11) Repeal the direct election of Senators, send it back to the
state government.
State and local governments are the only things without
representation in DC, and that stupid amendment is why. State
Governments could have told their Senators that the Obamacare
provisions for Medicaid would bankrupt the state, and if they
wanted to stay in Washington, they were to vote against it. It
might make herding the cats in the Senate more difficult, but I
see that as a feature and not a bug.
12) Repeal the Income Tax amendment and implement the Fair Tax as
put forty by John Linder and Neal Boortz.
I'm not going to copy from The Fair Tax Book, or the book Fair
Tax: The Truth in copious amounts. They wrote the books, and I
don't have any problems with it that I have been able to find.
13) Have a "castle" amendment and overturn the Kelo decision.
Strengthen personal property rights eroded by the Supreme Court in
this abominable decision.
14) Restrict the commerce clause only to direct commerce between
the states.
Some of the other lists call this interstate commerce reform.
15) Removal of citizenship of "anchor babies." This is not the
kind of "exceptionalism" that I support.
Currently the US is almost the only nation that has this issue.
Some of these have already been addressed above, but the whole
package is worth a go as far as I am concerned.
I do not support the Congressional section of Dr. Larry Sabato's
"A More Perfect Constitution." Increasing the House to 1000
members boggles my mind, and as the last almost two years has
shown, the House generates enough mischief with only 435 members.
The Senate also generates enough mischief with only 100 members,
so why do we need to increase their number to 136? And with all
due respect, Sabato is a known Democrat, so what's this
"non-partisan" reapportionment? Easy, he will only define the
Republicans as being partisan. Kind of like Mr. Post-Partisan
President (I actually think that's a typo and it should read "Most
Partisan President").
The Presidential proposals look OK, but I want to keep the 4 year
terms, and the current two term limit. Sometimes I think that 4
years is too long to get rid of a bad apple (Nixon, Carter,
Clinton, Obama), so 6 is just not acceptable.
The Supreme Court provisions generally suck, although I think that
the courts themselves can set their own time limit for retirement
so that each change in representation in the Congress does not
generate a politically motivated change in the retirement age to
get rid of an old conservative or liberal justice.
Likewise, the only part of his political section worth
implementing would be the primary lottery.
David
Barnett's Bill of Federalism:
Amendments of the Bill
of Federalism
Amendment
I - Restrictions on Tax Powers of Congress
Section 1. Congress shall make no law laying or
collecting taxes upon incomes, gifts, or estates, or upon
aggregate consumption or expenditures; but Congress shall have
power to levy a uniform tax on the sale of goods or services. Section 2. Any imposition of or increase in a tax, duty,
impost or excise shall require the approval of three-fifths of
the House of Representatives and three-fifths of the Senate, and
shall separately be presented to the President of the United
States. Section 3. This article shall be effective five years
from the date of its ratification, at which time the sixteenth
Article of amendment is repealed.
Section 1 of this amendment would disallow federal income, gift,
estate, and consumption taxes. It would
explicitly permit a national sales
tax, an idea which has been proposed in the United States as
the FairTax. Section 2 would require a supermajority of three-fifths of both
houses of Congress for any new tax or tax increase. Section 3
repeals the Sixteenth
Amendment, and delays the implementation of the whole
amendment for five years after it is ratified, to give Congress
time to dismantle the IRS.
This amendment is partially a combination of the fifth and sixth
amendments of the previous draft.
Amendment II -
Limits of Commerce Power
The power of Congress to make all laws which are necessary and
proper to regulate commerce among the several states, or with
foreign nations, shall not be construed to include the power to
regulate or prohibit any activity that is confined within a
single state regardless of its effects outside the state,
whether it employs instrumentalities therefrom, or whether its
regulation or prohibition is part of a comprehensive regulatory
scheme; but Congress shall have power to regulate harmful
emissions between one state and another, and to define and
provide for punishment of offenses constituting acts of war or
violent insurrection against the United States.
The Constitution grants Congress the power to
"regulate commerce with foreign nations, and among the several
states, and with the Indian tribes". This is amplified by the
additional power "To make all Laws which shall be necessary and
proper for carrying into Execution the foregoing Powers..." This
amendment would overrule the current interpretation of the
commerce clause by removing three present applications of the
interstate commerce clause: the regulation of an activity having
effects outside of a state, the regulation of instrumentalities of
interstate commerce, and regulation as part of a broader
regulatory scheme.
In Wickard v. Filburn, the
Supreme Court ruled that Congress could regulate the production
of wheat by a farmer named Roscoe Filburn, despite the fact that
Filburn did not intend to sell any of this wheat across state
lines. The court ruled that since in the aggregate, unregulated
wheat could have an effect on interstate commerce, it
was thus covered by the commerce clause.[10]
The Court has held that "Congress is empowered to regulate and
protect the instrumentalities of interstate commerce, or
persons or things in interstate commerce, even though the threat
may come only from intrastate activities."[11]
In one instance, the Court upheld federal safety regulations of
vehicles used in intrastate commerce on the grounds that they
run on highways of interstate commerce.
( I'm working on this from last to first ) ( BTW, I agree with your views on Sabato, just sent them along to give an example of what someone else has done with the idea of a set of Amendments )
The words and phrases of this Constitution shall be interpreted according to their meaning at the time of their enactment, which meaning shall remain the same until changed pursuant to Article V; nor shall such meaning be altered by reference to the law of nations or the laws of other nations.
------------------------------
.HUH ?
