As of Thursday, president Bush received a report from a committee he created on reforming our current tax system. From his previous speeches and debates, all believe President Bush's intended result fromt the committee would be a total scrapping of our current Federal Income Tax Code. The Committee was intended to suggested either a simple flat tax system or national sales tax system. Either choice would effectively lower taxes for all Americans yet still increase income tax revenue for the nation. No so. In the spirit of "diversity", the President appointed an eclectic array of Senators to man the committee. Not only were RINOs present, but Demes from all walks of life were also invited. The result is shameful. I don't not believe the results were W's intentions, and God knows these suggestions will not pass in Congress. But here's a synopsis of the Committee's findings. If we keep electing politicians only concerned with keeping their jobs, this is the result.
(I've copied a lot of this stuff from website I forgot to hyperlink.)
Neither flat nor fair, the panel's two plans propose income-based systems with three and four income-tax brackets, with top tax rates of 30- and 33-percent, respectively. That's a modest decrease from today's top bracket of 35 percent, but even that niggardly flattening of the tax schedule came to the panel as an afterthought. The President's directive had been to keep both plans revenue neutral---drawing no more or no less tax revenue than the current system---and this, they eventually realized, necessitated a lowering of the rates. (Even John Maynard Keynes, father of that child demand-side economics, maintained that 25 percent was the highest tolerable rate for income taxation.) Where did the panel find the savings for this act of benevolence? By ending federal deductions for state and local taxes paid, stripping tax-free provisions on employer-provided medical insurance, and chopping off home-mortgage deductions at the knees. Proposals of this sort can only be interpreted as tax increases on the middle class. The primary reason for the panel's failure is its composition.
Clearly, the President's plans for dynamic change in the tax code have been sabotaged, but why would an administration that purported to be so serious about tax reform entrust the job to a panel of pantywaists? Was it really nothing more than a hollow exercise?
But there is a glimmer of hope. A far more legitimate effort comes from Jim DeMint and Lindsey Graham, the South Carolina Senators who---in the best tradition of the Palmetto State---are willing to put their money where their mouths are. In response to the President's Adivisory Panel debacle, Senators DeMint and Graham have offered a plan to eliminate the personal-income tax completely, replacing it with the afore mentioned national consumption tax. Unlike most fair tax plans, however, the tax burden is equally distributed between businesses as a value added tax (VAT) and consumers as a national sales tax. Both the sales tax and the VAT would be a comfortable 8.5 percent, eliminating not only the income tax, but capital-gains taxes, the death tax, and taxes on Social Security benefits---not to mention the awful association we Americans have long had with April 15th. Sen. Graham came on board with the junior senator's plan because it would place U.S. and Chinese goods on a level playing field. "Now the Chinese goods would have to be charged the consumption tax just as American-made products would be," says Graham. Sen. DeMint, meanwhile, points out that the VAT would be "very visible to the final end-use consumer."
4 comments:
Stephen -- the panel's recommendation was merely that - a recommendation. It was a political stunt to appear nice and bi-partisan, but it does simplify things and is a step in the right direction. Bush and Snowe will have the final say on this late next year or in '07, and will hopefully take things further. By then W's poll numbers will probably be in the 60s again because Iraq will be (more) stable and we'll have started pulling out of there.
The best way to go would be what we did in 1986: re-establish 2 rates for personal income: 15% and 28%, and do away with all deductions save the home mortgage. This doesn't go near far enough, but anything that tries to go farther simply won't pass right now. Too many class-warfarists and too many John McCains.
In addition, we have the highest corporate tax rate in the world (35%). Something needs to be done about that too. Get rid of all the deductions and have something closer to 10%, like Ireland, New Zealand and Hong Kong, which are all booming right now.
The national sales tax/flat-tax just ain't gonna happen for at least a few decades or so.
As for social security, W has obviously given up, because the public simply doesn't understand the urgency. It's not a big deal though, because, around 2020 or so when the sh*t hits the fan and it HAS to be reformed, W will get credit for being the first one brave enough to have pushed for it.
And finally, Keynes was the worst economist ever. Long live Hayek.
Pat, I agree with on Keynes. He based all his theories on a hidden love of socialism. Since Socialism obviously contradicts Economic Theory, he twist and turned his way around contradicting philosophies; Social welfare and Economic growth. Even though your main man Hayek proved that Economic Growth produces superior social welfare.
Disclaimer: Germany and Japan have the highest corporate Tax Rates of 50% (for these countries, local and municipality corporate income taxes must also be considered), not the US at 35%. Many believe these two countries are able to have such high TRs because of their supperier work force. Not so superior when America still kicks their ass. Germany is in a severe depression, and Japan is unable to diversify away from a strictly Technological based industry. Wouldn't lower tax rates reverse these trends? (Many German and Japanese automakers have immigrated to the Southern US.)
Singapore is the King of Corporate friendly countries. Their tax rates are below 10%. Their whole country feeds off of booming corporations; they would not dare increase their tax rates. Let us learn from them. (some US companies, like Hewlett-Packard have already moved their headquarters there.)
Socialism in Ireland, led by Sinn Fein, is fighting like hell to raise their corporate tax rates. The scary part is, Sinn Fein is gaining support in the population. Who knows what will happen 5 years from now.
Not only is socialism a threat to wealth-creation, but it's a threat to freedom as well. This is an area oft-overlooked by the same "liberals" who so passionately defend individual liberties but who are just as quick to relinquish those liberties to central-planners who claim they will solve all of our problems.
Central planning slowly but surely creates the very bureaucratic framework the allowed Hitler and Mussolini to come to power (Germany, for example, was the first industrialized country to implement a welfare state in the 1890s). When citizens start believing that the source of their freedoms and economic well-being is not themselves and their Creator, but instead the Almighty State, we are in serious trouble. There are still people who, for example, think FDR somehow "got us out" of the Great Depression, when he in fact made it last 10 years longer than it should have been by implementing the most disasterous economic policies this country has ever seen. All of it, of course, was based on demand-based Keynsian fallacy.
P.S. - are we going downtown tonight?
Somewhere Naurdis(sp?) is sleeping and doesn't care about the use of the word "niggardly" in this article.
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