If we are discussing the replacement of ALL federal taxes with a consumption tax, which we are, then all taxation and all government expendatures must be accounted for. I am being intellecturally honest in my prior response and even allowed the production of widgets beyond what you said were sold just to pay for the additional taxes. And I have accounted for the expedatures by the government for that additional tax revenue.

The 20% embedded costs related to taxation and complying with the income tax codes. You may not want to believe it but it is a fact. Don't argue with me about it, argue with Dr. Dale Jorgenson at Harvard University.

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Soldiers swear to protect and defend the Constitution with their lives.

Politicians swear to protect and defend the Constitution with someone else's life.

I'm not sure if I'm following right. But that sounds a bit like simply increasing production which I discussed earlier (in essence I could make a new income tax model where they have the same number of laborers etc but say they make two million widgets now, resulting in widgets all over the place. No. 1,000,000 is plant capacity and they're running at it. If they were hypothetically able to increase they'd need more executives and laborers.



Alright I guess we have to talk about this first as it is central to the above problem and you aren't going to admit that the people of widget world don't need to expend nearlly 400,000 a year to multiply by .3

But on the above point he's blurring two things together.

-embedded costs from taxation. These all need to be paid anyway. All of them.

-complying with income tax codes. Compliance costs are not eliminated in a consumption tax. Shifted around a bit. But still there in the form of needing to file how much was collected. But beyond that much of the complexity is due to the various sticks and carrots the government tries to put into taxes. These would still be present in the form of prebates, or fines or something. So fidling still needs to be done. Also I'm curious how much of that can actually be eliminated. The company still needs to know what's going on with it's money, you can't just fire the accounting department.

Apparently you've never owned a business because the accounting is absolutely insane related to the records required to fill out the tax forms. I'm a small business owner (my wife's business) along with being a contract engineer. You have both employee taxes and business taxes to deal with for the IRS. I use perhaps 10 IRS forms each of which takes hundreds of pages of documentation often to support a single line entry. For example, I bought a laptop for the business. Now for the next five years I have to depriciate it on the tax forms so I have to track it... but the hard drive failed after three years so I had to buy another one. So I have to account for the income to purchase a new one, depriciate out the old one completely, and start all over again. You must imagine that my wife has about 50 items like this that I have to deal with every year and each must be "accounted" for. Oh, and I rent part of the building so now I have other tax forms to fill out. I swear it costs me far more for the accounting to do my taxes than the actual taxes I pay.

This is opposed to a simply accounts receiveable and accounts payable ledger that I could do in a ledger. My wife's cash register automatically does the accounting for sale tax and is capable of doing more than one sales tax addition to a transaction.

Our accounting to pay the sales tax quarterly takes about 10 minutes and I mail off the check. A national sale tax (consumption tax) would take about the same amount of time.

My IRS forms take me about one week every quarter and then at least two weeks for the final tax forms every year. That's five weeks of my time spent doing federal taxes every year and my wife has a very small business. I can't even imagine what a large company does but I'll bet 90% of their accounting department is doing IRS related accounting and they could get by with 1/10th of that.

You think it is small potatos but I can tell you it is not.

As you correctly mention there are "sticks and carrots" in the current IRS system which do not exist in a consumption tax. Talk about the corruption in politics then talk about the IRS laws. Corporations spend millions of dollars on lobbiests and campaign contributions to get a tax break buried deep in the tax laws. Someone just ran a thread on the fact that something like 50% of all corporations don't pay any income tax. Gee, how do you think they got those tax breaks written into the tax codes. They bought the politicians. Do you have any doubt about that.

A consumption tax does not allow hidden taxes or hidden tax breaks. Everyone gets the same prebate, rich or poor, and everyone pays the same tax rate on new products and services. No exceptions for anyone. No hidden taxes, not tax breaks, no politicians jerking off the public and helping out their campaign donors.

And the Politicians cannot hide a tax increase like they do today. If they want to raise more money on the same gross sales then they have to raise the tax rate, period. If the national gross sales goes up they do get more revenue, if it goes down they get less unless they change the rate.

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Soldiers swear to protect and defend the Constitution with their lives.

