|
Request for Comments #2 (Specific proposals to reform the tax code)
from Organization, Association or Government Group
Back to List
| Posted: Apr 26, 2005 |
By: Dr. Harvey F. Barnard |
Subject: Comments regarding specific proposals to reform the tax code
Comment: Thank you for the opportunity to participate.
Dr. Harvey F. Barnard
Author of NESARA
The NESARA Institute
P.O. Box 70 Greenwell Springs, Louisiana 70739 (225) 634-3228
April 23, 2005
TO: President's Advisory Panel on Federal Tax Reform
In response to your published request for comprehensive reform of the Tax Code, I offer Part II of NESARA, the National Economic Stabilization And Recover Act. Backed by more than 20 years of study, this proposed legislation exceeds all of your stated requirements. It replaces most of the 8 volumes of fine print in Title 26 which nobody understands with about two dozen pages of simple rules which Forest Gump would understand.
NESARA was designed using system theory, the same techniques used to identify and solve complex problems in heavy industry. The stated objectives for its design were: Simplicity, Practicality, Revenue Neutral, Progressive, Constitutional, Politically Doable, and with an efficiency increase of at least 2.5% annually to promote long-run economic growth. The final product, posted at the NESARA Institute’s web site, http://nesara.org/main/index.htm meets or exceeds all of its design objectives.
Far beyond comments or suggestions from which to write new or revise existing tax code, NESARA is written as a comprehensive legislative package. It provides an explicitness upon which to judge existing tax code and any proposed changes virtually unknown in Congress or to the general public.
Thank you for your kind attention.
For the NESARA Institute
Organizations and Associations
Dr. Harvey F. Barnard
Author of NESARA
Detailed Summary–Part II National Sales and Use Tax
Immediate Relief and Results
• Workers maintain better control of their earnings
• Production is no longer taxed, just consumption
• Most of the necessities of life are not taxed
• Encourages production thus revitalizing industry in America
• Encourages rebuilding of inner cities
• Discourages wasteful uses of natural resources
• Exposes the true cost of government
• Greatly eliminates the struggle between tax “protesters” and bureaucracy
• Allows the “underground” to resurface and become a viable contribution to production of goods and services
• Greatly restricts the influence of special interests and lobbyists
The Income Tax
• The Income Tax Act of 1939 is amended
• People need no longer fear the IRS
• Billions of hours of nonproductive labor are eliminated
• Mounds of paper work are eliminated
• The cost of the income tax is no longer hidden and embedded in the cost of doing business and passed down the chain with the consumer paying the final tab
• Most likely eliminates state income tax plans because state income taxation piggybacks on federal income taxation
• The IRS is reformed into the National Tax Service
• Volumes of complicated tax code are history
• Eliminates personal income taxes
• Eliminates corporate income taxes
• Eliminates gift taxes and estate taxes
• Eliminates capital gains taxes
Sales and Use Tax
• Tax rate of 14%
• Government entities are exempt
• Government mandated expenses such as licenses, permits, passports, are exempt
• Sales of bullion, coin and currency are exempt
• Sales made by or to nonprofit schools are exempt
• Sales of prescription drugs, medical supplies and services are exempt
• Real estate rents and leases are exempt
• Sales of groceries are exempt
• Sales of plants, livestock and fish used in the production of food for human consumption are exempt
• Insurance sales are exempt
• Segregated portions of labor in retail service contracts are exempt
• Incidental or occasional sales such as garage or rummage sales are exempt
• Sales for the purposes of recycling are exempt
• Meals provided by companies at company expense are exempt
• Sales that are nonprofit in nature are exempt
Description of Proposal:
1. Tax base
NESARA is a consumption based tax, the design most favored by America’s Founding Fathers. It eliminates personal income taxes, corporate income taxes, gift taxes and estate taxes, and capital gains at the Federal level.
2. Exemptions, Deductions, Credits And Exclusions
NESARA provides more than 20 classes of items exempted from consumption taxes at the Federal level. Individuals of modest means are protected from the adverse effects of federal taxation by removal of the hidden elements of current tax policies on productive activity and by exempting groceries, rent, insurance, medicines, and some categories of previously used articles from consumption taxes.
One of the exemptions is worded somewhat curiously: “Ninety percent of the purchase price paid for all secondary sales of commercial investment securities of whatever type, excluding the transferable securities of the United States government and all its political subdivisions which are exempt from the tax;” When translated it means that secondary sales of securities are taxed at 10 percent of the full sales tax rate. Within the philosophy of a sales tax, taxing secondary stock sales is fair, largely paid by wealthy people just relieved of income and capital gains taxes. The tax is low enough to prevent capital flight from the country and high enough to raise substantial amounts of revenue, something over $500 Billion annually. More importantly, this tax discourages market speculation, the constant moving of money to make money in the short run rather than into long-term productive investments. Long-term investors are largely unaffected by this tax.
NESARA distinguishes between initial public offerings and secondary transfers of stock. NESARA encourages new commercial investment because initial issues of stocks and bonds are not subject to the national sales tax, only trades in the secondary market. Initial investments build businesses; secondary trades merely swap ownership. Stock certificates are property and proof of company ownership. Whereas initial stock purchases capitalize a new venture, secondary exchanges are really nothing more than property sales in the commercial retail market and thus subject to any sales tax.
3. Tax Rate(S)
NESARA imposes a national sales and use tax of 14 percent on the retail sale or use of all property, both domestic and foreign, exchanged in commerce by any person within the jurisdiction of the United States. The first requirement of this tax is that it replaces dollar for dollar all revenue lost with the demise of the income tax.
Congress must set the actual tax rate, 14 percent being a judicious suggestion based on computer simulations of the national economy. With the anticipated increase in economic productivity and tender hopes for prudent government, that initial rate drops. After a few years one estimate puts it as low as 7 percent, others at around 9 percent. All estimates are established on various assumptions for many factors.
Experts argue over the validity of their assumptions and the impacts of numerous factors in their economic models. Most agree on one thing — the size of a uniform tax rate generating a given amount of revenue depends on the volume of taxable sales.
Other tax rates for special cases are explicitly stated in NESARA. For example, it imposes a tax of 8 percent on the gross profits of gaming sponsors, that is, 8 percent of gross gaming receipts less total gaming payoffs to chance purchasers and government entities. And it encourage recycling materials. This justifies a 50 percent tax break on retail sales of used tangible property—used cars or equipment, parts acquired at scrap yards, merchandise from secondhand stores, etc. — excluding remanufactured items sold with warranties longer than 90 days. The latter are treated as new items and taxed at the full rate.
4. Distribution Of The Tax Burden
Contrary to popularly held belief, the “progressive” income tax is actually regressive because it is often easily passed through as a hidden tax in the price of goods and services. It falls most heavily and unfairly on working middleclass citizens who pay the tax twice, once when it is withheld from their wages and again as a hidden tax in the price of essential goods and services.
Exempting most of the necessities of life from the Federal consumption tax destroys the misconception that a national retail sales tax is always regressive, that it falls hardest on those who must spend most of the money they earn out of necessity, not choice. Discrediting that myth destroys the moral justification for the current income tax system.
Consider the fabled poor family of four. At a minimum wage of $5.15/hour, two full-time wage earners provide an annual income of $21,424, (2 workers x $5.15/hour x 40 hours/week x 52 weeks/year = $21,424). Of course, this family will be affected by the new federal retail sales and use tax. If 90% of the family’s income is spent on necessities — nontaxable items, a reasonable figure for a poor family, the taxes actually paid becomes 14% of the remainder, or $299.94 ($21,424 x 10% x 14%).
When spending money for necessities a poor family pays directly for the goods and services received, and pays indirectly all of the hidden embedded costs of the income tax. Assuming the national sales tax system is a mere 2.5% more efficient than the current income tax system (a conservative estimate), this family will avoid an additional $535.60 of hidden embedded taxes (2.5% x $21,424), providing an annual net savings of $235.66 per year ($535.60– $299.94).
