[Rhodes22-list] Flat Tax Semi-Rant

[Brad Haslett]

Dear Comrade,

You caught me just as I was walking out the door to try and solve some
business issues.  Let me "kill some rats", have a vodka on the way home, and
we'll start this discussion anew.  Ah yes, workers!  Do you have any idea
where I can find some?

Yours truly,

Karl (shit, I meant Brad)


On 1/17/07, Bill Effros <bill at effros.com> wrote:
>
> Brad,
>
> Sadly, the boldface does not come through as boldface, so I have no idea
> what you are trying to prove by quoting a source that has been
> consistently wrong in its tax analysis.
>
> So why don't you become a citizen of Estonia?  Maybe because the flat
> rate there is 23%, they have a federal VAT on top of the flat rate, you
> would have to pay 23% of your pilot's income to Estonia in addition to
> the amount you would still have to pay to the American government (there
> is no deduction for your US taxes), and you would be required to file
> complex tax documents in both countries.
>
> Hong Kong does not have a flat rate.  They have a base rate with
> progressive marginal rates of 2%, 4%, 8% and 20%.  There are deductions
> and exclusions.  Mortgage interest is not taxed.  You still must file a
> complex tax document.
>
> Russia does not have a flat tax.  Individuals pay 13% on wages, 9% on
> dividends.  Non-residents pay 30%, in addition to what they must pay to
> their home governments (better not move to Russia, either).  There are
> "social engineering" exemptions.  Corporations pay 24%.
>
> Serbia does not have a flat tax.  Individuals pay 14% of their wages,
> but only 10% if they are self-employed.  There are "social engineering"
> discounts and credits available.  Wage earners taxes are immediately
> taken from their salaries.  Self employed can pay only once at the end
> of the year provided they can document that the lump sum payment will be
> less than 2 million dinars.  The capital gains tax is 20%.  Rental
> income is taxed at 20%.  There is a tax surcharge of 10% on all incomes
> greater than 4 times the average Serbian income as determined by the
> Serbian Government.  The corporate tax is 10%, and there are a huge
> number of "social engineering" exemptions available to corporations so
> that they can wind up paying substantially less than 10%.  (I guess we
> know why the Wall Street Journal likes this idea.)
>
> Ukraine does not have a flat tax.  They have 22 different taxes on the
> federal level, and 14 more local taxes.  In addition to the income tax,
> there is a social security tax, an environmental pollution tax, a Value
> Added Tax, an excise tax, a tax on use of the public airwaves,  a
> pension fund tax, a corporate profits tax, a land tax, a tax on the use
> of motor vehicles, a tax on bank deposits, an oil and gas tax--those are
> just some of the National taxes--on a local level there are also pension
> and social security taxes, advertising taxes, use of local symbols
> taxes...late payment fees are 120% of the prevailing interest rate...no
> more than 1 government audit is permitted per year except when certain
> conditions occur.
>
> Lithuania does not have a flat tax.  It varies from 15% to 27%.  In
> addition there is an additional 18% Value Added Tax.
>
> Latvia does not have a flat tax.  It varies from 15% to 27%.  In
> addition there is an additional 18% Value Added Tax.
>
> I don't have time to do this for every country in the world.  Suffice it
> to say that the "flat tax" as you described it has not been implemented
> anywhere, and that taxation by definition is "social engineering".
> People who earn wages should be leery of tax schemes promoted by the
> Wall Street Journal for the benefit of the "Workers".
>
> Bill Effros
>
>
>
>
>
> Brad Haslett wrote:
> > Bill,
> >
> > Here's your sign! I can provide more all day long. The bold print in the
> > article was my idea and highlights David's main point.
> >
> > Brad
> >
> > ------------------------
> >
> > WSJ
> >
> > *High Taxes Wither Away
> > *Former communist countries lead the way in abandoning progressivity.
> >
> > *Monday, February 28, 2005 12:01 a.m.*
> >
> > President Bush went out of his way last week in Europe to praise the
> > growing
> > number of countries that have junked their complicated tax codes and
> > adopted
> > a flat tax.
