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23% National Sales Tax -versus- Income Tax/I.R.S.

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
I saw this and see some pro's and con's to it. Any change in the tax collection system is going to ruffle someone's feathers.

What are your thoughts on getting rid of the IRS and replacing it with a National Sales Tax?

I also think it is interesting that some of the opponents say the tax rate could be as high as 50% and wonder how the math works on that? If most people spend most of what they earn AFTER TAX then most people only have NET income to spend currently and most people do not pay a 50% income tax rate. So I suspect the folks who suggest the rate needs to be as high as 50% are fear mongering (or are accountants or tax auditors trying to keep their jobs?)

http://www.latimes.com/news/nationw...ec24,0,2536770,full.story?coll=la-home-nation
Huckabee campaigning for 23% sales tax

Political suicide? Quite the opposite for the GOP White House hopeful -- so far. But many call the plan for a national levy 'crackpot' (even if it would shut down the IRS).

By Janet Hook, Los Angeles Times Staff Writer
December 24, 2007

WASHINGTON -- Mike Huckabee, one of the most conservative Republicans in the 2008 presidential race, has embraced one of the most radical ideas on the campaign trail: a plan to abolish all federal income and payroll taxes and replace them with a single 23% national sales tax.

The idea -- dubbed the "fair tax" by proponents -- has been a political asset for Huckabee; its well-organized backers have helped catapult him from the back of the presidential pack to its top tier.

Sales tax proponents have tapped into seething voter hostility toward the Internal Revenue Service to become a below-the-radar political force, popping up at campaign events and candidate forums in Iowa and elsewhere.

The efforts on Huckabee's behalf by sales tax advocates helped spur his surprise second-place showing in an August Iowa straw poll -- the breakthrough that marked the beginning of his rise in the state and nationwide.

He is the only major presidential candidate to make the idea central to his campaign. "The first thing I'd love to do as president: Put a 'going out of business' sign on the Internal Revenue Service," he said at one debate.

Some wonder, however, whether his embrace of the plan eventually could turn into a liability.

The sales tax proposal has been around for years but languished on the fringes of practical politics and policy. Tax professionals generally regard the idea as impractical, regressive and even "crackpot," as one critic puts it.

It has gone nowhere in Congress. The 2005 Presidential Advisory Panel on Federal Tax Reform soundly rejected the idea. And many politicians shy away from it because it is easy for opponents to portray it as a huge tax increase -- as Democrats did in a 2006 Senate race in South Carolina.

The front-runner, Republican Jim DeMint, faced an unexpectedly stiff contest because of his support for a national sales tax. "DeMint wants an extra 23% on nearly everything -- gas, food, clothing," one Democratic ad said.

DeMint responded that his position was being misrepresented, but he still suffered a sharp decline in the polls. He won in the end, but what many thought would be a cakewalk for him turned into a cliffhanger.

Grover Norquist, a conservative activist who, as head of Americans for Tax Reform, pushed candidates to take a no-tax-hike pledge, said promoting a national sales tax in the presidential election would be "political poison."

Still, the proposal inspires grass-roots passion, in large part because it would replace or abolish the Internal Revenue Service, one of the most hated federal agencies and a symbol of intrusive government in some conservative circles.


Among the early advocates of a national sales tax were members of the Church of Scientology, a group that battled the IRS for years to gain recognition as a legitimate religious institution eligible for tax-exempt status. Church leaders backed the establishment of Citizens for an Alternative Tax System in 1990 to advance the cause of replacing the income tax with a national sales tax.

Eventually, the church won tax-exempt status and the group faded. But the issue was taken up by another group, Americans for Fair Taxation -- better known as Fairtax.org -- founded in 1995 by a group of Texas millionaires.

Proponents of a national sales tax say it would be an improvement over the current system because it would increase the incentive to save, by taxing money spent instead of money earned.

Also, the proposal would rid the tax code of its myriad loopholes and would free taxpayers and businesses from the time-consuming, often costly task of preparing annual tax returns.

"What we would do with the fair tax is to eliminate all the taxes on productivity, which means you could earn anything you want," Huckabee said. "You wouldn't be penalized for saving, earning, for having a capital gain, making an investment."

Huckabee and Fairtax.org call for a 23% tax on virtually all purchases in place of federal income taxes, as well as payroll taxes to fund Social Security and Medicare.

To ease the effect on the poor, they propose a "prebate" -- a monthly cash payment to every family -- to cover sales taxes on spending up to the federal poverty level.

'Crackpot plan'

Critics argue that this aspect of the plan would create an unwieldy new government program akin to welfare.

A report by the president's tax-reform panel said such a program could cost $600 billion a year -- "which would make it America's largest entitlement program," the report said.

Even with the subsidies to poor families, critics argue, the tax would primarily benefit the rich because they save the largest share of their income.

Independent analyses have concluded that the tax would have to be far higher than 23% to maintain the government at current levels -- especially if Congress did not eliminate popular tax breaks, such as the mortgage-interest deduction.

William G. Gale, a tax expert at the centrist Brookings Institution think tank, estimates that the levy could run as high as 50% -- a tax so steep that it would be an invitation to mass tax evasion.


"It's a crackpot plan," said Bruce Bartlett, a conservative economist and former Treasury Department official who is a leading critic of the sales tax. "Anyone who supports it should not be taken seriously."

Ken Hoagland, communications director for Fairtax.org, said critics had financial and professional interests in continuing the current tax code.

