Zakaria, Fareed, “America needs a 2-page tax code,” Fareed Zakaria GPS, CNN, 03/24/2012

Fareed Zakaria: Our corrupt tax code has degraded the entire system of American government.

“We’re going to hear a lot of polarized rhetoric over the next few months. The Republicans and Democrats will seem to disagree about everything. But there is one huge and important area where there is a possibility – a possibility – of bipartisan action and that’s tax reform.

Most Americans – Republicans and Democrats – dislike the tax code. They’re right to do so. America has what is arguably the world’s most complex tax code. The federal code plus IRS rulings is now 70,000 pages long. The code itself is 16,000 pages. The statist French, for example, have a tax code of only 1,909 pages – only 12% as long as ours. And then there are countries like Russia, the Czech Republic, Estonia that have innovated and moved to a flat tax, with considerable success.

You have to understand, complexity equals corruption.

When John McCain was still a raging reformer, he used to point out that the tax code was the foundation for the corruption of American politics. Special interests pay politicians vast amounts of cash for their campaigns and in return they get favorable exemptions, credits or loopholes in the tax code.

In other countries this sort of bribery takes place underneath bridges and with cash in brown envelopes. In America it is institutionalized and legal but it is the same thing: Cash to politicians in return for favorable treatment from the government.

The U.S. tax system is not simply corrupt, it is corrupt in a deceptive manner that has degraded the entire system of American government. Congress is able to funnel vast sums of money in perpetuity to its favored funders through the tax code without anyone realizing it.

For those who despair at the role of money in politics, the simplest way to get the corruption out of Washington is to remove the prize that members of Congress give away – preferential tax treatment. A flatter tax code with almost no exemptions does that.

The U.S. is the only rich country in the world without a national sales tax. Germany has one at 19%, Britain at 20%, Korea at 10%.

What’s the appeal of a consumption tax?

First, it is efficient. Most studies, including one by the Internal Revenue Service (IRS), suggest that the federal government loses several hundred billion dollars a year to tax fraud. This is much tougher to pull off with a consumption tax.

Second, it provides the government with a more stable form of revenue than income taxes. Income taxes fluctuate greatly between boom and bust years.

Third, American’s consume too much, often using credit and leverage to do so. A consumption tax would moderate this behavior. Government will always get less of a behavior it taxes and more of what it subsidies.

Ironically, the heavy reliance on income taxes makes the American system more progressive than those in Europe. The federal government gets about 43% of its total tax revenue from taxes on individual incomes and profits, compared with only 29% in Germany and 22% in France. The balance for France and Germany comes from the VAT, which is highly regressive. One recent OECD study showed that the top ten percent in America pay a larger share of total taxes, 45.1%, than do the top ten percent in any of the 24 countries examined. In Germany they pay 31% of the taxes, in France 28%.

But the best thing about tax reform is that it kills corruption. So if you ask me what kind of tax code I am in favor of, I am in favor of almost any new tax code that fulfils one requirement: It should fit on two pages.”

http://cnn.com/video/?/video/politics/2012/03/24/gps-fareeds-take-tax-reform.cnn

 

Stockman, David: “We Need a Value Added Tax,” WSJ Report w/Maria Bartiromo, 08/11/11

 

 

David Stockman on WSJ Report w/Maria Bartiromo

 

 

Stern, Andy (fmr. SEIU President) at Committee for Economic Development, 06/10/11

Andy Stern states his six-point program for economic renewal, including VAT.

Daniels, Gov. Mitch Floats Sweeping Tax Reform: VAT plus Flat Income Tax, 10/14/10

Indiana Gov. Mitch Daniels, endorsed sweeping tax reform on the occasion of accepting the Hudson Institute’s Herman Kahn Award. Gov. Daniels selected a quote from Kahn’s 1982 book, “The Coming Boom”: “It would be most useful to redesign the tax system to discourage consumption and encourage savings and investment. One obvious possibility is a value added tax and flat income tax, with the only exception being a lower standard deduction.”

Gov. Daniels, who once headed the Hudson Institute, a conservative think tank, and served as Director of the OMB under President George W. Bush added: “That might suit our current situation pretty well. It also might fit Bill Simon’s line in the late ‘70s that the nation should have a tax system that looks like someone designed it on purpose.”

The above quote can be found in the video from 17:15 to 19:30.

Clinton, President Bill on “Deficit and VAT,” interview with Maria Bartiromo, CNBC, 05/14/10

President Clinton: “It’s unrealistic that we can basically solve this whole thing (deficit) from cutting spending and just raising upper income taxes.  We’re gonna have to have more growth.  I think we’re gonna have to have more taxpayers, which is why I favor, in a disciplined way, immigration reform and letting more immigrants come to this country.  I think it would make more jobs for people who are unemployed, not fewer.

We’re going to have to look at different tax systems, that are not easily evadable and that make us more competitive.  I think they oughta look at a progressive value-added tax, just because — and I think it’s important that the American people understand this — most of our competitors have tax systems like this.  If you have a value-added tax, you put a little revenue that’s collected — you lower the income taxes, corporate and personal — and you put a little revenue collector on every stage of sales in a product or service.

But if it is exported you don’t pay the last price…it’s exempt from the value-added tax.  And, when a foreign good comes into this country they do pay the last stage of the value-added tax.  So, when we export American products to countries with VAT taxes, our products pay that even though our corporations have already paid an income tax, already paid whatever other burdens.  So if we could figure out how to do that, it would make us much more competitive with our exports.  And, since I believe this cleansing process…this awful process we’ve just been through…gives us a great chance to  bring manufacturing back in America, I’d like to see that looked at.