5. Treatment Of Charitable Giving
NESARA abolishes some tax policies that stimulated contributions to charitable organizations. It restores some of that loss by issuing Credit Certificates applicable to national sales and use tax liabilities for donations to qualified organizations. To obtain the certificates, worth 10 percent of all donations valued at $250 or more, the organization must be recognized and approved by the National Tax Service. It must also apply for each Credit Certificate in the donor’s name and certify the contribution. The Credit Certificates can be sold in commerce and will be accepted by the government for tax payments at full face value.
6. Treatment Of Home Ownership
Real estate sales are taxable but credit is allowed for taxes paid on previous retail transactions or for taxes that would have been paid had NESARA been in force. A home purchased for $100,000 several years ago and sold for $150,000 after NESARA becomes law has a $50,000 taxable base. If it sold for less than $100,000 no national sales tax would be due. For purposes of establishing an initial taxable base, transactions in progress when the Act becomes law may be considered as completed.
Under NESARA, new real estate developments suddenly become more expensive, older properties more valuable. This inevitably slows the mad dash to abandon existing property. A new $200,000 suburban home carries a $28,000 national sales tax burden. Many people could achieve the same increase in standard of living, spend less money and avoid most of these taxes by playing This Old House with an older property. The net effect revitalizes inner cities and older neighborhoods at little or no cost to the government. In fact, federal, state and local governments all collect revenue from these activities while avoiding the expense of supporting new expansion projects. Taxpayers win by spending less, avoiding some sales tax, but also with lower property taxes due to more efficient use of the existing infrastructure.
7. Collection Method
The liability for payment of the national sales and use tax attaches to every purchaser and for its collection and remittance to every seller. The mere act of initiating a taxable sale in commerce within the jurisdiction of the United States makes one an agent for the National Tax Service. There are no forms to fill out or sign, no coupons to clip or box tops to send in. Getting into this game is ridiculously easy.
To get out, remit the tax due in full at any authorized federal depository on or before the tenth day of the month following the month in which the taxable sale was made and do not initiate any more taxable sales.
Keep the receipt. That piece of paperwork is all that is necessary to prove the seller’s liability was discharged. The same holds true for the purchaser’s receipt from the seller.
Obviously, the tax bureaucrats will insist on standard forms and taxpayer identification numbers. But these items are only for the convenience of maintaining auditable records. They have nothing at all to do with establishing or discharging one’s liability under the law. The burden of proving that liability falls on the National Tax Service.
8. Treatment Of Businesses
There are no limits to the number of times a particular article may be subject to the national sales or use tax if it returns to the stream of commerce. Each time the purchaser must pay and the seller must collect and remit the tax unless the sale is exempt. But taxes are collected at the retail, end or final transaction and not from wholesalers, or from intermediate sales of items directly used for or incorporated into the manufacture of a product to be ultimately sold at retail. Maintenance tools and office supplies purchased by a chemical manufacturer are taxable even if bought from a recognized wholesale dealer. Pipe, valves, pumps, catalyst and solvents directly used in its processes to make chemicals are exempt. Electric power to its office buildings or to run its pumps is taxable but power used directly in its industrial processes, such as electroplating and metals refining, is exempt.
Should a dispute occur between the purchaser and seller about whether any particular sale is exempt from the tax, the purchaser must pay it. The law provides ways to challenge that collection and, if successful, to get the money back plus interest. Excess taxes inadvertently collected must be remitted to the National Tax Service when not refundable.
Summary documentation, also called returns or reports, of the seller’s monthly tax remittances may be voluntarily submitted to the National Tax Service. If timely, meaning within five working days after the tax due date, the seller may deduct 1 percent of their tax deposit to offset expenses for collection and keeping records. If everyone files, sellers will divide $6 billion annually. What at first seems like a lot of money comes to only $600 per year when split equally among 10 million sellers. Of course the big companies get most of it but they also do most of the work.
9. Transition, Tradeoffs and Special Issues
NESARA provides compensation for tax policy changes to recipients of fixed income payments from the federal government and prevents double compensation for high income recipients with full Cost of Living Adjustments (COLA) protection.
Timing, limitations and funding for the transition are explicitly specified in NESARA.
10. Enforcement
Occasions of negligence or refusal to pay, collect or remit the national sales and use tax as required by law. Conflicts will arise but should be minimal. Sellers have little reason not to collect the tax: A lawful statute, clearly worded and easily understood, requires that they collect it; Uniform taxes do not unduly affect their competitive position; They are not the ones paying the tax; and the government compensates them, at least in part, for obeying the law. Purchasers refusing to pay the tax are unlikely to obtain goods and services from sellers. No sale, no problem with the law.
Simple procedures handle the difficulties that do occur. Each step taken by the National Tax Service is explicitly marked by the title of the notification document: Assessment / Preliminary Notice of Deficiency, Preliminary Determination, Final Notice of Deficiency, Final Determination, and Notice of Levy. One or more remedies are available at every stage for an alleged delinquent taxpayer to challenge the government’s assertion.
Upon receiving either a Final Notice of Deficiency or a Final Determination, one may bypass the National Tax Service, placing the argument before a court of competent jurisdiction. The stakes get higher. Win, even partially, and the government must pay your legal fees plus twice the amount of tax relief ordered by the court. Lose and the court may order you to pay its costs and all legal fees in addition to the tax, penalties and interest.
A Notice of Levy cannot be issued more than two years after the date on which a tax was payable or due and it automatically expires three years after the tax due date. During that period the National Tax Service may agree to an Offer in Compromise in partial settlement of taxes due or by mutual agreement extend the limitation period in hopes that the taxpayer might acquire the money and pay the debt.
To avoid the many problems associated with collections under the current income tax system, NESARA clearly defines that a warrant of distraint be issued before continuing with any seizure. Additionally, because the national sales and use tax is collected only in activities of commerce, real and personal property is exempt from seizure and collections. Innocent third party owners of property are also protected, eliminating some of the repulsion with current asset forfeiture laws.
The government prefers to obtain something for taxes due rather than nothing. It is one thing to drill for oil, quite a different matter when you know it will be a duster. Revenuers cannot use the remedies of garnishment against a delinquent taxpayer while the taxpayer can declare bankruptcy any time. Better for everyone to make the best of a bad situation, reach a compromise settlement if possible and move on.
NESARA defines four federal tax crimes and specifies the punishment for convicted offenders. A seller who misrepresents or hides the national sales tax attempts to gain unfair competitive advantage or to defeat its visibility, a misdemeanor. Knowingly participating in a taxable transaction and willfully evading responsibility to pay, collect or remit the tax may be a misdemeanor or a felony depending on the amount of money involved. If the amount is over $100 but less than $1,000, the crime is a misdemeanor punishable by a fine of not more than $1,000 or a term of imprisonment of not more than six months, or both. For amounts over $1,000 the crime is a felony punishable by a fine of not more than $5,000 or a term of imprisonment of not more than two years, or both. Making or conspiring to make fraudulent use of a Certificate of National Sales and Use Tax Exemption is a felony. Conviction may subject you to either a fine of not more than $5,000 or a term of imprisonment of not more than two years, or both.
Summary
The most important action Congress can take to put America on the road to recovery is to replace the federal income tax with a uniform excise tax on consumption. Part II of NESARA provides the framework, the final numbers currently expressed in the proposed legislation to be inserted by Congress.
That said, it should be noted that Part I of NESARA which addresses Monterey Policy reform is specifically designed to work hand-in-hand with Part II. Working together, they generate far more benefits than either taken alone. NESARA will double the standard of living for all Americans in just 20 years and at negative cost. We are doing most of the damage to ourselves and it costs us nothing to stop doing stupid things.