Politicians swear to protect and defend the Constitution with someone else's life.

Inspired by ShivaTD, and others who are longer/purer 'Fairtax' supporters, I have come up with the Fairest tax Possible.
And Flattest too.

Under my plan Everyone carries their own weight equally.
No free rides.

We have app 300,000,000 people and have a $3,000,000,000,000 (that's trillion) Budget.

Quite simply? $10,000 per Person, per year.

Singles - - - - - - - - - - - -- - - - - - - - - -- - $10,000
Couples - - - - - -- - - - - - - - - - - - - - - - - $20,000
Couples with two Kids (little resource users)- $40,000
Single mother with 6 Kids? - -- - - - - -- -- - $70,000

No more Corporate tax few pay anyway and more is spent avoiding and accounting for.
This will increase USA jobs big time too.

No more BS, IRS, "Shoulds" etc; just a Flat 10k.

NOW some might say some people can't afford it. TOUGH!
Let them 'work it off' until/with someone who kicks in Their share, or serve some hard time, or 'do the right thing'.
If 1/3 can't pay it?
We raise it to $15,000 per person. (and so forth, in ratio)

No more of those Half-@ssed complex/give-and-take measures like 'FairTax' designed to merely take all they GOT to spend! Noooo.
Let's NOT beat around the Bush with eliminating this unfair progressivity!
Fair, Flat, equal.

And NO GUFF from any Bleeding-heart Socialists here!
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LOL I've proposed something similar in the past but only applied it to 10-65 years old adults.

Once again, for everyone, I am not a FairTax.org supporter. I find problems in the details of their plan. But their plan does beat the crap out of the current IRS system of income taxes, hidden taxes, and special legislative tax loopholes.

Once again, the ideal of a consumption tax is simple. It replaces ALL federal taxes including income, FICA, Capital Gains, and Estate taxes and it replaces all of these with a single source federal sales tax. To mitigate any negative impact on the poor and to be totally fair it has a "Prepate" that is paid based upon a present tax up to a certain spending level to offset the tax. FariTAx.org sets it based upon the poverty level set by the government but I believe that is too low. Depending upon whether you are a senior or not it is about $9,500 but let's call it an even $10K and if the tax was 20% then a single adult would get $2000 to offset the tax if all of that money was spent on taxable goods and services. I would like to see the "based" raised to at least $15K because I don't believe the poor can live on $10K.

As I have noted the poor benefit the most percentage-wise. They immediately get a 7.6% in their take-home pay even if they don't have any income taxes withheld. If they have 10% withheld they instantly get 17.6% more take-home pay. Everyone gets the "gross" amount of their earnings. Anyone that says a consumption tax is increadably confused because they actually end of with more money in their pockets AND more purchasing power than under the current income tax system.

Remember, not all goods are taxable. Only new goods so a new car is taxed but a used car is not. A new house is taxable but only the house and not the property. A "used" house is not taxed.

And also remember that everyone pays including those with illegal incomes such as drug dealers and organized crime members.

Can there be fraud and abuse? Of course but it is estimated to be considerably less than under the current income tax system.

The politicians can't engage in corrupt practices because it is a flat sales tax rate and there are no hidden loopholes. No more sneaking in a tax break for the farmers or oil producers. If the politicians want to give them money they will have to include it in the budget and not sneak it into the tax codes.

__________________
Soldiers swear to protect and defend the Constitution with their lives.

Politicians swear to protect and defend the Constitution with someone else's life.

No, sunnyside just sits around and waits for his government cheese ration.

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"All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident." - Schopenhauer

What the heck. I get no government handouts. I'm even a Republican.

However I'm also a realist and I don't blindly believe that something will work out the way I'd like it to.

Anyway why don't you take your personal attacks elsewhere "truth" bringer.

Shiva_TD is at least insightful, and open minded.

Look you have a point in that the current tax systems consumes significant resources. (Though I'm given to understand by a report I don't remember now that very small businesses have it the worst as far as tax related expenditures compared to total expenditures. )

But I have two point. The first is that many of the "hidden" taxes, FICA, the loopholes and much of the elaborate accounting are not inherant to an income tax.

