Subject: SALE: The SALE Tax Plan Comment: Page 0 - Cover Page This is a submission to the President's Advisory Panel on Federal Tax Reform. It is being submitted by email to Jeffrey Kupfer, Executive Director of the Panel. It is from Marcus Brown, Individual, P. O. Box Box 26690, Tamarac, FL 33320-6690. The date of submission is May 08, 2005. The author may be contacted at SALEtax@Gmail.Com (or, if necessary, emailer01@yahoo.com). Page 1 - Marcus Brown, Individual SALE: The SALE Tax Plan ((The following is an edited/expanded version of a proposal originally submitted to the President's Advisory Panel on Federal Tax Reform in early May of 2005. On May 17, 2005, the Panel invited comments on proposals previously submitted, to be received by June 10, 2005. The author, Marcus Brown, of Tamarac, FL, is a retired teacher.)) (00 - Introduction to The Proposal) This is a proposal, submitted to the President's Advisory Panel on Federal Tax Reform, for replacement of our insane IRS tax code. As the Panel required, it is consistent with a progressive tax, is revenue neutral, and recognizes the importance of home ownership and of charity in our society. It is strongly at odds with all "dual-rate" plans, such as those of the Cato Institute and Citizens for Tax Justice. It is also strongly at odds with all "flat" tax plans known to the author, because of what they would tax and because of their ineliminable inequities. Finally, it is also strongly at odds with all so-called "sales" tax plans known to the author, such as that of Rep. John Linder, Rep.-GA, and The Fair Tax Plan. (The Fair Tax Plan constantly confuses "simple" with simplistic. This very widely supported program, which includes many economists, is preposterously said to involve a voluntary tax, as you would not pay any tax if you did not buy anything. No supporter of The Fair Tax Plan has thus far volunteered to buy nothing.) All "sales" tax plans known to the author involve buyer/purchase taxes, not seller/sales taxes! Senator Connie Mack, Chairman of the Panel, has asked for "... tax reform options that are simpler, fairer, and pro-growth ..." It is relatively easy to meet these badly needed requirements. However, "dual-rate" tax plans, "flat" tax plans, and "sales" tax plans all fail to do so. The proposal that is outlined herein, "the SALE tax plan" (or SALE) avoids their triviality and/or superficiality, their unfairness, and the risks that they offer for our economy and for the majority of our taxpayers. SALE is a sane and Page 2 - Marcus Brown, Individual unique sale tax system. It is not a pathetic consumption tax plan. (01 - SALE and Tax Fairness) The author of SALE believes that no reasonably equitable "sales" tax plan has ever been proposed. "Sales" tax plans primarily tax necessities. They generally tax unnecessarily. What they propose to tax and their tax rates both tend to be both arbitrary and capricious. To tax all such purchases at the same rate, so that the middle classes pay the same tax amount on a purchase as do the wealthy classes, where such taxes constitute the primary taxation, is unavoidably very inequitable. The belief that such a system would be fair because the wealthy buy more is blindly committed to the dumb belief that all who are wealthy buy more. ("If wealthy ..., the one who buys is a different buyer --- i. e., buys differently --- than the poor and a boarder." John Dewey - Essays in Experimental Logic - Chapter 10: Epistemological Realism - 1916.) The bottom line is that while the wealthy classes may buy more, the "sales" tax plans permit them to unevenly accumulate capital untaxed, while making the poor poorer. Even the gap between the many who are only very very rich and the many richest is enormous; resulting from our insane IRS tax code. (02 - SALE Tax Plans and Purchase Tax Plans) The "sales" tax plans now on the market for adoption by Congress are not sales tax plans. They are purchase tax plans. SALE taxes sales; not purchases! With SALE, the seller pays the tax and is responsible for its transmission. Whatever is sold in the USA would be taxed; both goods, rights, and services, etc. With SALE, nothing else is to be taxed! It is estimated here that there would be no need to tax sales beyond 1% of the sale price. (SALE could, if necessary, produce more revenue than any other tax plan; without the pain now experienced by most taxpayers, and without the extraordinary crippling of economic activity/opportunity fostered by our insane IRS tax code.) (The author will be using the 1% figure hereinafter.) Page 3 - Marcus Brown, Individual (03 - SALE Taxation) (03-A - Employers) Employers would deduct 1% of gross employee earnings and transmit the tax (for the employee; the seller of services). There would be no withholding of any tax. (03-B - Stores) Merchants would pay 1% of gross sales and transmit it. These taxes could not be added to the customers' bills. (03-C - Real Estate) A real estate sale, whether involving a profit or a loss or neither, would create a tax obligation of 1% of the gross amount. (03-D - Leases) A lease would be taxed to the lessor. (03-E - Securities) The sale of 100 shares of XYZ stock at $50.00 a share would be taxed only on the amount of the proceeds