FREEDOM: Income Tax, Federal Reserve, & Future of America

[NJGOAT]

Ok, on a more serious note, let's break down some of the things that you are supposing:

1. The Federal Government (Congress in particular) was granted the right to "…lay and collect taxes, duties, imposts, and excises, pay the Debts and provide for the common Defense and general Welfare of the United States." by the Constitution. This is not in the amendments it is in the actual Constitution that laid out the seperation of powers, what each is responsible for and delineated state and federal rights.

2. The Federal Government was restricted in that the taxes must be levied equally in proportion to each states population. This is why the 16th Amendment had to happen. The first income tax, was in fact declared unconstitutional because it was not equally apportioned among the states. The Amendment clearly states that: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration." The Amendment was then ratified by 38 states (36 were required) out of a total of 48. That is a 3/4 majority and is the exact constitutional requirement to ratify an amendment.

3. You are supposing a long standing theory that the ratification processes within each state was flawed and therefore their votes did not count. Irregardless of what happened at each individual state level, the Amendment was ratified. Countless court cases at both the Federal and State levels have upheld not only the votes of the state legislatures, but also the right of the Federal Government to collect the taxes.

4. You need to realize that Amendments are not laws per se. They are laws that govern other laws. The Amendment clearly gives the Federal government the right to create laws to collect taxes on income. So, while the Amendment does not say you have to pay the taxes or clearly define penalties for not paying them, the actual U.S. tax code clearly states that you do and what will happen if you don't and the right to create that code is clearly granted by the Amendment.

You may want to do some reading here on the histroy of U.S. Tax Law, while it is from the U.S. Treasury website, it may give you some good background on how U.S. tax code evolved: http://www.ustreas.gov/education/fac...es/ustax.shtml

Also, your other rambling opinions of spending versus taxes and what not, are completely off base. These concepts and processes can all be covered at your local community college in a macro-economics course, but rest assured that banks do not loan money to the federal government, the gold in Ft. Knox no longer has anything to do with our economy, the Federal Reserve is a wholly necessary and vital part of our economy. I can expound if you want me to, only because the only thing worse than no knowledge is incorrect knowledge.

I will sum up by asking everyone who thinks that the income tax is BS to think really hard about all of the things that those taxes pay for. The defense of our country, our roads, our schools, the insurance of our personal money in banks, healthcare for the poor and elderly, Social Security, etc. You may not agree with all the aspects of the tax code and you may not agree with how the money is spent, but even if we had the option of not paying it, would you? I can assure you all that I probably pay more in taxes than what some of you make and I would still pay my share.

[poolmike]

I don't really mind paying taxes. I just have problems with where the money goes, more on a local level than federal. In general, I feel this country relies on th government way too much, costing the average person way too much.

I also feel that as the tax payer, I should decide where my tax dollar goes. I would direct most of my $$$$ toward national defense, and nothing for life sucking peeps. << just an example.

[bastid]

What does everyone feel about the Fair Tax ideas? I believe Mike Huckabee is running on this economic platform in 2008. Basically, it removes the IRS and income tax however a VAT-like tax is put on ALL goods, similar to Europe. The pro side of the argument is that we will have more money, and therefore we will spend more money and send the economy in a positive direction. I haven't read up on specifics, but it sounded like a fresh idea.

[Omar_MSP]

For those that did not see the documentary and have something to say, please reserve your judgement until you see the movie. Thank you.

I'm interested to learn more bout this VAT tax.

[NJGOAT]

Originally Posted by Omar_MSP

For those that did not see the documentary and have something to say, please reserve your judgement until you see the movie. Thank you.

I'm interested to learn more bout this VAT tax.

I have seen the movie. I've also read and studied this argument several times. It is an untenable position in any debate as the overwhelming weight of the evidence is in favor of the legality of the income tax, as I outlined above. The entire argument that it is illegal is based on errors in process and conjecture. However, the overwhelming argument that supports the income tax is, what would happen if we all didn't pay?

