Hassert wants to end corporate income tax, shift to national sales tax

[xray s]

I think the Republicans are handing us the campaign issue that will seal their doom this year. I hope they push really hard for this one!

http://www.chicagotribune.com/news/nationworld/chi-0408140163aug14,1,4411551.story?coll=chi-newsnationworld-hed

GOP eyes abolishing income tax
Leaders discuss national sales tax

By William Neikirk
Tribune senior correspondent
Published August 14, 2004

WASHINGTON -- A once-quiet campaign by several top Republicans to abolish the IRS and replace the federal income tax with a European-style national sales tax has burst into the open, leading President Bush to withhold his blessing of the controversial proposal.

Yet the plan has strong backing within the GOP hierarchy, including House Speaker Dennis Hastert of Illinois, who has become its most visible advocate and said he has plans to push the idea strongly in the next Congress.

(snip)

Hastert ridiculed Kerry's remarks about the valued-added tax, referred to as the VAT, and said the plan would benefit the middle class. Now, he said, middle-income people pay an "imputed" tax on every product they buy because corporate income taxes have been simply passed through to them.
(end of citation)

That last line about corporate taxes being passed onto consumers is pure Republican bull. Corporate taxes are not passed onto consumers. That is a stupid comment. No one has ever sat in a pricing meeting at a corporation and said "well, lets add something to the price of these sweat socks to cover our potential taxes that we'll pay in 12 months". Conversely, if corporate taxes were cut to zero, does anyone think marketing departments around the country would all sit there and say "gee, our taxes are lower, so lets cut our prices". The price a business sets for its goods and services has nothing to do with the amount of income tax it may end up paying on its net profits at the end of the year. NOTHING. If the corporate income tax is too high, you won't see people invest in business. No one advocates taxing corporations out of business.

Corporations pay the corporate income tax. Period. There is nothing wrong with collecting taxes from corporations, because that is where a lot of wealth is generated. Taxes on net profits lowers the amount a corporation has to distribute to stock holders, or lowers the amount of earning retained in the business. That's all. So, you can say investors take a hit from corporate income taxes if the corporation was inclined to pay dividends in the first place, or, corporations may have to borrow money instead of spending retained earnings if they need to raise capital.

The Republicans are calling for a massive shift in the tax burden from investors and the wealthy to the poor and middle class consumers. We should have a lot of fun with this one.

[NMDemDist2]

1. everyone is so sick of taxes from their checks the repugs may

get some traction on this one. What folks may not understand in a sales tax will have no impact on the FICA deductions which are the highest amounts in most folks deductions.

Be sure to let folks know that income taxes are the least of their deductions

[ayeshahaqqiqa]

3. You are right

I'm a bookkeeper, and would encourage everyone to tell folks to look at the deduction breakdown on their paystubs.

[phish_head]

8. For it

I think we should be for the national sales tax. It would do away with the IRS as we know it and prevent all politicians from using the tax code to buy votes. It would make my life easier and more private by not requiring me to give all my personal information to the govt. With either a rebate or exemption of items (food/clothing/med) the less fortunate would be protected.

[Solon]

9. National Sales tax is a horrible Idea...

First off, you wouldn't eliminate the IRS, it would still collect taxes, just from a different source. Second, food, clothing, and medication are vital to many people, however, what about cars? They are a requirment in many areas just to live because of sprawl. Hell many jobs require reliable transportation or you can't get hired, and there are HUGE gaps in the coverage of public transportation in many areas. What about gas as well? If these aren't exempt then the tax would be extremely regressive and you would FORCE many working class people onto welfare simply from the cost.

Going back to not eliminating the IRS, once a National Sales Tax is implemented, then the Black Market will take preference to many people, including me. There is quite a difference between paying anywhere from 5 to 10% for goods, compared to paying anywhere from 20-30% that would be required with a NST. Hell at the prices required for that, it would probably be cheaper to import all of your non-essential goods than to pay for them here, talk about outsourcing!

So with the rise of a HUGE black market you would have to have enforcement, and that is the NEW IRS, a good 10 times bigger than the one we have now, that's just great isn't it? They would probably have to organize very simularly to the way the ATF is organized now, just to break the cartels and gangs that will rise up in the gap that will form when we stop going to malls. This also brings up internet commerce, will it have to be outlawed to prevent 'Illegal' importing of products that could be considered tax evasion?