The NESARA Institute is happy to be able to offer hundreds of pages of detailed research on these subjects at our nesara.org web site. More than 10,000 people visited our site in March, several hundred from various government agencies.
In addition, the NESARA Institute is currently releasing a book on the subject entitled Draining the Swamp for those who dislike sitting in front of a computer monitor for hours on end. Upon your request, we would like to offer a copy, free of charge, to each member of the President's Advisory Panel on Federal Tax Reform. If you accept this offer, have someone call (225) 634-3228 or contact us through the nesara.org web site to specify the number of copies needed and a shipping address.
After 20 years of studying these subjects I feel obligated to thank you for your endeavors in solving such thorny problems and wish you the best of success.
|
| Posted: Apr 26, 2005 |
By: Gary Clyde Hufbauer and Paul L. E. Grieco |
Subject: Tax Panel RFC #2 Submission
Comment:
Please find attached our response to the President's Advisory Panel on Tax Reform's Request for Comments #2. Thanks very much for the opportunity to present this proposal to the Panel.
Paul Grieco
Research Assistant
Institute for International Economics
1750 Massachusetts Ave, NW
Washington, DC 20036
File: HufbauerGriecoIIE.doc
|
| Posted: Apr 26, 2005 |
By: Michael Bindner |
Subject: revised comments
Comment: In publishing my comments on my web page, I noted an error. Please accept the corrected copy with my apologies.
Michael Bindner, Executive Director
Iowa Center for Fiscal Equity
Michael Bindner
http://www.christianleft.net
http://xianleft.blogspot.com
File: TaxReformProposal1.doc
|
| Posted: Apr 26, 2005 |
By: Judy Scarabello |
Subject: NFTC Submission to the President's Advisory Panel on Federal Tax Reform
Comment: Attached please find the National Foreign Trade Council’s submission, The U.S. International Tax System and the Competitiveness of American Companies. The submission makes recommendations to further reform the U.S. international tax regime.
Thank you for the opportunity to comment.
Judy Scarabello
Vice President for Tax Policy
National Foreign Trade Council
1625 K Street, NW, Suite 200
Washington, DC 20006
202 887 0278, extension 2023
jscarabello@nftc.org
File: TaxReformPanelSubmission2005.doc
|
| Posted: Apr 26, 2005 |
By: John S. Irons, Ph.D. |
Subject: Comments #1 - resend
Comment:
Last month we submitted comments per the panels request for comments #1. These comments, however, have not yet appeared on the panels website. Attached is a resubmission of those comments in case the previous version was not received for some reason. If you did receive the prior comments, please disregard this email.
I would appreciate a note informing us whether you have received the comments and if they will be mode public and/or posted on the website.
Best regards,
John
_____________________________________
John S. Irons, Ph.D.
Director of Tax and Budget Policy
jirons@americanprogress.org
202.682.1611 x251
Center for American Progress
1333 H Street, NW
Washington DC, 20005
File: TAX_REFORM_PANELCAP_COMMENTS.pdf
|
| Posted: Apr 26, 2005 |
By: John S. Irons, Ph.D. |
Subject: Comments #1 - resend
Comment:
Last month we submitted comments per the panels request for comments #1. These comments, however, have not yet appeared on the panels website. Attached is a resubmission of those comments in case the previous version was not received for some reason. If you did receive the prior comments, please disregard this email.
I would appreciate a note informing us whether you have received the comments and if they will be mode public and/or posted on the website.
Best regards,
John
_____________________________________
John S. Irons, Ph.D.
Director of Tax and Budget Policy
jirons@americanprogress.org
202.682.1611 x251
Center for American Progress
1333 H Street, NW
Washington DC, 20005
File: taxreformpanelCAPcommentsFINAL.doc
|
| Posted: Apr 26, 2005 |
By: Ryan Kingsly |
Subject: Proposal for Comprehensive Reform
Comment: To: The President's Advisory Panel for Federal Tax Reform
From: Ryan Kingsly, Administrator, The NESARA Discussion Board
Advisory Panel Members:
Attached is the National Economic Stabilization and Recovery Act
proposal as proposed by Dr. Harvey Barnard, PhD. at the NESARA
Institute at http://nesara.org.
In association with the NESARA Institute, the NESARA Discussion Board
has elected me to submit our support for this proposal in this
attached draft that meets your comprehensive proposal guidelines for
submission.
We sincerely hope that the members of the panel would take a serious
look at this draft, visit http://nesara.org/bill/ and consider
reporting it to the President as a practical, viable, and transitional
option towards true fiscal and monetary reform.
Sincerely,
Ryan Kingsly
Administrator
The NESARA Discussion Board
http://www.thewordfiles.com/nesara/
File: NESARA1.doc
|
| Posted: Apr 26, 2005 |
By: NESARA Institute |
Subject: National Economic Stabilization and Recovery Act
Comment: To: The President's Advisory Panel for Federal Tax Reform
From: Ryan Kingsly, Administrator, The NESARA Discussion Board
Advisory Panel Members:
Attached is the National Economic Stabilization and Recovery Act proposal as proposed by Dr. Harvey Barnard, PhD. at the NESARA Institute at http://nesara.org.
In association with the NESARA Institute, the NESARA Discussion Board has elected me to submit our support for this proposal in this attached draft that meets your comprehensive proposal guidelines for submission.
We sincerely hope that the members of the panel would take a serious look at this draft, visit http://nesara.org/bill/ and consider reporting it to the President as a practical, viable, and transitional option for true fiscal and monetary reform.
Sincerely,
Ryan Kingsly
Administrator
The NESARA Discussion Board
http://www.thewordfiles.com/nesara/
File: NESARA2.doc
|
| Posted: Apr 27, 2005 |
By: The Savings Coalition of America |
Subject: Response to Request for Proposals for Tax Reform
File: SavingsCoalition2005proposaltoPresidentsAdvisoryPanelonTaxReform.doc
|
| Posted: Apr 27, 2005 |
By: United Californians for Tax Reform |
Subject: A proposal to reduce the top tax rate to 20%
File: 20topratefinal.pdf
|
| Posted: Apr 28, 2005 |
By: American Citizens Abroad (ACA) |
Subject: Eliminate Citizenship-based Taxation
File: ACATaxPanelSubmissionwithReformProposalwithtable.doc
|
| Posted: Apr 28, 2005 |
By: Dr. Harvey F. Barnard |
Subject: Comments regarding specific proposals to reform the tax code
Comment: I have re-attached this 10 page paper as a Word document in following the guidelines for posting comments on reforming the tax code.
Thank you for the opportunity to participate.
Dr. Harvey F. Barnard
Author of NESARA
The NESARA Institute
P.O. Box 70 Greenwell Springs, Louisiana 70739 (225) 634-3228
April 23, 2005
TO: President's Advisory Panel on Federal Tax Reform
In response to your published request for comprehensive reform of the Tax Code, I offer Part II of NESARA, the National Economic Stabilization And Recover Act. Backed by more than 20 years of study, this proposed legislation exceeds all of your stated requirements. It replaces most of the 8 volumes of fine print in Title 26 which nobody understands with about two dozen pages of simple rules which Forest Gump would understand.
NESARA was designed using system theory, the same techniques used to identify and solve complex problems in heavy industry. The stated objectives for its design were: Simplicity, Practicality, Revenue Neutral, Progressive, Constitutional, Politically Doable, and with an efficiency increase of at least 2.5% annually to promote long-run economic growth. The final product, posted at the NESARA Institute’s web site, http://nesara.org/main/index.htm meets or exceeds all of its design objectives.
Far beyond comments or suggestions from which to write new or revise existing tax code, NESARA is written as a comprehensive legislative package. It provides an explicitness upon which to judge existing tax code and any proposed changes virtually unknown in Congress or to the general public.
Thank you for your kind attention.
