Cal Thomas Praises Maverick Liberal For Backing Consumption Tax

[NATO AIR]

good note from cal thomas about a maverick liberal in the House

http://www.foxnews.com/story/0,2933,132900,00.html

'I Am About to Praise a Liberal'
Monday, September 20, 2004
By Cal Thomas

No, there's nothing wrong with your TV and you have not inadvertently tuned to one of the broadcast networks. This is still FOX News Channel.

Congressman Chaka Fattah (search) of Pennsylvania has proposed eliminating the cumbersome and to most of us indecipherable tax code and replacing it with a consumption tax. Instead of individuals and corporations paying a tax on earnings, Fattah wants to tax what we buy, sell, trade or acquire.

He estimates the current system costs the government $200 billion because of people who evade or break the law. And he notes that the top 27,000 earners of $500,000 or more pay little or no taxes legally.

The Congressional Research Service estimates more than $53 trillion changes hands through transactions or purchases every year. That's more than 20 times the 2004 federal budget.

Congressman Fatta says in order to protect the poor, transactions of $500 or less would be exempt and there may be other exemptions such as food. I like this idea.


House Speaker Dennis Hastert has proposed eliminating the income tax and replacing it with a flat tax or value added tax. President Bush has said it's an interesting concept worth studying.

Congressman Fattah criticizes Republicans for breaking decades of promises to make the tax code simpler. He is right to do so. Democrats, like Republicans, enjoy talking about reform, but don't do much about it. The tax code has allowed Members of Congress to perpetuate themselves in office by doling out tax breaks to campaign contributors and buying votes.

And that's a tax-free Column One for this week.

What do you think? Send your responses to: [email protected]

 

[Merlin1047]

Bah. Have to give this one an emphatic thumbs-down.

We already have consumption taxes. They're called sales taxes and they run around ten percent in many places.

A consumption tax is an even more simple-minded approach than a flat tax. Neither will work. Consumption taxes are as regressive as sales taxes because they are the same thing. They tax low and middle income consumers at a much higher rate than the rich. Not only that, they are easily avoided by the rich, who will simply resort to purchasing luxury goods from overseas sources. Setting a threshold limit of $500 is simply window dressing to fool those who aren't paying much attention. Although it provides limited relief, its effect will be to make it even more difficult for the poor to purchase things like automobiles, appliances, furniture and homes.

I agree that the current tax code is complex and convoluted. But it is still better than any of the proposed alternatives.

Want to increase federal revenues? Institute a federal lottery. Yes, it has all the shortcomings of a sales or "consumption" tax, but at least it is voluntary and those with very limited incomes are not required to participate.

 

[NATO AIR]

merlin, how can we fix or at least repair somewhat the tax code?

 

[MissileMan]

I've been in favor of eliminating the IRS and replacing income tax with a national sales tax for a long time. There are a lot of people out there who do not pay income tax, and not just rich people. Prostitutes, drug dealers, illegal aliens are all making money and not contributing to the tax base. All of these people spend money though. Get their taxes from them when they purchase goods. It also goes right to the heart of every Dems dream: higher taxes for the rich. If the rich man spends a million dollars, he will definitely be paying more tax than someone who spends a thousand.

P.S. I'm not a Dem! :happy2:

 

[Merlin1047]

merlin, how can we fix or at least repair somewhat the tax code?

HOLY MACKEREL! Trying to answer that question would have given Einstein an Excedrin headache.

The problem with the current tax code is that it has become confusing and convoluted in an effort to nail down and detail those items of income which are exempt from taxation or those that are taxed at different rates. In other words, the devil is quite literally in the details.

Those who support a flat tax claim that switching to that system would simplify the tax code. Personally, I believe that it will do no such thing, it will merely switch the emphasis of the code from stipulating what is not taxable to spelling out in great detail that which IS taxable. Proponents of the flat tax tend to ignore the fact that DEFINING INCOME will be even more difficult than defining which income is not taxable. Unless a strict and detailed code defining income is written, a flat tax will help the rich avoid taxation. For example, the CEO of ACME corporation makes five mil a year. When the flat tax kicks in, he simply reduces his "income" to 500,000. The balance he takes in "perks". His 34 room mansion is purchased for him by the corporation, his utilities, domestic staff, automobiles, yachts, vacations, medical & dental expenses and his children's tuition at Vassar and Princeton are paid by the corporation. The corporation even purchases his Mont Blanc pen sets. The result is that his actual income is the same, now it is simply in a different form.

