taxes
Return to Common Sense
July 3, 2010
Section:
Domestic – Taxes
“The tax code is
socialistic redistribution of wealth and discourages growth, while foreign
country experiments with low and flat rates have resulted in growth in
population and revenue.”
“To compel a man to
subsidize with his taxes the propagation of ideas which he disbelieves and
abhors is sinful and tyrannical.” Thomas Jefferson.
Philosophy (Background, Issues, Objectives):
Constitution Article I identifies “direct
taxes shall be apportioned among the several states...”
- Congress “shall have the power to lay and collect taxes,
duties, imposts and excises to pay the debts…”
Amendment XVI specifies that the Congress can
“…collect taxes on incomes…”
Almost 40% of the public is out of
compliance with the present tax system, according to the IRS.
- The IRS has an almost limitless number of forms, publications,
schedules, instructions and rules — all totaling roughly 70,000
pages or 3.7 million words.
- Cost of compliance has increased from $112 billion in 1995 to $265
billion in 2005.
o Compliance
consumes 7.6 billion hours or the equivalent of 3.8 million full-time workers.
- Non compliance is most due to the enormous complexity of the
current system.
o
About 60% of taxpayers pay professionals, who have
to refer to 25 volumes of administrative and legal guidance books that take up
nearly nine feet of shelf space, to file for them.
o
22% of taxpayers buy software that helps steer them
through the process.
- Tax evasion is a major, continuing, and growing problem (IRS
estimates 2% in 1992)
o
IRS assessed over 33 million civil penalties in
1997.
Current income tax is unfair and
inequitable.
- Revised
minimums, exemptions, and deduction are exempting more and more from
paying any taxes.
o
In 2010 47% of Americans pay zero or
negative federal income taxes.
o
Between 1950 and 1990, the number zero federal tax
returns averaged 21%, dipping to 18% in 1986, in the 1990s, the zero tax
percentage hovered around 25% of taxpayers.
- Progressive
rates penalize increased income (top 1% pay 36.9% of all income taxes).
o Karl
Marx demanded a “heavy progressive or graduated income tax” to
redistribute wealth.
o “Living
wage” concept is discredited Marxian dogma justifying redistribution of
wealth.
- Thanks to
inflation, Alternative Minimum Tax (AMT) now applies to more people.
- Rasmussen poll
found majority (61%) did not believe they got their money’s worth
from taxes.
- Corporate income
tax of 35% is higher than tax rate is every European nation.
Lower tax rates have been proven to grow
the economy and improve standards of living.
- Laffer curve
demonstrates how lowered tax rates increase revenue.
- Kennedy, Reagan, and Bush tax cuts all proved positive impact of
rate cuts.
·
Tax
cuts aimed at capital and business produced the biggest economic benefits.
o For every tax-cut dollar on
capital gains, $10.61 of new GDP is created.
o For every dollar of
accelerated business-investment tax write-offs, $9 of new GDP is created.
o Fr every dollar of corporate
tax cuts, $2.76 of new GDP is created.
o The IMF found for every
dollar of government spending, only $0.70 of new GDP
is created.
Nonprofits have a unique and profound
influence on the American people and culture.
- Nonprofits serve
many roles in society and our families' daily lives: churches,
educational institutions, unions, health and medical care charities, youth
outlets such as Boys and Girls Clubs, pet rescue and placement groups,
etc.
- Nonprofits help
shape nearly every aspect of American society.
- Government money
has bought charitable allegiance and complicity with the liberal
agenda.
- Rather than
instruments of private association and independence as part of the fabric
of American freedom, taxpayer-financed charities have become extensions of
big, corrupt government.
- Nonprofits
historically have been one of the two institutional watchdogs and critics
of bad government and corrupt politicians.
- Politicians have
taken full advantage of this situation, and use taxpayer funding of
charity as a means of political patronage and even personal benefit.
- There seems to
be correlation between corruption and public (versus private) financing of
charity.
- Liberal
nonprofits indoctrinate our youth and are helping move society towards
socialism.
States have different income tax rates,
which has had a predictable influence on growth.
- States with high tax rates (
- The only
- States with low income taxes (
- States with no income tax (
- In
- In
Bush tax cuts have once again proven
value of Supply Side economics.
- Tax revenues are above the historical average,
even after the tax cuts.
- Nearly all of the 2006 budget deficit
resulted from additional spending above the baseline.
- Supply side economics assumes replenishment of some but not
necessarily all lost revenues.
- Capital gains tax revenues doubled following the 2003 tax cuts.
- Projections show that entitlement costs dwarf the projected large
revenue increases.
- Tax revenues correlate with economic growth, not tax rates.
- The low income tax cuts reduced revenues the most.
- Pro-growth tax cuts support incentives for productive behavior.
- The economy responded strongly to the 2003 tax cuts.
- The rich are now shouldering even more of the income tax burden.
- Contrary to common belief, lowering corporate
tax rates results in increased tax revenues.
Two major alternatives are designed to replace the
existing progressive income tax.