For the NESARA Institute
Organizations and Associations
Dr. Harvey F. Barnard
Author of NESARA
Detailed Summary–Part II National Sales and Use Tax
Immediate Relief and Results
• Workers maintain better control of their earnings
• Production is no longer taxed, just consumption
• Most of the necessities of life are not taxed
• Encourages production thus revitalizing industry in America
• Encourages rebuilding of inner cities
• Discourages wasteful uses of natural resources
• Exposes the true cost of government
• Greatly eliminates the struggle between tax “protesters” and bureaucracy
• Allows the “underground” to resurface and become a viable contribution to production of goods and services
• Greatly restricts the influence of special interests and lobbyists
The Income Tax
• The Income Tax Act of 1939 is amended
• People need no longer fear the IRS
• Billions of hours of nonproductive labor are eliminated
• Mounds of paper work are eliminated
• The cost of the income tax is no longer hidden and embedded in the cost of doing business and passed down the chain with the consumer paying the final tab
• Most likely eliminates state income tax plans because state income taxation piggybacks on federal income taxation
• The IRS is reformed into the National Tax Service
• Volumes of complicated tax code are history
• Eliminates personal income taxes
• Eliminates corporate income taxes
• Eliminates gift taxes and estate taxes
• Eliminates capital gains taxes
Sales and Use Tax
• Tax rate of 14%
• Government entities are exempt
• Government mandated expenses such as licenses, permits, passports, are exempt
• Sales of bullion, coin and currency are exempt
• Sales made by or to nonprofit schools are exempt
• Sales of prescription drugs, medical supplies and services are exempt
• Real estate rents and leases are exempt
• Sales of groceries are exempt
• Sales of plants, livestock and fish used in the production of food for human consumption are exempt
• Insurance sales are exempt
• Segregated portions of labor in retail service contracts are exempt
• Incidental or occasional sales such as garage or rummage sales are exempt
• Sales for the purposes of recycling are exempt
• Meals provided by companies at company expense are exempt
• Sales that are nonprofit in nature are exempt
Description of Proposal:
1. Tax base
NESARA is a consumption based tax, the design most favored by America’s Founding Fathers. It eliminates personal income taxes, corporate income taxes, gift taxes and estate taxes, and capital gains at the Federal level.
2. Exemptions, Deductions, Credits And Exclusions
NESARA provides more than 20 classes of items exempted from consumption taxes at the Federal level. Individuals of modest means are protected from the adverse effects of federal taxation by removal of the hidden elements of current tax policies on productive activity and by exempting groceries, rent, insurance, medicines, and some categories of previously used articles from consumption taxes.
One of the exemptions is worded somewhat curiously: “Ninety percent of the purchase price paid for all secondary sales of commercial investment securities of whatever type, excluding the transferable securities of the United States government and all its political subdivisions which are exempt from the tax;” When translated it means that secondary sales of securities are taxed at 10 percent of the full sales tax rate. Within the philosophy of a sales tax, taxing secondary stock sales is fair, largely paid by wealthy people just relieved of income and capital gains taxes. The tax is low enough to prevent capital flight from the country and high enough to raise substantial amounts of revenue, something over $500 Billion annually. More importantly, this tax discourages market speculation, the constant moving of money to make money in the short run rather than into long-term productive investments. Long-term investors are largely unaffected by this tax.
NESARA distinguishes between initial public offerings and secondary transfers of stock. NESARA encourages new commercial investment because initial issues of stocks and bonds are not subject to the national sales tax, only trades in the secondary market. Initial investments build businesses; secondary trades merely swap ownership. Stock certificates are property and proof of company ownership. Whereas initial stock purchases capitalize a new venture, secondary exchanges are really nothing more than property sales in the commercial retail market and thus subject to any sales tax.
3. Tax Rate(S)
NESARA imposes a national sales and use tax of 14 percent on the retail sale or use of all property, both domestic and foreign, exchanged in commerce by any person within the jurisdiction of the United States. The first requirement of this tax is that it replaces dollar for dollar all revenue lost with the demise of the income tax.
Congress must set the actual tax rate, 14 percent being a judicious suggestion based on computer simulations of the national economy. With the anticipated increase in economic productivity and tender hopes for prudent government, that initial rate drops. After a few years one estimate puts it as low as 7 percent, others at around 9 percent. All estimates are established on various assumptions for many factors.
Experts argue over the validity of their assumptions and the impacts of numerous factors in their economic models. Most agree on one thing — the size of a uniform tax rate generating a given amount of revenue depends on the volume of taxable sales.
Other tax rates for special cases are explicitly stated in NESARA. For example, it imposes a tax of 8 percent on the gross profits of gaming sponsors, that is, 8 percent of gross gaming receipts less total gaming payoffs to chance purchasers and government entities. And it encourage recycling materials. This justifies a 50 percent tax break on retail sales of used tangible property—used cars or equipment, parts acquired at scrap yards, merchandise from secondhand stores, etc. — excluding remanufactured items sold with warranties longer than 90 days. The latter are treated as new items and taxed at the full rate.
4. Distribution Of The Tax Burden
Contrary to popularly held belief, the “progressive” income tax is actually regressive because it is often easily passed through as a hidden tax in the price of goods and services. It falls most heavily and unfairly on working middleclass citizens who pay the tax twice, once when it is withheld from their wages and again as a hidden tax in the price of essential goods and services.
Exempting most of the necessities of life from the Federal consumption tax destroys the misconception that a national retail sales tax is always regressive, that it falls hardest on those who must spend most of the money they earn out of necessity, not choice. Discrediting that myth destroys the moral justification for the current income tax system.
Consider the fabled poor family of four. At a minimum wage of $5.15/hour, two full-time wage earners provide an annual income of $21,424, (2 workers x $5.15/hour x 40 hours/week x 52 weeks/year = $21,424). Of course, this family will be affected by the new federal retail sales and use tax. If 90% of the family’s income is spent on necessities — nontaxable items, a reasonable figure for a poor family, the taxes actually paid becomes 14% of the remainder, or $299.94 ($21,424 x 10% x 14%).
When spending money for necessities a poor family pays directly for the goods and services received, and pays indirectly all of the hidden embedded costs of the income tax. Assuming the national sales tax system is a mere 2.5% more efficient than the current income tax system (a conservative estimate), this family will avoid an additional $535.60 of hidden embedded taxes (2.5% x $21,424), providing an annual net savings of $235.66 per year ($535.60– $299.94).
5. Treatment Of Charitable Giving
NESARA abolishes some tax policies that stimulated contributions to charitable organizations. It restores some of that loss by issuing Credit Certificates applicable to national sales and use tax liabilities for donations to qualified organizations. To obtain the certificates, worth 10 percent of all donations valued at $250 or more, the organization must be recognized and approved by the National Tax Service. It must also apply for each Credit Certificate in the donor’s name and certify the contribution. The Credit Certificates can be sold in commerce and will be accepted by the government for tax payments at full face value.
6. Treatment Of Home Ownership
Real estate sales are taxable but credit is allowed for taxes paid on previous retail transactions or for taxes that would have been paid had NESARA been in force. A home purchased for $100,000 several years ago and sold for $150,000 after NESARA becomes law has a $50,000 taxable base. If it sold for less than $100,000 no national sales tax would be due. For purposes of establishing an initial taxable base, transactions in progress when the Act becomes law may be considered as completed.
Under NESARA, new real estate developments suddenly become more expensive, older properties more valuable. This inevitably slows the mad dash to abandon existing property. A new $200,000 suburban home carries a $28,000 national sales tax burden. Many people could achieve the same increase in standard of living, spend less money and avoid most of these taxes by playing This Old House with an older property. The net effect revitalizes inner cities and older neighborhoods at little or no cost to the government. In fact, federal, state and local governments all collect revenue from these activities while avoiding the expense of supporting new expansion projects. Taxpayers win by spending less, avoiding some sales tax, but also with lower property taxes due to more efficient use of the existing infrastructure.
