I'm sure this is a campaign ploy, timed to go with the election. But, since we're dealing with politicans --even the ones we generally like-- I'd expect nothing less.

That being the case, I'd love to see it. I think a flat tax would be met with howls and squeals from the left (unless, of course, it was on a sliding scale -- anyone over $20,000 pays 60%), but I'm sure many other ideas would come off as better than the current IRS system. A national sales tax? Any takers?

However, as much as I like Bush, I'm guessing this may end up with the Hydrogen Car, the Voucher Program, and a small privitizing of SS .... derided by the Democrats. So, Bush, under the guise of his "new tone," does nothing with it.

VAT is a terrible, terrible idea. Not because it doesn't soak the rich enough, but because it has to be such a high tax to generate sufficient revenue. A VAT would have to be in the 25-30% range to make up for zeroing out income tax--that's a 30% markup on everything you buy. And when I say everything, I mean everything--most VAT plans include taxing garage sale items, groceries, and clothing.

I won't even get into the fact that there's no tax more regressive than sales tax (since it taxes consumption), and there would still have to be an IRS to run roughshod over businesses.

As for the flat tax--if you really believe a person earning 2.3 million should pay the same percentage of his income as a person making $13,000--that's just a fundamental difference we won't bridge. But it ends up giving the rich a nice tax cut at the expense of the poor and middle class, which come to think of it has been the Bush tax policy since he took office.

"Elimination of the IRS"

Wow, those are beautiful words.

Personally, I'd like to see us eliminate almost all national tax and have the federal governement get its funding from the states (by what mechanism would need much debate). Let each state determine its own tax structure.

The federal government could continue taxes or fees on anything that is in its mandate. International trade, possibly interstate trade, etc.

Something about having the money flow "up" rather than be handed to the top and flow back down strikes me as a better way to do things.

A couple of thoughts.

While I think we should move in a direction that goes towards voluntary financing of government or directing taxation towards those who use government services, I support abolishing the federal income tax and going to a NRST (national retail sales tax) instead. It would be simpler to collect, more economically efficient, and probably be better for encouraging saving and investment.

However I would not support a VAT because a VAT – by being added to the goods at each level of creation – tends to be less transparent whereas a RST is added to end user (buyer) which means that taxpayer would have a better idea of what they are paying.

Also, I think that claim that this would “eliminate the IRS” is both misleading and meaningless. It’s misleading because you’re still going to need someone to collect the revenue (it’s just that it will probably be easier to collect it from millions of regulated businesses rather than tens if not hundreds of millions of individual filers – particularly since most of the States already seem to have a decent sales tax collection infrastructure in place). Also, there will probably be some desire to deal with making it less burdensome on the poor either by exempting certain items (which could lead to making the sale tax code more politicized and complicated but probably not such much as the income tax code) or some sort of rebate structure.

I realize that this is an important issue and if done correctly would result in a net improvement in the taxation side of government. I just wish that we had more members of Congress who were as interested in dealing with the SPENDING side of things.

Correct me if I'm mistaken, but haven't most Flat Tax proposals included a minimum income below which no tax is levied?

Actually, there is a growing support for something like this. Check out this site, there main guy was on the Patriot a few weeks back and he had an answer for every critisism and the have the research to back it up on the website. The rate to be revenue neutral is 23% and they have a rebate going out to every family for the entire amount up to the poverty level of income. I like the concept, it would help in so many areas. Check it out...

http://www.fairtaxvolunteer.org/smart/sketch.html

The horrible problem with a VAT is--it will be in addition to, instead of in place of the income tax. And you know it will. I would LOVE to see the IRS abolished, but I also know it would only be replaced with something else. I was for Steve Forbes' plan for a flat tax, below a certain income lever there's no tax. You could send your return on a post card. What's not to like? Except for the tax/and/spend Dems

Flat tax revolution
http://www.townhall.com/columnists/jackkemp/jk20031110.shtml

Since instituting a flat 13 percent personal income tax, the old Soviet bear has been transformed into a raging bull. In 2001, income taxes rose 47 percent, 28 percent if adjusted for inflation, and in 2002 real tax revenues rose another 20 percent. During this period economic growth averaged about 4.6 percent while many other countries' economies around the world continued to stagnate or contract. Even The New York Times begrudgingly conceded, "Russia imposes flat tax on income, and its coffers swell." Before Russia adopted its flat tax, countries that had adopted a pro-growth tax system were small city-states like Hong Kong and small countries including Latvia and Estonia, all of which benefited from the flat tax.

