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House GOP seeks to abolish IRS, replace income tax with consumption tax

Fifty-four House Republicans on Thursday reintroduced legislation that would terminate the IRS and replace the system of income taxes on people and corporations with a consumption tax.

The FairTax Act, from Rep. Rob Woodall (R-Ga.), would abolish the 16th Amendment, which was ratified 100 years ago this February. That amendment gives Congress the power to impose income taxes without having to spend the revenues evenly among the states.

Woodall's bill, H.R. 25, would replace the current tax system with a 23 percent consumption tax on all new goods and services. He said Thursday that this change would eliminate the need for a complicated tax code, and would be the kind of tax reform that helps reinvigorate the economy.

Read more: http://thehill.com/blogs/floor-action/house/275697-house-gop...

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neocons desperately trying to use old issues to draw us back

Into the fold.

Guns, taxes, gays, etc.

They know the fair tax has a following. ..so they pretend to push it. But please know, the income tax brings money to them first which is an age old financial rule. There is no way that they don't want the money coming to them first and that's what the income tax. The national sales tax is getting the money last (if at all) and they don't want that.

Spending

is the problem...
Changing the method of taxation will not cure THAT problem!

When Fascism goes to sleep, it checks under the bed for Ron Paul!

Why can't we just tax Leveraged Income Earned?

In short, that taxes the fed, the banks that use fractional reserve banking, profits from stock traders and every derivative out there. Basically, if you profited from the use of money that wasn't yours, you pay a tax.

These are the PROBLEMS in our society so let's discourage their activity.

We could start out with a measly 0.5% or something just to get people to go along with it. My numbers actually show it would only take .75-1% tax to alleviate all our budget problems in about 2 years flat!

Hell no! - that's a blank check to Congress. They don't have a

taxing problem, they have a spending problem.

We need to restrict that with a change in the tax code. Swapping the so-called "income tax" for the misnomer "fair tax" won't do the trick.

We need DIRECT APPORTIONED TAXATION.

It is the most unpopular form, and why it needs to be used exclusively. That way, since it would be so unpopular, Congress would have no votes to impose them unless absolutely necessary. It would put a major hamper on their ability to sell their constituents "someone else's money."

And heck, it's as "fair share" as you can get. (that one is for the communists among us)

While we do that, we can leave the 16th amendment in place (because there is technically nothing wrong with it) and instead, pass an amendment that "the Congress shall not have the power to tax Wages or Salaries, nor any gain or profit which does not arise from the privilege of doing business in a corporate capacity."

This amendment would settle the issue of the meaning of "income" in the 16th once and for all. Courts and the IRS could no longer duck the issue.

A question I have for people

A question I have for people who want to return to no income tax. This is also a question for Ron Paul.

Ron Paul constantly mentions that we didn't have an income tax prior to 1913, yet we still funded government. He wants us to return to those levels.

The problem is, is that excise and import taxes were a huge source of government revenue during that times. Using numbers from 1796, it would be just over 800 billion to as much as 1.2 trillion in revenue today. We collect about 1.6 trillion in taxes (income + ad-valorum + other; no payroll).

As economic theories started to advance, the US government started to eliminate excise and import taxes. This was decided not only because free trade is best for the economy (as Keynesian modeling had found), but they also came around to the idea that free trade encouraged peace and friendliness between nations. As a side, it was also a great way to foster pro-capitalist, pro-Western ideas in the second world.

Also, before the income taxes, the state governments had a much bigger role in terms of governmental influence. State + Local taxation today is about on par with federal taxation. Back in the days of the founders, state and local governments taxed at approximately 5 times the rate of the federal governments. State had many more duties to do. They had to mantain their own militias, their own regulatory agencies. Many of them dealt with their own roades, their own trade, etc. These processes, for better or worse, have become federalized. The founders spent what today would be equivalent of 100-300 billion on national defense...that number is unthinkably low.

So expectations have to be adjusted.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

You're suffering from the same disease Congress is - baseline

budgeting.

It's the absolute worst thinking method concerning finance ever invented.

