Yes! Anything not to have to file another freakin' tax return. Blah!

Greenspan Says Taxes Should Focus More on Spending
Thu Mar 3, 2005 05:14 PM ET

By Caren Bohan

WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan on Thursday backed a change in the tax code, shifting more to taxing personal consumption, but said scrapping the income tax altogether may be too drastic a step.

The Fed chief told an advisory panel named by President Bush, who has made revamping the tax system a top priority, that it ought to consider a combination of an income and consumption tax.

"I would suspect that probably that may be the best route to go," he said.

Some of his sentiments were echoed by former Sen. John Breaux, the panel's vice chairman, who later told reporters he was intrigued by the idea of a levy on consumption such as a value-added tax.

"Other countries have done it successfully," the Louisiana Democrat said.

He said one idea might be to replace the payroll taxes that pay for entitlements like Social Security and Medicare with a value-added tax while keeping an income tax to pay for other programs.

Breaux leads the bipartisan panel along with its chairman, former Republican Sen. Connie Mack of Florida.

Bush has called the complex existing U.S. tax code a "complicated mess." Simplifying that and restructuring the Social Security retirement program are two of the top items on his domestic agenda for his second term.

But he has opted to push changes to Social Security first and is struggling to make headway in Congress with his proposal to carve private retirement accounts out of the program.

Bush, who has asked the tax panel to report back to his administration on July 31 with recommendations, has said he wants any proposal to be revenue neutral, meaning it would not raise or lower the government's total tax revenue.

That means any change will involve winners and losers, as some businesses and families see their tax bills go up while others see theirs go down.

A value-added tax, which is used in many European countries, is a type of sales tax that is applied to goods at various stages of production and distribution.

In the United States, some conservatives staunchly oppose it because they view it as a hidden tax that would prove too tempting for policymakers to raise.

Many Democrats say consumption taxes would place an unfair burden on America's poor. Lower income people tend to spend most of what they earn and would expend a higher proportion of their money on the tax than high-income people who save more.

Greenspan said, however, there were ways a consumption tax system could be made progressive so that the wealthy continued to shoulder more of a tax burden.

"Probably the simplest way is to exclude certain items from the tax which tend to be disproportionately consumed in a lower bracket," he said. Food and clothing are some items that experts said could be excluded.

James Baker, who served as Treasury secretary during the Reagan administration and was a key player in a revamp of the tax system in 1986, urged the panel to be mindful of politics when it weighed its recommendations.

He noted that ideas such as scaling back the popular tax deduction on home-mortgages came up in the 1986 debate and could have stymied the changes had it not been dropped.

To illustrate the complexity of the current tax system, Everson passed doughnuts around to each of the panel members. He said that if he were a retailer and sold the doughnuts, he would not be eligible for a tax credit but a wholesaler selling the same pastry would get it.

"I hope this gives you some food for thought," he said to laughter. (Additional reporting by Tim Ahmann)

Bush has called the complex existing U.S. tax code a "complicated mess."

This may be the first thing he's said that I completely agree with. Now the problem lies in what the 'fix' will be.

If food/clothing/medical/dental are exempted from the value added tax, I am all in favor of it, particularly if it eliminates income taxes altogether. I do realize that it couldn't be done overnight, but I think it would put the tax burden on those who can afford it, and allows each tax payer a much greater say in how much they want to pay in taxes based on their purchasing decisions.

He noted that ideas such as scaling back the popular tax deduction on home-mortgages came

Removing this welfare program for homeowners would boost the tax revenue base ENOURMOUSLY!

There is no other reason besides out and out social and economic discrimination that the home owner tax deduction still exists.

As for the VAT tax?, I heartily and readily endorse a FAT tax. Whatever your fat to body weight percentage is, YOU pay that amount additionally on ALL consumables and goods.

Removing this welfare program for homeowners would boost the tax revenue base ENOURMOUSLY!False. It would do virtually nothing to the tax revenue base, since virtually the entire tax base comes from business and top wage earners, for whom the deduction is merely a trifle. It is, however, an important tool for the middle class to help them buy a house.

