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Crafty_Dog
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« on: November 20, 2008, 03:09:57 AM »

WSJ

Let's Have a Real Middle-Class Tax Cut
Obama's tax credits won't stimulate the economy.By NEWT GINGRICH and PETER FERRARAArticle
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President-elect Barack Obama is right: America needs a real and meaningful middle-class tax cut. Unfortunately, despite the rhetoric, that is not what his proposals offer.

 
AP
Newt Gingrich
Mr. Obama's tax plan includes creating or expanding nine or more federal income tax credits mostly focused on low- and moderate-income earners, with an estimated cost of $1.3 trillion over 10 years. These tax credits are provided for certain social purposes, such as child care, health care, education, housing and retirement. Buried amid these is Mr. Obama's purported tax cut for the middle class.

For the bottom 40% of income earners, who pay no federal income taxes on net today, these refundable income tax credits will not reduce tax liability but instead result in new checks from the federal government for the targeted social purposes. That's not a tax cut. It's welfare.

These tax credits will do little or nothing to promote economic growth because they do not reduce marginal tax rates -- the rate on the next dollar of income -- to provide powerful, meaningful incentives for productive activities such as investment, entrepreneurship and work. A tax credit is effectively a cash grant that can only affect incentives up to the amount of the grant. Indeed, such tax credits would likely reduce economic growth because the credits are phased out as income rises, and so effectively impose higher marginal tax rates over those income levels.

For a real middle-class tax cut, we should cut the 25% income tax rate that now applies to single workers earning $32,550 to $78,850, and married couples earning $65,100 to $131,450. We should reduce that rate down to the 15% rate paid by workers below these income levels. That would, in effect, establish a flat-rate tax of 15% for close to 90% of American workers.

Marginal tax rates for middle-income families in the 25% tax bracket are too high. Add in effective payroll tax rates of 15% and state income taxes, and these workers are laboring under marginal tax rates of close to 50%. No wonder middle-income wage growth has slowed sharply. Reducing the marginal tax rates for these middle-income earners would lead to income increases for middle-income workers, just as reducing excessive marginal tax rates for higher-income workers did, going all the way back to the Kennedy tax cuts of the 1960s.

This 40% cut in middle-class income tax rates would provide a powerful boost to the economy, greatly expanding incentives for savings, investment and work. This would be much more effective than Mr. Obama's tax plan with it's $1.3 trillion in redistributive tax credits, as well as yet another so-called stimulus package based on another $300 billion or more in increased government spending.


Taxing or borrowing from the economy and then spending hundreds of billions more through government bureaucracies will have zero effect in promoting economic growth, as did the failed stimulus package adopted by the Bush administration this year.

We could add to this alternative tax proposal an increase in the personal exemption from $3,500 to $7,000. The package would then cut taxes for all taxpayers, including those in the lower tax brackets. Of course, reducing the top income tax rates of 28%, 33% and 35%, capital gains tax rates, and the excessive 35% corporate tax rate, would boost the economy even more. But these are the "hate" rates imposed on those who liberals think are too productive, work too hard, and earn too much. Liberals deride these taxpayers as corporate fat cats and "the rich."

Fine. Leave those rates for a future initiative. For now we should focus on the middle-income tax rates that are attractive to cut in the current political climate. This would continue the tax cuts for low- and moderate-income workers Republicans have been adopting for 30 years now.

Because of the highly beneficial effect of these middle-class rate reductions on our economy, and the freedom they would give workers to spend, save or invest their money as they choose, this proposal would likely enjoy broad public support and present a viable alternative to the liberal social purposes of President-elect Obama's tax credits.

Mr. Gingrich is the former speaker of the House. Mr. Ferrara is director of entitlement and budget policy for the Institute for Policy Innovation.
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G M
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« Reply #1 on: November 20, 2008, 09:05:53 AM »

Sounds good to me.
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Crafty_Dog
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« Reply #2 on: February 27, 2009, 11:41:22 AM »

That didn't take long. The same week that President Obama promised (again) that "95% of working families" would not see their taxes rise by "a single dime," his own budget reveals that taxes will rise for 100% of everyone for the sake of global warming. Ahem.

You don't even have to burrow into yesterday's budget fine print to discover the "climate revenues" section, where the White House discloses that it expects $78.7 billion in new tax revenue in 2012 from its cap-and-trade program. The pot of cash grows to $237 billion through 2014, and at least $646 billion through 2019. If this isn't tax revenue, what is it? Manna from heaven? The offset from Al Gore's carbon footprint?

If it brings in revenue that the government then spends, it's a tax, and politicians should start referring to it as such. The Administration in fact projects that these "climate revenues" will become the sixth largest source of federal receipts by 2019, outpaced only by individual and corporate income taxes, payroll taxes for Social Security and Medicare and (barely) excise taxes. We're supposed to be living in a new era of fiscal honesty, so let's start with cap and trade.

Of course it's easy to see why Democrats don't want the public to think of cap and trade as a tax. Tax increases aren't popular, as Mr. Gore learned when he and Bill Clinton tried to impose a BTU tax in 1993. The complex cap-and-trade tax would ripple throughout the energy chain and ultimately the entire economy. All consumers, not just "the rich," would pay more for goods and services that use carbon energy -- though some would pay more than others. A majority of those "95% of working families" probably lives in the middle of the country that relies far more on manufacturing and coal-fired power than do the better-off coastal regions.

Mr. Obama's Energy Secretary Steven Chu was refreshingly candid on this point with the New York Times earlier this month. Given that higher prices are supposed to motivate the changes necessary to reduce carbon energy use, Mr. Chu said he was worried that climate taxes may drive jobs to countries where costs are cheaper. "The concern about cap and trade in today's economic climate," he said, "is that a lot of money might flow to developing countries in a way that might not be completely politically sellable." You are correct, sir.

Meanwhile, the political class loves a cap-and-trade tax because it gives them new economic and political power. Congress would create a new property right to expend CO2, setting a price per ton on carbon output, and then Congress would also get to determine the distribution of allowances. The Administration wants all of them to be auctioned off, which is what creates the giant revenue windfall. The politicians would then decide how to spend all of that new "climate revenue."

Mr. Obama's budget proposes to spend this windfall on two items: $15 billion a year in more subsidies for alternative fuels, and $65 billion or so a year to finance tax subsidies for workers, many of whom don't pay income taxes. In other words, once this cap-and-trade tax is on the books, the revenue stream will create political constituencies that depend on it.

No new pot of gold goes uncontested, however, so you can assume that Mr. Obama's priorities will not go unchallenged. Already on Capitol Hill, Charlie Rangel's tax committee and Henry Waxman's energy clan are feuding about who gets to divvy up the spoils. Not to mention who gets the political control that will become a source of tens of millions in new campaign contributions from thousands of affected businesses.