7. Collection Method
The liability for payment of the national sales and use tax attaches to every purchaser and for its collection and remittance to every seller. The mere act of initiating a taxable sale in commerce within the jurisdiction of the United States makes one an agent for the National Tax Service. There are no forms to fill out or sign, no coupons to clip or box tops to send in. Getting into this game is ridiculously easy.
To get out, remit the tax due in full at any authorized federal depository on or before the tenth day of the month following the month in which the taxable sale was made and do not initiate any more taxable sales.
Keep the receipt. That piece of paperwork is all that is necessary to prove the seller’s liability was discharged. The same holds true for the purchaser’s receipt from the seller.
Obviously, the tax bureaucrats will insist on standard forms and taxpayer identification numbers. But these items are only for the convenience of maintaining auditable records. They have nothing at all to do with establishing or discharging one’s liability under the law. The burden of proving that liability falls on the National Tax Service.
8. Treatment Of Businesses
There are no limits to the number of times a particular article may be subject to the national sales or use tax if it returns to the stream of commerce. Each time the purchaser must pay and the seller must collect and remit the tax unless the sale is exempt. But taxes are collected at the retail, end or final transaction and not from wholesalers, or from intermediate sales of items directly used for or incorporated into the manufacture of a product to be ultimately sold at retail. Maintenance tools and office supplies purchased by a chemical manufacturer are taxable even if bought from a recognized wholesale dealer. Pipe, valves, pumps, catalyst and solvents directly used in its processes to make chemicals are exempt. Electric power to its office buildings or to run its pumps is taxable but power used directly in its industrial processes, such as electroplating and metals refining, is exempt.
Should a dispute occur between the purchaser and seller about whether any particular sale is exempt from the tax, the purchaser must pay it. The law provides ways to challenge that collection and, if successful, to get the money back plus interest. Excess taxes inadvertently collected must be remitted to the National Tax Service when not refundable.
Summary documentation, also called returns or reports, of the seller’s monthly tax remittances may be voluntarily submitted to the National Tax Service. If timely, meaning within five working days after the tax due date, the seller may deduct 1 percent of their tax deposit to offset expenses for collection and keeping records. If everyone files, sellers will divide $6 billion annually. What at first seems like a lot of money comes to only $600 per year when split equally among 10 million sellers. Of course the big companies get most of it but they also do most of the work.
9. Transition, Tradeoffs and Special Issues
NESARA provides compensation for tax policy changes to recipients of fixed income payments from the federal government and prevents double compensation for high income recipients with full Cost of Living Adjustments (COLA) protection.
Timing, limitations and funding for the transition are explicitly specified in NESARA.
10. Enforcement
Occasions of negligence or refusal to pay, collect or remit the national sales and use tax as required by law. Conflicts will arise but should be minimal. Sellers have little reason not to collect the tax: A lawful statute, clearly worded and easily understood, requires that they collect it; Uniform taxes do not unduly affect their competitive position; They are not the ones paying the tax; and the government compensates them, at least in part, for obeying the law. Purchasers refusing to pay the tax are unlikely to obtain goods and services from sellers. No sale, no problem with the law.
Simple procedures handle the difficulties that do occur. Each step taken by the National Tax Service is explicitly marked by the title of the notification document: Assessment / Preliminary Notice of Deficiency, Preliminary Determination, Final Notice of Deficiency, Final Determination, and Notice of Levy. One or more remedies are available at every stage for an alleged delinquent taxpayer to challenge the government’s assertion.
Upon receiving either a Final Notice of Deficiency or a Final Determination, one may bypass the National Tax Service, placing the argument before a court of competent jurisdiction. The stakes get higher. Win, even partially, and the government must pay your legal fees plus twice the amount of tax relief ordered by the court. Lose and the court may order you to pay its costs and all legal fees in addition to the tax, penalties and interest.
A Notice of Levy cannot be issued more than two years after the date on which a tax was payable or due and it automatically expires three years after the tax due date. During that period the National Tax Service may agree to an Offer in Compromise in partial settlement of taxes due or by mutual agreement extend the limitation period in hopes that the taxpayer might acquire the money and pay the debt.
To avoid the many problems associated with collections under the current income tax system, NESARA clearly defines that a warrant of distraint be issued before continuing with any seizure. Additionally, because the national sales and use tax is collected only in activities of commerce, real and personal property is exempt from seizure and collections. Innocent third party owners of property are also protected, eliminating some of the repulsion with current asset forfeiture laws.
The government prefers to obtain something for taxes due rather than nothing. It is one thing to drill for oil, quite a different matter when you know it will be a duster. Revenuers cannot use the remedies of garnishment against a delinquent taxpayer while the taxpayer can declare bankruptcy any time. Better for everyone to make the best of a bad situation, reach a compromise settlement if possible and move on.
NESARA defines four federal tax crimes and specifies the punishment for convicted offenders. A seller who misrepresents or hides the national sales tax attempts to gain unfair competitive advantage or to defeat its visibility, a misdemeanor. Knowingly participating in a taxable transaction and willfully evading responsibility to pay, collect or remit the tax may be a misdemeanor or a felony depending on the amount of money involved. If the amount is over $100 but less than $1,000, the crime is a misdemeanor punishable by a fine of not more than $1,000 or a term of imprisonment of not more than six months, or both. For amounts over $1,000 the crime is a felony punishable by a fine of not more than $5,000 or a term of imprisonment of not more than two years, or both. Making or conspiring to make fraudulent use of a Certificate of National Sales and Use Tax Exemption is a felony. Conviction may subject you to either a fine of not more than $5,000 or a term of imprisonment of not more than two years, or both.
Summary
The most important action Congress can take to put America on the road to recovery is to replace the federal income tax with a uniform excise tax on consumption. Part II of NESARA provides the framework, the final numbers currently expressed in the proposed legislation to be inserted by Congress.
That said, it should be noted that Part I of NESARA which addresses Monterey Policy reform is specifically designed to work hand-in-hand with Part II. Working together, they generate far more benefits than either taken alone. NESARA will double the standard of living for all Americans in just 20 years and at negative cost. We are doing most of the damage to ourselves and it costs us nothing to stop doing stupid things.
The NESARA Institute is happy to be able to offer hundreds of pages of detailed research on these subjects at our nesara.org web site. More than 10,000 people visited our site in March, several hundred from various government agencies.
In addition, the NESARA Institute is currently releasing a book on the subject entitled Draining the Swamp for those who dislike sitting in front of a computer monitor for hours on end. Upon your request, we would like to offer a copy, free of charge, to each member of the President's Advisory Panel on Federal Tax Reform. If you accept this offer, have someone call (225) 634-3228 or contact us through the nesara.org web site to specify the number of copies needed and a shipping address.
After 20 years of studying these subjects I feel obligated to thank you for your endeavors in solving such thorny problems and wish you the best of success.
File: NESARAProposaltoReformTitle26.doc
|
| Posted: Apr 28, 2005 |
By: Ryan Kingsly |
Subject: Revised NESARA Word Doc
Comment: I noticed some errors in my original submission. Please accept this paper as the corrected version. Thanks! - Ryan
To the President's Advisory Panel for Tax Reform:
The National Economic Stabilization and Recovery Act is a proposal for comprehensive reform of the current tax system. It has nothing to do with an internet hoax with the same name.
Drafted by Dr. Harvey Barnard, PhD. at the NESARA Institute in Greenwell Springs, Louisianna, his draft proposal deserves a thorough review by this commission.
Included is the summary of the fiscal provisions of the NESARA draft proposal, in my own words, following the guidlines for submittal. We hope that it will be given serious attention by members of the President's Advisory Panel for Tax Reform.