All this talk of tax reform won't change the big picture much. The top earners and busines are still going to support, essentially, the entire country, because they are the only ones who can. The only question is how the tax burden is going to be split among those elite.

All this talk of tax reform won't change the big picture much.

If you're retired with no income then I'd suggest a change to a VAT is very much in your picture, big or small. It does have a big effect on demographics. VAT is not a particularly good or bad tax, but the change over might be politically painful.

It is, however, an important tool for the middle class to help them buy a house.

Why do they need to buy a house, and why do ALL the other taxpayers have to foot the bill for them to do so?

Why can't(shouldn't) they rent? (I know the real reason, my question is rhetorical if YOU too know the answer).

Or pay for their own house with their own money, not the taxpayers(ooh, Fyyr sounds like a socialist-only backwards)?

I don't see any real moral or ethical reason why the government should subsidize the interest on their/my/our credit and loans.

The amount of tax NOT collected on that deduction is enormous. I would have paid additionally about $50K in taxes(10 years, 15K interest per year, 35% rate) on that money.

Well, I did some research. It's much more than I thought it would be, but still not "enormous". The homeowner's deduction for 2005 will amount to <a href=http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/02/06/REGSIB5IQ01.DTL>$72.6 billion</a>, out of a 2005 budget containing <a href=http://www.whitehouse.gov/omb/budget/fy2005/tables.html>$2,400 billion in expenses</a>. It's therefore 3% of the expenses (I expected it to be <1%).

Why subsidize homeowners? For the same reason the government subsidizes charitable donations: home ownership is a positive thing. Homeowners have a stake in their property, and are much more likely to be in it for the long term, and therefore they will be more likely to take steps to improve it and the surrounding neighborhood. Home ownership also raises property value.

If you want to reduce spending, there are better places to start, such as the handouts that go to subsidize crack addicts (through welfare) and the preventible medical problems of fat and/or tobacco-addicted people (medicare).

This reminds me of 'shuffling the deck chairs on the Titanic'. Whether people like some form of VAT or not depends on if they think it will benefit them personally.

What do you think about the total level of taxation in the U.S. if the tax system is reformed?
1. It will go down?
2. It will stay the same?
3. It will go up?

My vote is for alternative 3.

Implementing a 'fairer' system of taxation is a pseudonym for collecting 'more' taxes.

There is nothing fundamentally wrong with a consumption tax such as a VAT (Value Added Tax). Governments need revenue. It's just a matter of where and how they get it.

Canada has had its version for many years. It's called GST (goods and services tax), or its variant HST (harmonized sales tax which combines GST with provincial sales taxes). The GST replaced a complicated pile of hidden business and industrial taxes.

The Canadian government made a major mistake in implementing the GST. They assumed that citizens wanted openness and transparency in taxation. The GST is very open and transparent. You see it on your sales slip whenever you make a purchase. The old business and industrial taxes were totally hidden, but still paid for by the consumer. The government miscalculated. Human nature overshadowed rational thought. There was an amazing uproar about the GST (lots still exists) because people see it continuously. Openness may have been the right philosophical thing to do, but it was a public relations nightmare.

If the U.S. implements a consumption tax, I would highly recommend that the tax doesn't blatantly stare you in the face every time you make a purchase.

Notice how VAT was accepted when it was also said that income tax wouldn't be removed.

The translation is:

If tax income goes up, anything is good.

My prediction from the choices from our Canadian friend is also #3.

I'm all for tax reform. A national sales tax would be find with me.

It is often said of the current tax system that it is a taxation on ignorance. Also, a great many people make their livelihood because the tax system is complex. Simplifying it will be an uphill battle.

It is, however, an important tool for the middle class to help them buy a house.


I am firmly entrenched in the "middle class". I have a nice sized house, that I have a nice sized mortgage on. The interest on that mortgage is nowhere near enough to allow me to itemize now that they raised the Standard Deduction so high.

