Mike Gravel: His campaign issues page

[quixotecoyote]

http://www.gravel2008.us/issues.php

Generally broad as one might expect, but I like everything I see.

But...

Progressive Fair Tax—A Green Tax
Senator Gravel's Progressive Fair Tax proposal calls for eliminating the IRS and the income tax and replacing it with a national sales tax on new products and services. To compensate for the tax on necessities, such as food, lodging, transportation and clothing, there would be a "rebate" to reimburse taxpayers. This would be paid in a monthly check from the government to all citizens.Does anyone know about this? It sounds like an intriguing way to realign the tax system, but the income tax makes up a majority of the federal governments revenue. How much would you have to raise sales taxes and how much of a rebate could you afford to give?

[quixotecoyote]

5 days, no replies.

Anyone?

[WildCat]

The idea of eliminating the income tax instead of the sales tax is interesting. Not having to expend the time and money accounting for al of your income as well as not having to report this very personal matter would be great, but I don't know how you could sell it especially since the mortgage interest deduction is held dear by people, including me!

[JoeEllison]

It is a con game.

[UserGoogol]

I think Gravel supports the FairTax (http://en.wikipedia.org/wiki/FairTax) specifically, which is a plan to have a sales tax of 23% (although that's 23% of the total cost of the product including tax, it would be 30% if it measured as a percentage of the pre-tax cost. Supporters of the plan claim that using the tax-inclusive number makes it easier to compare with the income tax.) and combine it with a monthly "prebate" roughly equivalent to the amount of money that a person living at the poverty line spending all of their income would pay in taxes (about $200 per month for single people, more for people with children and/or a spouse) so that the net-taxation rate is progressive and more-or-less comparable to the current tax burden.

[quixotecoyote]

I think Gravel supports the FairTax (http://en.wikipedia.org/wiki/FairTax) specifically, which is a plan to have a sales tax of 23% (although that's 23% of the total cost of the product including tax, it would be 30% if it measured as a percentage of the pre-tax cost. Supporters of the plan claim that using the tax-inclusive number makes it easier to compare with the income tax.) and combine it with a monthly "prebate" roughly equivalent to the amount of money that a person living at the poverty line spending all of their income would pay in taxes (about $200 per month for single people, more for people with children and/or a spouse) so that the net-taxation rate is progressive and more-or-less comparable to the current tax burden.

That actually looks, workable... I'm surprised.

[Cain]

A progressive sales tax sounds good because it punishes people for consuming rather than working, as well as gives us an added incentive to save/invest. I like that because I am frugal guy, and I think people buy way, way too much crap. Also on the positive side, it prevents income tax cheats from shirking their social responsibilities since everyone has to consume. However, it's ultimately unfeasible for two reasons: 1) It unleashes a tremendous incentive for consumers and sellers to expand the underground economy; 2) Powerful lobbies will kill the measure (Retailers, small business owners, National Restaurant Association). I think some anti-IRS Reaganite loon like Dick Armey opposed a national sales tax on the grounds that we will be taxed twice because the government will never completely get rid of the income tax. The conservatives who suddenly find privacy rights important -- "how dare the govt. know how much I make" -- are just kidding themselves. Regular people can do a pretty good job guessing how much you make based on your profession. I still care more about the government listening in on my phone calls and reading my e-mail than taking account of my pathetic pay check.

This will not fly in an age of eBay. Oh, and illegal immigrants will still get out of paying, at least here in Southern California (check out the local swap meet -- I'll see you there).

[quixotecoyote]

What do you say to the arguments against the black market downside that UserGoogol linked to?

In the United States, a general sales tax is imposed in 45 states plus the District of Columbia (accounting for over 97% of both population and economic output). Most states also collect a variety of local sales taxes including county, city, and transit taxes.[76] (http://en.wikipedia.org/wiki/FairTax#_note-SalesTaxFAQ) The United States has a large infrastructure for taxing sales that many countries do not have. Proponents respond to the underground economy argument by pointing out that, whereas tax evasion under the current income tax system requires only one person (the payer) to lie on their tax forms, tax evasion under the FairTax requires collusion of both the payer (the retail purchaser) and the payee (the retail seller). Furthermore, the number of individuals required to file taxes drops from approximately 145 million to 25 million, a drop in excess of 80%. This drop in the number of collection points will allow the tax administration to view tax fraud with greater scrutiny.[70] (http://en.wikipedia.org/wiki/FairTax#_note-taxfilers) Proponents of the FairTax see a substantial amount of additional tax revenue from those engaging in the black market, as a sales tax would require all who consume to be taxed

And if I'm voting for Gravel, its obvious I'm voting for what I think is a good idea than the most likely political option.

