Applying that sort of simple rule would mean lower taxes on caviar and fur coats than on gasoline and hand tools, which is absurd – the latter have a much stronger claim to be called “necessities”. Attempting to fine-tune the definition leads directly to the same incomprehensible fever swamp as the existing tax code.
Come on. What percentage of the electorate really expects politicians to keep their election campaign promises.
The phrase ‘campaign promises’ runs a stiff competition with ‘empty promises’ to be the idiom of choice when describing agreements that won’t be kept.
I’d be surprised if this got far out of wonk central circle jerks.
Sarcasm?
A proposal to change the income tax system to a national sales tax would probably scare the beejesus out of businesspeople. A radical change like that would have so many unknowable consequences, and markets hate unknowables.
A flat tax is less radical, but even then you’d have to phase it in very slowly, and the devil would indeed be in the details. A flat tax is typically set up with a generous deduction, and then a fixed percentage tax on income above that level. You could make it very friendly to lower and middle income earners, depending on how high the dedection is. But more complicated still is what you do with all the deductions and exemptions in the current tax code. How could anyone manage the politics of whittling those down so that the very wealthy aren’t (still) able to shelter so much of their income from taxation?
I don’t see it. The claim that Bush will make the elimination of the IRS the centerpiece of his re-election campaign is pretty laughable. There just isn’t time for that, and it would be a huge gamble, politically. I’d put this up there pretty close to claims that “Bush will reinstate the draft”.
It would establish a tremendous black market, since it would be very profitable for insiders to steal merchandise and sell it, tax free. At one time there was a thriving tobacco smuggling business on the East Coast, as people bought from low tax Southern states and sold in New York.
If Hastert is serious, he’s going to get a lot of campaign contributions from the Mob - this would rejuvenate them. But there is no way anyone is going to risk proposing it.
It would be nice for Kerry to be able to say the Republicans would make your sales tax 35% (adding in the local tax).
Yeah, right. Eliminating a 10% income tax for a 29% sales tax (and low income people spend most of their money) is sure going to help.
Now money wealthier people get that they don’t spend gets taxed - under this plan it won’t. Guess who has to make up the difference?
Great plan - if you’re Dick Cheney.
I don’t think there is any sort of intention to move on this before the election, it’s more like a collective GOP election promise. Vote us in, reelect Bush and we’ll get rid of the IRS.
It’s low risk politically because they know it can’t pass, but when it fails they can blame it on the Dems. They can pretend they fought hard for it so it’s not their fault. They can get political milage out of the Dems voting against it and they won’t have to deal with the consequences of such a monumental change actually happening.
I also think the points others have made about the loss of an entire industry of jobs (an industry which includes some very wealthy and high power corporate entities) make the idea virtually impossible to ever implement but it may work for them as sheer demamgoguery…kind of like the flag burning amendment.
It makes little sense to me why the rich supporters of the GOP would ever stand for something like this. While income tax exists, owners of capital have tremendous political influence. They can trade off investment and consumption income in order to bring about policy change under our current tax scheme.
If that disappeared and a tax on consumption were levied, they would lose that power entirely. Income taxes are very rational for capitalists and people whose economic behavior has real market consequences.
Is it? I think a LOT of republicans would be upset about going to a national sales tax. The flat tax might have some traction, but it didn’t get very far when it was being pushed by Dick Army. Once people start seeing that their deductions get fiddled with, they start to get scared.
The idea is DOA. The big losers would be Republicans. If there would be no more income tax, how could Republican candidates run on a platform of cutting your taxes? Without the tax cut at any cost faction, Republicans would then have to compete with Democrats on social issues and lose big. Plus all the big CPA firms have their congressmen on speed dial- I don’t think they would be afraid to lobby hard (in other words, buy the Congress) to keep this from happening.