You can't budget by starting from where you are now.

You MUST start from zero.

Take a look at the last published "budget" of the U.S. - for an illustration only - if you take only General Government, and the basic executive Departments, you are only looking at a few tens of billions. (in FRNs that is)

Of course, we wouldn't start from now, we'd start from zero and work our way up. So most likely, that figure wouldn't be anywhere near as high.

Then let's look at DEFENSE.

Navy? - check.

Army? - nope - State militias, kept regular, will suffice.

Marines? - put them under the Navy, scale back either appropriately.

Airforce? - scale back and place under the Navy again.

Again, starting from zero, you'll find most of what is spent by the Defense Department is NOT on DEFENSE, but rather on pork, or OFFENSE.

We can easily provide for the COMMON DEFENSE for under 100 billion FRNs, especially with a robust and regular militia system.

Now, look at the revenue side, (which should have been done first, but I did this for a reason) - look at Import and Export duties and taxes:

$135 billion (FRNs)

That's plenty enough to fund General Government, the basic executive departments (we'll have to abolish a few, especially the socialist ones) and a robust DEFENSE in the form of a Navy and well regulated militias.

It is absolutely doable.

I've had back burner plans to setup a website to outline this entire process.

Your comment just gives me more energy to get it to the front burner - thanks.

The point being that if you

The point being that if you moved the army to the states, they just have to take up the costs. They'll have to raise their own taxes to compensate.

Even Ron Paul has only deigned to cut military spending by 400 billion, leaving around 600 billion left. Much of our defense spending, by the ways, is not simply "offense". Even without any wars and any foreign bases, our military budget would be around 500-600 billion (which, surprise, surprise, is Ron Paul's number), which includes Clinton's much-hated cuts to the military. A lot of it is precautionary...we want to have a large standing army in case something happens. An ounce of prevention and all that. This number would also be very close to what other industrialized nations spend on defense relative to their GDP.

There are also debt payments (200 billion alone), transportation costs (100+ billion), veterans payments, paid unemployment, federal courts, law enforcement, federal prisons, waste management, economic regulation, national landmarks and parks, etc.

I look forward to seeing your analysis.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

I'll be sure to post the site link here when it's up.

But even that 600 billion figure includes lots of fluff beyond actual defensive posture. And of course it presumes keeping the organization of the DoD as it is, which I don't.

Most of what you listed at the bottom falls under "general government" or "basic executive departments" which I've already included.

The only thing I left out was debt service.

I have a plan for that too. The bankers won't like it, but I don't care what they want or like. They are going to take what we give them and that's that. It's not like they really loaned us anything from their own possession anyway. They just created it out of thin air.

I do have a plan for paying individual bond and note holders though.

As for shifting defense costs to the States, that's where it should be with respect to militias. And then with that model, the out of pocket cost for the State governments won't be that much. Regardless, the money and organization should be as close to "home" as possible.

Certainly, even with present import/export taxes, we could come close to current debt service levels. We could then use direct apportioned taxes (much better in my opinion as a check against excessive spending) for the regular and normal functions of government.

Once the debt is either paid off or if we reset it, then import duties can be used to pay for defense, since technically, the purpose of the Navy is primarily to protect shipping lanes, with actual continental defense as a side benefit. Some or most of this outside of continental waters, could be turned over to private concerns.

The whole point though is that the vast majority of what is in the federal budget doesn't have to be there for us to have what most people would expect from government, not to mention, only what they are constitutionally allowed to do in the first place.

So....

What is your question? I received your opinion, loud and clear...I will wait for your question to be asked I guess.

Bad food, worse weather, please rEVOLution the states so I can bring my family back home!
Rosa Koire for for President!

My question is that when Ron

My question is that when Ron Paul says he wants to abolish the income tax and return government taxation to pre-16th amendment levels, does he then want to increase excise and import taxes to make up the difference.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

I can't speak for Dr. Paul...

But my answer would be to lower spending...Starting with military and prison expenditures...I would also start to revenue something from corporate America and others...