- FairTax proposes a progressive national retail sales (consumption) tax.
o Requires
repeal of 16th Amendment which authorized tax on income.
o Theoretically
fair tax would include underground economy, paying at time of purchase.
o Value-Added
Tax is a national sales tax paid by individuals and businesses at the cash
register.
§ The
credit-invoice VAT gets its name from the fact that businesses remit the VAT
collected from consumers purchasing finished products, after subtracting the
tax they previously paid.
§ Another
form of the VAT is the "subtraction method," under which businesses
would pay taxes on their annual receipts after subtracting the money they spent
to make their product.
§ VAT
rarely replaced income taxes in Europe, or even resulted in lower income tax
rates.
- Flat Tax proposes all earned income taxed
only once and at one rate.
o 13
European countries implemented flat tax with great success in compliance and
economic impact.
o
o 3
Asian countries implemented flat tax, lead by
o
o
o
o Lowered
corporate income tax rate results higher tax income, proving Laffer Curve.
Principles:
Primary purpose is to raise revenue to
run the government.
- Taxes must be simple, fair, and equitable.
- Taxes should not be used for social change.
Personal achievement and risk must not be
penalized.
Recommendations:
Short
term, simplify the existing income tax:
- First, begin transition
by offering an optional flat income tax alternative.
- Next, implement incremental improvements to
the existing tax code:
o Make
income tax cuts permanent.
o Index
capital gains tax rate for inflation.
o Repeal
double taxation on interest, dividends, gifts, and capital gains.
o Repeal
Alternative Minimum Tax (AMT).
o Repeal
“death tax” on estate inheritance.
o Ban
internet taxes permanently.
o Reduce
corporate taxes to more globally competitive rates.
- Institute dynamic scoring of tax proposals to establish true impact
of any tax change.
- Stop defining political groups as non-profit organizations.
Long
term, replace the federal Income Tax approach
with National Sales (consumption) Tax:
- First, Repeal the 16th
Amendment that authorizes income taxes.
- Next, implement a flat retail sales tax system
with no exemptions, deductions, or minimums/maximums.
o
Apply same rate to individuals,
partnerships, and corporations.
o
Redeploy IRS to focus on enforcement.
- Abolish “worldwide” taxation, to eliminate double
taxation with foreign taxes.
References:
American for Fair Taxation on www.fairtaxvolunteer.org.
Citizens for Tax Justice on www.ctj.org.
“The
Fair Tax Book – Saying Goodbye to the Income Tax and the IRS”
by Neal Boortz and John Linder, published by
HarperCollins Publishing, 2005.
“Examining
a Change to a National Retail Sales Tax Regime: Impact to Households”
dated November 1996 published by Stanford Decisions and
“Emancipating
America From the Income Tax – How a National Sales Tax Would Work” by David R. Burton and Dan R. Mastromarco dated April 15, 1997 published by The Cato
Institute on http://www.cato.org/pubs/pas/pa-272es.html .
“Description
of Various ‘Flat Tax’ Proposals” dated
“The FairTax, Tax Evasion, and the Underground Economy”
dated 2000 published by Americans for Fair Taxation on http://www.fairtax.org/pdfs/tax_evasion.pdf .
“Tax
Slavery and the IRS” by Christopher Ruddy dated
“Few
think taxes are spent wisely” by Jon Dougherty dated
“A Tale
of Two Tax Codes” by Diane Alden dated
“Mayday,
Mayday” by Deroy Murdock dated
“Consumption
tax theory” by Bruce Bartlett dated
“Should
Paying Taxes Be a Requirement of Citizenship” by Bobby Eberle dated
“The
Historical Lessons of Lower Tax Rates” by Daniel J. Mitchell dated
“Adam
Smith’s Principles of a Proper Tax System” by Jack P. McHugh
dated
“Framework
for tax reform” by Jack Kemp dated
“Options
for Tax Reform” by Chris Edwards dated
“PAYGO:
A Recipe for Steep Tax Increases and Runaway Spending” by Brian Riedl dated
“Income Distribution: Stagnant or
Mobile?” by Bruce Bartlett dated
“Eastern Europeans Are More Free Than Americans” by Dave Gibson dated
“’Living Wage’ is Socialistic
Income Redistribution” by Tom Brewton dated
“The ‘Fair Share’
Cannibals” by Joel Turtel dated
“Income
Relativism” by Tim Kane dated
“Stop
Lying About Tax Cuts” by Herman Cain dated
“The
Simple (Tax) Life” by Chris Edwards dated
“An
Accidental Tax Boon” by Robert H. Nelson dated
“It’s
Tax-Cut Time, Once Again” by Thomas E. Nugent dated July 14, 2006
published by National Review Online at http://article.nationalreview.com/?q=NTlhN2ZiOGQwYWJjMTBiNzUyM2IyNWQyMTcwNTQ0MGU=
.
“Income
Tax Destroyed
“The
Benefits of Good Tax Policy” by Daniel J. Mitchell dated
“Federal
Tax Burdens and Expenditure by State” dated March 2006 published by
Tax Foundation at http://www.taxfoundation.org/files/sr139.pdf .
