Or, respond here.
Below the words I post now, is the piece Bruce Bartlett wrote.
This is where I formed my opinion from, talk to him as you talk to me.—House Speaker Dennis Hastert (R-Ill.) created a flurry of excitement in Republican circles the other day when it was reported that he is proposing abolition of the Internal Revenue Service in a new book. This would be accomplished by eliminating all existing federal taxes and replacing them with a national retail sales tax.
There is no indication of what tax rate Speaker Hastert thinks would be necessary to replace all federal revenue. A current proposal by Rep. John Linder (R-GA) says that a 23 percent rate would be adequate. But such a low rate can only be sustained by making completely absurd assumptions about what would be taxed. Every serious economist who has ever looked at this question has concluded that a vastly higher rate would in fact be needed.
First, an unstated assumption is that the 23 percent rate proposed by Mr. Linder is comparable to existing state and local sales taxes, where the tax comes on top of the purchase price. Thus, a 5 percent sales tax on a $1 purchase comes to $1.05.
But that’s not the way the Linder plan works. He deceptively calculates the rate as if the tax is part of the purchase price. He calls this the tax-inclusive rate. Calculating the rate the normal way people are accustomed to with state and local sales taxes would require a 30 percent tax rate, not 23 percent.
When Congress’s Joint Committee on Taxation scored the Linder proposal 4 years ago, it estimated that it would actually require a tax-inclusive rate of 36 percent, not 23 percent, to equal current federal revenues. Calculating the rate in a normal, tax-exclusive manner would mean a 57 percent rate.
Economist Bill Gale of the Brookings Institution notes that supporters of the sales tax assume that there will be no tax evasion under their proposal and that the size of government will not grow, even though they would send a large annual check to every American in order to offset the regressivity of the tax. Making realistic assumptions, Mr. Gale estimates that the tax-inclusive rate, comparable to Linder’s proposed 23 percent rate, would actually have to be about 50 percent. A rate comparable to existing sales taxes would be close to 100 percent.
And let us not forget that state and local sales taxes would come on top of the federal sales tax, pushing the total rate even higher.
Obviously, the federal government is not going to impose tax rates this high, nor would anyone pay them if it did. There would be a massive tax revolt.
The Linder bill (H.R. 25) is also deceptive in its basic assumption that all consumption of goods and services in the U.S. would be taxed. Implicitly, Americans would be taxed on, among other things, all medical care, purchases of new homes, and services provided by state and local governments if Linder’s bill became law.
This means that if you are sick and have large doctor bills, you are going to pay 30 percent on top to the federal government. (Alternatively, you would pay 30 percent more for health insurance.) If you buy a new house listed for $150,000, your actual purchase price is going to be $195,000, including the sales tax. (Alternatively, there could be a tax on the imputed rent homeowners pay themselves for living in their own homes.) And if your children receive $20,000 worth of education each year from the local public schools, somehow or other you are going to have to pay an additional $6,000 to the federal government.
Of course, it is completely idiotic to think that the American people will ever allow this to happen. The idea of taxing all consumption sounds nice in theory until you realize just how broad the definition of “consumption” would be under Linder’s plan.
Economist Evan Koenig of the Federal Reserve Bank of Dallas makes the point that any new sales tax is going to raise prices by that amount. If the Federal Reserve accommodates it, we are going to have 30 percent inflation the year the tax is introduced. If it is not accommodated, then producer prices are going to have to fall by 30 percent, which will cause a severe recession and greatly reduce the tax yield.
Somehow or other, Mr. Linder has gotten 54 House members to cosponsor his proposal. They should all pray that their opponents overlook their poor judgment. When last the national retail sales tax was a major campaign issue—in the 1996 senate race in Louisiana—the Republican sales tax supporter was crushed by his anti-sales tax Democratic opponent. That may explain why only two senators support Linder’s plan, one of whom is retiring this year.
With all due respect to Speaker Hastert, trying to eliminate the IRS by adopting a national retail sales tax is a very dumb idea.
Bruce Bartlett is a senior fellow with the National Center for Policy Analysis.
Three cheers for copyright violations!!
BoyScout11 -
Am I mistaken in my belief that you cut and pasted the Bartlett article in its entirety?
If so, that is a violation of copyright.
As much as I would enjoy keeping you around for your entertainment value, I would e-mail a moderator ASAP (use the little button with the exclamation mark) and ask them to delete it.