Section 1. All persons are equally free and independent, and have certain natural, inherent and unalienable rights which they retain when forming any government, amongst which are the enjoying, defending and preserving of their life and liberty, acquiring, possessing and protecting real and personal property, making binding contracts of their choosing, and pursuing their happiness and safety.
Section 2. The due process of law shall be construed to provide the opportunity to introduce evidence or otherwise show that a law, regulation or order is an infringement of such rights of any citizen or legal resident of the United States, and the party defending the challenged law, regulation, or order shall have the burden of establishing the basis in law and fact of its conformity with this Constitution.
Unfunded Mandates and Conditions on Spending Congress shall not impose upon a State, or political subdivision thereof, any obligation or duty to make expenditures unless such expenditures shall be fully reimbursed by the United States; nor shall Congress place any condition on the expenditure or receipt of appropriated funds requiring a State, or political subdivision thereof, to enact a law or regulation restricting the liberties of its citizens.
Hmmm. Need to think this over, but on principle, sounds good.
--------------------------------------------------------------------------- - ---- Well, maybe. My main reservation is that this is a whole Amendment ( always important ) while the issues it addresses seem very minor.
14) Restrict the commerce clause only to direct commerce between the states.
11) Repeal the direct election of Senators, send it back to the state government.
State and local governments are the only things without representation in DC, and that stupid amendment is why. State Governments could have told their Senators that the Obamacare provisions for Medicaid would bankrupt the state, and if they wanted to stay in Washington, they were to vote against it. It might make herding the cats in the Senate more difficult, but I see that as a feature and not a bug.
Why are appointed Senators an improvement ? Seems to me that one of the reasons the Supremes are the kind of characters they often turn out to be is because they are appointed , not elected. But I see your point about the interests of states and the sometimes anti-state votes of Senators. Maybe there is some other way to handle the problem.
11) Repeal the direct election of Senators, send it back to the state government.
State and local governments are the only things without representation in DC, and that stupid amendment is why. State Governments could have told their Senators that the Obamacare provisions for Medicaid would bankrupt the state, and if they wanted to stay in Washington, they were to vote against it. It might make herding the cats in the Senate more difficult, but I see that as a feature and not a bug.
12) Repeal the Income Tax amendment and implement the Fair Tax as put forty by John Linder and Neal Boortz.
I'm not going to copy from The Fair Tax Book, or the book Fair Tax: The Truth in copious amounts. They wrote the books, and I don't have any problems with it that I have been able to find.
13) Have a "castle" amendment and overturn the Kelo decision.
Strengthen personal property rights eroded by the Supreme Court in this abominable decision.
14) Restrict the commerce clause only to direct commerce between the states.
Some of the other lists call this interstate commerce reform.
15) Removal of citizenship of "anchor babies." This is not the kind of "exceptionalism" that I support.
Currently the US is almost the only nation that has this issue.
Some of these have already been addressed above, but the whole package is worth a go as far as I am concerned.
I do not support the Congressional section of Dr. Larry Sabato's "A More Perfect Constitution." Increasing the House to 1000 members boggles my mind, and as the last almost two years has shown, the House generates enough mischief with only 435 members. The Senate also generates enough mischief with only 100 members, so why do we need to increase their number to 136? And with all due respect, Sabato is a known Democrat, so what's this "non-partisan" reapportionment? Easy, he will only define the Republicans as being partisan. Kind of like Mr. Post-Partisan President (I actually think that's a typo and it should read "Most Partisan President").
The Presidential proposals look OK, but I want to keep the 4 year terms, and the current two term limit. Sometimes I think that 4 years is too long to get rid of a bad apple (Nixon, Carter, Clinton, Obama), so 6 is just not acceptable.
The Supreme Court provisions generally suck, although I think that the courts themselves can set their own time limit for retirement so that each change in representation in the Congress does not generate a politically motivated change in the retirement age to get rid of an old conservative or liberal justice.
Likewise, the only part of his political section worth implementing would be the primary lottery.
David
Barnett's Bill of Federalism:
Amendments of the Bill of Federalism Amendment I - Restrictions on Tax Powers of Congress
Section 1. Congress shall make no law laying or collecting taxes upon incomes, gifts, or estates, or upon aggregate consumption or expenditures; but Congress shall have power to levy a uniform tax on the sale of goods or services. Section 2. Any imposition of or increase in a tax, duty, impost or excise shall require the approval of three-fifths of the House of Representatives and three-fifths of the Senate, and shall separately be presented to the President of the United States. Section 3. This article shall be effective five years from the date of its ratification, at which time the sixteenth Article of amendment is repealed. Section 1 of this amendment would disallow federal _income_ (http://en.wikipedia.org/wiki/Income_tax_in_the_United_States) , _gift_ (http://en.wikipedia.org/wiki/Gift_tax) , _estate_ (http://en.wikipedia.org/wiki/Estate_tax_in_the_United_States) , and _consumption_ (http://en.wikipedia.org/wiki/Consumption_tax) taxes. It would explicitly permit a national _sales tax_ (http://en.wikipedia.org/wiki/Sales_tax) , an idea which has been proposed in the United States as the _FairTax_ (http://en.wikipedia.org/wiki/FairTax) . Section 2 would require a _supermajority_ (http://en.wikipedia.org/wiki/Supermajority) of three-fifths of both houses of Congress for any new tax or tax increase. Section 3 repeals the _Sixteenth Amendment_ (http://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_United_States...) , and delays the implementation of the whole amendment for five years after it is ratified, to give Congress time to dismantle the IRS. This amendment is partially a combination of the fifth and sixth amendments of the previous draft. Amendment II - Limits of Commerce Power
The power of Congress to make all laws which are necessary and proper to regulate commerce among the several states, or with foreign nations, shall not be construed to include the power to regulate or prohibit any activity that is confined within a single state regardless of its effects outside the state, whether it employs
...