BTW: On your point about Corporate taxes and the rich, here's some figures about how UNFAIR taxes are now, and how they were in the past.

The Loss of Tax Progressivity
Effective Family Federal Tax Rate (Income and FICA) (2)

Year Median Millionaire or Top 1%
---------------------------------------
1948 5.3% 76.9%
1955 9.1 85.5
1960 12.4 85.5
1965 11.6 66.9
1970 16.1 68.6
1975 20.0 --
1977 -- 35.5
1980 23.7 31.7
1985 24.4 24.9
1989 24.4 26.7

As you can see from this, Millionaires are paying less and less of there due to the government, this is fact. Now look at this list:

Personal Corporate Payroll Excise/
Decade Income Tax Income Tax Tax Estate Borrowing
----------------------------------------------------------------
1950s 42.0% 26.9% 11.5% 17.2% 2.5%
1960s 42.0 20.4 18.4 14.9 4.4
1970s 40.3 13.3 27.7 11.3 11.1
1980s 38.0 7.7 29.2 8.2 17.7

As you can see here, Personal Income tax has decreased, but look at how much of a decrease the Corporations are paying now. They are the largest consumers of all groups for government services, yet they pay the least, that is unacceptable. Not to mention the huge increase in the payroll tax that we pay now, almost three times what it was payed in the 1950s.

The tax breaks that Corporations should have, according to Reagan et al. spread the benefit by increasing wages and benefits to workers, right? Well look at this statistic:

Average Hourly Wages (Total private industry, 1982 dollars) (6)

1978 8.40
1979 8.17
1980 7.78
1981 7.69
1982 7.68
1983 7.79
1984 7.80
1985 7.77
1986 7.81
1987 7.73
1988 7.69
1989 7.64
1990 7.52
1991 7.45
1992 7.41
1993 7.39
1994 7.40
1995 7.40

Average wages, accounting for inflations has actually DECREASED for the average worker, add this in with the weakening of Unions and you have a recipe for disaster. Many people would wonder where the profits from paying less taxes and less wages to workers have gone, well it certainly wasn't in investing, which decreased in the 80s, nor was it benefits, which have also decreased, especially recently. They didn't even significantly increased employment, considering that layoffs and outsourcing has been a major trait of corporations since at least the 80s and 90s. Look at this last stat, and tell me that a NST will remedy any of this:

Salaries and benefits of corporate CEOs as a multiple of the average
factory worker's (7)

1980 30 times
1991 130-140
1996 187

For once, I agree with Repubs, I believe we should return the the 1950s, but only in respect to taxation. That was when it was progressive.

[phish_head]

11. Still For It - No matter what.

Solon-

First, I never said that the IRS would go away, they would just have a different role. The best part of the NST to me is the IRS would no longer be able to give me a finacial anal exam every year if the so choose. I have never been audited, but resent having to file every aspect of my personal finacial activity. Second, I would get to keep 100% of my paycheck. Third, people would be painfully aware of exactly how much the government takes from them each year, automatic withholding numbs people to their tax burden. Fourth, the government wouldn't be able to reward/punish people with the tax code for certain behavior (marriage, homeownership, ect) and by votes from different groups with special interest tax breaks.

What you fail to take into account in your above response was the fact that prices will go down without the imbedded taxes and tax accounting costs that are now integrated into the products. If the Fed.Gov. can't make due with 15% of sales receipts it is too big IMO.

As far as tax evasion, how many people evade taxes now either through not understanding such a complex tax code or by decit? Alot. It is hard to say if there will be higher or lower compliance under a NTS. A NTS would mean easier and less costly compliance for business. What I really don't understand is people who advocate higher taxes and repealing the tax cuts, are the first people who (like you stated) will go to the black market to avoid paying these taxes.

FAIRNESS means something different to each person. The most FAIR tax would be to treat everybody the same, which would mean that everyone would pay the exact same dollar amount (not that I'm advocating this).

respectfully,
CK

[PeaceForever]

13. What if you exempted necessities?

Food, clothing, medication, etc.

