I believe that the Flat tax has real potential to gain traction. The Fair Tax was originally put forth by Dick Armey and some of his supporters. Its base motive is to get at the so-called underground economy (Illegals, etc). Like the VAT the FT is anti-consumption and anti-capitalist in nature. It punishes consumption and hurts the poor to a much greater degree as the poor consumes nearly 100% of their income on just basic necessities like food and rent.
FT: What items are exempt? House and auto/truck purchases? Arizona has basically a 10% sales tax. FT of 23% (as put forth by Armey and the Tea Party groups) plus the state tax would mean a car that costs $30,000 would have an additional tax in excess of $9,900! That would crush manufacturing jobs immediately
Flat Tax: I would need hard data from IRS but here goes: Arthur Laffer has developed a Flat Tax proposal of about 11.5% plus ‘sin tax’ (alcohol and tobacco). I would increase the rate to 12% and add (through constitutional amendment) 3 to for points additional for a period of say ten years where these monies would be used to repurchase our debt. In ten years we should dramatically reduce the amount of total debt to zero or to a level relative to GDP/GDI that is nominal. At the end of ten years it would reset by the constitutional amendment to 12%.
Still, a flat tax will impact (relatively speaking) the poor harder as they utilize the vast majority of their income for basic needs. Perhaps we could exempt the first $10,000 per tax payer ($20,000 MFJ). Therefore, a couple making $100,000 would have taxable income of only $90,000. This is where it can get messy by adding exemptions, exceptions, etc. I would eliminate 100% of all deductions EXCEPT for an IRA contribution say of 10% of gross income. In this example:
MFJ* $ 100,000.00
First $10,000 $ (10,000.00)
IRA contribution of 10% $ (10,000.00)
Taxable Income $ 80,000.00
Flat Tax of 15% (12 plus 3 to pay down debt) $ 12,000.00
Married filing Joint Return
Laffer has better access to hard data; however, this is a good baseline. The obstacles are the entire Charity organizations, AICPA , NAEA , Trial Lawyers, Housing, and many more. Therefore it would take a major effort like a Constitutional Amendment and therein lies the danger. Would the amendment work? It is very tough to undue and amendment. Also, we don’t have the time to mess with this amendment, most likely. The debt must be attacked now by eliminating whole sections of the budget.
Fair tax is NOT fair. It has been pushed by various Tea Parties and they are 100% mathematically proved wrong by economists like Arthur Laffer, Walter Williams, Thomas Sowell, Thomas Zaleski (yes me). Fair tax is a consumption tax that crushes sales of all goods. Then proponents then say they will "exempt" certain items and that is the trap where special interests rule.
USA economy and ALL modern economies are based on consumption. Example: most propose 23% to 33%. Let's be generous and take the 23% ex. In Arizona our sales tax (actually a "privilege use tax) combined with the local/city tax is around 10% depending on the town. 23 + 10 = 33% tax. If you are have a typical family of 4 earning 35 to 60K you now have your tax more than TRIPPLED. That will NEVER sell and causes people to hoard cash. That CRUSHES investment, innovation, etc. Fair tax is a light cousin of France's VAT tax that was introduced in 1954 and has made France a NET importer of ALL manufactured goods with few exceptions. Please re-think this.
Arthur Laffer has proven that a flat tax of about 11 to 12% will replace 100% of current IRC (including FICA, etc). The Federal government is precluded by the US Constitution in the 9th and 10th Amendment from interfering with internal tax matters (and others). The several states all have different methods of levying and collecting state sales taxes. There is no way NY or WY will ever be the same type of population or desires, issues, etc; therefore, trying to have a uniform state sales tax will not take place. Even if possible and desirable we simply do not have the time.
We MUST slash spending now or risk entering a prolonged period of deflation where millions of new unemployed join the 15 million now unemployed. That has never been experienced in America and it would be brutal.
Another key factor: Fair Tax will lend itself to CORRUPTION on a grand scale. Certain favored activities/manufacturing/assembly will be EXEMPT from the tax. Such as: Green tech compaines, GM, Chrysler, etc. Think and you will agree Fair Tax is NOT fair and is down right dumb!
Dear Socialist author: I am economist and portfolio manager and prepare income tax returns annually. The so called poor in our state have: Free health care via AHCCCS, free education, subsidize housing and most have cell phones. The untaxed benefits on average for a family of 4 exceed $40,000.