By the way, the Congressional Budget Office estimates that cap-and-trade taxes would actually throw off as much as $300 billion every year -- not merely $78.7 billion -- and in a footnote the Obama budget implicitly acknowledges that its $645.7 billion estimate is a lowball: "All additional net proceeds will be used to further compensate the public." No doubt.
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Crafty_Dog
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« Reply #3 on: March 01, 2009, 03:45:13 PM »

Friedrich A. Hayek in "The Constitution of Liberty" (1960), on the myth that progressive tax rates are necessary to fund large increases in government spending, lest an intolerable burden be placed on the poor:

Not only is the revenue derived from the high rates levied on large incomes, particularly in the highest brackets, so small compared with the total revenue as to make hardly any difference to the burden borne by the rest; but for a long time . . . it was not the poorest who benefited from it but entirely the better-off working class and the lower strata of the middle class who provided the largest number of voters.

It would probably be true, on the other hand, to say that the illusion that by means of progressive taxation the burden can be shifted substantially onto the shoulders of the wealthy has been the chief reason why taxation has increased as fast as it has done and that, under the influence of this illusion, the masses have come to accept a much heavier load than they would have done otherwise. The only major result of the policy has been the severe limitation of the incomes that could be earned by the most successful and thereby gratification of the envy of the less-well-off.

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Freki
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« Reply #4 on: March 02, 2009, 09:33:59 AM »

   Fair Tax

I like this plan and thought maybe I could get some feedback on what the forum group thinks of it.  I copied this from the www.fairtax.org web site.  I also included some links to youtube vids.  We have to do something to change the curent system.  The power to tax is the power to take property and ownership of property is the basis of liberty.  This power must be used wisely.  Our system is not wise or fair now.


What is the FairTax plan?
The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.
The FairTax Act (HR 25, S 296) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.
The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.
The FairTax:
Enables workers to keep their entire paychecks
Enables retirees to keep their entire pensions
Refunds in advance the tax on purchases of basic necessities
Allows American products to compete fairly
Brings transparency and accountability to tax policy
Ensures Social Security and Medicare funding
Closes all loopholes and brings fairness to taxation
Abolishes the IRS

We offer a library of information throughout this Web site about the features and benefits of the FairTax plan. Please explore!

The FairTax Five
The gloves are off as critics try to pick apart the FairTax. Trouble is, it's just a replay of the same five FairTax myths:

"The 23% rate is misleading. It's actually 30%"
Well, actually...  http://www.fairtax.org/site/News2?news_iv_ctrl=1541&page=NewsArticle&id=8248

"It's not enforceable and evasion will be rampant"
Well, actually...   http://www.fairtax.org/site/PageServer?pagename=about_fairtax_four#enforceable

"It will not be revenue neutral at 23%"
Well, actually... http://www.fairtax.org/site/PageServer?pagename=about_fairtax_four#neutral

"The FairTax is not politically viable"
Well, actually... http://www.fairtax.org/site/PageServer?pagename=about_fairtax_four#regressive

"The FairTax is regressive and shifts the tax burden onto lower and middle income people"
Well, actually...
http://www.fairtax.org/site/PageServer?pagename=about_fairtax_four#regressive




You tube vids


http://www.youtube.com/watch?v=k3OaIA_Of1s

http://www.youtube.com/watch?v=se7-smPLydI

http://www.youtube.com/watch?v=7JGj85npt-c


http://www.youtube.com/watch?v=D2yt5gQsmHg

http://www.youtube.com/watch?v=SBUkeiTX4Ek


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DougMacG
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« Reply #5 on: March 02, 2009, 12:01:33 PM »

Freki, I very much like the way you are thinking in terms of simplifying and changing the current system and abolishing the IRS, but I oppose this proposal.  I wrote an opinion in 2007 explaining why I think it is unworkable.  I will summarize here, this time with fair tax in the title so it can be found again. I look forward to your comments and others.  I think it is extremely important that like-minded people debate the policies now and get on the same page before the next election cycle or face yet another trouncing.
----

My top ten reasons that the 'FairTax' is a non-starter.  IMHO you can stop reading after the first sentence of point 1) below which constitutes a total and complete show-stopper.

1) Changing over to the 'FairTax' requires the repeal of the 16th amendment. You will not see 2/3rds of Nancy Pelosi's House, 2/3rds of Harry Reid's Senate and 3/4ths of the legislatures, including states like Senator Amy Klobuchar's Minnesota and Senator Hillary clinton's New York, voting to 'permanently' cancel the authority of the federal government to tax income at all while their careers are fully focused on "raising taxes on the wealthiest among us" to pay for health care and more government of all kinds.

2)  A 23% "inclusive" tax is a 30% sales tax.  When you buy a $1 item you pay $1.30.  The inclusive version is fine for comparing with income tax rates but this is a sales tax and you add 30% (best case) to the price.

3) Unless you live in South Dakota or another location without a state income tax you will still need to file a complete income tax return including all of the schedules with the government every year.  (Who really thinks the states will soon quit taxing income.)

4) Somewhere approaching 40% of the economy are the government purchases.  You can make them FairTax-exempt and then adjust the 30% tax WAY upward for the rest of us.  If we make them not-exempt, then adjust our public spending 'needs' up by 30% to cover the tax.

5)  The so-called "prebates" that remove the harshness of sales tax regressivity also remove the simplicity which was the primary strength, purpose and justification for the 'Fair Tax'.

6)  New items are taxed and used items are not taxed again because they already were, yet 'used' homes will be taxed!  Again, there goes the simplicity and the lobbying as it means the rules are negotiable.

7)  Fairness? For whom? Those who worked hard, paid taxes and saved for the future and now want to enjoy it will be openly double taxed.  So much for fairness.  Again, if we adjust for fairness, out goes the simplicity.

8.) What kind of real and restructuring tax reform is revenue neutral?  Those who want reform generally want lower tax burdens.  Those who preach the populist 'tax the rich' message of today oppose efforts to lower or remove the burdensome taxes on production.

9)  The false promise (IMO) of ending taxation on income has split and damaged the already feeble movement to truly reform our massive, incomprehensible tax system.  Case in point, look at the GOP contest in Iowa (2008) that will spread from there.  The already thin minority of Iowans who are inclined to be a) caucus-goers, b) fiscal conservatives and c) have a tax reform orientation are now split candidates with income tax reform proposals and one who just recently co-opted the 'FairTax ' banner.  IMO that means certain defeat for the larger cause of simplifying and lessening the burden.

10)  I take issue with the nomenclatures and slogans of "FairTax"  and "revenue neutral".  They remind me of telling us that taxes are mere "contributions".  Changing to consumption-based taxation is not fairer, it is just different.  It is not revenue-neutral to the individual taxpayers.  It would shift burdens around and half the people would certainly cry out 'unfair!'.

