From: cp2w+@andrew.cmu.edu (Conrad Poelman)
Newsgroups: alt.politics.elections
Subject: Re: Jerry Brown and lack of thinking
Date: 14 Apr 92 14:08:30 GMT
	<1992Apr14.050143.8207@murdoch.acc.Virginia.EDU>
Organization: Doctoral student, Computer Science, Carnegie Mellon, Pittsburgh, PA

Excerpts from netnews.alt.politics.elections: 14-Apr-92 Re: Jerry Brown
and lack of.. Daniel Burton Avery@fara (2664)

> 2) When, exactly, will Brown make up his mind about what his
> VAT is?  The latest incarnation I saw taxes gross profits minus
> previously taxed goods purchased from other companies.  Does
> this mean that services won't be taxed, since labor isn't going
> to be?

Just to clarify the ongoing confusion, the VAT is a fairly standard
VALUE ADDED TAX!  Brown has been clear about this since he first
presented it, it's just that people in this country are so used to
*income tax* and *sales tax* that they have a hard time understanding
*value added tax*, which is neither.

From Brown's Feb 10 "The Case for a Flat-Rate Tax: A Silver Bullet
Solution for the Economy":
> For business, the basic tax is a simplified version of the value
> added tax popular in other countries.  Our version would be much
> better because it is so simple.  Each company would just take
> its total sales and subtract its purchases from other taxpaying
> companies to get its tax base.  The tax would then be calculated
> by multiplying the tax base by 13%.

In other words, the tax is on gross *income* minus purhcases to other
VAT-paying companies.  Thus if a company spends $600 buying engine parts
and $300 on employee pay to assemble the engines, and then sells the
engines for $1000, the VAT is 13% of $400 (total income = $1000,
purchases from other VATpaying companies = $600).

Anyway, Brown has said that of course some details of the proposal might
be modified, and the basic rate could of course be adjusted from 13% to
15% or 20% or 10% or whatever Congress needs to raise enough revenue. 
Scott Cromar brought up some valid questions about how
sole-proprietership companies would be treated under the new law.  So
yes, there are a few details that still need to be worked out, but the
basic VAT format is and has always been clearly defined.  It's just that
people seem to have a hard time understanding it.

--Conrad

P.S.  Here's the whole text of Brown's statement:  (I assume someone
typed the year in wrong...)  He does seem to pull the second-to-last
paragraph out of thin air...

-----------------------------------------------------
The Case for a Flat-Rate Tax:
A Silver Bullet Solution for the Economy

By Edmund G. Brown, Jr.
February 10, 1982


All the presidential candidates are proposing tax gimmicks which
add to the complexity of the tax code and do nothing to create
sustainable jobs.  What is worse, this constant reworking of the
tax code stokes up the crooked Washington fundraising machine
that routinely auctions off loopholes to the highest bidder.
Needless to say, churning tax rules year after year also kills
long term investment.

What is really called for is not cosmetic alteration, but
radical surgery.  The cancer eating at our democracy is the out
of control metastasis of political money.  The candidates, the
media, and public officials have all succumbed to the lethal
dogma that electability requires obscene amounts of special
interest money; and the most lucrative source of this kind of
money is the ceaseless manipulation of tax laws.

Halting the campaign-dollar banquet feast of loopholes can never
happen until the myth of progressivity in the Internal Revenue
Code is exploded and the dark nature of American tax reality is
exposed:  i.e., that only the rich hire lobbyists and high
priced lawyers to insure that the system favors themselves at
the expense of everyone else.

That is why the silver bullet which both fights corruption and
jump-starts the economy is the abolition of the current system
of federal taxation and its replacement with a flat 13% levy
across the board.  With one stroke, the major source of venality
and graft will be eliminated and the Byzantine strictures of the
Internal Revenue Code made so simple that even a sixth grader
will understand them.

