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Stinger
03-03-2005, 09:31 AM
Would love to see this happen

LINK (http://apnews.myway.com/article/20050303/D88JI49G0.html)

Greenspan Touts Idea of a Consumption Tax

Mar 3, 9:41 AM (ET)
By JEANNINE AVERSA

(AP) Federal Reserve Board Chairman Alan Greenspan discusses the nation's economic outlook before the...

WASHINGTON (AP) - Federal Reserve Chairman Alan Greenspan on Thursday embraced the notion of overhauling the nation's tax system and said that some form of a consumption tax - such as a national sales tax - could spur greater economic growth.

The Fed chief made his comments in prepared remarks to the President's Advisory Panel on Federal Tax Reform. Revamping the complex tax code is an important goal of President Bush.

Greenspan pointed out the merits of a "consumption" tax, as well as the challenges of setting up such a tax.

Consumption taxes can take the form of national retail sales taxes or a value-added tax, imposed on the increased value of a good or service at each stage of manufacture and distribution and ultimately passed on to the consumer.

"As you know, many economists believe that a consumption tax would be best from the perspective of promoting economic growth - particularly if one were designing a tax system from scratch - because a consumption tax is likely to encourage saving and capital formation," Greenspan said.

"However, getting from the current tax system to a consumption tax raises a challenging set of transition issues," he added.

Bush's advisers have spoken favorably of the economic benefits that could be achieved by moving from a system that taxes income to one that taxes consumption. However, Democratic critics contend such a consumption tax would hit low-income Americans the hardest.

Bush's aides have pointed out that the current tax system is actually a combination of a system that taxes income and one that taxes consumption. They note the creation of individual retirement accounts and other tax-deferred savings accounts allows taxpayers to shelter some investment earnings from tax.

Greenspan also said the tax panel will have to decide what type of system to use such as "a comprehensive income tax, a consumption tax or some combination of the two, as is done in many other countries."

The tax panel is responsible for coming up with recommendations to make taxes fairer and simpler. In addition to revamping Social Security, Bush wants to overhaul the nation's tax system - two centerpieces of his second-term economic agenda. Achieving both will be difficult politically and economically, especially against the backdrop of swollen budget deficits, analysts say.

Greenspan didn't offer a specific approach for policy-makers to follow as they consider an overhaul of the tax code.

But he did say that changes should be aimed at making the tax code easier for Americans to navigate, be fair and should contain an element of predictability so that businesses and consumers alike can look into the future and have a good idea what their tax obligations are - allowing them to plan ahead.

"A simpler tax code would reduce the considerable resources devoted to complying with current tax laws, and the freed up resources could be used for more productive purposes," Greenspan said.

whoman69
03-03-2005, 09:50 AM
Problem with a consumption tax is that it hurts those who cannot afford it and is another way for the wealthiest to pay less. Another example of supply side economics. It would also kill the benefits that most of us have for retirement by delaying the tax hit. What about charities? There would be no tax benefit to contribute to that either. All things being equal, a consumption tax would be the most fair system, but all things are not equal.

mikey23545
03-03-2005, 10:20 AM
Problem with a consumption tax is that it hurts those who cannot afford it and is another way for the wealthiest to pay less. Another example of supply side economics. It would also kill the benefits that most of us have for retirement by delaying the tax hit. What about charities? There would be no tax benefit to contribute to that either. All things being equal, a consumption tax would be the most fair system, but all things are not equal.


You have so many completely erroneous statements in one post, you may have set some some kind of record.

Poor people will be far better off under this plan than ever before.

Please go to www.fairtax.org and arm yourself with some facts before ever uttering such misguided BS again.

This has been a public service announcement.

Garcia Bronco
03-03-2005, 10:35 AM
Greenspan is the smartest man on the planet...one that Al Sharpton said he'd fire if he was elected President.

"We'd get our own people in there"

-Al Sharpton

SBK
03-03-2005, 12:35 PM
Problem with a consumption tax is that it hurts those who cannot afford it and is another way for the wealthiest to pay less. Another example of supply side economics. It would also kill the benefits that most of us have for retirement by delaying the tax hit. What about charities? There would be no tax benefit to contribute to that either. All things being equal, a consumption tax would be the most fair system, but all things are not equal.

If you spend $20,000 a year, you'll pay more in consumption tax than someone who spends $2,000,000.