Bonus, 11)  A national 30% sales tax would compete and worden the state and local sales taxes that are as high as 7% and higher.  States and localities would then shift taxation heavier toward the income side, potentially removing most or all gains after adding an enormous new layer of taxation.  Imagine your local public schools looking at all that new revenue potential.  Nothing in the federal constitution or future amendments removes the ability of the state, county, local, school, or waste, stadium or transit commissions to go after any revenues that the feds leave on the table.

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Freki
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« Reply #6 on: March 02, 2009, 09:39:22 PM »

DougMacG
Thank you for your response and I look forward to hearing more from you.  Your points made me look into this more and I am still in favor of the Fair tax.  I am still open minded and if we could come up with a better solution I am all ears.  I touched on each of your points and would be happy to go into depth on them more though that would require more time that I spent on this response and more research but I would be happy to do it.



1) Changing over to the 'FairTax' requires the repeal of the 16th amendment. You will not see 2/3rds of Nancy Pelosi's House, 2/3rds of Harry Reid's Senate and 3/4ths of the legislatures, including states like Senator Amy Klobuchar's Minnesota and Senator Hillary clinton's New York, voting to 'permanently' cancel the authority of the federal government to tax income at all while their careers are fully focused on "raising taxes on the wealthiest among us" to pay for health care and more government of all kinds.

Granted this is a real problem and the main obstacle to the fair tax, but you can not win a fight by standing idle.  The support must be large enough to move the Harry Reids aside or to the cause.  With enough press I think it can be done.


2) A 23% "inclusive" tax is a 30% sales tax. When you buy a $1 item you pay $1.30. The inclusive version is fine for comparing with income tax rates but this is a sales tax and you add 30% (best case) to the price.

Inclusive or exclusive is just a numbers game the amount of tax is the same it is just in how you chose to do the math.  Your 1 dollar example is weighted in the wrong direction if you pay a dollar you pay 70 cents for your item and 30 cents tax if you run the numbers exclusive so tax is 30%.  You also fail to take into account the taxes imbedded in the cost of good which will no longer be there.  Studies have shove this to be as much as 24% so the amounts balance out.

How does the FairTax affect wages and prices?
1. Americans who produce goods and earn wages must pay significant tax and compliance costs under the current federal income tax. These taxes and costs both reduce after-tax wages and profits and are then passed on to the consumers of those goods and services in the form of price increases. When the FairTax removes income, capital gains, payroll, estate and gift taxes, the pre-FairTax prices of these goods and services will fall. The removal of these hidden taxes may also allow wages to rise. Exactly how much prices will fall and wages will rise depends on market forces. For example, in a profession with many jobs and too few to fill them, wages will likely increase more than in fields where there are too many employees and not enough jobs.



3) Unless you live in South Dakota or another location without a state income tax you will still need to file a complete income tax return including all of the schedules with the government every year. (Who really thinks the states will soon quit taxing income.)

These states with state income taxes I believe will fall into line once the people see how easy it is to do their taxes.  They will demand their states change.  The power of goverment lies with the people.  If this is no longer the case then our civilization is on the downward slope.  I still have hope we can fix it.


4) Somewhere approaching 40% of the economy are the government purchases. You can make them FairTax-exempt and then adjust the 30% tax WAY upward for the rest of us. If we make them not-exempt, then adjust our public spending 'needs' up by 30% to cover the tax.

It is my understanding that even the government would pay the fair tax.  It was stated in the fair tax book and on their web page.




5) The so-called "prebates" that remove the harshness of sales tax regressivity also remove the simplicity which was the primary strength, purpose and justification for the 'Fair Tax'.

There are already systems in place in our govt. that would allow us to send out the checks and the form you send in to apply for a prebate is one page and easy to do.  The expense is negligible when compared to the IRS now.  Here is a PDF explaining the system. http://www.fairtax.org/PDF/FairTaxPrebateExplained2007.pdf

6) New items are taxed and used items are not taxed again because they already were, yet 'used' homes will be taxed! Again, there goes the simplicity and the lobbying as it means the rules are negotiable.

It is my understanding the used homes will not be taxed.  Here is an example from the firtax.org site it uses cars but a good is a good.

Does the FairTax tax used items?
1. The FairTax does not tax “used” goods but it is important to note that HR25 has a legal definition of the term “used”. This is necessary to ensure that items are taxed only once and to prevent tax cheating.
Under the FairTax, for an item to be considered “used” it must be:
(1) purchased before the FairTax is enacted, or
(2) the FairTax on the item must have been previously paid.
Let’s look at (1) above. Assume that Joe bought a new car in January of 2005. Let’s further assume that the FairTax went into effect on Jan. 1, 2006. Since Joe owned the car before the enactment of the FairTax, it is considered a “used” car. It has the taxes from the existing tax system embedded in its price. Therefore, when Joe sells that car to Bill, Bill will not owe tax on the transaction.
Now, let’s consider (2) above. The most common example is that Joe buys a new car for personal use and pays the FairTax on it. If Joe then sells his car to Bill, there would be no tax on it because the tax had already been paid. Let’s look at another example. Assume that Joe owns a flower shop business and buys a van to use when making deliveries to his customers. No tax is charged on purchases for business purposes so that the FairTax on goods sold to consumers does not double tax, or put a tax on a tax.
If Joe decides to sell the van to his friend Bill (who is not in business) for use as his personal vehicle, then it would be a taxable sale to Bill. Why? Because Joe did not pay tax when he bought the van for his flower shop. Since no FairTax has been previously paid on that van; it is not considered used and the sale to Bill would be taxable.
If later, Bill decided he did not like driving a van and sold it to someone else, it would not be a taxable sale. Why? Because the tax had been previously paid (when Bill bought it from Joe) making the item “used” and not subject to tax.


7) Fairness? For whom? Those who worked hard, paid taxes and saved for the future and now want to enjoy it will be openly double taxed. So much for fairness. Again, if we adjust for fairness, out goes the simplicity.


What about senior citizens, retired people, and anyone on a fixed income?

As a group, seniors do very well under the FairTax. Low-income seniors are much better off under the FairTax than under the current income tax system.

Some erroneously believe that people who live exclusively on Social Security pay no taxes. They may not know it, but they are paying hidden corporate income taxes and employer payroll taxes whenever they buy anything. Under the FairTax, seniors pay $0.23 out of every dollar they choose to spend on new goods and services.

Plus, seniors, like everyone else, receive a monthly prebate, in advance of purchases, for taxes paid on the cost of necessities which more than pays for all of the taxes they would pay if they received the average Social Security benefit amount and spent it all. If seniors choose to work, they are freed from regressive payroll taxes, the federal income tax on wages, and the compliance burdens associated with each. They pay no more hidden taxes on goods or services, and used goods are tax free. There is no income tax on their Social Security benefits.