Following the success of the Russia model, the Ukraine has recently passed legislation that would scrap a five-tier progressive tax scheme with a 13 percent flat tax.

Regional tax competition spurred by the success of the Russian flat tax has compelled Communist China to consider adopting a flat tax by reducing their 45 percent top personal income tax rate to a more reasonable 20 percent.

“Correct me if I'm mistaken, but haven't most Flat Tax proposals included a minimum income below which no tax is levied?”
Some of the proposals (most of the major ones that I’ve seen) usually keep and/or increase the level of the personal exemption. Strictly speaking it isn’t a “flat tax” but rather a political compromise in order to exempt the poorest of the poor from having to pay income taxes.

How do any of these proposals fit in with the idea of user fees? There doesn't seem to be any necessary correlation with consumption of private sector goods and public services. For example, I eat out 2/3rd of my meals and would likely pay higher taxes for that than a fellow citizen who eats at home. The higher taxes I pay have nothing to do with the governmental services I consume.

With an income tax you can a least make the argument that your income is derived from market transactions set within a stable institutional framework, and infrastructure provided by the government. Therefore the more I earn, the more benefit I am deriving from the infrastructual stability imposed by the government. Or vice versa, the more I have to loose if that stability is disrupted. Consequently my tax should be higher to sustain the system. This would be part of the argument for a progressive system since the wealthist own businesses large businesses and derive much of that wealth from the leverage of public goods i.e. public schools for educated employees, roads for shipping goods, federally insured deposits, etc. wheras the less well off are less able to leverage these public goods to their advantage.

With sales taxes you are taxing a voluntary decsion (which is why some find it appealing) but you aren't matching the tax revenues to either services recieved as in a user fee or a general benefit from government infrastructure and imposed stability.

Nick Frank wrote:

“How do any of these proposals fit in with the idea of user fees?”

No one suggested that it did. I said that I favored the idea of a NRST over an income tax because I believed it would more efficient economically (which has all sorts of perverse economic incentives built into) and tend to encourage saving and investment. Arguably it could also make the United States more competitive economically (particularly in encouraging FDI) while freeing up resources spent on tax compliance.

“There doesn't seem to be any necessary correlation with consumption of private sector goods and public services. For example, I eat out 2/3rd of my meals and would likely pay higher taxes for that than a fellow citizen who eats at home. The higher taxes I pay have nothing to do with the governmental services I consume.”

Nor is there any correlation with earning income and consumption of “public services.”

“With an income tax you can a least make the argument that your income is derived from market transactions set within a stable institutional framework, and infrastructure provided by the government.”

You could try to make that argument but it’s a fallacious one since (a) most of what government does is income transfer rather than providing “public goods” and (b) there is no correlation between earning income and using more government services. In fact it is probably the opposite as wealthier earners tend use FEWER government services such as sending their children to a private school, not using welfare programs, funding their own health care, purchasing a security system rather than relying on the police, etc.

“Therefore the more I earn, the more benefit I am deriving from the infrastructual stability imposed by the government. Or vice versa, the more I have to loose if that stability is disrupted. Consequently my tax should be higher to sustain the system.”

The only way that this argument would be anything less than laughable is if all that government did was to provide those services such as police, courts, and national defense. Instead most of what government does is rob Peter to pay for Paul’s favorite income transfer program and hence the graduated income tax is simply a mechanism for legal looting. The best way to sustain that system would be to have a user fee (such as charging an insurance premium for contractual enforcement) directed to pay for the police, courts, and national defense since there you are actually trying to tie the use of a government program to paying for it.

“This would be part of the argument for a progressive system since the wealthist own businesses large businesses and derive much of that wealth from the leverage of public goods i.e. public schools for educated employees, roads for shipping goods, federally insured deposits, etc. wheras the less well off are less able to leverage these public goods to their advantage.”

Roads are already pretty much paid for by those who use them with a dedicated gasoline excise tax (which is pretty close to a user fee although it is arguable if this covers the full cost or if all of the fees are going for the service). FDIC is also pretty much self-sustained (although there may be some concerns about the risk exposure). Both of these are actually an example of charging those who use a government service the cost of sustaining that program and actually undermine your argument.

As far as the “benefits” of public schools, they primarily go to those who work at the public schools with the secondary beneficiaries being the students who (if the education actually provides a value) are able to earn a higher wage. The “benefits” to the public and employers are actually much further and lesser than the “benefits” for school employees and the student/worker. In which case there is no justification (aside from those invented by would-be looters) for trying to pass along the cost TWICE to the public and employers since they are ALREADY baying for the “benefits” of a public education by paying higher wages to the employee.