> >
> > Mr. Bush speaks for a growing number of Americans who are embracing the
> > idea--among them Clint Eastwood, who said few years back that the
> > adoption
> > of a flat tax would mean "a little old lady on a home computer [could
> do]
> > the work of all these thousands of bureaucrats and accountants.
> > Passing that
> > would be amazing, wouldn't it?"
> >
> > The bipartisan tax-reform commission Mr. Bush has appointed will no
> doubt
> > look carefully at the global spread of the flat tax, a concept its
> > supporters hail because it is simple to calculate, is harder to cheat
> on,
> > encourages investment and fosters growth economic growth. Little
> > wonder it's
> > catching on in Eastern Europe.
> >
> > In 1994, newly independent Estonia borrowed the idea of the flat tax
> from
> > highly prosperous Hong Kong, which 45 years before had introduced a dual
> > income tax system, allowing taxpayers to pay a flat rate on their gross
> > income. (In practice, almost everyone in Hong Kong pays the flat tax.)
> > Lithuania and Latvia quickly followed Estonia's lead. Today, all three
> > Baltic states are booming, and, along with Slovakia, a recent convert
> > to the
> > flat tax, they are the least-taxed countries in the European Union.
> >
> > The success of the Baltics attracted the attention of Andrei Illarionov,
> > Russian president Vladimir Putin's economic adviser. At his
> > suggestion, Mr.
> > Putin implemented a 13% flat tax for individuals, along with a 15%
> > rate for
> > most business income. The results have been astonishing as Russia's
> > black-marketers decided the tax was low enough and transparent enough
> > that
> > it wasn't worth evading.
> >
> > After struggling for a decade, Russia's economy grew 5% a year after
> > inflation in 2002 and 2003 and 7.3% last year. The flat tax has been a
> > key
> > reason that revenue from the country's personal income tax has grown
> > by 150%
> > since 2001. "This constant expansion of the government tax revenue is
> the
> > result of less tax evasion and increased incentive to work, save, and
> > invest," noted the Adam Smith Institute in London in a report on the
> flat
> > tax's success.
> >
> > Russia's experience set off a wave of imitators. In 2003, Serbia
> > introduced
> > a 14% tax on income and corporate profits along with plans to cut it
> > further. Russia's neighbor, Ukraine then set a 13% rate, with
> > dividends and
> > bank interest taxed at only 5%.
> >
> > Last year Slovakia junked an old tax system that included 66
> > exemptions, 19
> > sources of untaxed income and 27 items with their own specific tax
> rates.
> > Instead it put in place a 19% flat tax on income and profits. In
> December
> > Jan Oravec, president of Slovakia's Hayek Foundation, told me that the
> > country's flat tax has helped sustain an economic growth rate of 4.9%,
> > lowered unemployment and led to a surge in surge in tax revenues as
> > people
> > take advantage of the new opportunities to work and invest. Last year,
> > the
> > World Bank named Slovakia the world's top economic reformer in 2004 for
> > improving its investment climate.
> >
> > It was in Slovakia last week that Mr. Bush privately told Mr. Putin
> > how much
> > he admired Russia's success in implementing the flat tax. Later, in
> > public
> > comments, he praised his Slovakian hosts for their flat tax, which "has
> > helped to attract capital and create economic vitality and growth."
> >
> > Alvin Rabushka, a senior fellow at Stanford's Hoover Institution who
> > consults with countries all over the world on how to design a flat
> > tax, can
> > barely keep up with all the new adherents. Within two weeks after taking
> > office in December, Romania's new prime minister, Calin Popescu
> > Tariceanu,
> > issued an emergency edict to take effect only three days later:
> Companies
> > and individuals now pay a single flat rate of 16%. Georgia also
> > adopted the
> > flat tax as of Jan 1.
> >
> > Europe is becoming so crowded with flat-tax nations that the original
> > proponents of the idea are having to play catch-up. Estonia has just
> > cut its
> > rate to 24%, and has promised to slash it to 20% over the next two
> years.
