Peter Schiff: Abolish Corporate and Personal Income Taxes

[MN Patriot]

I say instigate a tax revolt. Propose legislation to end payroll withholding of taxes. Make everyone write a check, or pay in cash, to the US Treasury every month.
Make it into a job creation program so the Democrats can support it. Hire more tax collectors. The Post Office is closing offices, turn those into IRS collection offices so it is convenient for everyone to visit their local tax office every month and pay their obligation to living in a civilized society.
Would people accept this state of affairs, or would they get sick of it in a hurry?
Let's find out by having our Tea Party Republicans introduce legislation to outlaw payroll withholding.

 

[jkr]

dont forget "property" tax


that is a contradiction in terms.

if you get "taxed" (punished) you do not own.

 

[QueenB4Liberty]

I say instigate a tax revolt. Propose legislation to end payroll withholding of taxes. Make everyone write a check, or pay in cash, to the US Treasury every month.
Make it into a job creation program so the Democrats can support it. Hire more tax collectors. The Post Office is closing offices, turn those into IRS collection offices so it is convenient for everyone to visit their local tax office every month and pay their obligation to living in a civilized society.
Would people accept this state of affairs, or would they get sick of it in a hurry?
Let's find out by having our Tea Party Republicans introduce legislation to outlaw payroll withholding.

sadly, I don't think that would make much of a difference, although I do like the idea. These people are just too far gone.

 

[enoch150]

Perhaps you can provide us with some alternative numbers. I was using the most recent available figures. I welcome a look at others. We have to start with some sort of assumptions- unless we get specific numbers from somebody. You too are making assumptions that he would cut every program by 100% if he was elected to office.

I've already posted a link to the numbers for 1971 - 2010 . Total revenue and outlays are on page 1. Revenue by source is on page 4.

http://www.cbo.gov/ftpdocs/120xx/doc12039/HistoricalTables[1].pdf

I am going to make some more assumptions- based on some of your questions. Let us assume that we get a Rand Paul sized $500 billion in cuts instututed. Budget cuts are politically difficult to achieve since cutting popular programs (every program is popular to somebody) means losing votes- which elected officials don't want. That will drop government spending down to $3.05 trillion. Lets assume that the non- governemnt (and taxable) portion of GDP stays where it is or $10.4 trillion. Now keep the assumption that we use a national sales tax as the only source of revenue and balance our budget. Congratulations. We have reduced the national sales tax down to 29%.

$500 billion in cuts is no more politically viable than a balanced budget, so why not just talk about Schiff's proposals as is? As explained in this interview with Rand Paul, Schiff operates on the assumption that Rand's one year $500 billion cut and balanced budget in five years is useless because we don't have five years. He thinks we need to balance the budget "right now." He was pushing Rand to go further - "if we're going to go down, go down swinging." He also asks Rand, about Social Security, "is there any way to reform a Ponzi scheme to make it work?"

http://www.youtube.com/watch?v=TXuJCmOWB2k&t=9m15s

In an interview with someone on the board of trustees for the SS Administration, Schiff startles the trustee by suggesting we immediately begin phasing out Social Security.

http://www.youtube.com/watch?v=ITMEZImvNio

I've heard other speeches and interviews where he goes into more detail. But, like I said, I don't know of any single source that lists everything he has suggested cutting. Entitlements, the military, the departments - he'd take an axe to everything. I'm fairly certain he would propose enough cuts to balance the budget in a single year, and then start cutting more in the out years so that taxes could be cut, too. I'd expect $2.2 trillion in proposed outlays from him the first year - no more.

Now, if that happens, you could not assume a static $10.4 trillion private sector GDP. For one thing, you'd have an extra $1.3 trillion in investment capital available. And that's to say nothing of the regulatory burdens which would suddenly go unenforced because the government would no longer have the manpower. Conservatively, I would estimate the private sector GDP to jump to $11 trillion, which would make the national sales tax 20%. FICA taxes alone amount to 15.3% of people's income as federal taxes, even if they don't pay income taxes (employees effectively pay for the employer's portion). Do you really want me to find another 4.7% of income that even poor people pay to the feds as taxes?