Now, on to VAT tax. The VAT system was originally thought up by a French economist in the 1950's. VAT, stands for Value Added Tax. This is how it works (I borrowed the example from Wikipedia):

Example
Consider the manufacture and sale of any item, which in this case we will call a widget.


Without any sales tax
A widget manufacturer spends $1 on raw materials and uses them to make a widget.
The widget is sold wholesale to a widget retailer for $1.20, making a profit of $0.20.
The widget retailer then sells the widget to a widget consumer for $1.50, making a profit of $0.30

With a North American (Canadian Provincial and U.S. State) sales tax
With a 10% sales tax:

The manufacturer pays $1.00 for the raw materials, certifying it is not a final consumer.
The manufacturer charges the retailer $1.20, checking that the retailer is not a consumer, leaving the same profit of $0.20.
The retailer charges the consumer $1.65 ($1.50 + 10%) and pays the government $0.15, leaving the same profit of $0.30.
So the consumer has paid 10% ($0.15) extra, compared to the no taxation scheme, and the government has collected this amount in taxation. The retailers have not lost anything directly to the tax, but they do have the extra paperwork to do so that they correctly pass on to the government the sales tax they collect. Suppliers and manufacturers have the administrative burden of supplying correct certifications, and checking that their customers (retailers) aren't consumers.


With a value added tax
With a 10% VAT:

The manufacturer pays $1.10 ($1 + 10%) for the raw materials, and the seller of the raw materials pays the government $0.10.
The manufacturer charges the retailer $1.32 ($1.20 + $1.20x10%) and pays the government $0.02 ($0.12 minus $0.10), leaving the same profit of $0.20.
The retailer charges the consumer $1.65 ($1.50 + $1.50x10%) and pays the government $0.03 ($0.15 minus $0.12), leaving the same profit of $0.30.
So the consumer has paid 10% ($0.15) extra, compared to the no taxation scheme, and the government has collected this amount in taxation. The businesses have not lost anything directly to the tax, but they do have the extra paperwork to do so that they correctly pass on to the government the difference between what they collect in VAT (output VAT, an 11th of their income) and what they spend in VAT (input VAT, an 11th of their expenditure).

Note that in each case the VAT paid is equal to 10% of the profit, or 'value added'.

The advantage of the VAT system over the sales tax system is that businesses cannot hide consumption (such as wasted materials) by certifying it is not a consumer.

Essentially the taxes collected in a VAT system are identical to those collected in a sales tax system, if they both charge the same amount. The difference would be that the price a consumer sees on a shelf is what they are actually paying. So, to the end consumer there is no difference in what is paid compared to a sales tax system as all costs that a business occurs are ultimately passed onto the consumer.

The EU (European Union) uses this system because it is the only way to ensure that the individual governments are able to collect their taxes. If we used the example above of the widget manufacturer, the plant could be in Germany, the wholesaler in France and the retailer in Italy. If there was just a sales tax, not every government entity would earn their due. Since these taxes make up 45% of most Euro governments income it is important to them that they receive the tax.

However, it is important to note that the general VAT tax runs ~20% in most countries, compared to less than 5% sales tax on average in the U.S. in the states that even have a sales tax. That would mean a general increase in the cost of consumer goods of ~15%, just to reach European levels. If we were to use a VAT system to replace the income tax, you would see an increase in the cost of consumer goods on the order of ~25%. The problem with that tax is that it places the burden directly onto the poor disproportinately to the rich.

The final nail in the VAT coffin is that all European countries still collect general income taxes that are far greater than what is collected in the U.S. So, they have a VAT system that places a burden on the poor and they are still collecting income taxes to make up the rest of their income that VAT cannot fulfill. The other thing to realize in the U.S. is that the federal government and state governments share different authorities. Sales taxes are collected by states (and not all of them have one), where as the bulk income tax is collected by the federal government. If we went to the VAT system, it would require that all states cede even greater authority to the federal government and would require the federal government to take on even greater financial responsibility to make up for the lost income of states.