I would urge you to get the Fair
Tax book and read it. Basically, the tax on 2 times the poverty
level of consumption is given to those making less than 2 times
the poverty level the prior year. This is called a prebate (as
opposed to a rebate, because they get that to start with at the
beginning of the year, kind of like today's earned income credit
which can be added in advance to someone's paycheck every pay
period-the differences are handled at tax filing time).
So a low-income person is advanced the money to pay the taxes with
before the year starts. If they don't have the sense to stretch
that money out for the year and go spend it all when they get it,
that's their problem.
David
To compel a
man to subsidize with his taxes the propagation of
ideas which he disbelieves and abhors is sinful and
tyrannical.--Thomas Jefferson
The words and phrases of this
Constitution shall be interpreted according to their meaning
at the time of their enactment, which meaning shall remain
the same until changed pursuant to Article V; nor shall such
meaning be altered by reference to the law of nations or the
laws of other nations.
------------------------------
.HUH ?
Section 1. All
persons are equally free and independent, and have certain
natural, inherent and unalienable rights which they retain
when forming any government, amongst which are the enjoying,
defending and preserving of their life and liberty,
acquiring, possessing and protecting real and personal
property, making binding contracts of their choosing, and
pursuing their happiness and safety.
Section 2. The due process of law shall be construed
to provide the opportunity to introduce evidence or
otherwise show that a law, regulation or order is an
infringement of such rights of any citizen or legal resident
of the United States, and the party defending the challenged
law, regulation, or order shall have the burden of
establishing the basis in law and fact of its conformity
with this Constitution.
Section 2 would require a
supermajority
of three-fifths of both houses of Congress
On Oct 13, 2010, at 6:29 PM, David R. Block wrote:
> 12) Repeal the Income Tax amendment and implement the Fair Tax as put forth by John Linder and Neal Boortz.
> I'm not going to copy from The Fair Tax Book, or the book Fair Tax: The Truth in copious amounts. They wrote the books, and I don't have any problems with it that I have been able to find.
But I still have a couple concerns about it, which Billy hints at:
> Regressive taxes, how wonderful. Tax the poor to lighten the burden on the rich. > Why didn't I think of that ?
Actually, that's not quite true. It would actually *reduce* the tax on the poor, especially as it would reduce hidden taxation costs in prices. It would also help the working poor by eliminating Social Security payroll taxes.
The problem is that it increase taxes on the lower middle class, who spend most of their income but currently pay virtually no income tax. The rich who invest/save large chunks of their income would generally pay less than they do now. For example, FairTax Calculator says my family would pay only $30K in taxes, versus close to 100K now:
That money has to come from somewhere. This redistribution would almost certainly lead to economic growth and job creation, but it would still be regressive (except for the very poor).
I do think there is a way to fix the FairTax, though:
1. Make a national Sales Tax replace the Payroll Tax
The payroll tax is what hits lower income Americans and complicates hiring. If we replaced all payroll taxes with a FairTax-like national sales tax of, say 10%, it should achieve most of the economic benefit without becoming overly regressive. At a guess, it should at least reduce taxes for those making less than $75K per year, which seems sufficiently progressive, and gets us into the range of those who pay more on income taxes than payroll taxes.
This still leaves the problem of how to account for Social Security when we only capture spending rather than income, but for now let's assume that's a solvable problem.
2. Create a financial tax to replace the income tax.
Most income tax only affects the rich already. If we are going to tax the rich -- which we have to do, since they have most of the money -- we should do it in a way that encourages appropriate behavior.
What do we want the rich to do? Generate value to the economy, by either working or investing. Including taking risks that the poor and middle class do not. This implies we should penalize the rich for being selfish or safe.
The FairTax would tax all spending from the rich, which is a good first step. Still, a 10% FairTax wouldn't bring in enough revenue. The remainder would have to come from taxing either a) wealth or b) financial transactions.
2a) Wealth Tax
If we don't want to penalize investments, a "wealth tax" means taxing either property or savings (defined as FDIC insured).
We could model this on FairTax, in that we set a baseline exemption based on the federal poverty level:
To convert income to wealth, use the treasury rate. For example, if the poverty level is $10,000, and the treasury rate is 5%, then the "wealth exemption" is $10K/.05 = $200,000.
To obtain a "fair" tax rate, I propose again indexing to 10% of the treasury rate, e.g. 0.5% for a treasury rate of 5%.
For example:
* a $1 million home would have $800K taxable, which at 0.5% comes out to $4,000 per year.
* an individual with the maximum 250K in FDIC-insured deposits across two banks ($500K) would have $300K taxable. They would pay $1,500 a year on a national wealth tax, which effectively reduces their interest from ~1.25% ($6,250 per year) to 0.95% ($4,750). Annoying, but hardly devastating, and a good stick for prodding the rich to take riskier or longer-term investments to earn better yields.
