VEON FINANCIAL SERVICES, INC.
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Vol. 18, Issue 2 – June 2003
Issued May 5 2003
PRESIDENT BUSH’S PROPOSED TAX PACKAGE
WILL CHANGE OUR ENTIRE TAX CODE TO A CONSUMPTION TAX
Joan M. Veon, CFP
This newsletter will discuss in detail the President’s proposed “Jobs and Growth Package”, also known as the “Tax Stimulus Program”, which is a misnomer as it will not stimulate the economy but will CHANGE THE ENTIRE TAX CODE, SHIFTING TAXES FROM INCOME TO TAXES ON CONSUMPTION, also known as a VALUE-ADDED TAX. Bush set the tone for this change with his 2001 tax cut which reduced tax rates over a number of years. To accelerate the shift, Bush is now proposing that all of the tax rate reductions be immediate. This, along with the other changes which are to be phased in over ten years, will provide a “bridge” to the VAT.
In order to shift to a tax on consumption, which will be a flat tax rate, the upper tax brackets have to come down and the lower tax brackets have to be raised. For poor and low income this will be a very difficult burden. For those in the 38.5% bracket that has been reduced from over 60% in 1986, this will be a windfall. Eventually their tax bracket will drop to 21% to 27% which is the rate that the Economic Advisers calculated that will equate the same income as what we have currently.
Unfortunately, President Bush has not chosen to explain this to the American people but has endorsed a program of deceit, deception and distortion—something most conservatives or Republicans would have attributed to Clinton. In the case of the proposed tax plan, the Democrats have been more honest and forthcoming than the GOP. Furthermore, The Washington Post was the first newspaper to alert me as to the real purpose of the “tax cut” when they reported on October 31, 2002, “Inching Away from Income Tax – ‘Value-Added’ Levy Would Turn System Upside Down” by Jonathan Weisman, who wrote:
Pamela F. Olson, the Deputy Treasury Secretary for Tax Policy would only hint at where the project was going. On the corporate side, she said, a tax system that was formed 40 years ago, before the proliferation of international investment and multinational corporations, is ill equipped to track income in today’s global economy. The Treasury is looking at long-term proposals to scrap the corporate income tax and replace it with a value-added tax which would work like a national sales tax on consumer and corporate purchases (emphasis added).
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