The income tax imposed on investment income and pension benefits or IRA withdrawals is repealed. Pension funds, IRAs, and 401(k) plans had assets of $12 trillion in 2004. An income tax deduction was taken for contributions to most of these plans. All beneficiaries and owners of these plans expected to pay income tax on them upon withdrawal, but are not required to do so under the FairTax.

All owners of existing homes experience large capital gains due to the repeal of the income tax and implementation of the FairTax Plan. Seniors have dramatically higher home ownership rates than other age groups (81 percent for seniors compared to 65 percent on average). Homes are often a family’s largest asset. Gains are likely to be in the range of 20 percent.

The FairTax makes the economy much more dynamic and prosperous. Consequently, federal tax revenues grow. This makes it less likely that federal budget pressures require Medicare or Social Security benefit cuts.


How does the FairTax help seniors who have paid taxes on their retirement savings or invested in Roth IRAs?

Simply put, the FairTax is a revenue-neutral proposal, raising no more money than does the current system. The FairTax only changes where the money is raised, not the amount.

Additionally, some erroneously believe that people who have invested in Roth IRAs will never pay taxes on this money again. They may not know it, but they are paying corporate income taxes, employer payroll taxes, plus the associated compliance costs that are hidden in the price of every retail purchase they make. Under the FairTax, these hidden taxes are driven out of retail prices. And note, they can determine the amount of tax they pay through their own lifestyle choices.

Furthermore, used goods are not taxed because they have already been taxed once -- when they were new. Therefore senior citizens, like all Americans, do not lose purchasing power, but gain it instead. Moreover, the FairTax preserves the purchasing power of Social Security benefits, and seniors receive a monthly prebate so they don’t pay taxes on the purchase of necessities. Tax-deferred investments get a one-time windfall. Savings invested in any long-term, income-generating asset such as a stock, real estate, or a long-term bond that can’t be called, increase substantially in value. Finally, complex estate planning is an artifact of an earlier age.

8.) What kind of real and restructuring tax reform is revenue neutral? Those who want reform generally want lower tax burdens. Those who preach the populist 'tax the rich' message of today oppose efforts to lower or remove the burdensome taxes on production.

Revenue neutral simply means this tax plan would raise a similar amount of funds as the current system would.  The difference is 1) we take the power out of the politican’s hands and move back to the people, 2) we now tax the underground economies and become hugely more competitive in the world market.  Many of the businesses driven offshore by taxes would now have incentives to come back to the U.S.

9) The false promise (IMO) of ending taxation on income has split and damaged the already feeble movement to truly reform our massive, incomprehensible tax system. Case in point, look at the GOP contest in Iowa (2008) that will spread from there. The already thin minority of Iowans who are inclined to be a) caucus-goers, b) fiscal conservatives and c) have a tax reform orientation are now split candidates with income tax reform proposals and one who just recently co-opted the 'FairTax ' banner. IMO that means certain defeat for the larger cause of simplifying and lessening the burden.

What system do you prefer?  Where is your support going and why


10) I take issue with the nomenclatures and slogans of "FairTax" and "revenue neutral". They remind me of telling us that taxes are mere "contributions". Changing to consumption-based taxation is not fairer, it is just different. It is not revenue-neutral to the individual taxpayers. It would shift burdens around and half the people would certainly cry out 'unfair!'.

I have explained revenue neutral earlier.
Is the FairTax fair?

Yes, the FairTax is fair, and in fact, much fairer than the income tax. Wealthy people spend more money than other individuals. They buy expensive cars, big houses, and yachts. They buy filet mignon instead of hamburger, fine wine instead of beer, designer dresses, and expensive jewelry. The FairTax taxes them on these purchases. If, however, they use their money to build job-creating factories, finance research and development to create new products, or fund charitable activities (all of which help improve the standard of living of others), then those activities are not taxed





Bonus, 11) A national 30% sales tax would compete and worden the state and local sales taxes that are as high as 7% and higher. States and localities would then shift taxation heavier toward the income side, potentially removing most or all gains after adding an enormous new layer of taxation. Imagine your local public schools looking at all that new revenue potential. Nothing in the federal constitution or future amendments removes the ability of the state, county, local, school, or waste, stadium or transit commissions to go after any revenues that the feds leave on the table.

The people prevent the state and local governments from getting out of control.
How are state tax systems affected, and can states adequately collect a federal sales tax?

No state is required to repeal its income tax or piggyback its sales tax on the federal tax. All states have the opportunity to collect the FairTax; states will find it beneficial to conform their sales tax to the federal tax. Most states will probably choose to conform. It makes the administrative costs of businesses in that state much lower. The state is paid a one-quarter of one percent fee by the federal government to collect the tax. For states that already collect a sales tax, this fee proves generous. A state can choose not to collect the federal sales tax, and either outsource the collection to another state, or opt to have the federal government collect it directly. If a state chooses to conform to the federal tax base, they will raise the same amount of state sales tax with a lower tax rate -- in some cases more than 50 percent lower -- since the FairTax base is broader than their current tax base. States may also consider the reduction or elimination of property taxes by keeping their sales tax rate at or near where it is currently. Finally, conforming states that are part of the FairTax system will find collection of sales tax on Internet and mail-order retail sales greatly simplified.



« Last Edit: March 02, 2009, 11:10:26 PM by Freki » Logged
Crafty_Dog
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« Reply #7 on: March 02, 2009, 10:43:48 PM »

Good to see a focused conversation!

Personally I like the idea of the Fair Tax and think it has been misunderstood by many and deliberately slimed by some whose interests it threatens, but at the given moment when we are in a terrible struggle to keep America a free market country, I suspect not much will get done with regard to the FT.  When people are being paniced (sp?) into a lemming stampede that throws away a goodly piece of what makes America America, is not a propitious time for a serious national conversation to persuade people to try of the FT.  By all means continue to lay groundwork and engage with the questions and doubts e.g. as is being done here, but my energies go elsewhere right now.
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Crafty_Dog
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« Reply #8 on: March 03, 2009, 09:02:11 PM »

Tax Poem
 
At first I thought this was funny...then I realized the awful truth of it.
 
Be sure to read all the way to the end!
 
 
Tax his land, 
Tax his bed, 
Tax the table 
At which he's fed. 
 
Tax his tractor, 
Tax his mule, 
Teach him taxes 
Are the rule. 
 
Tax his work, 
Tax his pay, 
He works for peanuts 
Anyway! 
 
Tax his cow, 
Tax his goat, 
Tax his pants, 
Tax his coat. 
 
Tax his ties, 
Tax his shirt, 
Tax his work, 
Tax his dirt. 
 
Tax his tobacco, 
Tax his drink, 
Tax him if he 
Tries to think.. 
 