I have no idea whether a national property tax would be legal, but making it legal would be a fair exchange for repealing the 16th amendment. :-)
The simplest and most effective (and FairTax-like) would probably be some kind of Transfer Tax, paid by the seller (to encourage holding investments longer):
Apparently we had one as late as 1966 of 0.4%, for stocks:
> The United States had a tax on sales or transfers of stock from 1914 to 1966. This was instituted in The Revenue Act of 1914 (Act of Oct. 22, 1914 (ch. 331, 38 Stat. 745)), in the amount of 0.2% (20basis points, bps). This was doubled to 0.4% (40 bps) in 1932, in the context of the Great Depression, then eliminated in 1966.
It's been reconsidered recently, but never went anywhere:
Unfortunately, at the tax rate we are proposing (0.5%), it would (inferring from that article) only raise around $500B, vs. the $1250B from corporate and individual income taxes we need to replace.
We could increase that by covering more than just stocks, but I suspect there isn't much other wealth out there to tax.
I am also worried about pushing that rate higher, as capital is even more flighty than people. Taxing transactions at too high a rate risks killing the financial industry; we only want to maim it, so it can't run as fast. :-)
Perhaps if we had a low (0.5%) rate for direct asset transactions (e.g., stocks) but doubled it for indirect (e.g., derivatives) it would do better, and also dampen speculation. Of course, it could have the perverse effect of making derivatives seek *higher* returns to compensate, though even 1% on a 13% Junk Bond doesn't seem like it would dramatically alter behavior.
And it still may not be enough, but it should at least get us into the ballpark. Maybe the magical stimulative effects of eliminating payroll and income taxes would do the rest. Plus, simply adding friction to high-end financial instruments seems like a good thing.
Again, the Right hates it, but if tied to an elimination of the income tax, that might turn them around. And maybe capital flight is not a horrible thing, as long as it didn't completely kill the revenue stream. Frankly, I'd rather have rich people living and working here and storing their money abroad than vice versa.
An interesting feature of tying wealth taxes to treasury rates is that they would be counter-cyclical -- low when the economy is week, but high when it is strong. That's good from the perspective of stimulating/dampening the economy, but hard on financial management, as government revenue dries up when you need it most, aggravating deficit spending.
The only solution I could think of offhand is -- in a world with a hypothetical balanced budget -- ensuring some portion of this revenue is dedicated to a rainy-day fund. e.g., anytime treasury rates exceed 10%, the surplus revenue automatically goes into a counter-cycle fund that can't be tapped. But rainy days funds are notorious for being leaky.
Still, this seems like a viable model that addresses the concerns of a pure FairTax and a mere financial transaction tax, at least at first blush.
Ernie: This is a discussion I will keep out of. To do the subject justice I'd need to drop priority research and spend a lot of time getting current in a field which holds little interest for me. Other issues are personally far more meaningful. What I do know are some basics, otherwise my competence is spotty.
But I still have a couple concerns about it, which Billy hints at:
> Regressive taxes, how wonderful. Tax the poor to lighten the burden on the rich. > Why didn't I think of that ?
Actually, that's not quite true. It would actually *reduce* the tax on the poor, especially as it would reduce hidden taxation costs in prices. It would also help the working poor by eliminating Social Security payroll taxes.
The problem is that it increase taxes on the lower middle class, who spend most of their income but currently pay virtually no income tax. The rich who invest/save large chunks of their income would generally pay less than they do now. For example, FairTax Calculator says my family would pay only $30K in taxes, versus close to 100K now:
That money has to come from somewhere. This redistribution would almost certainly lead to economic growth and job creation, but it would still be regressive (except for the very poor).
I do think there is a way to fix the FairTax, though:
1. Make a national Sales Tax replace the Payroll Tax
The payroll tax is what hits lower income Americans and complicates hiring. If we replaced all payroll taxes with a FairTax-like national sales tax of, say 10%, it should achieve most of the economic benefit without becoming overly regressive. At a guess, it should at least reduce taxes for those making less than $75K per year, which seems sufficiently progressive, and gets us into the range of those who pay more on income taxes than payroll taxes.
This still leaves the problem of how to account for Social Security when we only capture spending rather than income, but for now let's assume that's a solvable problem.
2. Create a financial tax to replace the income tax.
Most income tax only affects the rich already. If we are going to tax the rich -- which we have to do, since they have most of the money -- we should do it in a way that encourages appropriate behavior.
What do we want the rich to do? Generate value to the economy, by either working or investing. Including taking risks that the poor and middle class do not. This implies we should penalize the rich for being selfish or safe.
The FairTax would tax all spending from the rich, which is a good first step. Still, a 10% FairTax wouldn't bring in enough revenue. The remainder would have to come from taxing either a) wealth or b) financial transactions.
2a) Wealth Tax
If we don't want to penalize investments, a "wealth tax" means taxing either property or savings (defined as FDIC insured).
We could model this on FairTax, in that we set a baseline exemption based on the federal poverty level:
To convert income to wealth, use the treasury rate. For example, if the poverty level is $10,000, and the treasury rate is 5%, then the "wealth exemption" is $10K/.05 = $200,000.
To obtain a "fair" tax rate, I propose again indexing to 10% of the treasury rate, e.g. 0.5% for a treasury rate of 5%.
For example:
* a $1 million home would have $800K taxable, which at 0.5% comes out to $4,000 per year.
* an individual with the maximum 250K in FDIC-insured deposits across two banks ($500K) would have $300K taxable. They would pay $1,500 a year on a national wealth tax, which effectively reduces their interest from ~1.25% ($6,250 per year) to 0.95% ($4,750). Annoying, but hardly devastating, and a good stick for prodding the rich to take riskier or longer-term investments to earn better yields.