[Cain]

What do you say to the arguments against the black market downside that UserGoogol linked to?

I think it's misleading to say it would be easier to breakup underground economic activity because it involves both a payer anda payee. They payer is not necessarily "in on" wrong doing, and I imagine it will be difficult to prove even if true. Perhaps the example of a swap meet was misguided because it suggests tax free sanctuaries. Realistically the story is going to be more complicated. Business owners will claim to include a sales tax, but withhold funds from the government, and cost-sensitive consumers will not care how the owner can afford such fantastically reasonable prices. Business owners who want to behave honestly find themselves under tremendous constraints, the victims of unfair competition. Moreover, you're basically putting private business solely in charge of tax collection. I do not have any precise facts on hand, but I seem to recall the NYT's incredible tax reporter David Cay Johnson writing about how businesses are most liable to cheat due to lack of oversight (and this is consistent with my personal experience).

Maybe the idea would become more workable if we had a completely cashless economy. Of course, if you're already concerned about the government knowing your income then you had better be godamned frightened when it begins monitoring all of your purchases.

Also, I would never sign on for the Boortz plan in the Wiki link. That guy is a nut. In addition to receiving rebate checks, certain goods should probably remain exempt. Also, it seems aas though in this plan rebate checks do not discriminate on the basis of income (they only seem to take into account family size). So, correct me if I am mistaken, but a two parent household with three children clearing 500k a year gets the same back from the government as another family identically composed making 40k? Also, it makes little sense to tax everything the same; there's nothing wrong with government punishing economic activity that is less productive. I am assuming, for example, gas taxes would be abolished and replaced with this national sales tax. This measure is also contingent on the abolition of the estate tax. Though nobody asked, my original (sympathetic) comments were directed at the idea of a (progressive) national sales tax rather than this model.

[quixotecoyote]

How would your sales tax model be different?

(In case you hadn't noticed, this is one of the threads where I'm on the receiving end of the learning stick)

[Cain]

How would your sales tax model be different?

"Model" is a lofty word for my inchoate impressions. Come to think of it, I mis-spoke when I said "sales tax" because the emphasis should be on consumption. I have always been hostile to sales taxes because they are regressive, but a few articles did change how I look at the basic idea, particularly consumption. I like some of economist Robert H. Frank's ideas (he may have a couple appearances on bloggingheads.tv), though sometimes I think he gets too caught up in the psychology conspicuous consumption. Anyway, Frank proposes a progressive consumption tax. In a way it is an income tax but your savings are exempt, and marginal brackets remain in place:

http://www.nytimes.com/2007/10/07/business/07view.html?_r=1&ref=business&oref=slogin

Under such a tax, people would report not only their income but also their annual savings, as many already do under 401(k) plans and other retirement accounts. A family’s annual consumption is simply the difference between its income and its annual savings. That amount, minus a standard deduction — say, $30,000 for a family of four — would be the family’s taxable consumption. Rates would start low, like 10 percent. A family that earned $50,000 and saved $5,000 would thus have taxable consumption of $15,000. It would pay only $1,500 in tax. Under the current system of federal income taxes, this family would pay about $3,000 a year.

He goes on to give an example of a 100% consumption tax for the ultra-rich. So, if you have an income of 10 million dollars a year, and decide to spend two million dollars adding a new wing to your mansion, then you pay 2 million dollars in taxes on the wing. Of course, the progressivity can be anything; the uppermost bracket can be 50%, 200%, or 500% (you buy a yacht for ten million, then you pay 50 million additional dollars in taxes). I'm unsure what kind of compliance problems would emerge. Not everyone has 401K plans. What if I shelter my money by claiming to invest more than I actually did into starting a new small business, or expanding the one I already own? Or the biggest "investment" made by most of the middle-class: buying a home. But still, I think this gets the basic idea right.