Tax his cigars,   
Tax his beers, 
If he cries 
Tax his tears. 
 
Tax his car, 
Tax his gas, 
Find other ways 
To tax his ass. 
 
Tax all he has 
Then let him know 
That you won't be done 
Till he has no dough. 
 
When he screams and hollers,
Then tax him some more, 
Tax him till 
He's good and sore.. 
 
Then tax his coffin, 
Tax his grave, 
Tax the sod in 
Which he's laid. 
 
Put these words 
Upon his tomb, 
'Taxes drove me to my doom...' 
 
When he's gone, 
Do not relax, 
Its time to apply 
The inheritance tax .& nbsp;
   
 
Accounts Receivable Tax 
Building Permit Tax 
CDL license Tax
Cigarette Tax 
Corporate Income Tax 
Dog License Tax 
Excise Taxes 
Federal Income Tax 
Federal Unemployment Tax (FUTA) 
Fishing License Tax 
Food License Tax 
Fuel Permit Tax 
Gasoline At x (44.75 cents per gallon) 
Gross Receipts Tax 
Hunting License Tax 
Inheritance Tax 
Inventory Tax   ; ;
IRS Interest Charges IRS Penalties (tax on top of tax) 
Liquor Tax 
Luxury Taxes 
Marriage License Tax 
Medicare Tax 
Personal Property Tax 
Property Tax 
Real Estate Tax 
Service Charge Tax 
Social Security Tax 
Road Usage Tax 
Sales Tax 
Recreational Vehicle Tax 
School Tax 
State Income Tax 
State Unemployment Tax (SUTA) 
Telephone Federal Excise Tax 
Telephone Federal Universal Service Fee Tax 
Telephone Fed er al,
State and Local Surcharge Taxes 
Telephone Minimum Usage Surcharge Tax 
Telephone Recurring and Non-recurring Charges Tax 
Telephone State and Local Tax 
Telephone Usage Charge Tax 
Utility Taxes 
Vehicle License Registration Tax 
Vehicle Sales Tax 
Watercraft Registration Tax 
Well Permit Tax 
Workers Compensation Tax 
 
STILL THINK THIS IS FUNNY? 
 

Not one of these taxes existed 100 years ago, and our nation was the most prosperous in the world.  We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids. 
What in the hell happened?
Can you spell 'politicians?' 
And I still have to 'press 1' for English!?!?!?!?
 
 
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Body-by-Guinness
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« Reply #9 on: March 04, 2009, 11:05:10 AM »

March 04, 2009
US Companies Pay the Highest Taxes in the World

By Chris Banescu
It may come as a surprise that US companies pay the highest taxes in the world. Yes, you read that right. American businesses, large and small and across all industries pay from 35% to 41.6% of their income in combined state and federal taxes. The 41.6% maximum rate is scheduled to rise to 46.2% in 2010 when President Obama's promised tax increases are implemented. Compare that to socialist France where companies pay only 34.4% in taxes, to China where the rate is 25%, or Russia which levies a mere 24%. Corporations in Ireland, Europe's fastest growing economy for the
last 18 years, pay just 12.5% in taxes.

Because of its dual taxation system, US businesses and individuals are required to pay both state and federal taxes on their income. When combined both these taxes range from a minimum of 35% in states like Nevada, South Dakota, and Wyoming that do not tax business income, to a maximum of 41.6% in Iowa, the state with the highest corporate tax rate of 12%.

Corporate Tax Rates, US vs. Other Free-Market Democracies

Last year the Tax Foundation, a nonpartisan educational organization with a solid reputation for independence and credibility, released a report that compared the tax rates of US corporations (across all 50 states) with 29 other countries that accept the principles of representative democracy and free-market economy (referred to as OCED countries, 30 total). Their study reveals the surprising finding that US companies are already at a significant competitive disadvantage in the world economy.

When compared to other OECD countries:

24 US states have a corporate tax rate higher than top-ranked Japan.
32 states have a corporate tax rate higher than third-ranked Germany.
46 states have a corporate tax rate higher than fourth-ranked Canada.
All 50 states have a corporate tax rate higher than fifth-ranked France.
(The Tax Foundation, 2008)
The full chart comparing the various US tax rates versus all the other OCED countries is available here.

Based on gross domestic product (GDP) data from 2008, Japan was ranked as the world's second largest economy, Germany was the fourth largest, France was the fifth largest, and Canada was the eleventh largest economy. (CIA World Factbook on Wikipedia)

Among other surprises, all 50 US states have a combined corporate tax rate higher than even Italy, Spain, United Kingdom, Greece, Sweden, Norway, Finland, Austria, Switzerland, Denmark, Hungary, New Zealand, Australia, Mexico, Turkey, and South Korea. All 50 US states have higher tax rates than 27 of the other OCED countries.

When compared with companies based in Ireland with a 12.5% flat tax rate, US corporations that face an average 39.3% rate are taxed at 3.1 times Ireland's rate. When contrasted with Iceland (18%), Turkey (20%), Poland (20%), and Switzerland (21.3%) US companies pay roughly twice the tax rates of their foreign counterparts.

Even our cousins across the pond levy lower rates. The United Kingdom requires 30% in taxes while the US companies pay on average 39.3%; that's a 31% premium.

US Corporate Tax Rates Highest Among The World's Largest 15 Economies

The comparison doesn't stop with the OCED countries. US corporations compete in a global marketplace where many other non-OCED countries also operate. When looking outside the 30 free-market democracies that the Tax Foundation examined, things are just as ominous for American firms.

Based on the GDP data from 2008, some of the world's largest economies are also providing a tax environment much friendlier to businesses than the United States.

Communist China, the world's third largest economy, lowered its top corporate tax rate to 25% as of January 1, 2008. The new tax rate replaced the previous one of 33%.

Russia, the world's eighth largest economy, currently taxes its corporations just 24%.

Brazil, the world's tenth largest economy, taxes its companies a maximum 34% rate.

India, the world's twelfth largest economy, taxes its corporations at a rate of 33%.

The United States is the world's largest economy. When compared to the next 14 countries that represent the world's largest economies by GDP as of 2008, from the second largest (Japan) to the fifteenth largest (South Korea), the emerging patterns are striking:

24 US states have higher corporate tax rates than all 14 other countries.
32 US states have higher corporate tax rates than 13 of the 14 countries.
46 US states have higher corporate tax rates than 12 of the 14 countries.
All 50 states have higher corporate tax rates than 11 of the 14 countries.
The full chart comparing all the US tax rates versus the world's largest economies is available here.

Raising Taxes Further on US Businesses

In the face of aggressive global competition and in spite of the considerable tax burdens they operate under, US businesses have somehow managed to prosper and grow and maintain America's prominence as the world's largest economy. Unfortunately, as the global competitive marketplace has expanded and countries like China, India, and Russia ramp up their economic might and move away from punitive corporate taxation, many of America's politicians are taking America in exactly the opposite direction.