Sincerely,
Ryan Kingsly
Adminstrator
The NESARA Discussion Board
http://www.thewordfiles.com/nesara/
nesara@thewordfiles.com
File: NESARA3.doc
|
| Posted: Apr 28, 2005 |
By: United Californians for Tax Reform |
Subject: 15% RATE OPTIONAL FLAT TAX
Comment: Under this proposal taxpayers would have the option of choosing a 15% flat tax with a standard deduction of $10,333 for single tax filers and $20,666 for joint filers. It would allow no deductions,exemptions, or tax credits
Our plan
File: 15percentFlatTax_final.pdf
|
| Posted: Apr 28, 2005 |
By: Center for American Progress; C. Butts, J. Irons |
Subject: Center for American Progress Refrom Plan
Comment: Attached please find our reply for the panel's RCF #2.
File: taxreformpanelCAPcomments2FINALedit.doc
|
| Posted: Apr 28, 2005 |
By: Center for American Progress; C. Butts, J. Irons |
Subject: Center for American Progress Refrom Plan (PDF)
Comment: Attached please find our reply for the panel's RCF #2.
File: taxreformpanel_CAP_2.pdf
|
| Posted: Apr 28, 2005 |
By: Coalition for Tax Fairness |
Subject: AMT Treatment of Incentive Stock Options
File: CTFLegProposaltoTaxPanelFinal.DOC
|
| Posted: Apr 28, 2005 |
By: Harvey F. Barnard |
Subject: NESARA Proposal upload
Comment: Attatched is the word file of my first comment.
Thank you again for the opportunity to participate.
Dr. Harvey F. Barnard
Author of NESARA
The NESARA Institute
P.O. Box 70 Greenwell Springs, Louisiana 70739 (225) 634-3228
File: NESARAProposal.doc
|
| Posted: Apr 28, 2005 |
By: Financial Services Roundtable |
Subject: Tax Incentives for Retirement Security
File: FinalFSRBlueRibbonReport.pdf
|
| Posted: Apr 28, 2005 |
By: Financial Services Roundtable |
Subject: Retirement Security
File: FinalFSRBlueRibbonReport1.pdf
|
| Posted: Apr 29, 2005 |
By: Joint Venture: Silicon Valley Network, submitted by ReformAMT.org on the JVSV's behalf |
Subject: AMT Treatment of Incentive Stock Options (ISOs)
File: JVSV AMT position2001-1.doc
|
| Posted: Apr 29, 2005 |
By: National Association of Bond Lawyers (NABL) |
Subject: Tax Simplification and Reform Recommendations for Municipal Bond Market
File: NABL COMMENTS TO TAX PANEL.doc
|
| Posted: Apr 29, 2005 |
By: Lone Star Foundation, David A. Hartman Chairman |
Subject: Business Transfer Tax
Comment: These comments examine the severe decline in U.S. manfacturing and the loss of high paying jobs. The comments argue that the U.S. tax system has been a major cause of that decline. The comments propose a business transfer tax as a replacement for the current system and examine in detail how a BTT might be implemented.
Sincerely,
David A. Hartman
Chairman
Lone Star Foundation
File: Lone Star Foundation Comments to Tax Reform Panel.doc
|
| Posted: Apr 29, 2005 |
By: National Association of Home Builders |
File: SecondPanelStatementFinal.doc
|
| Posted: Apr 29, 2005 |
By: W. Thomas Kelly |
Subject: Individual Investment Accounts
File: Taxreformpanel2.doc
|
| Posted: Apr 29, 2005 |
By: Laurie Lewis |
Subject: Life Insurance Industry Comments
File: TaxReformPanelSubmissionsecond.pdf
|
| Posted: Apr 29, 2005 |
By: Herman Cain |
Subject: The Federal Tax Code Must be Replaced With a Fairer and Simpler System
File: HermanCainsSubmissiontothePresidentsTaxAdvisoryPanel.doc
|
| Posted: Apr 29, 2005 |
By: Independent Community Bankers of America |
Subject: Comments 2
File: TaxReformPanelLetter2ndcomment.pdf
|
| Posted: Apr 29, 2005 |
By: Savers & Investurs League |
Subject: Reform Taxes on Savings
File: LeagueTaxReform0405.doc
|
| Posted: Apr 29, 2005 |
By: Roland Boucher |
File: 20topratefinal2.pdf
|
| Posted: Apr 29, 2005 |
By: National Association of Manufacturers |
Subject: Reform Proposals
File: ltr2JEcommentstaxrefpanel42905.pdf
|
| Posted: Apr 29, 2005 |
By: National Small Business Association |
Subject: Proposal for Fundamental Tax Reform
File: NSBAProposalforFundamentalTaxReform.doc
|
| Posted: Apr 29, 2005 |
By: Adam |
Subject: Response to solicitation for Comments#2
File: TaxReformPanelComments2.doc
|
| Posted: Apr 29, 2005 |
By: ReformAMT.org |
Subject: Proposal: AMT Treatment of Incentive Stock Options (ISOs)
File: ReformAMTReformProposalTaxPanel42905final.pdf
|
| Posted: Apr 29, 2005 |
By: United for a Fair Economy and Responsible Wealth |
Subject: Responsible Estate Tax Reform
Comment: Responsible Estate Tax Reform
By Chuck Collins and Lee Farris
I. Description of Proposal
United for a Fair Economy and its Responsible Wealth project support keeping a reformed estate tax in our national tax structure, along with a progressive income tax. The estate tax plays an important role in maintaining the progressivity of the tax system and brings in significant revenue. Responsible Wealth members are among the top 5% in wealth or income in the United States. Responsible Wealth has enlisted more than 2200 taxpayers who have paid or will pay the estate tax, and who support a responsible, reformed estate tax (see http://www.faireconomy.org/.)
The 2001 tax cut phases out the estate tax between now and 2009; the amount of wealth exempted rises from $1.5 million in 2005 to $3.5 million for individuals, double that for couples. In 2010, the tax will be completely repealed … for one year. If Congress takes no action, the 2001 tax law will sunset and the estate tax will return at its pre-2001 levels, including a $1 million individual wealth exemption and 55 percent rate structure. The reason for this sunset was to significantly reduce the cost of repealing the estate tax.
The push for repeal comes from a coalition of anti-tax groups, business trade associations, newspaper owners, and lobbying firms like Patton Boggs, representing some of America's wealthiest families, including the Mars and Walton clans. But the fiscal, moral, and political case for complete estate tax abolition is weak.
In the context of prolonged large budget deficits, abolishing a tax that will generate almost $1 trillion in revenue from 2010-2021 is fiscally irresponsible, according to Senator George Voinovich (R-OH) and other moderates in both parties who abhor the prospect of red ink for decades to come. (Revenue estimate from “Estate Tax Reform Could Raise Much-Needed Revenue: Some Reform Options With Low Tax Rates Raise Very Little Revenue,” Joel Friedman and Ruth Carlitz, Center on Budget and Policy Priorities, March 16, 2005.)
In fact, the estate tax could play a vital role in saving Social Security. According to the Center on Budget and Policy Priorities, “The Chief Actuary of the Social Security Administration has estimated that maintaining the estate tax at the 2009 levels — with a $3.5 million exemption and a 45 percent top rate — would raise enough revenue to cover more than one-quarter of the shortfall in the Social Security Trust Fund over the next 75 years, as measured by the Social Security Trustees. The trustees estimate the shortfall to be 0.65 percent of GDP, while the revenue raised by this reform would equal 0.2 percent of GDP. The Congressional Budget Office projects a smaller shortfall (0.36 percent of GDP). Under CBO assumptions, the estate tax revenues collected under this reform would close about half of the 75-year shortfall. A reform with a $2 million exemption and a 45 percent rate (the law in 2008) would close an even great portion of the Social Security shortfall.” (“House To Vote On Permanent Repeal Of Estate Tax: Estate Tax Reform, Rather Than Repeal, Could Preserve Much Needed Revenues And Help Restore Social Security Solvency,” Joel Friedman and Arloc Sherman, CBPP, April 12, 2005.)