Five years ago, I itemized every year, but now even with medical bills, property taxes, etc. I can't get above the Standard Deduction.

My guess would be I'm not unique in that.

Personally for me I like the idea of either a VAT or sales tax to simplify the current tax scheme. I would think that changing to a new tax system would be very hard simply because of the entrenched special interests that would resist mightily. Imagine what this would do to Intuit and their Turbo Tax division.

I suspect switching to a consumer type of tax would change the tax rate a little. Probably it'd go up for some, down for others. For me, if income taxes were eliminated, I'd probably have a lot more money because I'm thrifty and don't spend a lot of money. I'm probably the sort of person who would make this scheme not work...

As someone who has always done my own taxes, even when I had my own business, I'd sure welcome a system that was less complicated, even if it meant giving up some of my favorite tax-breaks.

I would gladly give up any and all tax breaks if there were a fairer system that was much simpler to use.

My "ideal" tax system would be to completely abolish the current tax code and replace it with a flat XX% tax on all spending (a sales tax basically). No matter how you earn your money, you'll be taxed the same percent as everyone else. No exceptions, no deductions, no freebies, not even food/shelter. No forms for individuals to fill out. Businesses collect sales taxes already, so the mechanism is there to tack on another sales tax and remit it to the US Treasury, rather than the State.

People who earn more spend more - that's just the way it is. People who earn money illegally still spend money on cars, boats, clothes, food, etc. They would be taxed just like people who earn their living legally under such a plan.

I'm self-employed so 4 times a year I get to write out a check for my taxes. You never really know how much it is until you have to write out a check by hand to pay it. It really takes a BIG bite :(

Someone did a study several years ago that if a National Sales tax was adopted, and there were no exemptions, the rate would only have to be like 4-6% to bring in the same amount of tax revenue that the IRS currently brings in. I would welcome any reduction from the 30+% of federal income/self employment taxes I pay now!

People who earn money illegally still spend money on cars, boats, clothes, food, etc. They would be taxed just like people who earn their living legally under such a plan.

You might find that a "grey economy" grows where small businesses and local salesmen take payment as cash-in-hand, avoiding VAT. It's not actually that much of a problem though.

VAT in the UK is 17.5% by the way and we still have a sizable income tax. 4-6% seems very optimistic even for an economy as strong as the US.

Why do they need to buy a house, and why do ALL the other taxpayers have to foot the bill for them to do so?

Why can't(shouldn't) they rent? (I know the real reason, my question is rhetorical if YOU too know the answer).

Or pay for their own house with their own money, not the taxpayers(ooh, Fyyr sounds like a socialist-only backwards)?

I don't see any real moral or ethical reason why the government should subsidize the interest on their/my/our credit and loans.

The amount of tax NOT collected on that deduction is enormous. I would have paid additionally about $50K in taxes(10 years, 15K interest per year, 35% rate) on that money.

First off, are you taking into account the local/school/state property taxes homeowners pay out that offsets the "subsidy" you seem to think the Federal goverment gives Fyyr. Could itbe that what is really happeneing is a redistribution of some of the Federal tax money to the local level.

Also, don't you think the owners of rental property are not taking all of thier expenses as using them as business deductions?

You might want to try looking at the whole picture once Fyyr.

I think one thing about not having an income tax is that you can't encourage certain behaviors by associating tax breaks with them, like driving alternative fuel vehicles or home ownership. Of course, this is part of what makes our tax code so fricking complicated anyway.

I think one thing about not having an income tax is that you can't encourage certain behaviors by associating tax breaks with them, like driving alternative fuel vehicles or home ownership. Of course, this is part of what makes our tax code so fricking complicated anyway.

Actaully, a VAT will get passed if the WTO forces the US to remove protectionistic trade barriers. A VAT allows taxation on imported goods and no tax on exported goods. This would effectively reduce the cost of exported US goods a lot.