So, the next logical comment would be, "Well, that's easy, we'll just count all that as income". Ah, but not so fast, Gertrude. First, in order to quantify all those bennies as income, the tax code will have to be just as detailed and just as voluminous as the one we currently "enjoy". And remember the law of unintended consequences? Basically it says that if you adopt a law to target one specific area, it inevitably screws some innocent bystander. Here's what will happen - in an effort to get Mr. Rich's perk's into the tax code, many of the benefits working Americans enjoy will get sucked into the black hole along with Rich's hidden income. Does your employer provide health care benefits? Now they're taxable. Does your employer provide safety equipment at no cost? Could be taxable. How about that free meal you had at the company picnic? Ridiculous, you say? Remember, this is the IRS we're dealing with. Paid travel, per diem, expense accounts, company sponsored day care, perhaps even free parking in the company lot are all examples of things that will probably be taxable under the "flat" tax proposal.

Which brings me to the other "benefit" claimed by supporters of a flat tax - equity, fairness and a lower rate for everyone. Poop. Mr. Rich can create an overseas corporation as a "consulting firm". The corporation can send Rich's multi-million dollar salary to that corporation. Sure, that's illegal, but so what? If Rich sets up his straw man in a country whose banking laws encourage these types of accounts, who will prove where that money really went?

Next let's discuss the other myth about the "flat" tax - that we will pay less in taxes. Yes, we will pay a smaller percentage rate, but we will pay that percentage on far more income than most people suspect. The average value of an employer-provided family health care policy is between six hundred and eight hundred dollars PER MONTH. Add that to your income and see what you get. Now add all those other little bennies that most people think nothing about - and tax them. An annual income of fifty thousand can easily balloon to 75 to 80 thousand for "flat" taxation purposes.

National sales tax - well that's regressive. Low-income wage earners pay a far greater percentage of their income than the rich. Let's say that Phillip Poorboy, making an annual salary of $20,000 buys a modest car for $15,000. He also pays a ten percent national sales tax, bringing the total to $16,500. The $1,500 tax Phil paid represents 7.5% of his annual income. Let's do the same transaction with Richard Rich. Dicky's income is 5 mil per year. He pays the same $1,500 tax on the same car. What could be fairer than that? Do the math. $1,500 is only .03%. That's three hundredths of one percent of Rich's annual income. That type of tax leads to class warfare. It taxes the poor at a disproportionate rate of their earnings and makes life even more difficult for those who can least afford it.

So what solutions do we have? Well, first I would say that controlling spending is perhaps the best way to fiscal health. Unless spending is controlled, it does not matter how much money the government takes in. You can bet your ass that they will always find the means to fritter it away one hell of a lot faster than it ever comes in. So that has to be step one, otherwise there can be no solution.

A healthy economy is always the best boon to governmental income. That's why there was a projected surplus during the latter years of the Clinton administration. Now before you libs get your panties wet - that was Reagan's and Bush Sr.'s economy we were enjoying - not Clinton's. Clinton's only economic strategy was to let Greenspan manage the economy while Clinton claimed the credit. Once the current economic trends bear fruit, federal income will improve to a healthier level.

Increase tax on air travel. Currently air travel is so cheap that the folks who used to ride Greyhound are practically jet setters.

Increase tax on public lands. Loggers and some large-scale cattle ranchers use huge tracts of publicly owned land and pay a mere pittance for the privilege. That land belongs to you and me and we should be getting market value for its use.

Increase tax on heavy vehicles using our highways. Ever see those bragging signs on the back of 18-wheelers "This vehicle pays $50,000 in highway taxes every year"? Well whoopee-doo. It probably causes at least half a million in damage every year.

Impose a federal sales tax on mail order and internet purchases. Keep it small, because it is a regressive tax, but two to three percent won't hurt most folks much.

Force corporations with workers in foreign countries to pay a tax based on the number of workers employed offshore.

Institute a federal lottery. Again, regressive but since participation is voluntary, I have no problem with that.

Now there are lots of money savings devices we could employ such as dropping a nuke on the UN building but that is another topic.

Anyway, that's some of my ideas. I freely admit I'm no economist and might be totally full of crap on the subject.

