Fellow wants a 10% national sales tax to replace payroll tax,and End to SS

[papau]

A "generationally equitable, but highly progressive" solution? FROM: http://www.boston.com/news/globe/editorial_opinion/oped/articles/2004/11/21/dont_reform_it_replace_it/ The end of Social Security?
Don't reform it, replace it By Laurence J. Kotlikoff | November 21, 2004

"Rather than substitute consumption for income taxation, I favor substituting consumption for payroll taxation. We should do this as one of nine steps needed to properly reform Social Security, albeit in ways that are very different from those the commission proposes. My plan, which has been endorsed by 150 of the nation's leading economists, is called the Personal Security System.

Step 1 shuts down, at the margin, the retirement (Old Age Insurance, or OAI) portion of Social Security. Current retirees continue to receive their full retirement benefits, and current workers receive all the retirement benefits now owed to them, but that's it. There is no further accrual of Old Age benefits.

Step 2 eliminates the employee FICA taxes (7.65 percentage points of the total 15.3 percentage point employer plus employee tax), directing these contributions to individual Personal Security accounts. The employer FICA contribution continues to finance Social Security disability, survivor, and Medicare benefits.

Step 3 uses a roughly 10 percent federal retail sales tax to replace employee FICA taxes and pay off all accrued Old Age benefits. Over time, the sales tax rate falls as more and more of the accrued benefits are paid off.

Step 4 has married workers split their contributions 50-50 with their spouses/legal partners leaving each with an equal sized Personal Security account. This protects dependents who are secondary earners.

In step 5 the government matches the Personal Security contributions of low-income workers, making the new system as progressive as it wants. It also contributes on behalf of the disabled and the unemployed.

Step 6 invests all Personal Security account balances in a global, market-weighted index fund of stocks, bonds, and real estate securities. "Market-weighted index" means buying assets in proportion to their share of the financial market. The allocation of the portfolio is thus determined solely by the marketplace, not the government.

Step 7 limits the risk of market downturns by having the government guarantee that at retirement Personal Security balances will equal at least the sum of past contributions adjusted for inflation.

In step 8, each participant's holdings of the global index fund is gradually sold off between ages 57 and 67. The proceeds from the sale are used to purchase inflation-protected annuities (pensions). These annuities are paid out beginning at age 62. Between ages 62 and 67, participants receive additional annuities based on the sale of remaining balances. Participants dying prior to age 67 bequeath their nonannuitized account balances.

Step 9 has the Social Security Administration administer all Personal Security transactions at very low cost. It collects the contributions, manages the accounts, buys and sells the global index fund, and handles the annuitization of account balances at retirement. Wall Street plays no role and collects no fee. The Social Security trustees determine which foreign financial markets to include in the global index fund."

[grease_monkey]

1. A lot of democrats would go for this

But not me. Why not get the money from income tax by raising the rates on the top income earners by a certain percent?

[papau]

3. I agree - enough with the not-income/just wages or consumption tax

concept-

When we put in the income tax as an amendment to the Constitution, the rich were so embarrassed by the wealth difference between rich and average person, that they made the tax rate on investment earnings HIGHER than the rate of taxation on wages!

Good thing our media and the GOP taught the rich that there was no need to feel embarrassed moving funding of the government away from those with huge assets and toward those living off the paycheck.

Of course, doing the above with inadequate top end rates so that we can pass a huge national debt onto our kids.

It is the GOP/AMERICAN WAY!

sigh.....

:-)

[noamnety]

2. I've already earned most of the money I'm gonna make

And I've already paid income taxes on it. I'm not too interested in paying taxes on it again as I spend it.

[Krs216]

4. 10% wouldn't be enough.

It would take a 25% sales tax to make up the difference.

[bemildred]

5. Why do we want to do this?

I can't see the point. Why do I want a mandatory retirement
investment plan where I don't even get to choose what gets
invested in? It's a boondoggle. The Congress will start fiddling
with the money immediately. It will start another market bubble,
and the treasury will pick up the pieces (your 0% ROI) when it
pops. Rubbish.

[fedsron2us]

6. Never going to happen

Payroll taxation is the best way for politicians and the military industrial complex to get their hands on US citizens money. People in employment have little or no choice about payment. Consumption taxes by contrast are discretionary. If you choose not to buy goods then you do not pay the tax. This form of levy would do wonders for US savings but government revenues would plummet. Even if you ditched all medicare and social security expenditure current military spending would still leave a sizeable budget deficit. Of course you do not have to be Einstein to realise that it is the former items that the are the real target of the proposals. What your rulers plan is for you to continue to pay income tax as before but not to receive the benefits that you should be entitled. All that money is needed to keep the politicians well greased, the war machine running and the corporate bosses in the lifestyle to which they have become accustomed.

