? There is no way to make paying taxes convenient or enjoyable. I'm not too sure why this statement is used as pre-qualification.

IV. Every tax ought to be so contrived as both to take out and keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state . . . ."

Makes sense. But this factor currently resided within our EO's power to implement. Somthing like super-super majority should be required to raise taxes. Say 90% of the congress must agree to raise taxes.

An Income tax(i.e. Flat Tax), no matter how carefully constucted, falls short on all counts.

Obviously I disagree. But definately look forward to more information from you as you seem very knowlegable.

Furtheremore , in Wealth of Nations pp. 561-64, he had this to say about bad taxes:

1. A tax was bad that required a large bureaucracy for administration.

Wouldn't a large bureau be required to make sure that manufaturers, service providers and retailers collect taxes from sales? IMO it would have to be larger than that needed for a flat tax scenario.

2. A tax was bad that "may obstruct the industry of the people, and discouraged them form applying to certain branches which might give maintenance and employment to great multitudes. While it obliges the people to pay, it may thus diminish, or perhaps destroy, some of the funds which might enable them more easily to do so."

All taxes, in all formes discourage industry. Sales taxes hamper sales. Property taxes hamper property ownership. Income taxes hamper all of the above. All taxes restrict disposable income.

3. A tax was bad that encouraged evasion. "The law, contrary all the ordinary principals of justice, first creates the temptation, and then punishes those who yield to it. "Evasion is also bad, says Smith, because it tends to "put an end to the benefits which the community might have received from the employment of their capitals."

All taxes encourage evasion. If we, here in Oregon, had a sales tax I would shoot more deer and start a garden in my back yard to avoid taxes. I would think that a simple flat tax would be harder to evade because of the two party conspiratory actions required to accomplish it (employer and employee).

4. A tax is bad that put the people through "odious examinations of the tax-gatherers, and exposes them to much unnecessary trouble, vexation, and oppression...It is in one or other of these four different ways that taxes are frequently so much more burdensome to the people than they are beneficial to the sovereign"

This is a plus for the NRST. Private folks will never have to be interrogated by the tax man. The interrogation burrden will fall squarely upon the shoulders of the producers. I'm not sure that's a better scenario but at least my "ox" would be safe.

I'm not convinced that the NRST is far superior (or superior at all for that matter) to a "simple" flat tax system. The SFT (simple flat tax) would be fair and equitable but would of course not sound the bell for the IRS.

EBUCK

37 posted on 04/19/2002 12:36:18 PM PDT by EBUCK
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To: ancient_geezer
This post actually does a better job of convincing me than your previous one.

Let me ask you one thing tho. Don't you see a very enticing incentive to buy black market under a NRST?

To tell you the truth, I think I'm just about sold on the NRST. Although I'm not going to give up on the Simple Flat Income Tax. Mostly becuase it seems so simple and in-fallable.

EBUCK

38 posted on 04/19/2002 1:19:39 PM PDT by EBUCK
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To: EBUCK

For example, I made from all sources of income say 50K last year. I then have to pay 5K on November 1st (Nov 1st so that we're fresh out of paying before voting), That's it. No deductions, exemptions, write offs or entitlements. Sounds "sound" to me.

How much of your receipts were earnings as opposed to the cost out of your wealth you put into aquiring your earnings.

The complexity and difficulty lay in separating the two into "earnings" to be taxed as income, instead of "Gross receipts" which is a tax on (income + your wealth expended that has been taxed previously). The devil is in the details of what government allows you to deduct as cost.

Why should you be required to report and prove to the government what your earnings and expended wealth are to compute and pay that tax, instead of simply paying a fixed percentage of total payment collected by a business in an anonomous sale not requiring any of the above.


Is there ever a convenient time to pay taxes?

Yep, at the grocery store when you are spending money you have already earned, at the time you elect to spend it.


Every tax ought to be so contrived as both to take out and keep out of the pockets of the people as little as possible

Makes sense. But this factor currently resided within our EO's power to implement.

Actually the choice of an income tax imposes complexity in separating earnings from expended wealth aquiring those earnings. That imposes direct costs on business & individuals that places an unecessary burden on the economy and what we as individual have to apply to other ends.

A retail sales tax removes over 95% of all those costs:

Where Have All the Dollars Gone?
How the government robs Peter to pay him back.
By James L. Payne, Reason Magazine February '94

When the overhead costs are added together, (24 percent compliance costs, 33 percent disincentive costs, and 8 percent other costs), they total 65 percent of tax revenue.