Bad food, worse weather, please rEVOLution the states so I can bring my family back home!
Rosa Koire for for President!

Military, sure. Yet Ron Paul

Military, sure. Yet Ron Paul has only proposed around 400 billion in military cuts, which are not nearly enough.

Prison expenditures at the federal level are very modest; I don't know for sure, but I would guess that the vast majority of prison spending is done at the state and local level.

This is why I say that our issue is a revenue problem as well as a spending problem. Government income pays for payroll expenditures, military spending, and our debt. Practically everything else is borrowed.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

I would only start with...

Prison and military...There are plenty of other places to cut spending...Government spending is way out of control on every level...I believe the states could get close to covering necessary costs with a 12%ish sales tax...And I know that I could possibly, if not probably, be dreaming but I do not buy into your idea that we could not solve our financial problems by cutting spending...Every facet of US government is corrupted and overspending...But I do respect your position...

Bad food, worse weather, please rEVOLution the states so I can bring my family back home!
Rosa Koire for for President!

Until the government needs

Until the government needs more money... Then 23% becomes.... 50%?

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deleted

This is gonna kill my

This is gonna kill my elderly Mom. There's no way she can afford a 23% tax on her medication. Its going to add 600+ dollars to her monthly expenses.

Blessings )o(

That tax is exactly...

for people like your mom who pay no taxes...It allows an equal tax for all the people of the USA...Not just the already overly taxed tax payers, it is a tax for the people that aren't paying taxes...The real issue here is the monopoly excused pharmaceutical companies and their price gouging...

Bad food, worse weather, please rEVOLution the states so I can bring my family back home!
Rosa Koire for for President!

There should be a markdown for the poor

That way it would both be progressive (and fair to your Mom), and also eliminate all the 40,000 pages of garbage that we have to waste our time and money on every April.

There is, it's call the FairTax Prebate

For all spending under the poverty level (~$11,000 per year) an individual would pay no consumption tax. The prebate applies to everyone equally not just the poor.

Also, keep in mind used items are never taxed.

Except, the prebate wouldn't

Except, the prebate wouldn't help my Mom. We live in a tax free state already, so it will raise taxes on us. And, with the fair tax calculator her prebate is only going to be 207/mo, which won't cover the 600+/mo for her meds and then there will be a 23% tax on everything else too on top of that. She is going to be screwed if they do this. She currently pays no taxes at all because she is retired and can't work. So all of her income is tax free. All of these promises of paying no tax will not be applicable to her, or others like her here in NH. Bottom line, even after the prebate her cost of living will go up by that 600+/mo. because even food will be taxed now, where its not currently.

Blessings )o(

How did you come up with $600?

How did you come up with $600 as the amount she would be paying more?

Keep in mind, before the 23% tax is applied, prices would be lower than they are today (estimated at 16-19% lower), because embedded and cascading taxes (corporate taxes, payroll taxes, etc.) would be eliminated.

Retail on her meds is

Retail on her meds is $3100/mo. Multiply that by 23% and you're looking at 600+ in taxes. Currently, there's no consumer taxes on medications. Insurance will pay the cost of the meds, but they don't pay your taxes. So, even after her 207/mo prebate, she will still be on the hook for an extra 400/mo in taxes and that's only the meds. Add to that the taxes on her phone, electric, TV, food, clothing, etc, and she's going to be paying about 600 more every month. She doesn't have that kind of money. She'll skip buying meds instead. At that point I'll be making funeral arrangements and forking over 23% in taxes on her casket and funeral.

The only ones exempt from paying taxes on anything they purchase are the corporations. Basically, what this does is gives businesses no tax liability at all and it shoves those taxes at the consumer instead. Businesses are not going to lower prices because they don't pay taxes anymore. They will enjoy the windfall the Govt has allowed them with greater profit, especially the pharmaceutical companies.

Blessings )o(

Businesses don't pay taxes NOW. Consumers pay ALL taxes.

Any imposed tax is passed along in higher prices.