I have no idea whether a national property tax would be legal, but making it legal would be a fair exchange for repealing the 16th amendment. :-)
The simplest and most effective (and FairTax-like) would probably be some kind of Transfer Tax, paid by the seller (to encourage holding investments longer):
Apparently we had one as late as 1966 of 0.4%, for stocks:
> The United States had a tax on sales or transfers of stock from 1914 to
1966. This was instituted in The Revenue Act of 1914 (Act of Oct. 22, 1914 (ch. 331, 38 Stat. 745)), in the amount of 0.2% (20basis points, bps). This was doubled to 0.4% (40 bps) in 1932, in the context of the Great Depression, then eliminated in 1966.
It's been reconsidered recently, but never went anywhere:
Unfortunately, at the tax rate we are proposing (0.5%), it would (inferring from that article) only raise around $500B, vs. the $1250B from corporate and individual income taxes we need to replace.
We could increase that by covering more than just stocks, but I suspect there isn't much other wealth out there to tax.
I am also worried about pushing that rate higher, as capital is even more flighty than people. Taxing transactions at too high a rate risks killing the financial industry; we only want to maim it, so it can't run as fast. :-)
Perhaps if we had a low (0.5%) rate for direct asset transactions (e.g., stocks) but doubled it for indirect (e.g., derivatives) it would do better, and also dampen speculation. Of course, it could have the perverse effect of making derivatives seek *higher* returns to compensate, though even 1% on a 13% Junk Bond doesn't seem like it would dramatically alter behavior.
And it still may not be enough, but it should at least get us into the ballpark. Maybe the magical stimulative effects of eliminating payroll and income taxes would do the rest. Plus, simply adding friction to high-end financial instruments seems like a good thing.
Again, the Right hates it, but if tied to an elimination of the income tax, that might turn them around. And maybe capital flight is not a horrible thing, as long as it didn't completely kill the revenue stream. Frankly, I'd rather have rich people living and working here and storing their money abroad than vice versa.
An interesting feature of tying wealth taxes to treasury rates is that they would be counter-cyclical -- low when the economy is week, but high when it is strong. That's good from the perspective of stimulating/dampening the economy, but hard on financial management, as government revenue dries up when you need it most, aggravating deficit spending.
The only solution I could think of offhand is -- in a world with a hypothetical balanced budget -- ensuring some portion of this revenue is dedicated to a rainy-day fund. e.g., anytime treasury rates exceed 10%, the surplus revenue automatically goes into a counter-cycle fund that can't be tapped. But rainy days funds are notorious for being leaky.
Still, this seems like a viable model that addresses the concerns of a pure FairTax and a mere financial transaction tax, at least at first blush.
> In a message dated 10/15/2010 12:19:32 P.M. Pacific Daylight Time, ernest.prabha...@gmail.com writes: > On Oct 13, 2010, at 6:29 PM, David R. Block wrote: > > 12) Repeal the Income Tax amendment and implement the Fair Tax as put forth by John Linder and Neal Boortz.
> > I'm not going to copy from The Fair Tax Book, or the book Fair Tax: The Truth in copious amounts. They wrote the books, and I don't have any problems with it that I have been able to find.
> But I still have a couple concerns about it, which Billy hints at:
> > Regressive taxes, how wonderful. Tax the poor to lighten the burden on the rich. > > Why didn't I think of that ?
> Actually, that's not quite true. It would actually *reduce* the tax on the poor, especially as it would reduce hidden taxation costs in prices. It would also help the working poor by eliminating Social Security payroll taxes.
> The problem is that it increase taxes on the lower middle class, who spend most of their income but currently pay virtually no income tax. The rich who invest/save large chunks of their income would generally pay less than they do now. For example, FairTax Calculator says my family would pay only $30K in taxes, versus close to 100K now:
> That money has to come from somewhere. This redistribution would almost certainly lead to economic growth and job creation, but it would still be regressive (except for the very poor).
> I do think there is a way to fix the FairTax, though:
> 1. Make a national Sales Tax replace the Payroll Tax
> The payroll tax is what hits lower income Americans and complicates hiring. If we replaced all payroll taxes with a FairTax-like national sales tax of, say 10%, it should achieve most of the economic benefit without becoming overly regressive. At a guess, it should at least reduce taxes for those making less than $75K per year, which seems sufficiently progressive, and gets us into the range of those who pay more on income taxes than payroll taxes.
> This still leaves the problem of how to account for Social Security when we only capture spending rather than income, but for now let's assume that's a solvable problem.
> 2. Create a financial tax to replace the income tax.
> Most income tax only affects the rich already. If we are going to tax the rich -- which we have to do, since they have most of the money -- we should do it in a way that encourages appropriate behavior.
> What do we want the rich to do? Generate value to the economy, by either working or investing. Including taking risks that the poor and middle class do not. This implies we should penalize the rich for being selfish or safe.
> The FairTax would tax all spending from the rich, which is a good first step. Still, a 10% FairTax wouldn't bring in enough revenue. The remainder would have to come from taxing either a) wealth or b) financial transactions.
> 2a) Wealth Tax
> If we don't want to penalize investments, a "wealth tax" means taxing either property or savings (defined as FDIC insured).
> We could model this on FairTax, in that we set a baseline exemption based on the federal poverty level:
> To convert income to wealth, use the treasury rate. For example, if the poverty level is $10,000, and the treasury rate is 5%, then the "wealth exemption" is $10K/.05 = $200,000.