Meanwhile, states are voting with their feet to preserve revenue from taxing wealthy estates. This year, the "state credit" portion of the federal estate tax expired, leaving states that previously "piggy-backed" on the federal law bereft of hundreds of millions of dollars. As a result, seventeen states have voted to retain their own state-level estate taxes, a pragmatic response in the face of tight state budgets. In April, legislative leaders in Washington state instituted a new Washington estate tax at the initiative of recently elected Governor Christine Gregoire.
The current wartime context also raises moral questions about the timeliness of abolishing the estate tax. A number of commentators and politicians have pointed out how unseemly it is for Congress to zealously protect every dime of Paris Hilton's inheritance while other families are holding bake sales to buy body armor for their children serving in Iraq. This grotesque inequality of sacrifice is not lost on some veterans groups. "During the Civil War, rich people could buy their way out of the draft," said Charlie Richardson, co-founder of Military Families Speak Out. "Now the wealthy don't have to pay anything to avoid military service - and they get big tax cuts on top."
Senator John McCain (R-AZ) recently observed that cutting taxes for the very wealthy during a time of war is historically unprecedented. "In the last year we have approved legislation containing billions and billions of dollars … in pork barrel projects, huge tax breaks for the wealthy, and a corporate tax bill estimated to cost $180 billion. This is a far cry from sacrifice." Historically, wealth has been "conscripted" to pay for war costs and debts.
The estate tax encourages charitable giving by exempting donations to charities. According to a recent study by the Congressional Budget Office, in 2000, repeal would have reduced giving by $13 to $25 billion. This amount exceeds the total amount of all corporate charitable donations in the United States, which equaled $11 billion in 2000. It approaches the $25 billion that foundations contributed for charitable causes in 2000. (Congressional Budget Office, "The Estate Tax and Charitable Giving," July 2004. See also David Kamin, "New CBO Study Finds That Estate Tax Repeal Would Substantially Reduce Charitable Giving," CBPP, July 31, 2004.)
Contrary to popular thought, the estate tax does not threaten small farms and businesses. According to the Tax Policy Center, in 2004, of almost 19,000 taxable estates, only about 440 were primarily made up of farm and business assets. Some legislators have proposed keeping the estate tax with an unlimited exemption for qualified family-owned farms and businesses (QFOBI). However, as Tax Policy Center noted, an unlimited QFOBI exemption would be very costly, and would give the wealthy huge incentives to buy farms and businesses, thus bidding up prices and hurting family farms and businesses. In addition, an unlimited QFOBI exemption would exempt some of the largest businesses in the world, such as Mars and Cargill. (Leonard Burman, William Gale, and Jeffrey Rohaly, "Options to Reform the Estate Tax," Tax Policy Center, March 2005.)
When there is no estate tax in 2010, inheritances will be subject to capital gains tax using carryover basis, rather than the step-up in basis now used with the estate tax. This change will impact ten times the number of estates. According to the recent article by John Buckley (Chief Democratic Tax Counsel, House Ways and Means Committee), “Estate Tax Repeal: More Losers Than Winners”, 106 Tax Notes 833 (2005), “Repeal will benefit an extraordinarily small number of estates. Of the 7,500 estates that would have estate tax liability with the 2009 exemption level, many would face tax increases because the potential capital gains taxes from carryover basis could exceed their estate tax liability. In contrast, the new carryover basis rules will impose substantial compliance burdens on more than 71,000 estates per year. A significant number of those estates also will suffer tax increases from carryover basis, even though they would receive no benefit from repeal.” Buckley also noted that long held assets such as farms are particularly impacted by the change in basis.
The case for responsible estate tax reform is compelling.
United for a Fair Economy and its project Responsible Wealth advocate reforming the estate tax by:
- Raising the exemption to $2 million for individuals and $4 million for couples
- Indexing the exemption for inflation
- Keeping the step-up in basis
- Simplifying and liberalizing provisions to ease the transfer of the few closely held businesses subject to the tax, and retaining the existing ability of businesses and farms to pay any tax over 14 years
- Creating an automatic exemption for married couples that is double that for single people
- Ending the loopholes, such as valuation discounts, especially those for multiple owners, and special trust arrangements
- Reinstating the state credit, so states do not create a mismatching patchwork of state laws, but can simply piggyback on a reformed federal law
- Returning to a progressive rate structure, lowering the rate on estates smaller than $5 million to 40 percent, with incremental steps to a top rate of 65 percent on estates over $20 million.
This progressive rate structure invokes the historical intent of the tax, as articulated by Teddy Roosevelt and Andrew Carnegie, to thwart the build-up of "wealth dynasties" that threaten to undermine democracy. During the Depression and World War II, President Franklin D. Roosevelt won approval of a top rate of 70 percent on dynastic fortunes over $50 million, ensuring that even the wealthiest shared in the wartime sacrifice.
II. Impact of Proposal Relative to Current System
Relative to the current tax system, the responsible estate tax reform we propose would:
- Maintain the revenue generated by the estate tax from 2010-2011
- Continue to encourage charitable giving
- Simplify estate tax provisions regarding married couples, businesses, and farms
- Reduce compliance and administration costs by simplifying the tax code and reducing loopholes
- Make the estate tax more progressive and thus fairer
- Enhance economic growth and competitiveness by encouraging the wider dispersion of wealth, rather than its accretion in fewer and fewer hands.
We encourage the President's Advisory Panel on Federal Tax Reform to include a reformed estate tax in its recommendations to the President. We would welcome the opportunity to testify before the Advisory Panel on this proposal.
Chuck Collins is Senior Fellow at United for a Fair Economy and its project Responsible Wealth, which advocates for estate tax reform (See: http://www.faireconomy.org/estatetax/index.html). He is coauthor with Bill Gates Sr. of Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes (Beacon).
Lee Farris is Senior Organizer on Estate Tax Policy at United for a Fair Economy.
File: UFEEstateTaxReformPosition.doc
|
| Posted: May 02, 2005 |
By: NASCUS |
Subject: Federal Tax Reform
File: Tax_Letterpdf.PDF
|
| Posted: May 02, 2005 |
By: Retail Industry Leaders Association |
Subject: Comments
File: CommentstothePresidentsAdvisoryPanelonFederalTaxReformApril2005.pdf
|
| Posted: May 02, 2005 |
By: Chris Edwards- CATO Institute |
Subject: Tax Reform Proposal
File: catodualratetax.doc
|
| Posted: May 03, 2005 |
By: U.S. Congressman Chaka Fattah |
Subject: Transform America Transaction Fee Proposal: Comprehensive Reform Proposal
File: FinalFattahFeeLegSeal7.doc
|
| Posted: May 03, 2005 |
By: Genie Hayes |
Subject: Economists nationwide endorse specific proposal to replace the tax system
File: FairTax0.pdf
|
| Posted: May 03, 2005 |
By: Stephen Elkins |
Subject: Principles for Tax Reform
Comment:
PRINCIPLES FOR FUNDAMENTAL TAX REFORM
SUBMITTED TO THE PRESIDENT’S ADVISORY PANEL
ON FEDERAL TAX REFORM
BY THE
AMERICAN CHEMISTRY COUNCIL
April 2005
The American Chemistry Council represents the leading companies engaged in the business of chemistry. Council members apply the science of chemistry to produce innovative products and services that make people's lives better, healthier and safer.
Chemical manufacturing provides products and services that are essential to virtually all other manufacturing, from steel to microchips. Accordingly, the chemical industry has a primary effect on suppliers, customers, consumers and the U.S. economy. Chemical manufacturers invest more in research and development than any other business sector, and comprise the largest exporting industry.
The Council commends the President’s Advisory Panel on Federal Tax Reform for undertaking the immense task of proposing fundamental reform of the U.S. tax system. We hope that this effort will result in the Congress and the Administration reaching a consensus with respect to a reform proposal that has, as its core principle, the long-term growth of the U.S. economy. Moreover, a fair, efficient and transparent tax reform proposal will attract foreign investment in jobs and the economy.