Then I think that the other thing that the other thing you’ve gotta do is you’ve just gotta be more disciplined in controlling spending.  You just can’t…but it’s important to recognize that all these things are related. For example, if you don’t want Medicare to eat us alive.  Medicare is a much more of a problem than Social Security, by the way.  If you don’t want it to eat us alive you’ve gotta do something to stop the cost drivers in healthcare.  We can’t keep doubling the cost of healthcare after inflation every decade.

So my view is control spending on an annual basis, work on healthcare costs, get more taxpayers, and try to have the most competive possible tax system.  And eventually you’ve gotta really enforce these pay as you go rules.  America..the American people have got to take responsibility too.  They’ve got to know You just can’t keep saying you want more government than you wanna pay for, and borrowing more money from overseas.  It’s just not right.  It’s bad for our kids and  grandkids.  And it puts us in a very vulnerable position going forward.

We’re not, you know…Greece is vulnerable because they’re small, and they’ve been viewed as profligate.  But, essentially in an international world where people can put their money in a nano second anywhere they want to,  I simply don’t think we can afford to keep exploding this debt. And I think your gonna…the Democrats, we’re more socially progressive, but we’re also gonna have to be more fiscally conservative.  I don’t think it’s fair to take any other course.”

http://www.cnbc.com/id/15840232/?video=1494410463&play=1

Altshuler, Rosanne, Director, Tax Policy Center, “U.S. deficit and potential revenue-generating solutions,” Wall Street Journal, portfolioofideas.com, 05/04/10

“We can’t think that we’re going to raise the revenues we need just on the backs of the rich….So, we’re going to have to consider fundamental tax reform.  An, we may actually have to consider alternative revenue sources.

Virtually every developed country has a VAT.  The revenues that are raised with a value added tax, for instance, can he used for paying down the deficit, can be used for reducing payroll taxes, could be used to reduce individual income tax rates.

In terms of the corporate tax, I think we have  a real problem.  We have the second highest statutory rate in the developed world.  The rest of the OECD countries – the rest of developing countries – have been lowering their corporate tax rates.  We’re in a world, now, where capital is very mobile.  It an move from one country to the other very easily.  So, we need to raise more revenue, but we always have to worry when you raise tax rates, you discourage economic activity.

In terms of tax reform, what you want is a simpler tax system, a fairer tax system, and a more efficient tax system.  You want a tax system that people have faith in.”

http://link.brightcove.com/services/player/bcpid76957653001?bctid=78525026001

Clinton, President Bill, “Federal Budget and the National Debt,” interview with Bob Schieffer, Peterson Institute for International Economics, C-Span Video Library, 04/28/10

President Clinton: ”(T)he Europeans have used it quite successfully.  I think if you did it you’ld have to readjust the whole – the rest of the tax system to keep it progressive.  It’s also somewhat complex because it’s on every stage of the production process.  But, the one thing that blue collar America should like about it is it’s good for exports and it in effect, it doesn’t allow quite so much subsidy of imports – when other countries subsidize their production for export at least they get slapped with a value added tax when it comes in here.  And, it’s good for exports.  So, if you’re not willing to give up on manufacturing and I’m not, I think it’s a great time to,  for us to, rebuild a manufacturing sector in America.  If we had the right sort of value added tax and we made enough adjustments in the other tax bills to make it – to keep the progressivity of our tax system, it could be really good.

Now the real problem with the value added tax is the problem why we couldn’t pass the single-payer health system, right?  A lot of things that are good in theory require so much change that people just can’t make the mental leap.  So, I’m not at all sure, that the Simpson-Bowles Commission will wind up recommending it.  I know ‘em well enough to know that they’ld have to have a theory in their mind about how it could actually pass before they would recommend it.

It’s a big leap, but if you look at it, people in Europe – just like any other sales tax – they just get used to payin’ it, and it would be good for exports and it would, our home market products would, be on more even footing with imports if we had one.  And, we compete in countries that have ‘em all the time.  So we get it comin’ and goin’ because they have it and we don’t,” 58:14-1:00:30

http://www.c-spanvideo.org/program/293217-3

Bowles, Erskine, Bipartisan Deficit Commission, “Balancing the Budget,” Andrea Mitchell Reports, MSNBC.com, 04/27/10

Erskine Bowles: “I don’t think anybody’s gonna look at a value added tax without taking into account the income taxes.  You know there’s a lot of good arguments for a consumption tax as opposed to taxing wages or savings.  But, we can’t take startin’ this thing by takin’ things off the table.  We’ve gotta put things on the table and then we’ve gotta find some common ground that we can bring this budget back into balance.  We’re gonna have trillion dollar deficits as far as the eye can see if we don’t, and this country’s gonna become a second rate power, you know, just by not takin’ the tough stands.”

Toder, Eric, Urban Institute, “Can Washington Embrace the Value-Added Tax,” NPR, 04/24/10

“Increasing the personal income tax very much is not a very good idea, and so that you’re left with a VAT which could be used partly to buy down income tax rates, partly to buy down corporate rates and partly to buy down the deficit. But that’s not to say the political system is ready for that.”

http://www.npr.org/templates/story/story.php?storyId=126248094

Zakaria, Fareed, “America’s future faces a lot of doom and gloom, but perhaps its largest problem, the budget deficit, has a solution (VAT),” Fareed Zakaria, GPS,” 02/28/10

“…We have big problems, but the biggest one by far is the growing national debt.  It’s worth reminding ourselves that this is not a fact of life that we simply have to accept.  There are many simple economic measures that would correct the budgetary mess easily.  Let me give you just one – a value added tax.”

http://www.youtube.com/watch?v=VXHQ5ZFGAF8