In the midst of a serious global economic slowdown, with devastating reductions in corporate profits, accelerating business bankruptcies, and massive corporate layoffs, many state lawmakers are working to increase tax rates and fees on corporations and businesses. Concurrently, the White House and a majority of representatives in Congress are promising more tax increases and the elimination of many tax credits. Instead of helping US companies be more competitive and profitable and thereby allow the US economy to remain the job creating engine and economic driver of the world, our politicians are punishing and handicapping them. What could they be thinking?

2010 Corporate Tax Rate: US = 46.2%, China = 25%

Looking toward 2010, if President Obama and Congressional Democrats keep their promises, we will witness the once unthinkable: free-market America will tax its companies at 46.2%, almost double the rate of state-controlled China at 25%. As the world's largest economies continue to embrace lower corporate tax rates, a friendlier business environment, and greater prosperity for their people, the US will move backwards to the failed policies of the past, of punitive taxation and mediocre growth at best.

Chris Banescu blogs at chrisbanescu.com/blog.

Page Printed from: http://www.americanthinker.com/2009/03/us_companies_pay_the_highest_t.html at March 04, 2009 - 12:02:58 PM EST
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JDN
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« Reply #10 on: March 04, 2009, 12:09:19 PM »

I'm sorry, I don't think I have ever heard of Chris Banescu.  Is he a well known economist, or???


According to an August 2008 report by the Government Accountability Office (GAO), "Statutory tax rates do not provide a complete measure of the burden that a tax system imposes on business income because many other aspects of the system, such as exemptions, deferrals, tax credits, and other forms of incentives, also determine the amount of tax a business ultimately pays on its income." Indeed, World Bank and GAO data indicate that the U.S. effective corporate tax rate is lower than 35 percent and lower than several developed -- including some European -- economies.

In its August 2008 report, the GAO estimated that "[t]he average U.S. effective tax rate on the domestic income of large corporations with positive domestic income in 2004 was an estimated 25.2 percent." Further, in its Paying Taxes 2009 publication, based on its 2009 Doing Business report, the World Bank-International Finance Corporation estimated that the United States has a lower effective rate of current corporate tax than several developed economies, including Germany and Italy. Moreover, in June 2007, the Treasury Department concluded: "If special provisions were eliminated, the top corporate tax rate could be lowered to 27 percent or more than 40 percent expensing could be provided to all businesses for new the cost of tangible investments, and the tax system would produce the same level of revenue."

In Paying Taxes 2009: The Global Picture, the World Bank noted that "reducing the statutory rate of corporate income tax has been the most popular government tax reform in the period. However in most of the economies, the case study company does not pay corporate income tax at the statutory rate on its profit before tax, since the tax rules require adjustments to be made to this in order to calculate taxable profits." The World Bank:

A common example is to substitute tax depreciation for commercial amortisation of assets.

The effective rate of current corporate income tax can be defined as the actual rate of corporate income tax paid as a percentage of profit before tax (see Appendix 2 for an explanation of the calculation). Figure 2.7 compares this effective rate with the statutory rate of corporate income tax for the G8 and BRIC (Brazil, Russia, India and China) economies, and shows that the two are often not the same.

The key point to recognise is that it is not simply the statutory rate of corporate income tax that is important here, but also the effective tax rate for current corporate income tax, taking into account all the additions and deductions to profit before tax that tax rules may require.

The report concluded that the United States has a lower effective rate of current corporate tax than several G8 and BRIC countries.





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Body-by-Guinness
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« Reply #11 on: March 04, 2009, 12:48:04 PM »

I'm sorry, I don't think I have ever heard of Chris Banescu.  Is he a well known economist, or???

Ah, a fallacious appeal to authority. Good to have you and your inanity hammer back. Of course Banescu is citing data from the Tax Foundation, as clearly noted in the piece. Do let us know if they measure up to your high standards.

Quote
According to an August 2008 report by the Government Accountability Office (GAO), "Statutory tax rates do not provide a complete measure of the burden that a tax system imposes on business income because many other aspects of the system, such as exemptions, deferrals, tax credits, and other forms of incentives, also determine the amount of tax a business ultimately pays on its income." Indeed, World Bank and GAO data indicate that the U.S. effective corporate tax rate is lower than 35 percent and lower than several developed -- including some European -- economies.

Oh thank goodness our system is so opaque that, if we factor in a bunch of other gobbledygook, we are only the second or third most burdensome nation, at least until BHO's new taxes come in.

As for the rest, I'll leave it as a chew toy for Doug, as he's better at it than I, particularly as I'm in no mood to deal with further pompous obfuscation.
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JDN
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« Reply #12 on: March 04, 2009, 01:34:22 PM »

Actually, no, the Tax Foundation does not measure up.  They are a corporate funded, politically biased, very conservative advocacy group;
hardly impartial like the GAO.  One should look at the total picture.

Though our tax laws include statutory rates that are fairly high (35% for corporations earning about $18 million or more annually) but generally in the same ballpark as those of other developed western nations, the actual tax rates paid by US corporations are extraordinarily low, around 6%.  The latest GAO report that shows that two-thirds of US corporations pay no federal income tax.  That's not just the ones that are losing money, but also many corporations that have record high profits (including some Big Oil companies) that end up paying next to nothing in taxes.

That's because the statutory rate of 35% is only on paper.  Corporations engage in aggressive tax planning and they take advantage of a bountiful number of lucrative loopholes built into the system often unavailable in other countries.  As a result, the US can be construed as a corporate tax haven, with one of the lowest effective corporate tax rates among all the countries that participate in the OECD. 
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Body-by-Guinness
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« Reply #13 on: March 04, 2009, 02:40:58 PM »

Ah yes, the same GAO my ex-spouse worked for. Use to hear her say "the requester took issues with our findings so we had to recast the question. I'll be working late tonight. . . ." Sounded all sorts of unbiased to me.

So as you are dissing the use of advocacy groups as source material will you be posting a list of who we are allowed to cite? It ought to be interesting and will doubtless reflect your unflinching lack of bias.
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DougMacG
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« Reply #14 on: March 04, 2009, 02:53:17 PM »

Seems diversionary to me to refer to (false IMO) numbers about an effective or average tax rate when it is the marginal tax rate that sets the disincentive to invest, expand, hire or build further.

Please document one major oil company that posted a record profit while paying next to nothing in taxes.
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Crafty_Dog
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« Reply #15 on: March 04, 2009, 10:59:46 PM »

While conceptually the point that there are other variables that the marginal rate is relevant, I agree fully with Doug's point about the pivotal role of the marginal rate.