A VAT can be a broad tax or could be specified for non-food goods... or a VAT can be specified on a good by good basis such as taxing candy but not food. In addition, the amount of the VAT can vary from good to good or tax goods and services...

I do think that US made goods will become much cheaper in the export market with a VAT.

First off, are you taking into account the local/school/state property taxes homeowners pay out that offsets the "subsidy" you seem to think the Federal goverment gives Fyyr. Could itbe that what is really happeneing is a redistribution of some of the Federal tax money to the local level.
If it is not a subsidy, then let renters be able to deduct their rent. It is the exact same expense as homeowners pay. And leave not getting any equity in the property as the disincentive.

As Panamah said in a further post, the tax code is used to alter your behavior and how you act, not just as a way to generate revenue. I say that it is obscene to use it that way(to use force with threat of violence to coerce people to behave the way that you want them to), while Socialists and Liberals will say that is what its real purpose is.

Also, don't you think the owners of rental property are not taking all of thier expenses as using them as business deductions?
That is because it is a business expense. It is an increase in the cost in the product or service.

A VAT explicitly and implicitly taxes business expenses, that which you have spent to increase the value of a good or service. It is a sales tax collected all along the manufacture, distribution, and retail chain; at each and every step.

You might want to try looking at the whole picture once Fyyr.
Aye.

The homeowner deduction is a straight out and out tax on the poor, of which homeowners are the direct recipients of. It is reverse welfare at the best, and feudalism at worst. Homeowners will not agree with me, of course, because it is in their best interest(selfishness and greed) to keep it. It certainly isn't fair, moral, or just.

A VAT ... is a sales tax collected all along the manufacture, distribution, and retail chain; at each and every step.

VAT would probably only be applied on final sale, and would not be applied to business purchases.

My "ideal" tax system would be to completely abolish the current tax code and replace it with a flat XX% tax on all spending (a sales tax basically). No matter how you earn your money, you'll be taxed the same percent as everyone else.*snip*

This has always been the ideal way in my mind too. The LDS church only ask people to pay 10% and they are well into the green. The only problem is that everyone views it as a punishment to them. The lower class claims they need a tax break to live and the upper class claims they have to pay more then everyone else.

Someone did a study several years ago that if a National Sales tax was adopted, and there were no exemptions, the rate would only have to be like 4-6% to bring in the same amount of tax revenue that the IRS currently brings in. I would welcome any reduction from the 30+% of federal income/self employment taxes I pay now!

Linkage?

Homeowners will not agree with me, of course, because it is in their best interest(selfishness and greed) to keep it.

I am a homeowner. I do not reap the rewards of this part of the tax code because I have no mortgage. Not all homeowners reap the rewards of the mortgage interest write off.

While that same mortgage interest write off helped me get into my first home, when my circumstances changed and I no longer needed the mortgage, it didn't do me any good at all.

In our current taxation system, I do think the mortgage interest writeoff should be kept in place, but I think a cap on the amount of the mortgage should also be put in place. I believe that home ownership, especially in neighborhoods where urban decay is starting or has already gotten a strong foothold, is good for everyone as it lowers crime rates, increases property values for everyone, chases drug houses out etc. I also feel it's insane to be allowing people to deduct interest on mortgages for homes in the $2M+ range.

How would you define "final sale"?

I was reading up on the idea of
alternative taxes (http://www.pbs.org/newshour/bb/economy/jan-june05/consumption_3-3.html) and learned a couple of things I hadn't thought about.

- The less money you make, the larger % of your income will go to taxes. Presumably wealthy people don't spend every penny they earn whereas a lot of poor people do simply to keep themselves fed, clothed and for transportation. So the middle-class and poor will pay a larger % of taxes than they currently do.

- You'd be taxed on money you borrow. Right now you don't get taxed on money you borrow, only money you earn. But if you borrowed money to spend on home improvement, you'd be taxed.

-/+ Old people would be taxed again. Right now old people avoid taxes by living off of social security and retirement savings. My parents haven't paid taxes in years. However, they'd be paying taxes again if it changed to a consumption type of tax.