> To obtain a "fair" tax rate, I propose again indexing to 10% of the treasury rate, e.g. 0.5% for a treasury rate of 5%.
> For example:
> * a $1 million home would have $800K taxable, which at 0.5% comes out to $4,000 per year.
> * an individual with the maximum 250K in FDIC-insured deposits across two banks ($500K) would have $300K taxable. They would pay $1,500 a year on a national wealth tax, which effectively reduces their interest from ~1.25% ($6,250 per year) to 0.95% ($4,750). Annoying, but hardly devastating, and a good stick for prodding the rich to take riskier or longer-term investments to earn better yields.
> I have no idea whether a national property tax would be legal, but making it legal would be a fair exchange for repealing the 16th amendment. :-)
> The simplest and most effective (and FairTax-like) would probably be some kind of Transfer Tax, paid by the seller (to encourage holding investments longer):
> Apparently we had one as late as 1966 of 0.4%, for stocks:
> > The United States had a tax on sales or transfers of stock from 1914 to 1966. This was instituted in The Revenue Act of 1914 (Act of Oct. 22, 1914 (ch. 331, 38 Stat. 745)), in the amount of 0.2% (20basis points, bps). This was doubled to 0.4% (40 bps) in 1932, in the context of the Great Depression, then eliminated in 1966.
> It's been reconsidered recently, but never went anywhere:
> Unfortunately, at the tax rate we are proposing (0.5%), it would (inferring from that article) only raise around $500B, vs. the $1250B from corporate and individual income taxes we need to replace.
> We could increase that by covering more than just stocks, but I suspect there isn't much other wealth out there to tax.
> I am also worried about pushing that rate higher, as capital is even more flighty than people. Taxing transactions at too high a rate risks killing the financial industry; we only want to maim it, so it can't run as fast. :-)
> Perhaps if we had a low (0.5%) rate for direct asset transactions (e.g., stocks) but doubled it for indirect (e.g., derivatives) it would do better, and also dampen speculation. Of course, it could have the perverse effect of making derivatives seek *higher* returns to compensate, though even 1% on a 13% Junk Bond doesn't seem like it would dramatically alter behavior.
> And it still may not be enough, but it should at least get us into the ballpark. Maybe the magical stimulative effects of eliminating payroll and income taxes would do the rest. Plus, simply adding friction to high-end financial instruments seems like a good thing.
> Again, the Right hates it, but if tied to an elimination of the income tax, that might turn them around. And maybe capital flight is not a horrible thing, as long as it didn't completely kill the revenue stream. Frankly, I'd rather have rich people living and working here and storing their money abroad than vice versa.
> An interesting feature of tying wealth taxes to treasury rates is that they would be counter-cyclical -- low when the economy is week, but high when it is strong. That's good from the perspective of stimulating/dampening the economy, but hard on financial management, as government revenue dries up when you need it most, aggravating deficit spending.
> The only solution I could think of offhand is -- in a world with a hypothetical balanced budget -- ensuring some portion of this revenue is dedicated to a rainy-day fund. e.g., anytime treasury rates exceed 10%, the surplus revenue automatically goes into a counter-cycle fund that can't be tapped. But rainy days funds are notorious for being leaky.
> Still, this seems like a viable model that addresses the concerns of a pure FairTax and a mere financial transaction tax, at least at first blush.
But I still have a couple concerns about it, which Billy hints at:
> Regressive taxes, how wonderful. Tax the poor to lighten the burden on the rich. > Why didn't I think of that ?
Actually, that's not quite true. It would actually *reduce* the tax on the poor, especially as it would reduce hidden taxation costs in prices. It would also help the working poor by eliminating Social Security payroll taxes.
The problem is that it increase taxes on the lower middle class, who spend most of their income but currently pay virtually no income tax. The rich who invest/save large chunks of their income would generally pay less than they do now. For example, FairTax Calculator says my family would pay only $30K in taxes, versus close to 100K now:
That money has to come from somewhere. This redistribution would almost certainly lead to economic growth and job creation, but it would still be regressive (except for the very poor).
I do think there is a way to fix the FairTax, though:
1. Make a national Sales Tax replace the Payroll Tax
The payroll tax is what hits lower income Americans and complicates hiring. If we replaced all payroll taxes with a FairTax-like national sales tax of, say 10%, it should achieve most of the economic benefit without becoming overly regressive. At a guess, it should at least reduce taxes for those making less than $75K per year, which seems sufficiently progressive, and gets us into the range of those who pay more on income taxes than payroll taxes.
This still leaves the problem of how to account for Social Security when we only capture spending rather than income, but for now let's assume that's a solvable problem.
2. Create a financial tax to replace the income tax.
Most income tax only affects the rich already. If we are going to tax the rich -- which we have to do, since they have most of the money -- we should do it in a way that encourages appropriate behavior.
What do we want the rich to do? Generate value to the economy, by either working or investing. Including taking risks that the poor and middle class do not. This implies we should penalize the rich for being selfish or safe.
The FairTax would tax all spending from the rich, which is a good first step. Still, a 10% FairTax wouldn't bring in enough revenue. The remainder would have to come from taxing either a) wealth or b) financial transactions.
2a) Wealth Tax
If we don't want to penalize investments, a "wealth tax" means taxing either property or savings (defined as FDIC insured).
We could model this on FairTax, in that we set a baseline exemption based on the federal poverty level:
To convert income to wealth, use the treasury rate. For example, if the poverty level is $10,000, and the treasury rate is 5%, then the "wealth exemption" is $10K/.05 = $200,000.