 

[Zippyjuan]

Thank you for the info. Your numbers posted match the "wrong" ones I used. I don't deny that Schiff has called for balancing the budget but don't see the details. He does speak in broad terms of things he thinks should be cut- and he is right on most of them. I also don't disagree that we need to start doing someting right now. The devil is in the details. As I pointed out, even without any changes in taxation, you can immediately reduce Social Security by 50% and cut every department in government by 100% including the Department of Defense- make them ALL zero dollars- and still not balance the budget this year.

He thinks we need to balance the budget "right now."

Now if you do institute cuts of $1.7 trillion (the projected shortfall for 2011), the GDP will take a huge hit. Not only do you lose the government spending portion of GDP, but those people in those jobs now have no job and no income. They are no longer out buying things from other businesses like grocery stores, hardwares stores, Best Buy or Walmart etc. Those businesses then have less money coming in and they need fewer workers so there will be even more layoffs. Tax base goes down even more meaning even less revenue for governments and more cuts. We have seen how this plays out over the past couple of years when even people who did not lose their jobs cut back on spending out of fear for losing theirs. Those cutbacks led to lower sales and businesses laid off even more people. And as we have seen, this trend is hard to reverse. Knocking $1.7 trillion out of the economy would have a similar negative impact on things.

 

[enoch150]

Thank you for the info. Your numbers posted match the "wrong" ones I used.

No they don't. You said "For the year 2009, total government revenues were $2.7 trillion (it was actually $2.1 T) and $1.55 trillion of that came from individual income taxes ($1.2 trillion) (it was actually $.92 T) and corporate taxes($339 billion) (it was actually $.14 T).... Everything you used was estimates and projections, not the actual numbers (and from mismatched years, to confuse things even further).

I don't deny that Schiff has called for balancing the budget but don't see the details. He does speak in broad terms of things he thinks should be cut- and he is right on most of them. I also don't disagree that we need to start doing someting right now. The devil is in the details. As I pointed out, even without any changes in taxation, you can immediately reduce Social Security by 50% and cut every department in government by 100% including the Department of Defense- make them ALL zero dollars- and still not balance the budget this year.

In 2010:

Defense: $689 Billion. Cut in half, it's $345 Billion
SS, Medicaid, Medicare, and the rest of that stuff: $1.909 Trillion. Cut in half it's $955 Billion
Interest on debt: $197 Billion
All other departments go to $0

$955 + $345 + $197 = $1.497 Trillion

In 2010:

Individual income tax: $899 Billion
Corporate income tax: $191 Billion
Social insurance tax: $865 Billion
Excise tax: $67 Billion
Estate and Gift tax: $19 Billion
Customs: $25 Billion
Miscellaneous taxes: $96 Billion

Total tax confiscations in 2010: $2,162 Trillion

$2,162 (revenue) - 1,497 (outlays) = $665 Surplus

Not every department would have to go to $0, plus entitlement and defense spending reduced by 50% to balance the budget.

Now if you do institute cuts of $1.7 trillion (the projected shortfall for 2011), the GDP will take a huge hit.

Government projections are notoriously worthless. Use the 2010 numbers. $1.3 T. And no, the GDP will not take a huge hit. The money just stays in the private sector rather than being extracted and redistributed by the government. Unless you're referring just to the Fed's money printing? But the Fed isn't monetizing the entire deficit and that's not real GDP growth anyway, just inflation.

Not only do you lose the government spending portion of GDP, but those people in those jobs now have no job and no income. They are no longer out buying things from other businesses like grocery stores, hardwares stores, Best Buy or Walmart etc. Those businesses then have less money coming in and they need fewer workers so there will be even more layoffs. Tax base goes down even more meaning even less revenue for governments and more cuts. We have seen how this plays out over the past couple of years when even people who did not lose their jobs cut back on spending out of fear for losing theirs. Those cutbacks led to lower sales and businesses laid off even more people. And as we have seen, this trend is hard to reverse. Knocking $1.7 trillion out of the economy would have a similar negative impact on things.

Totally untrue. A lot of government jobs would be private sector jobs if the government wasn't involved. There will always be a need for teachers, firemen, police, etc. They may not have the same income if their jobs were funded by the private sector rather than with stolen tax money, but those jobs will still be there. And the reduced salary for them simply means other people have a higher income, so there is no net income change.

There are some jobs that the private sector would probably never fund: border patrol, tax collector, politician, and the like. Those people will experience a bout of unemployment, but if it forces them to find a productive line of work, then it will be for the better. Finding a more productive line of work ought to be easier in a much less encumbered economy.