I think Kevin Drum makes a pretty good case as to why this is a political ploy (like the Democrat draft), not a serious proposal. What DH is proposing has only a passing resemblance to what even mainstream conservative economists think is the way to make taxation more efficient and easier to administrate.
http://www.washingtonmonthly.com/archives/individual/2004_08/004436.php
It wont happen simply because, by getting rid of exemptions etc, congress would be voting to lower their own value as commodities for sale. As long as congress has the ability to raise/lower exemptions for industries, businesses etc, congressmen are a valuable commodity for companies/corporations/special interests to purchase.
Congressmen would have a more difficult time raising supplemental income and/or campaign financing from their current or future owners because they would have less of an ability to ‘fine-tune’ tax rates with exemptions and all that. I mean really, it would take a great deal of the incentive away for people to run for congress in the first place. What person in their right mind would do that job for the mere six-figure standard salary they get?
Equally so, large corporations/businesses/special interests wont support it because, while they could save vast amounts by whittling away all the resources devoted to nothing but keeping track of tax loopholes and buying congressmen, they would lose much of the indirect control they have now over the market (which is what the IRS is really; a market (society) control mechanism).
As others have pointed out, for many companies the cost of actually competing and having consumers rather than congressmen determine which companies get what is at this point unknowable, while the market rate for congressmen is generally a known static amount (although ideally, term limits are necessary so that a fresh crop would always be coming in, thus keeping the average price of a congressman relatively low. Term limits are increasingly necessary if we want to keep the cost of doing business in the US down, and I expect to hear more calls for them in the next few years).
Being from one of those Scandinavian countries with both income tax and VAT :eek: , allow me to point out that VAT is not the end-all and be-all solution.
VAT is pretty much 100% enforceable for things - a pound of coffee, a digital camera, a Learjet - as long as a deal is made within the borders. As I presume that one only pays VAT once, used merchandise suddenly takes on an extra value. (If a new car is 30% more expensive, an old car of course can be sold for more, too.) Good for those who own used stuff, bad for those who want to sell us new.
Smuggling and border trade suddenly becomes immensely profitable - good news for Canada and Mexico, I guess. Tariffs can be put in place, but they have to be enforced. And unless you want to improve border control immensely and make smuggling penalties absolutely draconian, the gamble will be well worth taking. We can’t keep people from crossing the border these days…
VAT is a royal pain in the rearside to enforce for service - when someone comes around to paint your house, it’s pretty much up to you, him and your conscience to get the number on the books. Get used to hearing “Do you need a receipt for this job?”. A good chunk of the service market will go “black” - either due to good old-fashioned barter economy or simply by handling transactions in cash. Having large sums of “black” cash floating around in an economy is not all it’s cracked up to be, either.
Oh, and in order to keep the economy going and prevent double taxation, you’ll want to exclude purchases made by companies from VAT. There’s another enforcement problem for you…
Sounds like someone is trying to introduce the meme “The republicans want to get rid of the IRS!” to the electorate. And just before an election, what a coincidence…
There seems to be an assuption that this is a libertarian-freindly thing. I’m not so sure.
One of the things purist libs object to about the current system is that it’s used to induce certain behaviors: i.e. get married and you get a tax break, buy a house and you get a break, install a solar panel on your house, etc etc.
On the surface a national sales tax seems to evade that; but in practice I strongly suspect that the taxes would be adjusted to fit the product. A politician will say that the tax rate – not just the total, but the rate – on yachts should be higher than on bass boats and people will support it.
The end result would eventually be a taxing structure just as byzantine (even if we don’t see it), and certain products that it is politically popular to tax the hell out of will be wildly expensive.
IOW, that’ll be $35 for the dildo, ma’am.
One of the benefits of a consumption tax is that it will those who work illegally in the “underground economy” – I’m thinking drug dealers – pay their fair share. OTOH most illegal workers make a lot less than your average drug dealer, and they’ll get even poorer.
In fact, if we’re paying $20 for a six-pack, $35 for dildos and $109 for a carton of Pall Malls, the “underground economy” is gonna get real big real quick.
Your best source for this is http://www.fairtax.org/.
Read it all, carefully. This is why I support the National Sales Tax concept.
