Tag Archives: Flat Tax

Commentary

The VAT as a replacement or add-on to the income tax

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From the Heritage Foundation. (H/T ECM)

Excerpt:

Revenue-neutral tax reform involving a VAT substituting for income tax raises a number of concerns, but its one advantage might be that it would reduce or even eliminate the net bias against saving. Such a reform would quickly begin to raise the level of private savings and the private saving rate.

The same cannot be said of adding a VAT to the current tax system. Adding a VAT would not have the same beneficial effects as substituting a VAT because, obviously enough, the anti-savings biases of the current system would remain intact.

Even more telling, a massive VAT-based tax hike would slash the after-tax purchasing power of individuals and families. As they adjusted to the new tax, an early casualty would be private saving.

[…]VAT proponents who seek massive new sources of revenue—whether in the short run to pay for President Obama’s spending surge or to address the nation’s unsustainable long-term fiscal imbalance—sometimes misapply arguments that have some validity in the context of a revenue-neutral tax reform. A good example is the argument that a VAT would increase private saving.

However, as an add-on tax, the VAT would not improve saving incentives as some suggest but would instead hammer private savings for an extended period as individuals and families slash their saving rates to sustain current consumption in light of the VAT’s higher prices.

I am pro-VAT, but only if it is revenue-neutral and is coupled with a cap on federal spending, indexed to inflation. A freeze would be better still!

What’s your view of taxation? Do you like a flat tax or the FAIR tax? Which taxes would you cut and which ones would you raise? What effect would it have on working families and their employers?

Videos

Sue Myrick interviews Paul Ryan about his Roadmap for America

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I love Sue Myrick! And Paul Ryan is very passionate about these ideas.

Video:

These are the best ideas out there.

I know some of you will want to see him fight, so here he is fighting:

More from CNSNews: Rep. Paul Ryan: Obama’s New Budget Will ‘Literally Crash the U.S. Economy’

Excerpt:

Ryan pointed out that the Government Accountability Office recently reported that the federal government already faces a “fiscal gap” of $76 trillion, meaning that over the next 75 years the cost of the benefits promised in federal entitlement programs exceeds the tax revenues expected to pay for those benefits by that amount. That works out to almost $250,000 for every single American and about $650,000 for every American household.

The new debt President Obama plans for the federal government to incur over the next decade would come on top of this existing $76 trillion “fiscal gap.”

“All those unfunded liabilities, all that debt I’ve been telling you about, is before you pass this budget,” said Ryan. “That’s if we don’t pass the budget. If we pass the Obama budget, it just gets worse. He doubles the debt in 5 years and triples it in 10.”

The federal government currently divides its total debt into two categories: debt held by the public and debt the government owes to itself because it has borrowed and spent money taken out of the so-called Social Security and Medicare “trust funds.”

“Under the President’s budget, debt held by the public would grow from $7.5 trillion (53 percent of GDP) at the end of 2009 to $20.3 trillion (90 percent of GDP) at the end of 2020,” says the CBO report on Obama’s fiscal 2011 budget. “As a result, net interest would more than quadruple between 2010 and 2020 in nominal dollars (without an adjustment for inflation); it would expand from 1.4 percent of GDP in 2010 to 4.1 percent in 2020.”

Our children are doomed – unless Obama and Democrats are kicked out in the next election. We’re being governed by spoiled little rich kids who have no idea how bills are paid.

News

India lowers income taxes and increases deductions for savings

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The story is here from the Times of India, sent to me by Shalini.

Changes to tax rates

Here are the current tax rates:

Now 10 per cent is levied on incomes of Rs 1.6-3 lakh, 20 per cent on Rs 3-5 lakh and 30 per cent above Rs 5 lakh.

Here are the new rates:

The government on Wednesday initiated radical tax reforms through a draft code that aims at moderating income tax rates, abolishing Securities Transaction Tax and increasing deduction for savings up to Rs three lakh. The new Direct Taxes Code has suggested a significant expansion of personal income-tax slabs, with levels of relief going up with incomes.

Releasing the Direct Taxes Code that will ultimately replace the over four-decades old Income Tax Act and bring all other direct taxes like wealth tax under its purview, Finance Minister Pranab Mukherjee today said if reasonable level of discussion happens on the code, a bill could be placed in the winter session of Parliament.

The Code said that the 10 per cent tax rate should apply to an annual income of Rs 1.6-10 lakh per annum and the 20 per cent rate to Rs 10-25 lakh.

The maximum rate of 30 per cent, it added, should apply to income above Rs 25 lakh per annum.

The new rates, it said, “are expected to yield the existing level of revenues with the revised comprehensive tax base proposed in this code”.

Indian tax brackets

Here are my calculations… are they wrong?

First bracket (10%): 1.6 to 10 lakh = 10 x 100,000 rupees = 1,000,000 rupees = up to 20,000 USD.

Second bracket (20%): 10 to  25 lakh = 10 x 100,000 rupees = 1,000,000 rupees = up to 50,000 USD.

Third bracket (30%): over 25 lakh = 10 x 100,000 rupees = 1,000,000 rupees = over 50,000 USD.

Changes to encourage more saving

Not only are they slashing income tax rates but they are increasing the deductions for savings.

I can’t believe this. India is doing everything RIGHT and we are doing everything WRONG. Even Canada is signing free trade deals, while Inspector Clouseau is trying to make us into North Korea. India is buying arms, we’re cutting the F-22 and missile defense.