Then people would be taxed on what they spend rather than what they earn.

This would encourage savings. This would eliminate the tax dodging done by the rich. This would shift the burden of taxation onto those who are the most spendthrift.

A national sales tax would also mean much lower costs to the economy--income tax compliance is a HUGE drain on the economy right now.

[Name removed]

16. Deleted message

Message removed by moderator. Click here to review the message board rules.

[PeaceForever]

17. Good explanation.

In any event, it does appear that a national sales tax CAN be progressive.

[Solon]

18. I doubt it, NST is regressive by nature...

It is not the AMOUNT of money that someone spends that is important, but what percentage of their income. Most working class people spend anywhere from 90 to 100% of their income, mostly on neccessities while for the rich and super rich, it is somewhere in the neighborhood of 10-40 percent, most of which ISN'T neccessities, but on properties that gain value over time, such as real estate or collectibles. If they decide to sell these items, at a profit, that would be a source of tax free income for these individuals.

Some people would say that the savings that corporations would make would actually reach down to consumers through lower prices or higher wages. However, this is never the case, the average worker has been losing their buying power consistently for the past 30 years, and the amount of money that CEO's and the top 1% have been making has shot through the roof. Prices, regardless of what Wal*Mart says, are not cheaper, adjusted for inflation, by any great amount. Also, on the issue of Corporate Taxes, on average, their tax rate is a little under 8%, probably less than that due to the Bush tax cuts.

The remedy to this isn't a regressive NST, but instead should be the elimination of tax loopholes, the ability to sieze overseas accounts used as tax shelters, and finally, a TRUE progressive income tax that lowers taxes on the middle and working classes and increase it on the top 10% of earners. Also, if corporations decide to raise prices to keep their current profit margins, price controls can fix that now can they?

[ayeshahaqqiqa]

2. no way

corporations don't pay their way now. There should be corporate income taxes. If there is to be an individual income tax, it should be progressive, so that the rich share their good fortune with the less fortunate.

That being said, personally I am for coporate income taxes and no personal income taxes. I think that a national sales tax, with exemptions for food, prescription drugs, and buying used items, would be better, because we could be assured that every consumer of new, non-essential products are paying their fair share.

[phish_head]

7. Corp. Taxes

Corporations don't ultimately pay taxes people do IMO. They pay through lower wages and higher prices.

[stevebreeze]

15. this of course explains why corporations spend millions in lobbying

for lower taxes.

IN FACT corp taxes come out of profits which of course mostly go to the owners of stock.

[ithacan]

4. another example of imposing theocracy on US

it is not a coincidence that the GOP is pushing this kind of thing.

According to right wing "Christians," these are the only biblically correct kinds of taxes.

These proposals are straight out of the Religious Right's agenda for imposing a theocracry on this country!

For details check out this page on Religious Right Economics from the excellent TheocracyWatch.org website: http://www.theocracywatch.org/rr_economics.htm

[Lefty48197]

5. Corporations were invented in this country to help individuals dodge taxes

.

[unblock]

6. um, no, they were invented to help individuals dodge bankruptcy

corporations can take on huge debt starting a business, but the owner's assets are safe in the event of bankruptcy. consider that trumps's casinos are bankrupt, but trump himself is doing fine.

corporate taxes loopholes increased when corporate political power increased.

today, many corporations are, indeed, created to dodge taxes. but bankruptcy-remoteness is still a primary motivator for the creation of corporations.

[dumpster_baby]

10. I want to try hastert in a recognized court of law for "economic treason"

Any of you sheeple with me?

[GOPBasher]

12. Yeah, kill the middle class and poor, so

the rich can get richer and richer. Same old shit from them. :mad:

[PeaceForever]

14. "Corporate taxes are not passed onto consumers" = incorrect

I suggest people saying things like "corporate taxes are not passed onto consumers" should take a finance class sometime.

In fact, the amount of taxes paid has a direct effect on corporate net income. The higher the taxes, the more that gets subtracted from net income.

Regardless of whether you agree or disagree with corporate income taxes, you shouldn't base your arguments on false statements.

(I happen to agree with corporate taxes and think 35% to 40% is about right.)