 

[NATO AIR]

Those are some great ideas Merlin. Thanks for the explanation! I feel a bit more knowledgable about this now.

 

[MissileMan]

HOLY MACKEREL! Trying to answer that question would have given Einstein an Excedrin headache.

National sales tax - well that's regressive. Low-income wage earners pay a far greater percentage of their income than the rich. Let's say that Phillip Poorboy, making an annual salary of $20,000 buys a modest car for $15,000. He also pays a ten percent national sales tax, bringing the total to $16,500. The $1,500 tax Phil paid represents 7.5% of his annual income. Let's do the same transaction with Richard Rich. Dicky's income is 5 mil per year. He pays the same $1,500 tax on the same car. What could be fairer than that? Do the math. $1,500 is only .03%. That's three hundredths of one percent of Rich's annual income. That type of tax leads to class warfare. It taxes the poor at a disproportionate rate of their earnings and makes life even more difficult for those who can least afford it.

You really think Richy Rich is gonna buy the same $15,000 car as Phil? Probably not. In fact Dicky probably will buy 3 or 4 $60,000 automobiles. I also don't believe that a national sales tax would need to be any more than 1 or 2 % in order to be effective.

 

[Merlin1047]

You really think Richy Rich is gonna buy the same $15,000 car as Phil? Probably not. In fact Dicky probably will buy 3 or 4 $60,000 automobiles. I also don't believe that a national sales tax would need to be any more than 1 or 2 % in order to be effective.

That's not the point. The point is that he pays far less in taxes when the tax is computed as a percentage of his income.

 

[CSM]

I agree with a lot of what Merlin said. I am no economist either, but it seems to me that government spending simply has to be brought under control. I know that when I look in my little checkbook, two things are very clear:

1) I can only spend so much money because I only make so much money. I dont buy things based on the lottery ticket I bought this week or the raise I may get next month.

2) I have to prioritize and put what is most important to me first. Those new computer games can really be enicing to me, but I know if I want them I have to SAVE for them.

Obviously, I could buy a lot of stuff on credit card, but if I do, I know I will have to pay for them eventually and at a very high interest rate. The US government should have a checkbook with a public ledger. None of this "secret project" crap. The money they get is the money they have, PERIOD. No credit cards for the Federal budget.

 

[musicman]

I agree. With the exception of clearly defined emergencies, they ought to have to live within their means, like everybody else.

 

[no1tovote4]

Bah. Have to give this one an emphatic thumbs-down.

We already have consumption taxes. They're called sales taxes and they run around ten percent in many places.

A consumption tax is an even more simple-minded approach than a flat tax. Neither will work. Consumption taxes are as regressive as sales taxes because they are the same thing. They tax low and middle income consumers at a much higher rate than the rich. Not only that, they are easily avoided by the rich, who will simply resort to purchasing luxury goods from overseas sources. Setting a threshold limit of $500 is simply window dressing to fool those who aren't paying much attention. Although it provides limited relief, its effect will be to make it even more difficult for the poor to purchase things like automobiles, appliances, furniture and homes.

Not so easily avoided if you tax the product when it enters the US. Regardless of where you purchase the product, if you wish to use it here you pay the tax. Rich people buy much more expensive things, and therefore would pay a larger percentage of the tax than those that are poor. The tax is not as regressive as you would have me believe. The interesting part to me, is Drug Pushers would pay Federal Tax on cars, etc. thereby collecting from sources that we have not in the past. RICOH laws notwithstanding, we do not collect the taxes we should on much of the income in the US. You could also exempt purchases of vehicles at certain levels, etc to insure that the taxes were more progressive than regressive.

I agree that the current tax code is complex and convoluted. But it is still better than any of the proposed alternatives.

Want to increase federal revenues? Institute a federal lottery. Yes, it has all the shortcomings of a sales or "consumption" tax, but at least it is voluntary and those with very limited incomes are not required to participate.

Federal Lottery would definitely be a regressive way to get money. It is one of the main things opponents of state and Powerball lotteries say. You want to replace a progressive system of taxation with voluntary taxation that largely will only hit at the poorest levels.

 

[Merlin1047]

Seems strange to me that while the overwhelming majority of Americans understand the need to live within a budget, our government seems to have no grasp of that concept whatsoever.

