Monday Rant (see addendum below)
What if I owned an automobile factory and half my production was just driven off a cliff? Could I still call my total output productivity?
All the money expended to maintain our tax system is wasted.Posted by Walter E. Wallis
08/02/2004 at 09:10 AM
The unemployment this would cause would be a great thing for the economy. The people doing those jobs today are relatively smart in areas of math and logic skills..you would have to be to be able to wade through the morass of complexity that =they= have built up over time. The monster they have built is a permanent high skilled, high paid make-work project. Yes, taxes have to be collected somehow, but compared to the simplicity of a pure sales tax or VAT approach, the current system looks like a dead weight loss for the overall economy.
Now regarding any whining about all those smart people who have invested their lives in it, well, essentially their careers aided and abetted a hated central government busybody spying operation. Now most of them will simply rejoin the world the rest of live in where things change, technologies go out of existence, expertise and job skills of all sorts go out of date, industries reorganise.
Frankly, whining about those people having to reset their careers looks about as dishonest to me as say, whining about the fate of the doctors and nurses and so on who would have to do something else thanks to a cheap and easy cure for cancer being introduced. The IRS is a bad thing, but it , at least, is readily curable.
Cheers, Bryan Travis
Posted by Bryan Travis
08/02/2004 at 09:51 AM
Vilmar,
I think you are a bit off base with the rant in a couple of respects:
First, the Keynesian model of government-supplied jobs as economic stimulus is fairly discredited. For each dollar paid to each public-sector employee, you and I pay about $1.41 in taxes. Even though all jobs are burdened with overhead for the employers, and all costs are borne by the consumers, the bloated, inefficient IRS bureaucracy is not worth this high premium.
Second, the impact of laying these folks off will probably be minimal. Very minimal. There are several reasons for this. Primarily is the overall small number of folks involved. How many people work at the IRS? Five thousand? Ten thousand? 100,000? 200,000? (I’m not going to research this, though.) Let’s say 200,000 people work for the IRS, which I assume to be about ten times too large. That’s less than one tenth of one percent of the workforce. That means that new jobless claims rise from 300,000 to 500,000, which is a large fluctuation in terms of our economy, but a one-time fluctuation. The unemployment rate jumps from 5.5% to 5.6% or 5.7%, well within the capacity of our economy to support. A second factor is the extremely generous, taxpayer-funded employee-buyout program. As many folks as possible will be reassigned within the government; as many folks as possible will be given early retirement options; as many folks as possible will be able to buy up the rest of their government time and retire, too. These combined may take 50% - 75% of the load and redistribute it.
As for the contractors and what-not? Okay, once again, let’s assume a big number. Let’s say the IRS and the hangers-on are One Million souls. Out of 134 Million. Dump them all on the economy, which is otherwise sound. Our inflation rate jumps seven tenths of one percent, a one-time bump.
How this trickles into the consumer economy and causes mass bankruptcy - which is based upon the money supply and the interest rates, more than anything - is beyond me. Your describing Depression-era failure, when our unemployment was 30% or higher, with serious deflation. Our economic conditions aren’t anywhere close.
The cost-savings to something like a VAT or a flat tax rate for consumers would be legion. It takes my wife and me several hours to compute our taxes, and we’re just simple folk. It would take five minutes with a flat tax. Besides, those countries with VATs or flat taxes have many fewer tax cheats, since there is little incentive to manufacture deductions in order to pay a lower rate.
How would you compute a VAT or national sales tax? Simple. 10% of everything you pay for goes to the government.
Lastly, a mandate to tie the taxation to a balanced budget is a canard. We have no mandate now, have never had such a mandate (at the federal level), and there are good reasons to not have such a mandate, for example, the current War on Terrorism. Imagine what pedagogical shenanigans would ensure by the Antis if the President needed to fund, say, $87 B worth of supplemental funding in Iraq, but needed a supermajority or a Constitutional Amendment to do so. (Or, fund cleanup of Homestead, FLA following Hurricane Andrew.)
You’re right on the mark to question the efficacy of abolishing the IRS. I think you’re arguments are a bit over the top, though.
Posted by Nathan Hale at Paulieworld dot com
08/02/2004 at 10:42 AM
Isn’t CAPITALISM wondeful! Everybody needs everybody
to survive!Posted by oldcatman
08/02/2004 at 10:52 AM
Vilmar, I disagree totally with you on this one. It’s time for the IRS to go. 90% of these workers you are so concerned about will simply move to other jobs in corporate accounting or in the new government department that handles accounting for the new national sales tax. Didn’t think of that, did you? Someone will have to handle the accounting for that. So stop whining about government employees losing their fat overpaid jobs. Also, the private accounting firms and tax preparers will still have work to do with state and local taxes as well as helping merchants manage the taxes owed to the Feds. Employment-wise, there will be minimal impact, if any at all.
Isn’t CAPITALISM wonderful! Everybody needs everybody to survive!
Posted by oldcatman
08/02/2004 at 10:54 AM
Hmmm, so far I’ve started a little shit-storm.
Keep it up. I am listening.