of the sale, not the cost. (The broker would charge the seller for the tax and remit it for the seller.) (03-F - Options) The cost of an option to buy/sell something would be taxable to the seller of the option. The exercise of a call option would create a tax on the call price for the seller of the option. The exercise of a put option would create a tax on the put price for the buyer of the option. (03-G - Mergers) In a merger, the non-surviving company (NSC) owners and the professional service providers are both sellers. If in a forward merger, the NSC is/was worth $100,000,000.00 and the surviving company (SC) $500,000,000.00, before the merger, the tax for the NSC (or for whomever pays it) is $1,000,000.00. (Acquiring a $10,000,000,000.00 firm nets a tax of $100,000,000.00.) If in a reverse merger, often used to permit going public without the need for an IPO, the NSC was worth $0.00 (a common occurrence) and the SC is/was worth $2,500,000.00, before the merger, the NSC tax would be $0.00/$0.01. The owners of a reverse merger NSC would benefit in cash and/or shares as part of what would be paid by the SC for outside professional services; such as an investment bank managing the reverse merger to bring the SC public. If the SC pays out $250,000.00 here, the professional services providers would pay a $2,500.00 tax at closing. (03-H - Trades) Capital transactions involving only non-cash capital assets would not be taxed. (This provision could be adjusted Page 4 - Marcus Brown, Individual to 0.05% for each side if vital.) To trade services for such assets is taxable to the services provider. (03-J - <<< Other Income Taxed/Untaxed) The following form of income would be taxed to a payee (receiver): Pension. The following forms of income would be taxed to a payor (remittor): Annuities (excess of contributions), Distributions, Dividends, Interest, Lottery, and Royalties. The following form of income would not be taxed: Alimony and Estates. There would be no alternative minimum taxation, no tax credits, and no tax forms. (03-L - Charity and Non-Profit Proceeds) To give is not to sell. Under SALE, if property is given to charity, etc., the donor does not have to pay SALE tax. However, if the charity, etc., sells the non-cash property, it pays the SALE tax. (The SALE tax plan would provide more money for all taxpayers to be able to contribute more to charity.) Under SALE, non-profit organizations would treat proceeds (including tuition) as gifts. Their sale of non-cash proceeds or property holdings would be taxed. (03-M - Other) A for-profit day-care center would not be taxed on its profit but on its gross proceeds for services; normally before it provides the services. (Our profit and non-profit business structures would not be upset by SALE.) (04 - Observations) Relatively very few people have any significant comprehension of just how complex our insane IRS tax code and its legal and managerial machinery have become. It is virtually a secret. Under SALE, with the disadvantages of our insane IRS tax code so substantially reduced for the aveage consumer of goods and services, both the poor and the rich can get richer. (This may not seem fair to some.) With SALE, the taxpayer can actually look forward to the joy of paying taxes. (A garage sale gross of $250.00 would net $247.50, after taxes; even if the profit was greater than 1000%.) Hopefully, a good citizen could be just as proud to pay a 1% tax as to pay a 15% tax. With SALE, the taxpayer, individual or industry, should be able to Page 5 - Marcus Brown, Indivual afford to pay taxes. SALE would permit extraordinary reductions in tax record keeping for those who wish to take full advantage of their tax system. One can only wish that Joe Louis Barrow, the late great heavyweight champion, as well as many other well-meaning taxpayers of reknown and service, could have been taxed under The SALE Tax Plan. Respectfully submitted, Marcus Brown June 08, 2005 ====================================================================== ((Readers: Please support the very best tax reform plan that you can find. It is most important that you make the right choice. Readers who wish to express interest or support for The SALE Tax Plan are invited to do so; soon, so that figures re same can be communicated to the Panel, etc. Please identify yourself and any current or former interest in another tax plan. Please also feel free to indicate which tax reform plans/organizations you believe to be dishonest, illogical, irrational, insane, unreliable, and/or useless. Economists who might wish to explore the author's 1% SALE tax rate estimate would be most welcome. You would be free to publish whatever is sent to the author. You may not be aware that some of the tax reform promotions are very highly organized. If you see The SALE Tax Plan to be as sensible as the author suggests that it is, please say so. If your comments are generally positive, the author will be in a much better position to promote SALE. As of now, as the author sees it, Congress is much more likely to substitute one form of tax terrorism for another than we are to achieve an intelligent tax reform system for the greater economic good and for the greater number of taxpayers.)) |