This is somewhat more serious than us ridiculing you, as fun as that is. Your failure to use the quote tags makes it appear that you are claiming the words as your own.
Seriously, report this right away, if that is in fact what you have done.
Regards,
Shodan
While I reported it, at the bottom of the article on that site, there was a notice that said, printable version, so I took that as anyone could use it, but just to be sure, I did turn it in.
You’re joking, right? “Printable version” means that it is formatted to be printed from your paper. It’s purely a formatting/typesetting matter, not a legal one.
Told ya I was computer illiterate and since I don’t go poking around for the most part, that was a simple error and not intentional. I type with just 2 fingers and if it is not the simplest of things on a computer, I don’t mess with it. It’s kinda like the new phones and all they can do, I use it to make calls, that’s it.
FYI: Here via the miracle of google is a link to the piece in question.
At quick glance, I can’t quite make sense of all that Bartlett says…He is clearly simpifying a complex topic and we would probably have to go back to the original source material to see the various assumptions made in computing the various rates that are needed. However, what we do have very good data on are such things as the effective tax rates currently (both national and total), via Citizens for Tax Justice (CTJ). [One can also get estimates for federal taxes only from the Congressional Budget Office (CBO).]
We can also go the U.S. Federal Budget and see what revenues as a percentage of GDP. That’s probably exactly same thing as taxes as a percent of income but it ought to be in the same ballpark and provides a sanity check. And, indeed, off the top of my head, I believe that federal revenues are now running something 16-17% of GDP, which is in the ballpark with the CTJ numbers that the federal taxes are in the neighborhood of 20% of income (with state and local taxes adding on about another 10%).
At any rate, there’s no big conspiracy here, Boy Scout11. The numbers are out there for the asking, although do admittedly get spun in various ways by different people.
And, by the way, you really should learn how to post links and quote sources. And, at the very least, if someone posts something saying, “I think this is the article he is referring to”, it is your responsibility to pipe up and so, “No, that’s not the one…It’s the one here.” Right now, you’ve only accomplished wasting a lot of time of other board members which is one reason why we may appear to be pretty hostile toward you.
[Moderator Hat ON]
Boy Scout11, do NOT post copyrighted articles; post a link or short excerpts only. Also, this forum is for debates, not yanking people’s chains; debate seriously and treat your fellow posters with more respect: “you are a poor human being” and the “baby” schtick should not be in here. I VERY nearly just banned you rather than give you a warning. This is your first and LAST warning.
[Moderator Hat OFF]
Oh, I see, they can twist and turn my words and attack me with all their nonsense and even cuss as jurph did.
Not a problem moderator, I will leave of my own volition.
BoyScout, let’s think for a minute. Suppose we wished to scrap our existing tax code and replace it with a national sales tax. So, we would therefore have to calculate what rate we would need to set in order to fund our government at current levels. And I agree that if we set the rate at 30%, so that what used to cost a dollar is now $1.30, that’s a 30% rate, and it would be dishonest to call that a 23% rate by arguing that you are paying $0.30 out of $1.30. (.3/1.3 = .23)
OK, got it.
But suppose we set aside certain classes of goods and make them tax exempt. Food, say. Or books. Or medical care. Or whatever. Clearly, we would have to raise the tax rate on non-exempt goods to keep the same funding levels. Lets say that half of all goods and services are classified as tax exempt. That means the tax rate on the remaining half would therefore need to be 60% to maintain the same tax revenue. Got it.
But, does that mean that we would be paying 60% of our income on taxes? No it would not. We’d still be paying 30%. Half our aggregate purchases would be taxed at 60%, but the other half would be taxed at 0%. (0.50.60)+(0.50.00)=0.30.
Or to plug in real numbers, suppose you make $100,000 a year. The tax on food and housing is 0%, the tax on everything else is 60%. And suppose you spend half your income on food and housing, and half on everything else. So you spend $50,000 on food and housing, and $50,000 on everything else, tax inclusive. Since the tax rate is 60%, you only get $20,000 in goods and services and pay $30,000 in taxes.
Now, what percentage of your income did you pay in taxes? 30% or 60%?
Get it? The tax rate on certain goods can be very high…100%, 200%, 100000%, but that doesn’t mean that the aggregate tax rate is that high. The total tax burden is calculated by multiplying each tax rate by the percentage of goods and services purchased under that tax rate.