Wouldn't a large bureau be required to make sure that manufaturers, service providers and retailers collect taxes from sales?

Substantially less than under an income tax that has to be administered and enforced on every individual in the United States.

Only retailers would be subject to collect and remit those taxes, and then only to the existing tax authorities in the States. 45 of which already administer sales taxes much more complex than the NRST decribed in HR2525. When one relises that only 10% of the largest businesses move 90% of all retail sales receipts.

It becomes very clear where the diffence lays and how much smaller a bureaucracy it takes. The federal bureaucracy essentially goes from the 120,000 employees of the IRS plus additional DOJ agents, plus US Court resources ... to an office in the US Treasury receiving revenues forwarded from the States,(who by the way are paid to adminster and remit those taxes to the Treasury) No unfunded mandate.

39 posted on 04/19/2002 1:29:53 PM PDT by ancient_geezer
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To: EBUCK

All taxes, in all formes discourage industry.

Not to the same degree, when payroll and income taxes disappear, the overhead costs associated with those taxes dissappear also. Those resources are then released to more productive purpose or in price reduction to retain market share in a competitive market looking to maintain its profitability.

Under an NRST entry level barriers that the payroll taxes impose are no longer there fostering the growth of new business and small enterprises of individuals.

Sales taxes hamper sales.

How do they anymore than (Income taxes + the overhead costs of Income) taxes do. Income taxes decrease the amount a person has to spend and increases the amount he has to pay for all products when he spends what's left after individual income and payroll taxes are extracted.

Remember, only retail businesses deal with the sales tax. which is easily computed from the regular accounts maintained for business purposes (it does not impose requirements beyond adding up gross sales). Others not engaged in "retail" sales are not burdened by retail sales nor the income or payroll taxes of today. Even resale of used/antique products is available as a business that does not entail the sales tax since those products have previously been tax, or grandfathered in the legislation.

The costs embedded in price of goods is much lower than in the income payroll tax system.

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%.

As a consequence the 22% price drops from overhead cost reductions tend to offset the 23% leaving about the same total expended with tax included as you are paying now with after tax income.

The net effect, more money to spend or save, and no impact otherthan positively on the sales.


All taxes encourage evasion.

It comes down to is the liability worth it.

90% of retail dollars flow through 10% of retail businesses.

No substantive business is going to risk there reputations and right to do business for the sake of not collecting a tax paid by its customer.

I would think that a simple flat tax would be harder to evade because of the two party conspiratory actions required to accomplish it (employer and employee).

Since when does it take two parties to conspire as regards an income tax. Just takes one deciding to not report receipts from cash when dealing with individuals only there is no reporting by your "employers"(i.e. customers) of how much they paid your or even that business occurred. Better talk to our infamous tax protesters on the FR threads for the bottomline on that.

Our do you intend to double the size cost of the Income Tax bureaucracy to track down cash payers as well as income receivers.

In the case of retail taxes there are two clear parties, one knowing he paid a tax, or at least got out of it but not at any liability for not remitting such to the government. The other, the business gets all the risk of not remitting taxes sufficient to cover his gross receipts. That business had better keep its customer very happy, else guess who turns states evidence. Then of course there the unhappy ex-spouse, the guy at the bar the business person boasts to, the envious neighbor, the tax authority sting, the ....

 


The interrogation burrden will fall squarely upon the shoulders of the producers.

Not quite true, as only those persons who chose to engage in retail business are subject tocollecting and remitting the tax, and they are paid to do that job by the feds. All others don't have anything to do with it.

40 posted on 04/19/2002 1:47:11 PM PDT by ancient_geezer
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To: ancient_geezer
"Substantially less than under an income tax that has to be administered and enforced on every individual in the United States."

The IRS itself conservatively estimates that 63,000,000 people are not paying the "income" tax, so that is a bogus assertion. I'm sure many of those millions (and posters like yourself) believe they are "getting away with not paying their fair share", but all they are doing is not volunteering to assess themselves. It is possible to be tax-free without an NRST, flat tax or VAT.

Anyway, the kind of tax "reform" that most think is the only solution has about as much chance of passage in this age as the final assignment of blame for the American Civil War.

41 posted on 04/19/2002 1:50:35 PM PDT by Middle Man
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To: EBUCK

Don't you see a very enticing incentive to buy black market under a NRST?

Perhaps, but who is really going to sell in it other than those already doing so.

It's the business selling the goods that is liable and that takes the hit, not the customer.