I too would like to see some examples of some of the data tossed out by JDN e.g. "the actual tax rates paid by US corporations are extraordinarily low, around 6%."

Also, the GAO IMHO is occasionally impartial-- and frequently at key moments does Congress's bidding. 
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DougMacG
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« Reply #16 on: March 05, 2009, 10:13:51 AM »

Coming back to Freki's points and enthusiasm toward the Fair Tax... I will answer and clarify some key points but I think we both made strong points already and neither was persuasive to the other.

Amending the constitution and REPEALING the authority for a federal income tax:  "Granted this is a real problem and the main obstacle to the fair tax, but you can not win a fight by standing idle."  - In rough terms, it would require around 75% popularity where we can't even win 50% approval to stop the current expansion of government and taxation complexity.  Ronald Reagan only won his first time with 51%.  With current demographics they say that total would only make 46%... 

Inclusive v. exclusive:  "...it is just in how you chose to do the math."  Yes, but the burden is on the proponents to blow the opponents argument out of the water.  When you calculate as an add-on sales tax, it is a 30% tax, which becomes a 37% sales tax in my state and I think as high as 39.5% in the highest sales tax locations.

"It is my understanding that even the government would pay the fair tax.  It was stated in the fair tax book and on their web page."  - But of course the government can't pay, we do.  The public sector, including counties, schools, roads, military and on and on comprises close to 40% of the economy, but let's say 30% of purchases.  While you strive to be 'revenue-neutral', it is implied that we will fund the same sized government.  Therefore, to be 'spending neutral' we need to raise and spend enough  additional to cover government's share of the tax.  By my math, the 30% sales tax becomes 40% which becomes 47% with state tax here and over 49% in the highest tax areas.

State Income Taxes, I wrote: "Unless you live in South Dakota or another location without a state income tax you will still need to file a complete income tax return including all of the schedules with the government every year. (Who really thinks the states will soon quit taxing income.)  Freki replied:  "These states with state income taxes I believe will fall into line once the people see how easy it is to do their taxes.  They will demand their states change.  The power of goverment lies with the people.  If this is no longer the case then our civilization is on the downward slope.  I still have hope we can fix it."

I chose South Dakota as the example because it is the nearest state to me (in MN) that has no income tax and because it sounds so remote.  In fact, seven states have no state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.   We come at this from different perspectives because I am in an oppressive, high tax state and I think you are in one with no state income tax.  I envy that, but keep in mind that most of the other 43 states are totally and completely addicted to the complicated and progressive taxation of income.  Imagine California today canceling it's income tax.  Is that realistic?

Freki wrote:  "What system do you prefer?  Where is your support going and why"

This is a great question which slowed down my response to think about this.

I think we should evaluate tax choices on many different levels, efficiency first - that is to raise the money while doing the least harm to the incentives that make the economy work.  Morality - I think there is a case to be made for right and wrong in the way that taxes are applied and debated, and of course trying to be politically realistic. 

If we were starting from scratch and creating a LOW tax, simple system to finance the basics of constitutional government, I think I would be with you and favor a small tax rate against consumption instead of income.  The founders had a tariff on imports which I would oppose,  but would accept an across the board tax applied to everything evenly at a very low rate.  In hindsight, it would have been far easier to defeat the income tax amendendment then than to repeal it now.

From where we are today, I think the outrage, the battle and the uprising has to be first aimed at spending.  We must tax enough to pay our bills, but our bills are out of control.  I just can't get excited enough to work decades and dedicate a part of my life to such a large cause as defeating almost everyone in the House and Senate to move this forward and take this movement across the land to pass it in 3/4th of the legislatures if the reward at the end is to have a revenue-neutral change in tax systems that funds all of the crazy programs, cradle to grave, that we currently demand.

I would like to see the current income tax simplified and applied more widely at much lower rates.  I actually think all income should be taxed at exactly the same rate no matter who earns it or how.  As a political matter I know that isn't going too happen, but we need everyone to have 'skin in the game'.  I would settle for a mildly progressive system with continuously variable rates that start with a very low rate on your first dollar of income and cap at something lower than what we have today, perhaps 24% with VERY FEW or no deductions.   If we could apply a tax rate more evenly across the electorate, then maybe we could lessen the demand for wasteful programs and spending.
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Freki
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« Reply #17 on: March 05, 2009, 05:15:20 PM »

Thanks for your response DougMacG. I will read it a couple of times and see if I have a response but at first glace it seems we might disagree on details but are both of the same mind we need a change.

On a different note and a more emotional one I received this email and thought the group might like to know about this movement.

There's a storm abrewin'.  What happens when good, responsible people keep quiet?  Washington has forgotten they work for us.  We don't work for them.  Throwing good money after bad is NOT the answer.  I am sick of the midnight, closed door sessions to come up with a plan.  I am sick of Congress raking CEO's over the coals while they, themselves, have defaulted on their taxes.  I am sick of the bailed out companies having lavish vacations and retreats on my dollar.  I am sick of being told it is MY responsibility to rescue people that, knowingly, bought more house than they could afford.  I am sick of being made to feel it is my patriotic duty to pay MORE taxes.  I, like all of you, am a responsible citizen.  I pay my taxes.  I live on a budget and I don't ask someone else to carry the burden for poor decisions I may make.  I have emailed my congressmen and senators asking them to NOT vote for the stimulus package as it was written without reading it first.  No one listened.  They voted for it, pork and all.

O.K. folks, here it is.  You may think you are just one voice and what you think won't make a difference.  Well, yes it will and YES, WE CAN!!   If you are disgusted and angry with the way Washington is handling our taxes.  If you are fearful of the fallout from the wreckless spending of BILLIONS to bailout and "stimulate" without accountability and responsibility then we need to become ONE, LOUD VOICE THAT CAN BE HEARD FROM EVERY CITY, TOWN, SUBURB AND HOME IN AMERICA.   There is a growing protest to demand that Congress, the President and his cabinet LISTEN to us, the American Citizens.  What is being done in Washington is NOT the way to handle the economic free fall..


So, here's the plan.  On April 1, 2009, all Ameicans are asked to send a TEABAG to Washinton ,  D.C.    You do not have to enclose a note or any other information unless you so desire.  Just a TEABAG.   Many cities are organizing protests.  If you simply search, "New American Tea Party", several sites will come up.  If you aren't the 'protester' type, simply make your one voice heard with a TEABAG.  Your one voice will become a roar when joined with millions of others that feel the same way.  Yes, something needs to be done but the lack of confidence as shown by the steady decline in the stock market speaks volumes.

This was not my idea.  I visited the sites of the 'New American Tea Pary' and an online survey showed over 90% of thousands said they would send the teabag on April 1.  Why, April 1??  We want them to reach  Washington by April 15.   Will you do it?  I will.       
Send it to;     1600 Pennsylvania Ave.      Washington ,  D.C.  20500 ...