Calcountry
03-04-2005, 08:27 PM
If you spend $20,000 a year, you'll pay more in consumption tax than someone who spends $2,000,000.Right, and they can exempt bread and milk and basic food stuffs.

Who would be paying the tax WHOman?

SBK
03-05-2005, 11:11 PM
Right, and they can exempt bread and milk and basic food stuffs.

Who would be paying the tax WHOman?

The poor guy would and kids would starve....ROFL

Mr. Laz
03-05-2005, 11:35 PM
i doubt it will happen ...


a consumption tax encourages less consumption


the U.S. economy is bases on more,more,more

Logical
03-06-2005, 12:23 AM
i doubt it will happen ...


a consumption tax encourages less consumption


the U.S. economy is bases on more,more,more

If the US citizenery did not have one of the lowest propensity to save and highest credit card debt averages in the world I would agree. All the extra income from no income tax would increase consumption most likely not decrease it. In fact a worry for me is the likelihood people would put much less into 401Ks because they would not be getting the tax shelter advantage.

mlyonsd
03-06-2005, 12:02 PM
Greenspan is the smartest man on the planet...one that Al Sharpton said he'd fire if he was elected President.

"We'd get our own people in there"

-Al Sharpton
I see where the Senate minority leader for the Dems, bug eyed Harry Reid came out and called Greenspan a "political hack". ROFL

The dems just keep digging a bigger and deeper hole.

beavis
03-06-2005, 06:50 PM
If the US citizenery did not have one of the lowest propensity to save and highest credit card debt averages in the world I would agree. All the extra income from no income tax would increase consumption most likely not decrease it. In fact a worry for me is the likelihood people would put much less into 401Ks because they would not be getting the tax shelter advantage.
Exactly.

Though they'll probably end up instituting a sales tax on top of the income tax. That'll be wonderful :mad:

Taco John
03-07-2005, 01:47 AM
a consumption tax encourages less consumption





Right... :rolleyes:

Sales tax has been a miserable failure in this country... Why continue to perpetuate such a failure.

Nightfyre
03-07-2005, 02:28 AM
i doubt it will happen ...


a consumption tax encourages less consumption


the U.S. economy is bases on more,more,more
However a consumption tax encourages more responsibility. I think a consumption tax based on how much it costs to repair the damage done to the environment would be a solid start.

SBK
03-07-2005, 02:37 AM
However a consumption tax encourages more responsibility. I think a consumption tax based on how much it costs to repair the damage done to the environment would be a solid start.

How much would it cost me to take a piss on a tree? ROFL

patteeu
03-07-2005, 08:48 AM
Problem with a consumption tax is that it hurts those who cannot afford it...

That's nonsense. There is noone who can't afford a consumption tax. The cost of food is even more regressive than a consumption tax, but I don't remember ever hearing about someone in the US who was so poor that they died because they couldn't afford food.


What about charities? There would be no tax benefit to contribute to that either.

Donations to charities wouldn't have to be taxed (and as far as I know, most consumption tax proposals don't tax charitable donations). Contrary to popular misconception, you don't make money by donating to charities under the income tax. Instead, the money you donate is effectively amplified by the fact that it is made with pretax dollars instead of after tax dollars. Under a consumption tax, the same would be true. The only difference is the psychology.

BTW, why don't you complain about progressivity in the income tax since it means that rich people get a far larger tax break for charitable donations than poor people do?

patteeu
03-07-2005, 08:50 AM
Right, and they can exempt bread and milk and basic food stuffs.

That would be a mistake.

patteeu
03-07-2005, 09:02 AM
i doubt it will happen ...


a consumption tax encourages less consumption


the U.S. economy is bases on more,more,more

Back in the day you were right. US consumerism was the engine behind both US economic activity and much of the economic activity of the world. What we should be moving toward is a production-focused policy and an economy that depends on global consumerism (e.g. China). The goal should be to improve our productivity so that American products can outcompete foreign products in global markets. Otherwise, US consumption will ultimately be satisfied by foreign production while US workers lose their jobs because they can't compete.

A consumption tax would be better than our current income tax in at least two ways:

1) The flipside of your criticism that a consumption tax would discourage consumption is that it would encourage capital formation which enhances production capability.

2) The cost of the income tax is built into every product the US produces. Under the GATT agreements, a consumption tax (an example of a pro rata tax) could be rebated as a product is exported for foreign markets but the income tax cannot. This means that when our products reach foreign shores, they have both our income tax and the foreign pro rata tax included in the price of the product. These products have to compete with foreign-made products that have only the foreign pro rata tax factored into the price. This is a competitive disadvantage.