But you're right. We can debate taxation schemes till hell freezes over, but that will accomplish nothing until fiscal restraint is demanded of our government. And I do mean "demanded", because fiscal restraint will never be something that the government is willing to impose on itself.

 

[NATO AIR]

just another major plank for our 3rd party platform

(enforced fiscal restraint)

 

[CSM]

just another major plank for our 3rd party platform

(enforced fiscal restraint)

Write that down! I like it a lot....how many planks are we allowed to have?

 

[Merlin1047]

Federal Lottery would definitely be a regressive way to get money. It is one of the main things opponents of state and Powerball lotteries say. You want to replace a progressive system of taxation with voluntary taxation that largely will only hit at the poorest levels.

It seems to me that you have accepted a liberal premise. Liberals believe that most people (except the chosen elite) are incapable of taking care of themselves and must, therefore, be "looked after" by government.

VOLUNTARY spending is by no means regressive. Granted, a poor person purchasing a lottery ticket spends a greater percentage of his/her income on that ticket. But participation in a lottery is not compulsory. Each person who buys a ticket does so at his own volition.

Is it your position that people with limited income also have limited intelligence and therefore government must present them with limited choices? Obviously, that question was rhetorical. But I want to make the point that all Americans regardless of income level have a right to dispose of their income as they choose. And all Americans have an obligation to manage their income to meet their needs. Government is the only entity in our society that is apparently exempt from that concept. The rest of us have to decide if buying those lottery tickets will stretch the budget out of shape this month. Personally, I have faith that nearly all of us are up to that task.

 

[NATO AIR]

dunno know, the RNC and DNC have like 9 or 10 right?

we're commited so far to

massive upgrade of the army/marines
energy/education overhaul
fiscal restraint

ha, anything else so far?

 

[CSM]

dunno know, the RNC and DNC have like 9 or 10 right?

we're commited so far to

massive upgrade of the army/marines
energy/education overhaul
fiscal restraint

ha, anything else so far?

Not yet, but I'm sure that we'll have quite a platform when all is said and done. These message boards are pretty inspiring.

 

[NATO AIR]

Personally, I have faith that nearly all of us are up to that task.

Amen!


(oh and you're absolutely correct about these forums csm)

 

[no1tovote4]

It seems to me that you have accepted a liberal premise. Liberals believe that most people (except the chosen elite) are incapable of taking care of themselves and must, therefore, be "looked after" by government.

VOLUNTARY spending is by no means regressive. Granted, a poor person purchasing a lottery ticket spends a greater percentage of his/her income on that ticket. But participation in a lottery is not compulsory. Each person who buys a ticket does so at his own volition.

Is it your position that people with limited income also have limited intelligence and therefore government must present them with limited choices? Obviously, that question was rhetorical. But I want to make the point that all Americans regardless of income level have a right to dispose of their income as they choose. And all Americans have an obligation to manage their income to meet their needs. Government is the only entity in our society that is apparently exempt from that concept. The rest of us have to decide if buying those lottery tickets will stretch the budget out of shape this month. Personally, I have faith that nearly all of us are up to that task.

I was giving him a reason within his own lexicon to deny him argument against my POV.

Reasonable people would realize that the Federal Government simply could not run on the amount of money a Federal Lottery would bring in. While it may make a small dent in our genrally large tax bills, it would only be a small dent.

My argument is actually for a Consumption tax, and I gave reasons to him that it would not be the "regressive" taxation that he expected. Using words from his lexicon is for understanding, not for agreement.

 

[Merlin1047]

I was giving him a reason within his own lexicon to deny him argument against my POV.

Reasonable people would realize that the Federal Government simply could not run on the amount of money a Federal Lottery would bring in. While it may make a small dent in our genrally large tax bills, it would only be a small dent.

My argument is actually for a Consumption tax, and I gave reasons to him that it would not be the "regressive" taxation that he expected. Using words from his lexicon is for understanding, not for agreement.

I was advancing the lottery not as a sole source of revenue, but merely as a means of collecting additional revenues supplemental to those produced by the current tax system The lottery, along with the other suggestions I outlined such as increased taxes on trucks and airlines, and the internet/mail order sales tax would improve the government's cash flow. Eventually perhaps income tax rates might be reduced if we can ever get the government to combine increased revenues with reduced spending and reduce the national debt in order to finally balance the budget.