“Why
Should the Middle Class Fight Tax Hikes on the Rich?” by Michael Medved dated
“Ten
Myths About the Bush Tax Cuts” by Brian M. Riedl
dated
“Cowboy-Up
Economics” by Greg Kaza dated
“Emerald
Miracle” by Chris Edwards dated
“Conservatives
Push Taypayer Bill of Rights” by Dick Armey
dated
“Which
Taxes Weigh Most Heavily on Americans with Different Incomes?” by
Andrew Chamberlain and Gerald Prante dated
“Who’s
paying the taxes?” by Frank Pastore dated
“Who
Pays America’s Tax Burden, and Who Gets the Most Government
Spending?” by Andrew Chamberlain, Gerald Prante,
and Scott A. Hodge dated March 2007 published by Tax Foundation at http://www.taxfoundation.org/files/sr151.pdf .
“State
and Local Tax Burdens Hit 25-Year High” by Curtis S. Dubay dated April 2007 published by Tax Foundation at http://www.taxfoundation.org/files/sr153.pdf .
“Tax
Facts” by Bruce Bartlett dated
“Closing
the Tax Gap Means Taxpayers Beware!” by Alison Acosta Fraser and
William Packer dated
“Taxing
Myths” by Brian Riedl dated
“Flat
World, Flat Taxes” by Daniel J. Mitchell dated
“You
go,
“Socialistic
Fairness” by Tom Brewton dated
“Revenue-Maximizing
Corporate Income Taxes: The Laffer Curve in OECD
Countries” by Alex Brill and Kevin A. Hassett
dated July 31, 2007 published by American Enterprise Institute at http://www.aei.org/publications/filter.all,pubID.26577/pub_detail.asp .
“Why
the Fair Tax Won’t Work” by Warner Todd Huston dated
“The
World is Flattening” dated
“Internet
Tax Ban: The Next Chapter” by John Gizzi
dated
“State
and Local Tax Hikes Add to Federal Tax Relief Pressures” by JD Foster
dated September 28, 2007 published by The Heritage Foundation at http://www.heritage.org/Research/Taxes/wm1647.cfm “Keep the Internet Tax-Free” by
Grover Norquist dated October 4, 2007 published by
Real Clear Politics at http://www.realclearpolitics.com/articles/2007/10/keep_the_internet_taxfree.html .
“The
Fair Tax – The Truth” by Neal Boortz
dated November 27, 2007 published by Town Hall at http://www.townhall.com/columnists/NealBoortz/2007/11/27/the_fairtax_--_the_truth .
“Is the
“Inflation
and the Tax Man” by Richard W. Rahn dated
“States
of
“The
History of
“Saving
Time & Money” by Michael Burgess and Newt Gingrich dated
“2009
State Business Tax Climate Index” by Curtis Dubay
and Chris Atkins dated October 2008 published by Tax Foundation at http://www.taxfoundation.org/publications/show/22658.html .
“Corporate
Tax Rates: Receipts and Distortions” by Alex Brill dated December 22,
2008 published by American Enterprise Institute at http://www.aei.org/docLib/20090102_TaxNotesBrill.pdf .
“Change
We Need” dated January 13, 2009 published by Investor’s
Business Daily at http://www.ibdeditorials.com/IBDArticles.aspx?id=316743763302078 .
“Cornerstone
of the Obama Agenda” by Mark J. Fitzgibbons dated April 2, 2009
published by American Thinker at http://www.americanthinker.com/2009/04/cornerstone_to_the_obama_agend.html .
“Kennedy-Reagan
vs. Bush-Obama” by Peter Ferrara dated April 8, 2009 published by The
American Spectator at http://spectator.org/archives/2009/04/08/kennedy-reagan-v-bush-obama .
“We
Still Need a Simpler Tax Code” by Nina E. Olson dated April 10, 2009
published by The Wall Street Journal at http://online.wsj.com/article/SB123933106888707793.html .
“The
Income Tax System is Broken” by Declan McCullagh
dated April 15, 2009 published by CBS News at http://www.cbsnews.com/stories/2009/04/15/politics/otherpeoplesmoney/main4945874.shtml .
“The
Flat Tax vs. the Fair Tax” by John Tamny
dated May 19, 2009 published by Real Clear Markets at http://www.realclearmarkets.com/articles/2009/05/the_flat_tax_vs_the_fair_tax.html .
“Value-Added
Tax: No Solution for Health Care or Fiscal Woes” by Curtis S. Dubay dated July 9, 2009 published by The Heritage
Foundation at http://www.heritage.org/Research/Taxes/wm2532.cfm .
“Repeal
the Sixteenth Amendment” by Paul Moreno dated January 14, 2010
published by Human Events at http://www.humanevents.com/article.php?id=35185
.
“Europe’s
VAT Lessons” dated April 15, 2010 published by The Wall Street
Journal at http://online.wsj.com/article/SB10001424052702304198004575172190620528592.html
.
“Business-Power
Neglect” by Larry Kudlow dated July 3, 2010
published by Town Hall at http://townhall.com/columnists/LarryKudlow/2010/07/02/business-power_neglect#
.