To obtain a "fair" tax rate, I propose again indexing to 10% of the treasury rate, e.g. 0.5% for a treasury rate of 5%.
For example:
* a $1 million home would have $800K taxable, which at 0.5% comes out to $4,000 per year.
* an individual with the maximum 250K in FDIC-insured deposits across two banks ($500K) would have $300K taxable. They would pay $1,500 a year on a national wealth tax, which effectively reduces their interest from ~1.25% ($6,250 per year) to 0.95% ($4,750). Annoying, but hardly devastating, and a good stick for prodding the rich to take riskier or longer-term investments to earn better yields.
I have no idea whether a national property tax would be legal, but making it legal would be a fair exchange for repealing the 16th amendment. :-)
The simplest and most effective (and FairTax-like) would probably be some kind of Transfer Tax, paid by the seller (to encourage holding investments longer):
Apparently we had one as late as 1966 of 0.4%, for stocks:
> The United States had a tax on sales or transfers of stock from 1914 to
1966. This was instituted in The Revenue Act of 1914 (Act of Oct. 22, 1914 (ch. 331, 38 Stat. 745)), in the amount of 0.2% (20basis points, bps). This was doubled to 0.4% (40 bps) in 1932, in the context of the Great Depression, then eliminated in 1966.
It's been reconsidered recently, but never went anywhere:
Unfortunately, at the tax rate we are proposing (0.5%), it would (inferring from that article) only raise around $500B, vs. the $1250B from corporate and individual income taxes we need to replace.
We could increase that by covering more than just stocks, but I suspect there isn't much other wealth out there to tax.
I am also worried about pushing that rate higher, as capital is even more flighty than people. Taxing transactions at too high a rate risks killing the financial industry; we only want to maim it, so it can't run as fast. :-)
Perhaps if we had a low (0.5%) rate for direct asset transactions (e.g., stocks) but doubled it for indirect (e.g., derivatives) it would do better, and also dampen speculation. Of course, it could have the perverse effect of making derivatives seek *higher* returns to compensate, though even 1% on a 13% Junk Bond doesn't seem like it would dramatically alter behavior.
And it still may not be enough, but it should at least get us into the ballpark. Maybe the magical stimulative effects of eliminating payroll and income taxes would do the rest. Plus, simply adding friction to high-end financial instruments seems like a good thing.
Again, the Right hates it, but if tied to an elimination of the income tax, that might turn them around. And maybe capital flight is not a horrible thing, as long as it didn't completely kill the revenue stream. Frankly, I'd rather have rich people living and working here and storing their money abroad than vice versa.
An interesting feature of tying wealth taxes to treasury rates is that they would be counter-cyclical -- low when the economy is week, but high when it is strong. That's good from the perspective of stimulating/dampening the economy, but hard on financial management, as government revenue dries up when you need it most, aggravating deficit spending.
The only solution I could think of offhand is -- in a world with a hypothetical balanced budget -- ensuring some portion of this revenue is dedicated to a rainy-day fund. e.g., anytime treasury rates exceed 10%, the surplus revenue automatically goes into a counter-cycle fund that can't be tapped. But rainy days funds are notorious for being leaky.
Still, this seems like a viable model that addresses the concerns of a pure FairTax and a mere financial transaction tax, at least at first blush.
I'm not a fan of the wealth tax.
Again, for those in the lower middle income range, one is hitting
mostly IRA, 401k or 503b accounts, unless they remain tax exempt
and I don't see that here. So saving for retirement on your own is
penalized. With the state of Social Security and Medicare, should
they remain, this would seem to me to be very unwise. Likewise the
financial transfer taxes would only hit me when I change
investments in my IRA or 401k. So I should be taxed for trying to
be a smart investor? Thanks, but no thanks.
I find $4000 in additional property taxes onerous when I already
have a combined School, County, and City property tax of about
$6000. Do I want to almost double it? Hell no. However, I see with
your wealth exemption, my house wouldn't be hit at all. Retirement
accounts? Now that's another story.
And the Fair Tax rate that I have seen most often is 21 % or so,
so where did 10 come from?
The rest I will have to think about.
David
To compel a
man to subsidize with his taxes the propagation of
ideas which he disbelieves and abhors is sinful and
tyrannical.--Thomas Jefferson
On 10/15/2010 2:19 PM, Ernest Prabhakar wrote:
On Oct 13, 2010, at 6:29 PM, David R. Block wrote:
12) Repeal the Income Tax amendment and implement the Fair Tax as put forth by John Linder and Neal Boortz.
I'm not going to copy from The Fair Tax Book, or the book Fair Tax: The Truth in copious amounts. They wrote the books, and I don't have any problems with it that I have been able to find.
Regressive taxes, how wonderful. Tax the poor to lighten the burden on the rich.
Why didn't I think of that ?
Actually, that's not quite true. It would actually *reduce* the tax on the poor, especially as it would reduce hidden taxation costs in prices. It would also help the working poor by eliminating Social Security payroll taxes.