Instead of the proposed National Sales Tax, what is wrong with a true Flat Tax - 1 rate for everybody & no loopholes. This would be a fair and equatable Tax for both rich and poor, and all the IRS would have to do would be to collect it. No myraid of rules, no Nazi like enforsement.
Mr Minority
Posted by Mr Minority
08/02/2004 at 11:16 AM
We’ve heard this bandied about for a long time, so I’m not going to get really excited about it. Like Vilmar, my question would be “if Congress spends like crazy now, how bad are they going to be with the alleged ‘vast increase’ in revenue this is suppossed to give them?” Don’t get me wrong - I’d love to lose the income tax. But I’m for smaller government and less spending. This will only catapult the Feds forward in terms of spending and expansion.
Posted by Kevin
08/02/2004 at 12:10 PM
We’ve heard about a flat tax since the Republicans took control of Congress in the 1990’s.
The Government wants 18% of our income, while God only wants 10%. Seems a 10% flat tax would garner more income for the State and simplify collections.
Posted by MAJ Mike
08/02/2004 at 02:14 PM
I am for it. And I seem to remember a fella by the name of Forbes, who made a run for the President on just such an idea. The wife is for a national sales tax. Me, I like the 10% (give or take a percent) flat tax across the board.) However, as I told her last night. Every single arm in both houses is going to have to be twisted. I don’t think this one is going to fly. Too many special interests....and the spin from this is going to be nothing but scare tactics....so the man on the street prob will never get the truth. (but that may be the cynic in me acting up again *grin*)
Posted by Guy S.
08/02/2004 at 03:31 PM
1) There will still be a need for the IRS. Someone is going to have to ensure compliance of the new rules and make sure the rules get out to people. We won’t need as many people as we have now, but some will definitely still be necessary.
2) Just because the Federal government does away with income tax doesn’t mean that state and local governments must. I dare say that most won’t. They’ll still need all the services that the ancillary people you’ve mentioned provide. Those businesses will have to reorient themselves to meet the new demand just like businesses have done since the first capatalist caveman hit the scene.
Posted by Jimmie
08/02/2004 at 03:47 PM
Vilmar,
In your ‘polished’ section you claim that ‘MILLIONS’ will lose their jobs. Can you back up this statement with a break-down.
BTW: What ever happened to all the typewriter makers? Or horse-carriage makers/operators? Most CPAs are upper-level educated people. They’ll find work rather quickly I’d supppose.
Posted by El Jefe
08/02/2004 at 04:21 PM
El Jefe,
I am not questioning the comparison with typewriter makers, etc. I concur that when something has outlived its usefulness, it is time to move on. But we must be measured in our approach. I just worry about the ECONOMY when these just are lost ALL AT ONCE. Find a way to do it gradually, that’d be great.
As for backing up my numbers, I have no way to DEFINITIVELY state them but take a look at your phone book, look at all the people I already mentioned in the sectors I’ve mentioned and then add in all those working for mutual fund and stock companies whose only job is to find ways to hide income, look at all the little industries surrounding accounting, taxes, shelters, etc.
Those numbers add up quickly.
Gretings Vilmar
Why not phase the sales tax in very, very slowly over a 20-25 year period? Lower income tax rates by 2% (40 % over 20 years) per year and raise sales tax rates by 0.5% per year. This way the tax people and IRS can retire, with no new hires at the IRS, H & R etc. Anyone at the IRS under 40 could find work elsewhere and be given a priority for other federal employment for new hires in other departments.
Posted by Dexter "Dark Wing" Duck
08/02/2004 at 07:13 PM
Dexter,
You are on the right track but I’d prefer it get done within 5-7 years. Minimizes the potential of meddling by the Congress.
If it happens, I suppose that’s the best way. At some point some people will pay more but over time it will all wash as different groups lose their “advantage.”
Okay, quick backup and a run at it.
Most of the fears you listed off are not reflective of economic reality.1)It’s called a “percentage.” Very advanced concept. You put it on EVERYTHING.
2)The guaruntee that we have that the tax rate won’t be raised by greedy idiots is simple market forces. They raise the rate, they raise the prices of all goods. Consumption drops, and therefore revenue drops. DRAMATICALLY. And even the public-schooled slackers loafing around the Kwikky Mart will be able to connect the concept of higher sales taxes=higher cost of living, because it will be visible and direct. Which means a lot of greedy, stupid politicians will have a MUCH harder time explaining why they raised taxes on things… and they will have a direct incentive to keep taxes low, because even a Democrat can figure out that the more something costs, the fewer people will buy it.
3)Yes, lots and lots of people will get laid off.
Initially. And this will look very very bad.
ON PAPER. However, any economic setbacks will be highly compartmentalized, remarkably transitory, and more than offset by the economic benefits, not the least of which will be increased consumer confidence and recovery of countless millions of work hours lost annually to needless paperwork… not to mention reduced burden on the individual taxpayer.Besides which, fretting that the staff of H+R block will be forced to seek new work is rather like fretting that the cure for cancer would put doctors out of work. Besides which, people working in the Tax industry are far better educated than the average joe and will have little or no trouble finding new jobs elsewhere.
Posted by RHJunior
08/03/2004 at 03:26 AM