The 13% flat tax reform is the only new idea to emerge from this
year's presidential campaign.  With it, the stock market will go
through the roof, businesses will thrive, and millions of
Americans will go back to work.  Of course, politicians, tax
preparers, attorneys, accountants and I.R.S. agents will fight
to preserve their honey pot.  But regular citizens will love the
low marginal rate and the utter ease of compliance.

The flat tax is straightforward:  eliminate the personal income
tax, the social security tax, the corporate tax, the gift and
estate tax, the gasoline tax and other federal excise taxes
(except the so-called sin taxes such as those on liquor and
tobacco), and replace them with a 13% tax on personal gross
unadjusted income and a 13% tax on the gross revenues of
business.

For business, the basic tax is a simplified version of the value
added tax popular in other countries.  Our version would be much
better because it is so simple.  Each company would just take
its total sales and subtract its purchases from other taxpaying
companies to get its tax base.  The tax would then be calculated
by multiplying the tax base by 13%.

For individuals, the concept is the same.  Each person would be
required to report all income without deductions, exemptions or
exclusions except for mortgage interest, rent paid on a primary
residence, and charitable deductions.  Once individuals or
families have calculated their tax base, the actual tax is
simply 13% of that number.

For the first time, deducting rent on one's primary residence
would put renters on an equal footing with homeowners and
substantially reduce their tax liability, especially for those
whose rent payments make up a significant proportion of their
income.  Despite the low rate of 13%, federal revenues would be
at least as much as they are today and probably much higher if
this revamping of the tax code unleashes the business expansion
we expect.

Today, 81.5% of all federal tax receipts come from individuals.
In 1950, individuals contributed only 50.9% of all federal tax
receipts.  This erosion of the business tax base is completely
reversed by our proposed flat tax which reduces the amount of
taxes collected from individuals by about 45% and puts the
obligation back on business.  Moreover, the flat tax does
something else.  In lieu of the current mess, it would steer
much of the considerable talent of tax lawyers and accountants
to better purposes elsewhere in the economy.

In a similar vein, politicians have created an obscene amount of
makeshift work because of the complicated and constantly
shifting tax laws.  In Washington, high paid lobbyists scurry
daily through the corridors of power currying favor with elected
officials.  Campaign donations, and other forms of payoffs are
the natural consequences.  Congressional staffs grow unchecked
to make sure that no possible donation is left untapped.  With
our radical restructuring of the tax law, Congress would be able
to focus on more pressing needs and their staffs could be
reduced and companies freed of the burden of hiring so many tax
lobbyists.  We would all come out winners.

We would also win in another way -- by putting a big dent in the
huge underground economy.  The flat tax would reduce tax evasion
for two reasons.  First, the low flat rate on individuals and
corporations provides a lot less incentive to cheat and a lot
fewer ways to do so.  And second, because more of the total tax
receipts would come from business, there will be less tax to
cheat on for individuals.  The additional federal revenues would
be quite substantial.

The present tax laws reward business lobbying and gimmickry.
The flat tax on individuals and businesses gets rid of all this
nonsense and tells people that you earn profits only on your
successes in the market place, not from your political influence
or your cleverness in mining the tax codes.

One other feature of the value added tax deserves special
notice.  Companies will be allowed to expense capital purchases
in the year of purchase for purposes of calculating their tax
base.  This will eliminate the need for complicated depreciation
schedules and dramatically spur investment.

With tax evasion and avoidance greatly reduced, with the money
and talent used for tax purposes released, and with production
incentives in place, the economy would expand and federal
revenues would sharply increase.

Finally, this tax proposal is revenue neutral.   Every tax
increase is offset by a tax reduction.  The net effect on prices
will be precisely zero.

People with large amounts of "unearned income" will bear more of
the tax burden [than currently].  Those earning less than
$100,000 annually will pay less in taxes.  Those people who make
more than $100,000 will pay proportionally more.  Those who have
all the write-offs and deductions will start paying their fair
share.

Other presidential candidates profess to help the middle class
and suggest all manner of tax gimmickry. This sweeping reform is
the only one which will do the job our economy needs.
Newsgroups: alt.politics.elections