The problem is that it increase taxes on the lower middle class, who spend most of their income but currently pay virtually no income tax. The rich who invest/save large chunks of their income would generally pay less than they do now. For example, FairTax Calculator says my family would pay only $30K in taxes, versus close to 100K now:
http://www.fairtaxcalculator.org/index.php
That money has to come from somewhere. This redistribution would almost certainly lead to economic growth and job creation, but it would still be regressive (except for the very poor).
http://www.factcheck.org/taxes/unspinning_the_fairtax.html
I do think there is a way to fix the FairTax, though:
1. Make a national Sales Tax replace the Payroll Tax
The payroll tax is what hits lower income Americans and complicates hiring. If we replaced all payroll taxes with a FairTax-like national sales tax of, say 10%, it should achieve most of the economic benefit without becoming overly regressive. At a guess, it should at least reduce taxes for those making less than $75K per year, which seems sufficiently progressive, and gets us into the range of those who pay more on income taxes than payroll taxes.
This still leaves the problem of how to account for Social Security when we only capture spending rather than income, but for now let's assume that's a solvable problem.
2. Create a financial tax to replace the income tax.
Most income tax only affects the rich already. If we are going to tax the rich -- which we have to do, since they have most of the money -- we should do it in a way that encourages appropriate behavior.
What do we want the rich to do? Generate value to the economy, by either working or investing. Including taking risks that the poor and middle class do not. This implies we should penalize the rich for being selfish or safe.
The FairTax would tax all spending from the rich, which is a good first step. Still, a 10% FairTax wouldn't bring in enough revenue. The remainder would have to come from taxing either a) wealth or b) financial transactions.
2a) Wealth Tax
If we don't want to penalize investments, a "wealth tax" means taxing either property or savings (defined as FDIC insured).
We could model this on FairTax, in that we set a baseline exemption based on the federal poverty level:
http://aspe.hhs.gov/poverty/09poverty.shtml
To convert income to wealth, use the treasury rate. For example, if the poverty level is $10,000, and the treasury rate is 5%, then the "wealth exemption" is $10K/.05 = $200,000.
To obtain a "fair" tax rate, I propose again indexing to 10% of the treasury rate, e.g. 0.5% for a treasury rate of 5%.
For example:
* a $1 million home would have $800K taxable, which at 0.5% comes out to $4,000 per year.
* an individual with the maximum 250K in FDIC-insured deposits across two banks ($500K) would have $300K taxable. They would pay $1,500 a year on a national wealth tax, which effectively reduces their interest from ~1.25% ($6,250 per year) to 0.95% ($4,750). Annoying, but hardly devastating, and a good stick for prodding the rich to take riskier or longer-term investments to earn better yields.
I have no idea whether a national property tax would be legal, but making it legal would be a fair exchange for repealing the 16th amendment. :-)
http://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_United_States_Constitution
2b) Financial Instrument Tax
I was intrigued by Billy's proposal a few years ago for a tax on financial transactions.
http://en.wikipedia.org/wiki/Financial_transaction_tax
The simplest and most effective (and FairTax-like) would probably be some kind of Transfer Tax, paid by the seller (to encourage holding investments longer):
http://en.wikipedia.org/wiki/Transfer_tax
Apparently we had one as late as 1966 of 0.4%, for stocks:
The United States had a tax on sales or transfers of stock from 1914 to 1966. This was instituted in The Revenue Act of 1914 (Act of Oct. 22, 1914 (ch. 331, 38 Stat. 745)), in the amount of 0.2% (20basis points, bps). This was doubled to 0.4% (40 bps) in 1932, in the context of the Great Depression, then eliminated in 1966.
It's been reconsidered recently, but never went anywhere:
http://online.wsj.com/article/SB125512957855977163.html
Unfortunately, at the tax rate we are proposing (0.5%), it would (inferring from that article) only raise around $500B, vs. the $1250B from corporate and individual income taxes we need to replace.
http://en.wikipedia.org/wiki/2010_United_States_federal_budget
We could increase that by covering more than just stocks, but I suspect there isn't much other wealth out there to tax.
I am also worried about pushing that rate higher, as capital is even more flighty than people. Taxing transactions at too high a rate risks killing the financial industry; we only want to maim it, so it can't run as fast. :-)
Perhaps if we had a low (0.5%) rate for direct asset transactions (e.g., stocks) but doubled it for indirect (e.g., derivatives) it would do better, and also dampen speculation. Of course, it could have the perverse effect of making
On Oct 15, 2010, at 9:22 PM, David R. Block wrote:
> I'm not a fan of the wealth tax. Again, for those in the lower middle income range, one is hitting mostly IRA, 401k or 503b accounts, unless they remain tax exempt and I don't see that here.
I'm only proposing a tax on FDIC-insured savings accounts over, e.g., $200K. *All* investment would be tax exempt, except at the end when you cash it out, and then only a small percentage. And anyone with over $200K in savings is probably no lower-middle income. :-)
> Likewise the financial transfer taxes would only hit me when I change investments in my IRA or 401k. So I should be taxed for trying to be a smart investor? Thanks, but no thanks.
We have to tax something. And if you're a smart investor, you should only shift your funds when there's a noticeable upside (greater than 0.5%).
Yes, this introduces friction into the market, so making small shifts to gain razor-thin margin advantages will become impossible. But it hurts institutional and professional investors (and day traders) far more than your typical individual. More patient capital seems a very good thing overall, and the elimination of capital gains should make this a very small price to pay for most people.
> I find $4000 in additional property taxes onerous when I already have a combined School, County, and City property tax of about $6000. Do I want to almost double it? Hell no. However, I see with your wealth exemption, my house wouldn't be hit at all. Retirement accounts? Now that's another story.
No, the same story. See above.
> And the Fair Tax rate that I have seen most often is 21 % or so, so where did 10 come from?
By assuming we can capture half the revenue from stock transactions and a wealth tax, to make things progressive but still simple.