We limit our comments to five principles that we think essential to discussion of tax reform and to the work of the Panel.
(1) Tax reform should recognize that U.S. industry must compete globally in order to survive domestically, and that U.S. and foreign tax systems are elements of the competition.
The chemical manufacturing sector cannot compete with foreign producers if it limits its production facilities and markets to the U.S. Long production times and high transportation costs require locating near customers or raw materials. The global market in commodities, specialty products, and technological services means narrow profit margins for all producers, thus mandating global economies of scale. Research and development and other global support functions must be spread over global operations to be efficient. U.S. companies could not compete in either U.S. or global markets absent the global sales volume, customer access and capital efficiency incident to global operations.
A business tax regime that recognizes the imperative of global operations for U.S.-based manufacturers is no less a requirement for U.S. affiliates of foreign parent companies. Such companies locate manufacturing facilities in the U.S. so as to gain access to the U.S. market, creating U.S. jobs and economic growth in the process. The resident affiliates become U.S. taxpayers, with no less a need for a dependable and comprehensible tax regime as U.S.-home companies.
(2) Business tax rates should be as low as possible, and under an income tax, the structure should prevent artificial inflation of income.
In order to compete globally, U.S. business taxpayers must pay taxes at statutory and effective rates that are no higher than, and preferably lower than, those of foreign competitors. Such a rate structure not only allows an even playing field for U.S. home companies, but also encourages investment of foreign capital in U.S. plant, equipment and the workforce. Low statutory tax rates would encourage efficiency, investment and jobs in the United States. Low rates enhance competitiveness of U.S. companies, and reduce the need for other incentives and complexity. Further, in the case of a business income tax, accurate measurement of income requires a fair deduction of all ordinary and necessary business expenses.*
(3) First year expensing of capital assets is the correct measure of economic income, and in addition, encourages investment in productive capacity that is the prime driver of economic growth.
The closer an income tax system moves toward expensing of capital assets, the more accurate is the measurement of economic income. First-year expensing avoids both artificial inflation of income for the year of asset acquisition and artificial reduction in subsequent years. Thus, first-year expensing reflects a policy of accurate measurement of business income subject to tax, as discussed above.
In addition to measuring income accurately, first-year expensing constitutes perhaps the prime incentive – necessary in light of foreign competition – for increased capital investment in U.S. productive capacity. As noted above, local tax systems are elements in the economic competition among nations. First-year expensing is a fundamental element in a competitive U.S. tax system.
(4) As is the case with first-year expensing, a tax benefit for research and development is among those few incentives broadly acknowledged as directly achieving economic growth.
A tax benefit for investment in research and development has become a fundamental policy goal in the current U.S. tax regime for good reason: Favored tax treatment, as embodied in the current R&D Tax Credit, promotes evolution of the U.S. economy and enhances its growth.
Additionally, tax reform should recognize that the structure of the R&D Credit must award tax benefits consistently. Under current law, the credit may operate differently with respect to similar levels and patterns of research expenditures by different companies. This inconsistency may occur among different industries as well as among companies in the same sector. Chemical manufacturing is a case in point, regardless of the uniformly high level of research expenditures within the industry.
(5) While tax reform should recognize simplicity as a desirable and laudable goal, a simplistic business tax could prove inconsistent with other policy objectives.
When the business income tax appeared in 1913, it was the model of simplicity, reflecting an economy in which manufacturing organizations were largely domestic and had similar organizational structures. The complexity of the current business income tax largely reflects the evolving complexity of U.S. manufacturing businesses, and those of suppliers and customers. In the great majority of policy debates by the Congress, such increased complexity emerged as a means of treating different industries and businesses fairly.
A reform proposal that overly simplifies the tax regime on business might produce inequitable results among industries and sectors of the economy. Any such simplistic business tax might fail to achieve the first four policy objectives discussed above. However, simplification that is fair and equitable is manifestly a policy goal to be sought.
* * *
The American Chemistry Council would be pleased to expand upon the principles outlined in this comment, or to answer questions concerning technical issues incident to calculation and return of tax, and to aspects of tax reform affecting separate issues of administration, taxpayer audit, and avoidance of controversies.
|
| Posted: May 03, 2005 |
By: American Benefits Council |
File: AmericanBenefits.pdf
|
| Posted: May 03, 2005 |
By: Malcolm McLouth |
File: Malcolm.pdf
|
| Posted: May 03, 2005 |
By: EIA |
File: EIA.pdf
|
| Posted: May 03, 2005 |
By: Lawrence Gahan |
File: LawrenceGahan.pdf
|
| Posted: May 03, 2005 |
By: National Manufacturers Association |
File: NAM.pdf
|
| Posted: May 03, 2005 |
By: Manufacturers Alliance |
File: ManufacturersAlliance.pdf
|
| Posted: May 03, 2005 |
By: Airports Council |
File: AirportsCouncil.pdf
|
| Posted: May 03, 2005 |
By: American Association of Port Authorities- Kurt Nagle |
File: KurtNagle.pdf
|
| Posted: May 03, 2005 |
By: Michael Cannon- CATO Institute |
File: MichaelCannon.pdf
|
| Posted: May 03, 2005 |
By: Leo Linbeck, Jr. |
Subject: FairTax Comprehensive Tax Reform Proposal
File: FairTaxstatementtoTaxPanel.doc
|
| Posted: May 03, 2005 |
By: Real Estate Board of New York |
File: REBNY.pdf
|
| Posted: May 04, 2005 |
By: Unknown |
File: Unknown1.pdf
|
| Posted: May 04, 2005 |
By: Coastwise Coalition |
File: CoastwiseCoalition.pdf
|
| Posted: May 04, 2005 |
By: Airports Council |
File: AirportsCouncil0.pdf
|
| Posted: May 04, 2005 |
By: Public Revenue Education Councel of Greater St. Louis - Stanley A. Frederiksen |
Subject: Submission
File: PublicRevenue.pdf
|
| Posted: May 05, 2005 |
By: Leo Linbeck, Jr.- Americans for Fair Taxation |
File: FairTaxstatementtoTaxPanel10.doc
|
| Posted: May 16, 2005 |
By: American Forest and Paper Association |
File: AmericanForestandPaper.pdf
|
| Posted: May 16, 2005 |
By: ITAA |
File: ITAA.pdf
|
| Posted: May 16, 2005 |
By: National Foreign Trade Council |
Subject: US International Tax System and the Competitiveness of American Companies
File: USInternationalTaxSystem.pdf
|
| Posted: May 16, 2005 |
By: Tax Foundation |
File: TaxFoundation.pdf
|
| Posted: May 16, 2005 |
By: Tax Council |
File: TaxCouncil.pdf
|
| Posted: May 16, 2005 |
By: National Center for Policy Analysis |
File: NationalCenterforPolicyAnalysis.pdf
|
| Posted: May 16, 2005 |
By: Norman Kurland |
File: NormanKurland.pdf
|
| Posted: May 16, 2005 |
By: Steven Cord |
Subject: Studies 61-110
File: StevenBCord.pdf
|
| Posted: May 16, 2005 |
By: Timothy J. Gillis |
Subject: The Real Property Use Tax (RPUT)
File: RPUT.pdf
|
| Posted: May 16, 2005 |
By: Committee of Annuity Insurers |
Subject: Committee of Annuity Insurers Response to April 5, 2005, Request for Comments by the President's Advisory Panel on Federal Tax Reform
File: Joseph.pdf
|
| Posted: May 16, 2005 |
By: Columbus Compact |
File: ColumbusCompact.pdf
|
| Posted: May 26, 2005 |
By: Steel Manufacturers Association |
Subject: Letter
File: SteelManufacturers.pdf
|
| Posted: Jun 06, 2005 |
By: Tax Council |
File: TaxCouncil0.pdf
|
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