Keep in mind that, Fed monetization aside, government debts compete with the private sector for capital. The government may take the money and pay for a bunch of unproductive people to sit on the border all day. This may or may not aid in consumption, but it is unequivocally harmful to a productive economy. It is production that grows an economy, not consumption. Forcing some people to pay for other people to be unproductive does not help an economy, and eliminating such government programs will not damage the economy. If the money was instead used in the private sector, maybe the unstolen tax money would be used to build a factory and the would-be border patrol agents instead could manufacture widgets.

 

[Zippyjuan]

Thank you for the correction on the numbers. I just quickly looked a the figure of a $1.4 trillion deficit for 2010 which agreed with what I said earlier. I admitedly did not scan down the page further. The differences you point out are not terribly significant with the size of the numbers. ($1.2 trilllion vs $0.92 trillion or being off by $100 billion on corporate revenue in a $3.5 trillion dollar budget). Projected deficit for 2011 was $1.7 trillion. I also did not assume to cut Medicare/ Medicaid as you do which is fine if you want to cut it and save some money for the DOD. Should a polititian propose to slash Social Security and Medicare by 50% in one year (to achieve Schiff's goal of a balanced budget in one year), they would be immediately voted out of office in the following election.

I do disagree with your optomistic view of cuts of that magnitude having minimal to no impact on the overall economy. New jobs may get created in the long term but would take many years. How long is it taking to replace the jobs vacated since 2008? Has that had "no impact on GDP" that corporations made the cuts they did? That should free up people and capital to create new jobs, right? The government cutting enough jobs to reduce spending by $1.7 trillion has the exact same impact on the economy as businesses cutting the same number. The result is people losing jobs and those people having $1.7 trillion less to spend supporting other jobs. You still have thousands if not millions suddenly losing their income. Yes, the Treasury will not have to borrow an additional $1.7 trillion they would have otherwise which should lower the cost of borrowing for others, but if all those people lost their jobs, demand for goods would drop significantly and business would have no reason to create more new jobs. Companies already are showing huge profit increases have more money available to invest since the collapse in 2008- but they are not adding more jobs or increasing investment. Why? Demand does not yet justify it. They won't build a widget factory in Wisconsin unless they believe they can sell all their widegets. Businesses have and have had access to adequate capital if they wanted to invest and hire more people- they just don't see the incentive to do so until their sales pick up enough. Freeing up more capital by laying off millions of government workers will not get them to use it any more than they do now- in fact they most likely would take the opposite tract. Fearning these people not buying stuff from them, they will probably reduce their investments and payroll- expecting lower sales in the future.

 

[enoch150]

I don't think so. There is an infinite amount of work to be done and at the right price there is a market for everything. That includes labor. Some companies may have a lot of cash, but if they aren't hiring, it's because the work the company wants done isn't worth the minimum wage demanded by government. Schiff wants to eliminate the minimum wage.

 

[Zippyjuan]

Let us try a small scale example and see what may happen. You work for a company and you have a buddy out of work. We will use this one company to represent all companies and you to represent those with jobs and your friend to represent those without one. Let us say that you agreed to cut your wages in half so your buddy could have a job. Very kind of you. Will your business experience an increase in sales? No. The money consumers have to spend did not increase- it is just divided between two people now. Your buddy does have more money to spend (he had none previously) but your money to spend was cut in half so you are now buying half as much from the company. Your buddy got a job but other than that, the net gain to the economy was zero. Sales at the company are not going to double because this happened. Are you willing to take a pay cut so that the laid off government workers can have a job?

Ford makes a profit off each car they sell, but if they can only sell a certain amount of them they are not going to make more than that. Companies are not hiring because they aren't selling enough goods to be worth hiring more people- even at lower wages. And lowering wages means that people have even less money to buy the goods so demand is even lower.

 

[lx43]

I wish they would abolish the personal and corporate income taxes totally and not replace it with anything. Starve the beast!

 

[thetruthhurtsthefed]

Zippy.....what is NEVER going to be paid-down is the interest on the fiat paper printed! Hence fed income tax. Therefore, abolish the fed = zero interest on fiat paper it "produces" = zero income tax (to payback the interest on the fiat paper)=you and I going home with what we labored for/earned!
of the 3 years on this site I cannot figure out where you stand. You are kinda all over the place politically especially on foreign affairs. Are you collecting IP's?