The reverse is true as well. When a foreign-made product is imported to the US, it has been stripped of the foreign pro rata tax and has no built-in income tax. Domestic products must compete with these imports but are at a disadvantage because they carry the burden of our income tax in their price.

patteeu
03-07-2005, 09:07 AM
If the US citizenery did not have one of the lowest propensity to save and highest credit card debt averages in the world I would agree. All the extra income from no income tax would increase consumption most likely not decrease it. In fact a worry for me is the likelihood people would put much less into 401Ks because they would not be getting the tax shelter advantage.

This is an interesting argument that might actually be the practical truth. Even though it's not reality based, the psychology of the situation might lead to less long term savings. Under a consumption tax, all savings would effectively be tax sheltered (like a 401K) with the added benefit that it wouldn't be subject to a tax penalty for early withdrawal. But since there wouldn't be the psychological factor of an obvious "tax break," and there wouldn't be the punitive factor of a "tax penalty" for early withdrawal, some argue that savings might actually fall under a consumption tax.

*edit*One way to maintain the psychology of the current system would be to implement a "consumption tax" that is shaped like an income tax. If you expanded the deductibility of IRAs to allow for unlimited contributions and eliminate the early withdrawal penalty, you would effectively have a consumption tax that maintains the psychology of the "tax break" for savings. Unfortunately, it would require us to continue to file taxes every year (or every quarter) and continue to divulge extensive financial information*/edit*

whoman69
03-08-2005, 12:58 PM
You have so many completely erroneous statements in one post, you may have set some some kind of record.

Poor people will be far better off under this plan than ever before.

Please go to www.fairtax.org and arm yourself with some facts before ever uttering such misguided BS again.

This has been a public service announcement.
I looked at the site, filled with distortions. Rich people will pay more in consumption tax because they spend more on food. Guess they're going to scale back on filet mignon and lobster. Poor people will pay less. How the hell does someone who under the current system is so poor they don't pay income tax suddenly end up paying less by having to pay out 23% more for food and medicine? I notice it also does away with capital gains and estate taxes, something the Republicans have argued effects everyone when it actually only effects the rich.
Its simpler and yet we still have to have the IRS to make sure that rebates are given. They have to calculate everyone's consumption at the end of the year. They would most likely do that with a calculation system based upon income level. How is that different.
It tries to argue that social security is triple taxed, when it will do the same thing.
Simply put, a consumption tax is just another way for the rich to pay less. It does away with taxes they have to pay now and gives them an overall lower tax rate.

patteeu
03-08-2005, 08:00 PM
I looked at the site, filled with distortions. Rich people will pay more in consumption tax because they spend more on food. Guess they're going to scale back on filet mignon and lobster. Poor people will pay less. How the hell does someone who under the current system is so poor they don't pay income tax suddenly end up paying less by having to pay out 23% more for food and medicine? I notice it also does away with capital gains and estate taxes, something the Republicans have argued effects everyone when it actually only effects the rich.
Its simpler and yet we still have to have the IRS to make sure that rebates are given. They have to calculate everyone's consumption at the end of the year. They would most likely do that with a calculation system based upon income level. How is that different.
It tries to argue that social security is triple taxed, when it will do the same thing.
Simply put, a consumption tax is just another way for the rich to pay less. It does away with taxes they have to pay now and gives them an overall lower tax rate.

I agree that a pure flat tax would lead to the poor paying more tax and the rich paying less tax if it is strictly a replacement for the income tax.

But, if it replaces the FICA tax as well, I'm not so sure.

And, there are things that can be done to make a consumption tax progressive (e.g. rebate an amount equal to that which a person would pay on the first X dollars worth of consumption). I'd be opposed to such measures, but practically speaking, a consumption tax without them would be a political non-starter because people are brainwashed into thinking progressive=fair.

KCWolfman
03-08-2005, 08:08 PM
Problem with a consumption tax is that it hurts those who cannot afford it and is another way for the wealthiest to pay less. Another example of supply side economics. It would also kill the benefits that most of us have for retirement by delaying the tax hit. What about charities? There would be no tax benefit to contribute to that either. All things being equal, a consumption tax would be the most fair system, but all things are not equal.
Don't the wealthiest buy more than the poor?

And wouldn't we only be taxed once instead of multiple times in regards to your delayed tax hit?

Didn't people donate to charities before tax breaks?