The New Inflation Tax
If the nation's economists were laid end to end, they would point in all directions.
- Arthur H Motley
The inflation of the money supply could be scientifically used to directly fund government. If, for example, the economy is growing at 4% per year, and the government prints and spends currency equal to that 4%, there should be no long-term inflation result. In the late 1800s in the US, prices dropped for many years because the US government was not printing money to match the production of the economy.
If one can live with a 2% inflation rate as a permanent feature of life, the system would work like this:
No income taxes or other taxes would be necessary. In fact, one no longer would need to even report to the government what one made in income as it would be irrelevant. In practice, one could not escape this inflation tax as long as he used the currency, since each dollar's value would be slightly decreased (taxed) by the printing of more money.
As long as basic rules are unviolated, there would be no danger of runaway inflation. The black market would become irrelevant. Noboby's business or financial activities would matter to the government and there would no longer be need for the IRS. Another advantage of this system is that it would automatically be indexed to economic growth, so there would be little danger of high taxes killing a weak economy. When times are bad, the tax burden automatically lowers. When times are good, more revenue accrues.
The obvious objection is that the power to print money could be abused. What if more money is considered needed to run the government than is available? Could it manage to stick to the rate of growth plus 2%, or to any set amount? Probably not,
The Tax Plan To Kill K Street
by George F Will
The power to tax involves, as Chief Justice John Marshall said, the power to destroy. So does the power of tax reform, which is one reason why Representative John Linder, a Georgia Republican, has a 133-page bill to replace 55,000 pages of tax rules. His bill would abolish the Internal Revenue Service and the many billions of tax forms it sends out and receives. He would erase the federal income tax system - personal and corporate income taxes, the regressive payroll tax and self-employment tax, capital gains, gift and estate taxes, the alternative minimum tax, and the earned-income tax credit - and replace all that with a 23% national sales tax on personal consumption. That would not only sensitise consumers to the cost of government with every purchase, it would destroy K Street.
"K Street" is shorthand for Washington's lawyer-lobbyist complex. It exists to continually complicate and defend the tax code, which is a cornucopia from which the political class pours benefits on constituencies. If the income tax were replaced - Linder had better repeal the 16th Amendment, to make sure the income tax stays gone - everyone and all businesses would pay their taxes through economic choices, and K Street's intellectual capital, which consists of knowing how to game the tax code, would be radically depreciated.
Under his bill, he says, all goods, imported and domestic, would be treated equally at the checkout counter, and all taxpayers - including upward of 50 million foreign visitors annually - would pay "as much as they choose, when they choose, by how they choose to spend." And his bill untaxes the poor by including an advance monthly rebate for every household equal to the sales tax on consumption of essential goods and services, as calculated by the government, up to the annually adjusted poverty level.
Today the percentage of taxpayers who rely on professional tax preparers is at an all-time high. The 67% of tax filers who do not itemise may think they avoid compliance costs, which include nagging uncertainty about whether one has properly complied with a tax code about the meaning of which experts differ. But everyone pays the cost of the tax system's huge drag on the economy. Linder says Americans spend 7 billion hours a year filling out IRS forms and at least that much calculating the tax implications of business decisions. Economic growth suffers, because corporate boards waste huge amounts of time on such calculations rather than making economically rational allocations of resources. Money saved on compliance costs would fund job creation.
Corporations do not pay payroll and income taxes and compliance costs; they collect them from consumers through prices. So the 23% consumption tax would allow taxpayers to stop paying the huge embedded cost of corporate taxation. Linder says the director of the Congressional Budget Office told him it costs individuals and businesses about $500 billion to remit $2 trillion to Washington. And studies show that it costs the average small business $724 to collect and remit $100.
In 1945 corporations paid more than 1/3 of the government's revenue. Now they pay only 11%, because corporations, especially multinationals, are voluntary taxpayers. In a world increasingly without borders that block capital movements, corporations pay where the burden is lowest. Linder says $6 trillion in offshore accounts would have an incentive to come home under his plan. Furthermore, by ending payroll and corporate taxes, the United States would become the only nation selling goods with no tax component - such as Europe's value-added tax - in their prices. With no taxes on capital and labour, multinationals would, Linder thinks, stampede to locate here, which would be an incentive for other nations to emulate America. "This," Linder says, "would unleash freedom around the globe."
Critics argue that ending the income tax, with its deductibility of charitable contributions, would depress giving. Linder says: Piffle. In 1980, when the top personal income tax rate was 70%, a huge incentive for giving, individual charitable contributions were $40.7 billion. In 1986 the top rate was reduced to 28%, and by 1988 charitable giving was $86.7 billion. The lesson, says Linder, is that we give more money when we have more money.