 

[Zippyjuan]

Which "interest on fiat paper" are you refering to? If you mean the interest on the debt you are right- that won't go away until the debt goes to zero which I don't expect to ever happen. The debt is produced by the Congress spending more money than they take in and then they have to have the Treasury issue debt to borrow the difference. If you get rid of the Fed, they can still borrow money so that will not solve the debt problem. That won't stop the govenment from borrowing or taxing. As long as you have ANY sort government they will have to borrow and/or tax to pay for it.

 

[heavenlyboy34]

Which "interest on fiat paper" are you refering to? If you mean the interest on the debt you are right- that won't go away until the debt goes to zero which I don't expect to ever happen. The debt is produced by the Congress spending more money than they take in and then they have to have the Treasury issue debt to borrow the difference. If you get rid of the Fed, they can still borrow money so that will not solve the debt problem. That won't stop the govenment from borrowing or taxing. As long as you have ANY sort government they will have to borrow and/or tax to pay for it.

Rothbard proposed repudiating the debt. What say you?

 

[low preference guy]

Rothbard proposed repudiating the debt. What say you?

I say do it.

 

[heavenlyboy34]

Which "interest on fiat paper" are you refering to? If you mean the interest on the debt you are right- that won't go away until the debt goes to zero which I don't expect to ever happen. The debt is produced by the Congress spending more money than they take in and then they have to have the Treasury issue debt to borrow the difference. If you get rid of the Fed, they can still borrow money so that will not solve the debt problem. That won't stop the govenment from borrowing or taxing. As long as you have ANY sort government they will have to borrow and/or tax to pay for it.

Or, the people who want government can donate to it. The treasury has a program in which people can make "patriotic" donations. This way, those who want government can fund it, and the rest of us can keep our money. (assuming a voluntaryist paradigm, of course)

 

[Zippyjuan]

Rothbard proposed repudiating the debt. What say you?

Most of the debt is held by retirement funds. Repudiating debt does not just hit China and Japan. But if you did want to destroy the dollar and wreck the economy, that would be a good way to go about it.

 

[low preference guy]

Most of the debt is held by retirement funds. Repudiating debt does not just hit China and Japan. But if you did want to destroy the dollar and wreck the economy, that would be a good way to go about it.

On the other hand, if you pay your debt with printed money you also destroy the dollar. If you want to pay it by raising taxes, you destroy the economy. So I don't think destroying the dollar is a consequence of defaulting alone.

 

[enoch150]

Let us try a small scale example and see what may happen. You work for a company and you have a buddy out of work. We will use this one company to represent all companies and you to represent those with jobs and your friend to represent those without one. Let us say that you agreed to cut your wages in half so your buddy could have a job. Very kind of you. Will your business experience an increase in sales? No. The money consumers have to spend did not increase- it is just divided between two people now. Your buddy does have more money to spend (he had none previously) but your money to spend was cut in half so you are now buying half as much from the company. Your buddy got a job but other than that, the net gain to the economy was zero. Sales at the company are not going to double because this happened. Are you willing to take a pay cut so that the laid off government workers can have a job?

Ford makes a profit off each car they sell, but if they can only sell a certain amount of them they are not going to make more than that. Companies are not hiring because they aren't selling enough goods to be worth hiring more people- even at lower wages. And lowering wages means that people have even less money to buy the goods so demand is even lower.

The government worker is paid for by the productive private sector worker. At the start of that scenario, you have one worker making, say, two cars, and the other person is just a leech off of the productive worker (either on welfare or working for the government). If the government leech suddenly got a job as a productive private sector worker (each at half the wage) several things would happen. First, there would be 4 cars produced instead of two. The cars would cost less, since the worker wage per car was cut in half, and also cars would become less scarce, which would squeeze the profit margin. Ford does not strictly sell domestically. The excess cars would be more competitively exported. So Ford may take a hit in profit margins, but it gains in volume. Also, the productive worker would no longer be paying the leech's salary.

On a net basis, yes, the total pre-tax wages paid would be the same. But between the reduced labor cost for the cars lowering the final price of the car, the reduced burden of supporting a non-productive leech, and the increase in cars produced, the economy is better off. Remember what wealth is. Wealth is not those little green pieces of paper. Wealth is stuff. More cars means more wealth.