Bush Tax Panel to Propose "Flat" AND Consumption Tax

http://quote.bloomberg.com/apps/news?pid=10000103&sid=aPrYNKUvyyG8&refer=news_index

Oct. 18 (Bloomberg) -- U.S. President George W. Bush's tax advisory panel backed two proposals to rewrite current law, one that would simplify the income tax and another to replace it with a modified flat tax. Both would eliminate many popular deductions and sharply reducing levies on investment income.

The panel agreed to endorse a ``simplified income tax'' that abolishes the alternative minimum tax and one of its major triggers -- the deduction for state and local taxes. The plan also restructures incentives for homeownership, health coverage and charitable giving. As an alternative, the panel also agreed to recommend a new progressive consumption tax that rewards savings, discourages borrowing, stimulates business investment, and simplifies tax filing for individuals. The recommendations will be the core of a report the panel will send to the Treasury Department on Nov. 1 that will be a blueprint for the Bush administration to recommend restructuring the tax code next year. White House officials and congressional Republicans have indicated that Bush may make tax overhaul his top domestic priority.

The panel's second, more ambitious proposal would fundamentally overhaul the current system, replacing it with a variation of the flat tax panel members dubbed a progressive consumption tax" that would set four tax rates on wages for individuals. Most investment income would be taxed at a 15 percent rate. The proposal would impose a radical reordering of tax rules for companies, financial markets and the economy. A pure version of the plan would tax only wages for individuals, which some panel members warned would shift the tax burden from the wealthy to salaried employees. ``It seems to me you would have some people who have no tax burden at all,'' said former Senator John Breaux, a Democrat from Louisiana who is the panel's vice-chairman. ``Many of them would be at the very, very top of the income stream. I'm not sure I'm very comfortable trying to sell that.''

The flat-tax idea represents an even more radical change for businesses, and not all of them would benefit, especially highly leveraged companies and those that lose money, analysts said. All businesses would pay at a rate equal to the top rate for individuals, eliminating current differences between large corporations and small businesses. Businesses would pay tax on the sale of all goods and services and receive no deductions except for wages paid. Interest, dividends and capital gains would be tax-free.

I'll agree to anything.

...it seems to work for Europe.

A consumption tax is a regressive tax.

" All businesses would pay at a rate equal to the top rate for individuals, eliminating current differences between large corporations and small businesses. Businesses would pay tax on the sale of all goods and services and receive no deductions except for wages paid. "
This would kill small business.

"Interest, dividends and capital gains would be tax-free."
The rich would benefit the most here.

"This would kill small business" and "The rich would benefit the most here."

As a "sole proprietor" (I am a self-employed graphic designer), I had a small heart attack when I read these articles.

The panel decided to drop the "Fair Tax" (National Sales Tax) from its list because they realized it would require a rate of EIGHTY SEVEN PERCENT (!), but ALSO cautioned:

"NRF has led the retail industry’s opposition to a National Retail Sales Tax, taking members of the NRF Board to the White House, meeting with the proposal’s two top supporters – Representatives Tom DeLay, R-Texas, and John Linder, R-Ga. – and educating Congress on the devastating impact the plan would have on the nation’s economy. A study commissioned by NRF in 2000 found that a national sales tax would bring a three-year decline in the economy, a four-year decline in employment and an eight-year decline in consumer spending. The study showed that similar results could be expected if other types of consumption taxes were enacted to replace the current system. (http://www.nrf.com/content/default.asp?folder=press/release2005&file=nrst-rejected.htm&bhfv=2&bhqs=1)"

...apparently no one on the panel read that press release, or simply didn't care.

put in place taxation on internet sales, since it says "all businesses..."

"Interest, dividends and capital gains would be tax-free." The mythical welfare queens driving cadillacs and buying caviar that Repugnants always toss out as a scare tactic and reason to hate big government are about to become reality. Instead of the poor being on the dole, it will be the multimillionaires and billionaires.