Forward this to everyone in your address book.  Visit the website below for more information about the 'New American Tea Party'.  I would encourage everyone to go ahead and get the envelope ready to mail, then just drop it in the mail April 1.  Can't guarantee what the postage will be by then, it is going up as we speak, but have your envelope ready.  What will this cost you?  A little time and a 42 or 44 cent stamp.

What could you receive in benefits?  Maybe, just maybe, our elected officials will start to listen to the people.  Take out the Pork.  Tell us how the money is being spent.  We want TRANSPARENCY AND ACCOUNTABILITY.  Remember, the money will be spent over the next 4-5 years.  It is not too late.
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Body-by-Guinness
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« Reply #18 on: March 12, 2009, 09:50:19 AM »

Contrary to the low overall tax claims of some, corporations are voting with feet and fleeing BHO's incoming redistributionist, carbon taxing follies.

RPT-FEATURE-Corporate oil booms in low-tax Switzerland
Thu Mar 12, 2009 9:04am EDT
* Companies seek Swiss domiciles despite tax row

* U.S. political climate may be helping

* Appeal as corporate location may outlast offshore dispute

By Sam Cage

ZUG, Switzerland, March 12 (Reuters) - The tidy towns and mountain vistas of Switzerland are an unlikely setting for an oil boom.

Yet a wave of energy companies has in the last few months announced plans to move to Switzerland -- mainly for its appeal as a low-tax corporate domicile that looks relatively likely to stay out of reach of Barack Obama's tax-seeking administration.

In a country with scant crude oil production of its own, the virtual energy boom has changed the canton or state of Zug, about 30 minutes' drive from Zurich, beyond all recognition. Its economy was based on farming until it slashed tax rates to attract commerce after World War Two.

It still has a chocolate-box old town with views over a lake to the high Alps, but is now surrounded by gleaming corporate offices -- including commodity trader Glencore and oil refiner Petroplus -- shopping malls and housing developments.

Local authorities say about 13 percent of full-time jobs in Zug canton are in the raw materials sector.

Over the past six months companies including offshore drilling contractors Noble Corp and Transocean, energy-focused engineering group Foster Wheeler and oilfield services company Weatherfield International have all announced plans to shift domicile to Switzerland.

"Switzerland has a stable and developed tax regime and a network of tax treaties with most countries where we operate," Transocean Chief Executive Bob Long said in a statement in October, when it announced its move. "As a result, the redomestication will improve our ability to maintain a competitive worldwide effective corporate tax rate."

Guido Jud, head of Zug's tax office, said about 1,200 companies had set up shop there in 2008 -- in line with the long-term average, though it is difficult to assess how many of those are foreign companies until they file tax returns.

Swiss cantons are free to set their own tax rates. For example in Zug, corporate tax is about 16 percent but can fall as low as 9.5 percent for companies that do most of their business outside Switzerland. That compares with an average global corporate tax rate of 25.9 percent, according to consultancy KPMG.

"One trend that we see is that particularly Bermuda-based companies are now moving to Switzerland," said Martin Frey, a partner at law company Baker & McKenzie. "That may only partly be obviously for tax reasons, but also for security reasons and the fact that the Obama administration may go after them."

CORPORATE APPEAL

The moves come as the Alpine country is under pressure to stop providing a haven to rich individuals who have been illegally dodging taxes: the U.S. political climate could be contributing to the corporate relocations as authorities seek to crack down on tax avoidance and boost their own revenues.

A bill introduced in the U.S. Congress in March targeting "offshore tax dodges" by individuals and companies names Switzerland among tax havens for evaders.

Offshore tax abuses cost the U.S. Treasury an estimated $30-60 billion in lost revenues from corporation tax, plus $40-70 billion from individuals, according to the office of Senator Carl Levin, who is sponsoring the bill.

Switzerland holds around $2 trillion of estimated global undeclared assets, according to the Boston Consulting Group. Revenue generated from this could be squeezed as a U.S. probe of its biggest bank UBS dilutes banking secrecy.

Yet analysts say the Swiss, whose GDP in 2008 was about 530 billion Swiss francs ($460 billion) according to the International Monetary Fund, are less likely to meet opposition to the low-tax regimes that draw foreign companies: these are deemed less harmful tax avoidance, rather than evasion.

"They are still making some money by having lower taxes on companies," said Lee Sheppard, contributing editor to Tax Notes, a tax journal based in Washington DC.

"But they're not ever going to be making the amount that other governments are annoyed about losing."

Analysts note that because Switzerland has its own tax treaty with the United States, blacklisting it at a corporate or individual level could cause unproductive diplomatic incidents.

Low-tax jurisdictions like Bermuda or the Cayman Islands look more vulnerable because they have less diplomatic clout, which is prompting some companies to head for Switzerland.

The European Commission, the European Union's executive body, has said the tax regimes in cantons like Zug, Schwyz and Obwalden are a form of state aid: it wants Switzerland to end favourable treatment of foreign-earned profits.

Switzerland, which is not a member of the EU, denies the cantons' special status violates its free trade deal with the bloc and rejects negotiations with Brussels on fiscal matters.

But it has pledged to consider some other company taxation regulations the EU has objected to, such as the status of foreign companies, aiming to ensure these go beyond thinly staffed headquarters to invest and create jobs in Switzerland.

CONTINUING TREND

Baker & McKenzie's Frey thinks more companies will shift to Switzerland, and Zug's Jud also highlighted the country's neutrality and reliability as an attraction to energy companies who do business in less stable countries.

"We are not reckoning on an unusually strong boom, but a continual and sustainable growth on the scale of the last few years and decades," Jud said.

Companies say Switzerland's attractiveness as a corporate location goes beyond tax to include easy and efficient transport, a high quality of life high and well-trained staff.

In the current climate, the attractions for the companies that move clearly outweigh one drawback: by making the switch they potentially sacrifice inclusion in stock market indexes such as the closely watched benchmark Standard & Poor's 500.

"In the past and most recently with Transocean, Standard & Poor's has ruled that the process of redomesticating to Switzerland renders a company 'ineligible for continued inclusion' in the S&P 500," said Macquarie Research analyst Angie Sedita in a note.

In buoyant times, inclusion in such indexes has offered access to equity capital. But the S&P 500 has fallen more than 50 percent since October. (Additional reporting by Braden Reddall in Houston; Editing by Sara Ledwith) ($1=1.158 Swiss Franc)

http://www.reuters.com/article/rbssEnergyNews/idUSL312427120090312?feedType=RSS&feedName=rbssEnergyNews&rpc=22
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G M
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« Reply #19 on: March 12, 2009, 02:25:10 PM »

And take their jobs with them. Right Miguel?
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