- IRA and Savings plans for retirement would be meaningless. The entire concept of saving money tax-free for retirement would be obsolete. If you don't pay income taxes, then avoiding income taxes to save for retirement doesn't really work any longer. Would this mean people would fail to save for retirement? You would have no incentive to have the special account you would be forced to not draw from, so would people just keep their retirement funds co-mingled with their other savings and end up spending their retirement?

- No tax break for state taxes. Right now you can deduct state taxes. If federal taxes went to consumption style, you couldn't deduct those.

In reality though, we'd probably continue to have an income tax even if we had a consumption tax.

VAT would probably only be applied on final sale, and would not be applied to business purchases.

That is a straight sales tax.

Wikipedia:
Value added tax (VAT) is a sales tax levied on the sale of goods and services. In some countries, including Singapore, Australia, New Zealand and Canada, this tax is known as "goods and services tax" or GST. VAT is an indirect tax, in that the tax is collected from someone other than the person who actually bears the cost of the tax.

VAT was invented by Maurice Lauré, joint director of the French tax authority, the Direction générale des impôts, as taxe sur la valeur ajoutée (TVA in French) in the 1950s.

Personal end-consumers of products and services cannot recover VAT on purchases, but businesses are able to recover VAT on the materials and services that they buy to make further supplies or services directly or indirectly sold to end-users. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. VAT was invented because very high sales taxes and tariffs encourage cheating and smuggling.

I was reading up on the idea of alternative taxes and learned a couple of things I hadn't thought about.

- The less money you make, the larger % of your income will go to taxes.

- You'd be taxed on money you borrow.

-/+ Old people would be taxed again.
- IRA and Savings plans for retirement would be meaningless.
- No tax break for state taxes.
In reality though, we'd probably continue to have an income tax even if we had a consumption tax.

I wanted to give my opinion on each of these...

- A final consumption tax could be tailored to be higher for non-necessities(outside the cpi) and none for necessties such as food or clothing under a certain dollar value. Presumably, a welfare mom won't be buying a mink coat or a Mercedes.

- Money you borrow for repair and NOT new construction avoids sales tax in some states... I don't see why application for a similar exemption could not be implemented. So, for those that lost a house in Florida, they could avoid a VAT when replacing their house.

- Old people pay sales tax but the very old tend to stay at home and not buy much. If SSI was increased 10%, I bet that would cover any extra VAT paid.

- Savings plans would be pointless unless your employeer matched...

- the VAT might consist of 3 parts, local + state + federal. If you want to avoid Cali tax, viva Mexico!

- I think some sort of income tax would continue even if it is to fund SSI and track down mobsters... What I think might occur is the need for people to fill out tax returns... federal...

In any case, if the VAT is too high, people will travel to other countries to shop...

Removing this welfare program for homeowners would boost the tax revenue base ENOURMOUSLY!

There is no other reason besides out and out social and economic discrimination that the home owner tax deduction still exists.

As for the VAT tax?, I heartily and readily endorse a FAT tax. Whatever your fat to body weight percentage is, YOU pay that amount additionally on ALL consumables and goods.

...

Pray tell, what ones weight have to do with how much tax they pay on, say, gasoline? Or Cable? Or any of the other thousands of consumables and goods out there to be taxed?

...

Pray tell, what ones weight have to do with how much tax they pay on, say, gasoline? Or Cable? Or any of the other thousands of consumables and goods out there to be taxed?

1) Excessive wear and tear on the roads, just for an example. All that fat adds up in infrastructure costs. Panamah just posted a related link on our failing infrastructure system.
Yeah, the roads are getting to be horrible in CA. I don't know where the money would come from to fix this stuff, our government is spending money like crazy, cutting taxes and so on. What happened to the good old-fashioned fiscal conservatives? I like them.
Taxing obese people will generate billions of revenue for the US. It is only fair, that those who use the most of our precious resources are taxed at a higher scale than those who use less. It's just common sense.