When Speaker Dennis Hastert published a book last year, he was startled to find that interviewers were most interested in talking about Linder's bill, which then had 54 co-sponsors. This year Hastert added Linder to the Ways and Means Committee. Linder cheerfully says his bill would reduce Ways and Means to "a B committee" by ending the political fun of making the tax code ever more baroque for the benefit of K Street's clients. Bliss.
Source: www.washingtonpost.com Thursday 31 March 2005 page A19
Not new, of course, and I've argued for a fairly similar plan with my friends for years. But fairly well explained. Pity it has no chance of going anywhere...
US Dips Out As Wealthy Avoid Taxes
Economics is extremely useful as a form of employment for economists.
- John Kenneth Galbraith
Washington - The United States fails to collect about $US200 billion ($NZ490 billion) annually in income taxes because of Internal Revenue Service enforcement cutbacks and efforts by the wealthiest Americans to avoid taxes, a watchdog group says.
Researchers at the Centre for Public Integrity detailed in a new book the efforts of thousands of US citizens and corporations to evade taxes through strategies including placing income in overseas accounts and renouncing citizenship to become "stateless characters".
"The dirty little secret is that governments don't know how to deal with this," said Charles Lewis, coauthor of The Cheating Of America and director of the Centre for Public Integrity.
Part of the problem is inadequate enforcement by the IRS, which has had its budget cut over the past several years, Lewis said. The number of IRS property seizures to pay back taxes fell to 161 from 10,000 a decade ago and the number of tax-related criminal prosecutions has fallen by 50% since 1981.
The centre estimates the net holdings of foreign wealth in tax haven countries like the Cayman Islands to be around $US3 trillion, although it had no estimate how much came from the US.
While Congress passed laws in the mid-1990s allowing the IRS and the Immigration and Naturalisation Service to bar US expatriates who renounce US citizenship for tax purposes from re-entering the country the law has never been enforced, Lewis said. - Bloomberg
Source: The Evening Post Thursday 29 March 2001
Heidi Fleiss to Open Laundromat
Heidi Fleiss, one-time leader of a high-priced ring of call girls to Hollywood stars,
She's calling it Dirty Laundry.
She is also opening Heidi's Stud Farm, a 20-man operation, Nevada's first legal bordello for women.
Source: nzherald.co.nz 3 July 2007 photo credit Reuters
What the Rich Worry About
by Shannon Reilly and Dave Merrill
Source: USA Today Wednesday 7 August 2002 from US Trust survey of affluent Americans
Examining State Taxes
Nine states (denoted by asterisks below) do not tax personal income or tax income only from dividends and interest...
State Tax Revenue per Capita
Source: The New York Times 23 August 2001 from the US Census Bureau
10 Worst Ways to Pay Your Tax Bill
by Jennie L Phipps
The bumper sticker is true: The IRS does have what it takes to take what you've got. But don't be in such a panic to pay the tax collector that you make an unwise payment decision. Frantic taxpayers too often come up with imprudent ways to raise tax cash, especially when April 15 is looming and the Internal Revenue Service bill is relatively small. But even a small amount can quickly balloon if exorbitant interest rates - or other strings - are attached. Before you make a tax-payment mistake, check out these 10 worst ways to pay Uncle Sam.
10. Get a cash advance against your paycheque.
9. Get a cash advance on your credit card.
8. Pawn your diamond ring.
7. Take out a personal loan.
6. Charge your tax bill.
5. Use your home equity.
4. Gamble on the float.
3. Dig into your retirement account.
2. Hit up the folks.
1. Pay off the government monthly.
Eva Rosenberg, publisher of TaxMama.com, says if you've already e-filed your return but haven't paid, and you're confident you can pay what you owe before the end of 2004, don't file the installment agreement. That way you save the $43 upfront fee and don't hand over your bank account information to the IRS. Instead, Rosenberg suggests you simply file your taxes and send the IRS as much as you can afford on April 15. Then save up and send money every time the agency sends you a notice about your balance due. Otherwise, put your tax return on an extension (or two) and buy yourself up to 6 months before IRS starts collections actions. But be very careful. If you're not disciplined enough to pay off Uncle Sam without the paperwork, if yearend arrives and you find you owe 2004 taxes and you've still not paid off your 2003 bill, you'll be in instant default. In this case, and the penalties and interest are brutal.
And so that you don't have to worry about coming up with tax cash next year, make sure your payroll withholding amount is correct now. Through this process, wage earners have a percentage of pay taken out each pay period and sent to the IRS where it is credited toward the taxpayer's final tax bill. If you have too little taken out, you'll owe money when you file your annual return. You can adjust your withholding simply by filing a new W-4 with your payroll office. True, you'll have to deal with a slight cut in take-home pay, but you won't have to write a big cheque to Uncle Sam next April.
Jennie L Phipps is a contributing editor based in Michigan;
Source: bankrate.com updated 15 April 2004
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