> > Mr. Rabushka's book "The Flat Tax" has just been published in Chinese,
> > with
> > a preface by Lou Jiwei, the vice minister of finance. If China were to
> > climb
> > on board the flat-tax train, more than a quarter of the world's
> > population
> > would be filling out their taxes on the back of a postcard.
> >
> > In the U.S., interest in the flat tax languished after Steve Forbes, who
> > championed a 17% flat rate during his 1996 presidential campaign,
> > failed to
> > win the GOP nomination. Former House majority leader Dick Armey, a
> > pioneer
> > in promoting the flat tax, privately admits that Congress is unlikely to
> > abolish tax deductions for mortgage interest and charitable
> > contributions,
> > but there is lots of room for President Bush's tax reform commission to
> > propose a dramatic flattening of the income tax code.
> >
> > Liberal Americans often deride the flat tax on the ground that its lower
> > rates would starve public services and allow the rich to escape the
> > higher
> > taxes. But as former California governor Jerry Brown pointed out
> > during his
> > 1992 presidential campaign, the rich will always be able to hire
> > experts to
> > lobby for tax loopholes and avoid the higher rate traps set for them.
> > "It is
> > in everyone's interest to make sure everyone pays and that both tax
> > loopholes and the underground economy are reduced," he told me at the
> > time,
> > citing studies that nearly 10% of the U.S. economy could be off of the
> > books.
> >
> > Indeed, under existing flat-tax systems the wealthy end up paying a
> > *larger*share of total tax revenues. In flat-tax countries, taxpayers
> > in the highest
> > brackets move from consumption or tax-sheltered investments to more
> > productive, taxable investments. Many higher earners work harder or take
> > additional risks, rewarded by higher after-tax returns.
> >
> > *Despite all of its advantages, the flat tax faces enormous ideological
> > opposition. Envy and the lust for the political control that
> > complicated tax
> > regimes can provide are powerful motivations to keep progressive tax
> > systems
> > in place. Karl Marx in "The Communist Manifesto" was among the first
> > to call
> > for "a heavy progressive or graduated income tax" at a time when a
> > flat rate
> > was the norm in advanced countries. He listed it as second in the list
> of
> > priorities for a new society based on the class struggle. *
> >
> > It is therefore ironic that every country that has adopted the flat
> > tax is a
> > former communist nation--except Hong Kong, the modern originator of the
> > concept, which has seen its new communist rulers retain the flat tax as
> a
> > centerpiece of its economic policies.
> >
> > Given all this, why should the U.S. allow itself to continue to see its
> > economic potential limited by a Marxist concept that most nations that
> > followed that path are now fleeing from?
> >
> >
> >
> > On 1/17/07, Bill Effros <bill at effros.com> wrote:
> >>
> >> Brad,
> >>
> >> Most of the former Eastern bloc countries have not implemented single
> >> rate flat taxes--and most of those who have, have implemented flat
> taxes
> >> higher than 17%.  Most also have national VAT (very complicated
> >> progressive sales taxes) in addition to income taxes.  Is this what you
> >> have in mind--a scheme to raise taxes for individuals well over the
> >> amounts we currently pay?
> >>
> >> Bill Effros
> >>
> >>
> >>
> >> Brad Haslett wrote:
> >> > Bill,
> >> >
> >> > Most of the former Eastern bloc countries, the former Soviet
> >> states, and
> >> > Russia, have implemented a flat tax.  They've had their fill of
> social
> >> > engineering. China is next.  We need to scrap our current tax
> >> system and
> >> > start from scratch.  Unless you miss the old communist community,
> >> > there's no
> >> > reason not to begin this whole process over again - with a clean
> sheet
> >> of
> >> > paper.
> >> >
> >> > Brad
> >> >
> >> >
> >> > On 1/16/07, Bill Effros <bill at effros.com> wrote:
> >> >>
> >> >> David,
> >> >>
> >> >> According to Brad's definition of the "flat tax" there's nothing in
> >> that
> >> >> proposal that prevents government at any level from enacting "social
> >> >> engineering" taxes -- or any other additional taxes.
> >> >>
> >> >> Do you have a different definition for the "flat tax"?
