OK, so tax-deferred retirement accounts, untaxed medical savings accounts, untaxed college accounts and now untaxed unemployment accounts. So, we're basically going to take savings out of the tax system. Why not just get rid of all taxes on interest and dividends?

I realized how dumb that comment was the moment I hit Post. Never mind.

David -

I'm not sure this is a dumb comment. By making more and more expenses tax-deductible (which is the jist behind all the so-called untaxed X or Y savings accounts) we continue to subsidize expenses (though, admittedly, the more "mandatory" types, like education, medical, etc). At the same time, we tax the rewards of the purest for of savings (interest, dividends, gains). The more we favor expenses in the tax code, the more we have to balance this by making investments tax free.

It's dumb because the point seems to be to back us into a consumption tax.

David:

The Administration is trying to convert us to taxing consumption (some kind of VAT in all likelihood), why don't you like it?

Ask a brit how they like VAT.

M:

Didn't most nations add a VAT to the income tax, rather than replace the latter with the former?

Yep,and it;s a complicated calculation for business.Different products equeal cost are taxed at different rates.

"Why not just eliminate all taxes on interest and dividends"

It's only a stupid comment because Bush would never get that past Senate Dems.. unless he did it one piece at a time...

M:

It can't be more complicated than the current system of business taxes and withholding, etc.

OJ,imagine having to calculate a different sales tax payment on each item in your store.The vat taxes the apple from tree to pie to applesause.
I had a friend who worked as a bartender in UK,he had to figure the tax on each type of liquor and drink mix,it was a nightmare for him.
The UK spends far more calculating and enforcing VAT than we do any of our taxes(relatively speaking).The VAT drasticaly raises consumer prices(imagine a sales tax of 25 to 30%)but it's hidden along the chain of production and supply.

Whisky=5%,whisky and coke=7.5%,whisky sour=12.5%
As opposed to taxing each shot at the same rate.
You're wifes a doc,right?Imagine each part of her job was taxed at a different rate.

Cold=3% tax,flu=5% tax,hang nail=2.5%,and she had to calculate how many colds and hang nails she had treated and calculate,as oppsed to simply taxing her gross income.

Yes, but business taxes in the U.S. cost more for business to calculate and comly with then government collects--that's pretty staggering. And the point of taxing consumption is that consuming would bear a higher price tag, no?

1)Business doesn't pay tax,they simply raise prices to consumers.

2)The VAT is simply a very complex and,to the public,invisible sales tax.It takes the same complexity of business tax and adds several new layers of complexity.

3)All taxes in the US are basicly a tax on gross profit or income.The complexity comes from deductions,exepmtions and loophole which are subjective,depending on the mood of the auditor.

To return to an earlier example.Youe wife the doc basicly tells the IRS "I treated X # of patients,earing Y amount of money and after deductions,owe Z amount of taxes".There might be debate over some deductions,but it still comes down to the gross amount she earned,right?

Under VAT she has to say "I treated A # of colds and earned X amount of money,I treated B# hangnails and earned Y amount of money,C# flu cases,etc."Now add different taxes on each cold case,which might be taxed 7 different ways depending on treatment.

UK business has lost billions complying with VAT,it is simply a very,very bad tax from a market perspective.

M:

How's that any different than figuring sales taxes? Which we currently have in addition to business taxes, income taxes, etc.? The point is to have just one form of taxation and that on consumption, not income.

I agree,but VAT isn't that tax,it's a very,very complex sales tax.And you seem to be missing my point.The exact same item can and is taxed a dozen different ways and levels.Under VAT $5 mixed drink isn'taxed a flat percentage of it's sale price,a mixed drink is taxed according to it's ingredients,which are all taxed at differing rates *depending on the mix* of ingredients.Thats not simple.
This would in no way whatsoever reduce the costs or complexity of the tax system.I could support a flat tax on income,a flat consumption tax or even some mix of the 2,but only a politician could love the VAT's ability to shear the sheep without the sheep knowing it's not just a fashionable haircut.

I think that the Ownership Society is a great idea, the only problem with it is that most people will make lousy owners. They will invest their accounts in magic bean futures, or bet it on the Powerball. There will still be a large consituency of impoverished, failed owners whom the Democrat Party (if they are still around) can gain votes from. There will still be a need for a safety net, which will basically save people from themselves.

Robert:

Those won't be options--it will be like a 401k without any high-risk funds and you'll be required to transition to even lower risk at some set age.

But what if I don't want to transition? Gold and copper have been the best investments over the past 18 months.