2) Obesity is the number 1 killer in the US, above all other diseases. Obesity is a silent disease for it not only looks ugly, smells ugly, it is also unhealthy. Over 2,250,000 Americans die of obesity each year. It causes diabetes, peripheral vascular disease, heart disease, renal failure, copd, and hepatic disease. And let us just face it, most obese victims, for that is what they really are, do NOT even know that they are obese.

3) It is the job of the US government to use the tax code for good if we can do so. It is a win/win/win situation. Generate revenue. Fat people can get healthy. And the rest of us have less fat people around us. Scientific studies recently have discovered and proved that one can have a lowered self, as well as other, image if in close proximity to an obese friend or co-worker. Obese people only think that their obesity affects them, they are wrong-it affects all of us around them. It affects their friends, their coworkers and their families. I was married and lived with an obese person for quite some time, I am still trying to get over the emotional distress, psychological scarring, and heath related problems that that caused. And if nothing else matters, think of the children.

If the US government can use the tax code to change peoples perceptions about drinking, tobacco, or any of the other things that it does, then certainly we can enact a FAT tax. It will be good for you. It will be good for them. It will be good for the economy and infrastructure. It will be good for your friends. And most certainly it will be good for your children and your children's children.

It is even in The Constitution(and we all know what constitution really means, right)...
We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.
Our Founding Fathers wanted this.

1) Excessive wear and tear on the roads, just for an example. All that fat adds up in infrastructure costs. Panamah just posted a related link on our failing infrastructure system.

Taxing obese people will generate billions of revenue for the US. It is only fair, that those who use the most of our precious resources are taxed at a higher scale than those who use less. It's just common sense.

2) Obesity is the number 1 killer in the US, above all other diseases. Obesity is a silent disease for it not only looks ugly, smells ugly, it is also unhealthy. Over 2,250,000 Americans die of obesity each year. It causes diabetes, peripheral vascular disease, heart disease, renal failure, copd, and hepatic disease. And let us just face it, most obese victims, for that is what they really are, do NOT even know that they are obese.

3) It is the job of the US government to use the tax code for good if we can do so. It is a win/win/win situation. Generate revenue. Fat people can get healthy. And the rest of us have less fat people around us. Scientific studies recently have discovered and proved that one can have a lowered self, as well as other, image if in close proximity to an obese friend or co-worker. Obese people only think that their obesity affects them, they are wrong-it affects all of us around them. It affects their friends, their coworkers and their families. I was married and lived with an obese person for quite some time, I am still trying to get over the emotional distress, psychological scarring, and heath related problems that that caused. And if nothing else matters, think of the children.

If the US government can use the tax code to change peoples perceptions about drinking, tobacco, or any of the other things that it does, then certainly we can enact a FAT tax. It will be good for you. It will be good for them. It will be good for the economy and infrastructure. It will be good for your friends. And most certainly it will be good for your children and your children's children.

It is even in The Constitution(and we all know what constitution really means, right)...

Our Founding Fathers wanted this.


Ah, I see, that's what I get for not reading the entire thread.

Satire is good.

I think orgasms should be taxed. We could plant an electrode in everyone's spines and when it detects a certain pattern of impulses it ticks up a count. Every year you go into the IRS, drop your trow and they read your happy-tax-o-meter. This way those who have more sex get taxed more than those missing out. I think this is quite fair! Imagine the revenue we could've made off of the NBA players!

Great idea, but reversed.

There should be a tax if you don't have a lot of orgasms.

If you don't meet your quota of 2 or 3 a day, THEN the taxman cometh...

And no faking either...

THEN the taxman cometh...


LOL! Literally!

Great idea, but reversed.

There should be a tax if you don't have a lot of orgasms.

If you don't meet your quota of 2 or 3 a day, THEN the taxman cometh...

And no faking either...

I've been married almost 26 years.... I'd be flat broke under this system :(

All that sex would cause a lot of problems anyway! So there you go, Kerech. A silver lining for you.