The group has spent about $2.5 million to mobilize supporters in early caucus and primary states, and plans to spend $1 million more in coming months.

As a nonprofit, it cannot endorse a candidate. But it lets people know where the candidates stand -- and that Huckabee is a particularly strong backer of the tax.

Thousands attended a May rally in South Carolina promoting the sales tax plan, just before the GOP candidates met for a debate there.

None of the then-leading candidates accepted the group's invitation to speak at the gathering. But Huckabee -- at that point still a dark horse in the race -- did speak and for the first time endorsed the group's plan.

"I have a dream that one day in this country . . . April 15 will just be another beautiful spring day," he told the cheering crowd.

A boost in Iowa

The group's biggest push was in Iowa leading up to the August straw poll. Fairtax.org advocates hit the talk-radio circuit. The group aired a radio ad featuring a jackalope -- a mythical animal -- with the tag line: "Real tax reform shouldn't be as mythical as a jackalope."

It sent stuffed jackalopes to every political reporter in Iowa. It hosted an open-bar reception at a major spring political dinner for Iowa Republicans. The group bought up all the tickets to a minor league baseball game and gave them to anyone who would listen to its tax pitch.

For the straw poll, Fairtax.org rented 10 buses and paid the $35 individual fee for 400 tickets to the event.

Huckabee placed second, behind former Massachusetts Gov. Mitt Romney, and garnered the first major coverage he had received in the campaign.

No one knows how many Fairtax.org voters backed Huckabee. But a Romney strategist said the group's effort clearly benefited the former Arkansas governor.

"They were engaged on the ground," said the strategist, who requested anonymity when discussing another campaign. "They were determined to play in this election."

Having depleted its resources in the straw-poll push, Fairtax .org scaled back its publicity efforts to recover financially.

"We went for broke, and almost got there," Hoagland said.

But the cause has been brought to the heart of the Huckabee campaign: David C. Polyansky, a former officer of Fairtax .org, has become a senior Huckabee campaign advisor.

For Huckabee, the proposal may prove a politically useful antidote to the intense criticism he has taken from his party's anti-tax wing for overseeing several tax increases as Arkansas governor.

The sales tax proposal, with its anti-Washington undertone, dovetails with the populist campaign themes he has crafted -- especially on economic issues.

"The average American is more afraid of an IRS audit than getting mugged," he frequently says.​
 

Av8r3400

Gone Flyin'
This will never fly (no matter how right or logical it may be) for several reasons:
  1. Joe & Jane Taxpayer are so stupid they don't know how much they pay on taxes, only how much their return is.
  2. 23% tax is HUGE compared to 0% current national sales tax (See item 1)
  3. IRS (Democrats) will not allow itself to be eliminated (Hundreds of thousands of union jobs)
  4. Simplifying the tax code will allow more people to understand the code (see item 1)
I could go on and on...
 

Glink

Active member
Site Supporter
I'll fast forward; and say that in the end, my sentiments mirror AV8R's, as to the failure of this plan due the paralyzing (maybe government induced) stupidity (maybe ignorance) of the average citizen. However I have spent a bit of time studying this proposal; and it does appear to go along way toward removing the inefficiency, potential for corruption, and undue corporate influence of the current system. Admittedly my study was very limited. Given the slim chance of change I wasn't willing to invest the time.

I guess I have also been well trained?
 

Bulldog1401

Anybody seen my marbles?
SUPER Site Supporter
How about the flat rate income tax. Say 10%. The wealthy (minority) would not like it much, but the por (majority) would embrace it. No loopholes or deductions. Just straight math. There are many people here better educated in finance, and possibly with a better view of the big picture, than me.
 

Bobcat

Je Suis Charlie Hebdo
GOLD Site Supporter
This is the cart before the horse and not much more than another smoke screen. We wouldn't be worrying about any of this if we'd reduce the size of the federal government and especially their waste.
 

Bulldog1401

Anybody seen my marbles?
SUPER Site Supporter
Agreed! I always said I don't mind paying taxes as long as they are used effectively.
 

jdwilson44

New member
This is the cart before the horse and not much more than another smoke screen. We wouldn't be worrying about any of this if we'd reduce the size of the federal government and especially their waste.

Exactly. All these proposals to do away with the income tax and replace it with something else are just a smoke screen. In the end you will pay just as much to the govt. as you do now.

Cut spending. Eliminate all of the things that the federal govt. does that are not authorized under the Constitution (this would probably be about 80% of what they do now). Then you could eliminate the income tax and the federal govt. could subsist with all of the constitutionally allowed methods of collecting revenue - as it used to for the first 1/2 or so of the lifespan of this country.

Somebody start a stopwatch - I want to see how long it takes for somebody to respond that without the income tax we wouldn't be able to support the roads, and bridges, and so forth. (this happens every time this subject gets brought up - so I am sure it will happen this time too)

Just a pre-emptive shot: - if you are going to argue that the roads and bridges will all collapse and fall down without the income tax you are first going to have to explain where all my money is going that I pay into gas taxes, excise taxes, road use fees, etc.
 

Bulldog1401

Anybody seen my marbles?
SUPER Site Supporter
O.K. Roads are covered through use taxes. What about the military, border patrol, ETC.... what are some other sources of funding for these facets of Govt.?
 

RedRocker

Active member
Fair Tax works for me, then cut spending by say 60% for starters. Get the feds out of the savings, education, pharmacy, health care and any other business that you can find in the yellow pages.
 
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