[cpalson]

7. Europe uses it

On first glance, a sales tax seems like a RW plot. It is, after all, highly regressive. They say, of course, they can make professions for low income Americans. But I don't entirely trust this because the gov right now is so prone to set the threshold so very low. That's why the "working poor", as they are called, are p'd. They need a boost, but instead they get stuck with medical bills, for example, that they can't afford. That's why welfare is such a campaign issue for them.

That said, however, the fact is that Europe uses it and the people of Europe have been living quite decently. Their VAT - Value Added Tax - is 25%. But nobody really complains because they get that back in services.

One of the advantages is considerable. It's a tax that is very difficult for the very rich and the giant corporations to avoid. At the corporate levels, they are taxed on the value they add to the product. So, say piece of plastic worth $1 is used to make a toy worth $5. They pay a VAT on the $4.

We have to face one hard fact: in today's world where electronic banking easily hides money, we have to have a tax system that gets around this. A VAT might be the way to go.

We need more research on how Europe does it. Anyone interested in doiong some?

[papau]

8. very rich and giant corporations easily avoid a VAT - just accept delivery

out of country.

To encourage exports - by giving local industry a price advantage - the sales price for export is after removal of all VAT.

So rich never pay a VAT.

The only good thing is the fact small businesses go into an auto-collect mode for efficiency sake - so a VAT is much harder for a local business to avoid - at least compared to the US SCH C tax.

And Bush wants to make corporate purchases of investment/capital equipment tax free via a 100% first year deduct from taxes.

[cpalson]

16. Export and VAT??

You say "To encourage exports - by giving local industry a price advantage - the sales price for export is after removal of all VAT." Could you please expand. I don't understand what you are saying.

My point is, Europe gets along quite well with a VAT. The proof, as they say, is in the pudding. I think it would be important to figure out how.

[papau]

9. Consumption taxes are NOT discretionary if poor/middle class - you

MUST spend to live just about 100% of income.

No one tries to save on tax by not buying food.

At the margin the poor and all others could save a nickel here or there by skipping an extra $1.00 of purchase.

But it is nothing compared to what the rich save.

[stevebreeze]

10. you are correct papau

look here for the effects of state reliance on sales taxes.

http://www.ctj.org/html/whopay.htm
In my state, Illinois, the richest 1% pay 0.9%
while those in the bottom quintile pay 6.4% in sales tax as a portion of AG Income.

Add in more tax and you add more incentive to avoid taxes.
Buy a computer pay sales tax.
Buy a computer company? no tax at all! How fair is that?

[papau]

11. :-)

:-)

[jwirr]

15. This could be avoided if like my state

some things were exempt from taxes: food, medical care, clothes, rent. This could be for everyone as it is in my state or just for the poor. However, what happens when you do the latter is that repugs set the limits too low and there is a group who get hurt because they are just above "poor".

[fedsron2us]

12. Your preaching to the converted

I fully accept that consumption taxes weigh more heavily on the poor than the rich and that spending on food, clothing, housing and heating is not discretionary. However, I doubt that any tax on these items alone would bring in sufficient money to meet the budgetary requirements of the US government. Even adopting VAT (a turnover tax rather than just a tax on consumption) at rates from 17.5% to 25% as widely levied in Europe would not come close to meeting the target. Europeans also pay income tax, national insurance contributions, excise duties on alcohol and tobacco, and various forms of property taxes in order to run their governments. It is true that their welfare and public health systems are much better funded that those of the USA but their politicians spend far, far less on their military, intelligence and homeland security operations. For the current administration in the White House to continue to conduct its aggressive foreign policy it needs cash and lots of it. Upto now it has been possible for US government to borrow money from abroad. If the dollar goes into free fall then even the ever supportive Japanese and Chinese lenders might decide to call it a day. When that happens Americans can look forward to higher taxes of all kinds.

[cpalson]

17. Consumption tax weighs too much on poor?

I don't know why you doubt a consumption + other taxes would not bring in enough money. I'd have to see a breakdown. It remains to be explained why the Europeans do quite well for themselves. I realize it doesn't make intuitive sense, but that's all the more reason for trying to figure out how they do it. The proof, as they say, is in the pudding.

[LiberalFighter]

13. Step 10

Dig up Jimmy Hoffa and switch bodies with this Laurence J. Kotlikoff.

[LiberalFighter]

14. He is just a shill for the stock brokers that want our money.

They are looking for a new source of cash flow that they can rely on. With the present system we don't pay commission fees and it is more reliable then investing.