It would be like if someone proposed a consumption tax with no prebates. And then I railed on consumption taxes for not having prebates.

It's an option. Same as the above things. Once could easily have an income tax system without them (such as in the example above)

And additionally I think the government would bring loopholes and such back. They want their control and their sticks and carrots. Just instead of a tax code it would be a prebate code. Ethanol gets X amount in prebates instead of X amounts in tax savings or what have you.

Do you think they wouldn't start that process anew? And if they wouldn't, couldn't they just do something like eliminating all company tax breaks and requiring subsidies to be in the budget?


Which highlights one of my concerns. Many of the taxes that are in use are there because they are fairly reliable. Property is there, you can tax it. People need to make income, you can tax it.

However it would be possible for a sticker shocked nation to nearly get by with no taxes. Simply by buying used, foreign, or what have you.

I think even you would agree that if the system were changed overnight it would be pure chaos as items would indeed cost so much more and people would therefore be more reluctant to buy them.

Even if the system would work well it'd take a slow gradual handoff.

We aren't as far apart as some might believe.

To start with your last comment first, the transitional phase is what concerns me the most. There is a time period where products were manufactured with embedded taxation and then would be taxed again under the consumption tax UNLESS a "Made On Date" was applied to the product and if the Made On Date preceeded the transition then the federal sales tax would not apply.

In income tax, by it's very nature, demands complexity. Obviously not all income is "net" income so it demands exclusions and for literally every catagory of business it requires "special" considerations by the lawmakers. Of course the industry in question always has someone lobbying for them and that person has a large pocket of "campaign contributions" to hand out. Yes, the also have a "justification" for special exemptions and the income tax laws grow and grow to the point where literally no one really knows what they say anymore. As I recall the IRS Tax Code is about 50,000 pages and that doesn't include forms or instructions or special rulings or thousands of other thing that affect the system. A report from a few years ago said that IRS agents advising taxpayers were WRONG like 40% of the time (don't quote me on that but it was huge).

But yes, politicians can corrupt anything but one of the keys to the consumption tax is that there are no exclusions and the prebates which are inherent with it ensure that it is fair especially for the very poor and lower income individuals. But remember, even Warren Buffet would get a prebate so it is universally fair for both the rich and the poor.

And it is a simple law of less than 100 pages. A small book you might call it. Nothing special just a straight forward tax plan. It is very hard for the politicians to get into a 100 page document and corrupt it.

But I agree with you they still could which is really why I would like to see it as a Constitutional Amendment replacing the 16th Amendment. It's intent and requirements could be condensed into less than 50 words which would make it ideal for a Constitutional amendment.

By the way, imported goods are subject to the consumption tax. You know those cheap Chinese items that people buy at Walmart which currently contribute nothing to things like Social Security, well they become taxed and do contribute. Yes, this increases their cost but it also makes the manufacture of an indentical product in America more cost competitive.

Final note: I agree that personal attacks are unwarranted.

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Soldiers swear to protect and defend the Constitution with their lives.

Politicians swear to protect and defend the Constitution with someone else's life.

First I don't know what the income tax law was in 1862. But from the sounds of it I think it might have fit on a single page. A very simple percent of income that goes to the government.

But pretty soon there was an inheritance tax. It got cancelled a couple times and then made it back. And now here we are. I doubt they imagined this. The simple fact that the politicians really want their sticks and carrots mean part of the complexity will come back.

The complexity that may simply vanish and not be replaced is the idea of calculating depreciation. On the flip side businesses become more of a boom or bust situation. For whatever that would do to the economy. Currently the system cuts some slack for a struggling business as their tax liability drops, while a business racking it in pays more. Here the situation is reversed. The wealthy company could invest their money to grow it tax free or any number of things. The company having it rough has it rougher.


You're double counting on the Chinese example though. Once again it's that the product was taxed but the income that bought it wasn't. The same amount of money goes to China and if anything the Chinese product becomes more appealing becauce the sales tax is based on a percentage. So if the Chinese products started out X dollars cheaper it is now X*(1+consumptive tax rate) dollars cheaper.