90% of retail sales dollars flow through the 10% representing the largest businesses.

Any substantive black market just pushes prices down and discourages new entries into the black market.

42 posted on 04/19/2002 1:51:38 PM PDT by ancient_geezer
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To: ancient_geezer
Yep, at the grocery store when you are spending money you have already earned, at the time you elect to spend it.

Nail in the coffin. You have fully convinced me.

Since when does it take two parties to conspire as regards an income tax. Just takes one deciding to not report receipts from cash when dealing with individuals only there is no reporting by your "employers"(i.e. customers) of how much they paid your or even that business occurred.

I was refering to the fact that my employer records and reports what they paid me. They have to by law. Hence the conspiracy between myself and my employer in order to "get away" with it. (see "under the table" employment for my point)

Not quite true, as only those persons who chose to engage in retail business are subject to collecting and remitting the tax, and they are paid to do that job by the feds. All others don't have anything to do with it.

The burden falls to the retailers as opposed to the producers. I understood that but didn't articulate it.

Like I said. I'm convinced. Most of my counterpoints were educational in nature. You teaching me. Thank you.

Now to drum up support since I've got all this new intelectual ammunition to let loose down range.

Here's hoping that this can be implemented.

EBUCK

43 posted on 04/19/2002 2:01:40 PM PDT by EBUCK
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To: Middle Man

The IRS itself conservatively estimates that 63,000,000 people are not paying the "income" tax, so that is a bogus assertion.

Do you even know the subject of my reply to EBAY?

EBAY has been recommending a flat tax on every individual no exceptions or exemption.

My response was concerning the enforcement on every individual in the United States in regard to that. Quite frankly, that is a totally unecessary intrusion into the family. As better options exist. Such as the NRST.

they are doing is not volunteering to assess themselves.

And making themselves prime cannon fodder for the IRS, with no gain.

It is possible to be tax-free without an NRST, flat tax or VAT.

ROTFLM(_|_)O!!!

The Individual Income Tax return(1040) that captures everyone's attention each April, is merely a partial VAT accounting sheet the government cons individuals, held at ransom, into filling out. It's misdirection puts blinders on the eyes of the voter, and totally distorts their perceptions as to the real impact of taxation in their lives.

Every man woman and child in the nation, pays federal taxes through a corporate VAT.

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 price(without taxes) of retail consumption goods and services is 36% for federal taxes alone.

Why? Because all wages and the taxes on them are paid for out of sales receipts to business,(i.e. consumption expenditure).

Federal tax revenues collected as % of current family expenditure = fed/(1-state-fed-savings) =

23.5/(1-.235-0.102-0.012) = 36.09%

If we add in the cost of federal tax compliance, planning, litigation & enforcement, the percentage that truely represents the burden on the family due to the Federal income/payroll tax system, product prices are increased by more than 55% over taxfree prices.

Where Have All the Dollars Gone?
How the government robs Peter to pay him back.
By economist James L. Payne, Reason Magazine February '94

When the overhead costs are added together, (24 percent compliance costs, 33 percent disincentive costs, and 8 percent other costs), they total 65 percent of tax revenue.

Current total Federal tax revenues are about $1900billion, more than $1,000 billion additional dollars are added on onto consumption prices due to the business costs of complying with the federal income/payroll tax laws.

The percent total current federal burden (taxes + compliance costs) of consumption dollars = 36*(1900+1000)/1900 = 54.95% economic burden added on to base retail(i.e. taxfree) prices.

Too bad that citizens don't get a receipt detailing those "hidden sales taxes" buried in their consumption purchases. If they ever did, some of those 70% of the public clamoring for more from government, thinking someone else foots the bill, might be tempted to change their mind.

 

ENJOY your "taxfree" life.

44 posted on 04/19/2002 3:41:35 PM PDT by ancient_geezer
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To: Middle Man

Anyway, the kind of tax "reform" that most think is the only solution has about as much chance of passage in this age as the final assignment of blame for the American Civil War.

So why the comment, nothing's going to change, and you're taxfree.

You have no worries at all, as I see it.

45 posted on 04/19/2002 3:46:31 PM PDT by ancient_geezer
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To: EBUCK

Now to drum up support since I've got all this new intelectual ammunition to let loose down range.

Good luck, you will find even more here, grassroots people working to common goal:

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

I've barely touched the edges in this thread.

46 posted on 04/19/2002 4:49:23 PM PDT by ancient_geezer
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