> >> >>
> >> >> Bill Effros
> >> >>
> >> >>
> >> >>
> >> >> David A. Culp wrote:
> >> >> > The flat tax is a great idea that will never see the light of day.
> >> >> >
> >> >> > The reason is simple... power.  Both political parties and most
> >> other
> >> >> politicians will never give up the power that our present taxation
> >> >> system
> >> >> gives them.
> >> >> >
> >> >> > Anybody ever hear the term "social engineering" before?  As an
> >> >> example,
> >> >> if the government really wants you to quit smoking, they impose
> taxes
> >> to
> >> >> make it so financially unattractive that you quit, same for rum
> >> >> drinkers.  In fact, it's best if they threaten to do so from time to
> >> >> time so
> >> >> that the rich tobacco and distiller's lobbies will go nuts and
> shower
> >> >> them
> >> >> with money and trips.  That's power.
> >> >> >
> >> >> > Just recently in Texas, we added $1.00 to the tobacco tax on
> >> January
> >> >> 1st.  The tobacco lobby worked very hard behind the scenes
> >> >> (read-spread a
> >> >> lot of $$ around) but came up short because our legislators had made
> >> too
> >> >> many promises to taxpayers over the past years to lower property
> >> >> taxes.  My
> >> >> brother who has smoked for years and we had been trying to get him
> to
> >> >> quit... finally did because he can no longer afford it.  So, our
> >> state
> >> >> legislators got my brother to quit smoking, collected lobby money
> >> >> from big
> >> >> tobacco trying to buy their votes and now will have even bigger tax
> >> >> revenues
> >> >> to waste in the next session.  A win, win, win for government by
> >> >> tinkering
> >> >> with the tax system.  To top it off, they will get even more
> property
> >> >> taxes
> >> >> long term because the rate reduction is a mere pittance and
> >> >> valuations have
> >> >> been going up dramatically with no legal cap.  Anyway, at least my
> >> >> brother
> >> >> quit smoking.
> >> >> >
> >> >> > Another example, if the US government wants or needs us all to go
> >> >> "green", they give us income tax incentives to do so.  Just think if
> >> the
> >> >> government wanted a wind generator in every well-to-do yard in
> >> >> America; they
> >> >> could do it in short order with the right tax incentives and we
> would
> >> >> all
> >> >> get into the wind energy business and sell those KW's back to the
> >> >> electric
> >> >> companies.  You can apply this model to just about any subject you
> >> >> can think
> >> >> of except sailboats.  I don't think the government will ever give me
> >> >> a tax
> >> >> credit for owning a sailboat, but they should because I'm saving
> >> >> fossil fuel
> >> >> and not polluting the air as much!  Unfortunately, the sailboat
> lobby
> >> in
> >> >> this country just doesn't have enough wealth to push this through.
> >> >> But it
> >> >> could be done with a large excise tax on fuel at boat docks, a huge
> >> >> luxury
> >> >> tax on power boats and huge tax breaks for sailboats.  I can just
> see
> >> it
> >> >> now, a chicken in every pot and a sailboat in every driveway or
> >> farmer's
> >> >> pond in America.
> >> >> >
> >> >> > And no matter what they say, no career politician will ever truly
> >> >> support a flat tax.  Steve Forbes is not a career politician with an
> >> >> agenda
> >> >> and already has plenty of money; so he can afford to support a flat
> >> >> tax.  Remember, democrats want to social engineer the whole of
> >> >> society by
> >> >> redistributing wealth-can't do that as quickly or easily under a
> >> >> flat-tax
> >> >> system.  Republicans would like to social engineer our morality but
> >> >> that's
> >> >> nearly impossible; so they are content to get their life-blood from
> >> >> businesses and lobbies whom they protect with tax breaks ala Exxon
> >> >> Mobil or
> >> >> threaten to put out of business, like tobacco for instance.  Either
> >> >> way, the
> >> >> money just rolls in and as we know, always follow the money.
> >> >> >
> >> >> > David Culp
> >> >> > __________________________________________________
> >> >> > Use Rhodes22-list at rhodes22.org, Help? www.rhodes22.org/list
> >> >> >
> >> >> >
> >> >>
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