They will lower their prices because SOMEONE is going to do so in an attempt to compete, this will start a price war to the down side. It may take a year to cycle out, perhaps sooner. But prices will fall accordingly. All it takes is ONE company in each market to do this and the rest will follow. No one wants to get caught looking like a gouger taking the extra 23% for their pockets.

In all fairness to the fair tax hoaxers, you can't use the $3100

figure to base the sales tax on.

This is because a significant portion of that $3100 is passed along or "embedded" income and payroll taxes, which would be eliminated.

The end result according to the math, is that it will still only cost $3100 for the meds - AFTER the sales tax is applied.

There will be no net change in how much she spends total on meds and tax. Just that the tax will be separated and no longer embedded in the price, but rather listed as a line item on the receipt.

The other major difference is who collects the tax, remits, it and files the returns.

Instead of individuals and payroll departments doing so, businesses will simply remit the extra collected sales tax.

Of course, there are lots of reasons to oppose the "fair tax" but increased costs is not one of them, at least on the initial rate.

The problem will arise, when Congress decides to raise the rate from 23%.

Are you sure about all that?

Are you sure a sales tax on medication wouldn't be covered by her insurance? When we pay for prescriptions covered by our insurance here in California, we pay only a $5 copay and we don't pay the sales tax.

@"Basically, what this does is gives businesses no tax liability at all and it shoves those taxes at the consumer instead."

Do you think businesses don't already pass along their tax liability on to consumers by embedding it in the prices of their products? Would this FairTax not then put our tax burden directly in view, instead of hiding it in income tax and product prices? Would this new clarity of our tax burden not encourage EVERYONE to demand the government lower taxes and thus spending?

@"Businesses are not going to lower prices because they don't pay taxes anymore."

Perhaps not in the first month or so, but I think you underestimate competitive pressures of the market.

I think there are many other benefits you may be overlooking as well. For example, it would eliminate the roll of corporate lobbyists and special favors for tax breaks, as a result collusion between corporations and the government (aka Crony-Capitalism) would diminish, it would greatly improve the U.S. economy due to business moving back from overseas, etc.

p.s. Have you run the FairTax calculator on yourself? Perhaps you'd have a net benefit from the FairTax and could help your mother cover any financial shortcomings? (Assuming you're correct about any additional costs imposed on her.)

p.p.s. The 23% is the inclusive tax rate, meaning 23% of what you pay is tax. Assuming her insurance doesn't cover sales tax and the price of the meds stay the same at $3100 (BIG assumption btw), that means her additional costs would be $900+ not $600+, because 77% (100% less 23%) of $4025 is $3100. I don't tell you this to make things look worse, I'm just saying if you don't fully understand the down side of the FairTax, odds are you don't fully understand the upsides either. My initial reaction to a national sales tax was also very negative, but I've done a lot of research on the FairTax since then and I'm convinced the FairTax would be vastly superior to our current income tax and any flat income tax.

Why in the world is the GOP

Why in the world is the GOP the party that's introducing new taxes?

Given a choice over the current tax system or this Fair Tax sham, I think I prefer the former. (Of course, I'd rather have no taxes.) Fair Tax sounds good but they're likely going to just raise taxes across the board.

A 25% VAT will starve low and middle class families, reduce overall consumption, and dramatically reduce imports. So we'll have nothing to consume until we transition back into a manufacturing economy.

FairTax, not new taxes.

FairTax, not new taxes. Presumably, with the IRS gone and the income tax gone this would be a "fairer" implementation... Although there is an excellent argument to be made that since government would be the administrator of the FairTax, it could never actually be fair. We could assume hundreds, if not thousands of exceptions will instantly migrate into the law, rendering the whole idea moot.

If it's a federal consumption

If it's a federal consumption or VAT tax, it's new. (We don't pay federal sales taxes currently.)

This talk about "Fair Tax" looks like a marketing ploy. I don't believe -- and don't think you do either -- that the federal government is actually going to abolish the income tax. It sounds like they're going to add a VAT to the income tax. Bastards!

I believe government has

I believe government has grown to the point where it acts as an organism that has only one interest—it's own.