Facts you can verify via www.irs.gov: Top 1% of tax payers pays more than 40% of total federal tax. Raising tax rates ALWAYS lowers cash to the treasury. The Bush era tax cuts brought in more CASH to the US Treasury than at any other time in history.
The FREE MARKET is best when government gets the hell out of the way
Thomas J. Zaleski RIA EA
President
Thomas Capital Management, LLC
Recent Comments
FT: What items are exempt? House and auto/truck purchases? Arizona has basically a 10% sales tax. FT of 23% (as put forth by Armey and the Tea Party groups) plus the state tax would mean a car that costs $30,000 would have an additional tax in excess of $9,900! That would crush manufacturing jobs immediately
Flat Tax: I would need hard data from IRS but here goes: Arthur Laffer has developed a Flat Tax proposal of about 11.5% plus ‘sin tax’ (alcohol and tobacco). I would increase the rate to 12% and add (through constitutional amendment) 3 to for points additional for a period of say ten years where these monies would be used to repurchase our debt. In ten years we should dramatically reduce the amount of total debt to zero or to a level relative to GDP/GDI that is nominal. At the end of ten years it would reset by the constitutional amendment to 12%.
Still, a flat tax will impact (relatively speaking) the poor harder as they utilize the vast majority of their income for basic needs. Perhaps we could exempt the first $10,000 per tax payer ($20,000 MFJ). Therefore, a couple making $100,000 would have taxable income of only $90,000. This is where it can get messy by adding exemptions, exceptions, etc. I would eliminate 100% of all deductions EXCEPT for an IRA contribution say of 10% of gross income. In this example:
MFJ* $ 100,000.00
First $10,000 $ (10,000.00)
IRA contribution of 10% $ (10,000.00)
Taxable Income $ 80,000.00
Flat Tax of 15% (12 plus 3 to pay down debt) $ 12,000.00
Married filing Joint Return
Laffer has better access to hard data; however, this is a good baseline. The obstacles are the entire Charity organizations, AICPA , NAEA , Trial Lawyers, Housing, and many more. Therefore it would take a major effort like a Constitutional Amendment and therein lies the danger. Would the amendment work? It is very tough to undue and amendment. Also, we don’t have the time to mess with this amendment, most likely. The debt must be attacked now by eliminating whole sections of the budget.
USA economy and ALL modern economies are based on consumption. Example: most propose 23% to 33%. Let's be generous and take the 23% ex. In Arizona our sales tax (actually a "privilege use tax) combined with the local/city tax is around 10% depending on the town. 23 + 10 = 33% tax. If you are have a typical family of 4 earning 35 to 60K you now have your tax more than TRIPPLED. That will NEVER sell and causes people to hoard cash. That CRUSHES investment, innovation, etc. Fair tax is a light cousin of France's VAT tax that was introduced in 1954 and has made France a NET importer of ALL manufactured goods with few exceptions. Please re-think this.
Arthur Laffer has proven that a flat tax of about 11 to 12% will replace 100% of current IRC (including FICA, etc). The Federal government is precluded by the US Constitution in the 9th and 10th Amendment from interfering with internal tax matters (and others). The several states all have different methods of levying and collecting state sales taxes. There is no way NY or WY will ever be the same type of population or desires, issues, etc; therefore, trying to have a uniform state sales tax will not take place. Even if possible and desirable we simply do not have the time.
We MUST slash spending now or risk entering a prolonged period of deflation where millions of new unemployed join the 15 million now unemployed. That has never been experienced in America and it would be brutal.
Another key factor: Fair Tax will lend itself to CORRUPTION on a grand scale. Certain favored activities/manufacturing/assembly will be EXEMPT from the tax. Such as: Green tech compaines, GM, Chrysler, etc. Think and you will agree Fair Tax is NOT fair and is down right dumb!
Facts you can verify via www.irs.gov: Top 1% of tax payers pays more than 40% of total federal tax. Raising tax rates ALWAYS lowers cash to the treasury. The Bush era tax cuts brought in more CASH to the US Treasury than at any other time in history.
The FREE MARKET is best when government gets the hell out of the way
Thomas J. Zaleski RIA EA
President
Thomas Capital Management, LLC