I don’t think this would happen. Lots of countries have a VAT, and I don’t see them being used in this way. In Canada, when the GST came in there was some very early bargaining as flaws in the tax were uncovered and unfairness had to be fixed (i.e. the rules had convenience stores being taxed for selling milk, while larger grocery stores weren’t). But after that sound of negotiations, the tax has remained pretty stable, and the government hasn’t even raised the rate.
The big problem with a sales tax is that fraud is much easier. The underground economy in Canada is huge - especially in the construction trades. Everyone around here has two prices - one if you’re willing to pay in cash, and a different one if some paperwork has to be filled out.
VERY perceptive. Here in CA, the State Board of Equalization really is (at times) a “jack-booted” agency. You have next to 0 rights. They employ plenty of staff, and do lots of audits. Ok, they would rename the IRS. :dubious: :rolleyes:
Ah yes- Fairtax- lies, damn lies & statistics. " Did you know that hidden income taxes and the cost of complying with them currently make up 20 to 30 percent of all retail prices? It’s true. According to Dr. Dale Jorgenson of Harvard University, hidden income taxes are passed on to the consumer in the form of higher prices - from 20 to 30 percent higher than they would otherwise be - for everything you buy"- most of this “accotunting for them” is just simply keeping a normal double entry set of books under the GAAP- which businesses are supposed to do anyway. They’d have plenty of recordkeeping under a Fedal Sales tax, too. This is a “damn lie” as it is literally the truth, but in practice a complete falsehood.
Next damn lie & statistic: “With the FairTax, if the federal government gets $23 out of every $100 spent in America, the same total revenue is delivered to the federal government. This is revenue neutrality. So, instead of paycheck-earning Americans paying 15.3 percent of their paychecks in Social Security/Medicare payroll taxes, plus an average of 18 percent of their paychecks in federal income tax, for a total of about 33 percent, consumers in America pay only $23 out of every $100 they choose to spend on new goods or services for their own personal consumption. And this tax is collected only on spending above the federal poverty level, thus making the tax rate zero up to that level.” Let me get this straight- the average american now pays 33%, so if they then switch to 22%, it’d come out the same? :dubious: And of course- all the money not spent on retail is tax fre- like reant, Mortages, etc. Impossible. And then, they don’t have the bottom 20% or so pay anything. Not even Social Security??? And- 22% will cover it? In their dreams. Yes, there is some econmy of collecting taxes that way, so most real unbiased experts figure a tax of 29%, not 22%.
Next lie “However, this does not take into account the criminal/drug/porn economy, which equally conservative estimates put at one trillion dollars of untaxed activity. The FairTax taxes this - criminals love to flash that cash at retail”- except that the buyers of drugs won’t pay "Fairtax’. Thus, no help here. Drug dealers already make sure to pay income taxes when they get into the higher brackets- that’s what “money laundering” is all about. Why- becuase smart crooks are afraid of the IRS- they got Capone, and many others. Under “Fairtax”- big time criminals would pay almost no taxes.
And then we have the problem of STATE sales taxes- out her that’s 8%. Add that to 29% and you have a 37% sales tax. Experts say at anything above 14% there is a good incentive to avoid taxes- at 37%, the “black market” would be half the economy. Thus, the’d have to raise the rate- driving more dudes into the underground economy. Until the “Fairtax” is more like 100%.
Every Western Industiralized nation has an Income Tax- none get by just on a VAT.
Don’t get me wrong- I’d like to see some combo of the 2- a Federal Income tax with a huge self exemption and standard deduction so that most working stiffs pay no FIT- just FICA & FUTA. The well-off and Filthy rich would pay less, too- but still a significant bite. Then there’d be a small VAT- something under 10%.
Many Nations do this. It works. The risk is with two taxes- the’d just tax you double - and that has happened, too.
My bolding.
The employer pays half of that 15.3 percent…7.65% matching FICA deduction…so reduce your numbers by that amount.
Well put! This thing is gonna fly like an anvil when it comes to implementation. It’ll nevr happen.
The only sane reason I can see for even floating this as an issue is as a diversion to keep said “army of Moloch” preoccupied whilst they attempt to permanently dismantle the Estate Tax.