Fareed Zakaria Shocker: U.S. Tax Code Too Progressive, Rich Pay More Than In Other Countries

By Noel Sheppard | March 25, 2012 | 09:09

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Readers are strongly advised to fasten their seatbelts before continuing. You've been warned.

On CNN's Fareed Zakaria GPS Sunday, the perilously liberal host actually complained about America's tax code being too progressive while noting, "The top ten percent in America pay a larger share of total taxes, 45.1%, than do the top ten percent in any of the 24 countries examined" (video follows with transcript and commentary):

FAREED ZAKARIA: For those who despair at the role of money in politics, the simplest way to get the corruption out of Washington is to remove the prize that members of Congress give away - preferential tax treatment. A flatter tax code with almost no exemptions does that.

You heard right. Fareed Zakaria on Sunday called for a flatter tax code. I told you to fasten your seatbelts. Now I'm advising you leave them on:

ZAKARIA: The simplest fix to our tax code would be would be to lower the income tax dramatically, lower the corporate tax, and instead raise revenues through a national sales tax, or a value-added tax (VAT).

Yes, he said "lower the income tax dramatically, lower the corporate tax."

Now I know what you're thinking: the catch is the VAT. However, as he noted, a mixture of a flatter tax with a VAT would be far less progressive than what we currently have:

ZAKARIA: The U.S. is the only rich country in the world without a national sales tax. Germany has one at 19%, Britain at 20%, Korea at 10%.

What’s the appeal of a consumption tax?

First, it is efficient. Most studies, including one by the Internal Revenue Service (IRS), suggest that the federal government loses several hundred billion dollars a year to tax fraud. This is much tougher to pull off with a consumption tax. Second, it provides the government with a more stable form of revenue than income taxes. Income taxes fluctuate greatly between boom and bust years. Third, American’s consume too much, often using credit and leverage to do so. A consumption tax would moderate this behavior. Government will always get less of a behavior it taxes and more of what it subsidies.

Actually, I disagree that a VAT would reduce the government's revenue risk in a recession. If you're relying on taxes from consumption, consumer spending drops more in a downturn than wages. So, this might be a weak point.

But who cares? This was Zakaria making far more sense than normal. Keep those seatbelts on:

ZAKARIA: Ironically, the heavy reliance on income taxes makes the American system more progressive than those in Europe. The federal government gets about 43% of its total tax revenue from taxes on individual incomes and profits, compared with only 29% in Germany and 22% in France. The balance for France and Germany comes from the VAT, which is highly regressive. One recent OECD study showed that the top ten percent in America pay a larger share of total taxes, 45.1%, than do the top ten percent in any of the 24 countries examined. In Germany they pay 31% of the taxes, in France 28%.

But the best thing about tax reform is that it kills corruption. So if you ask me what kind of tax code I am in favor of, I am in favor of almost any new tax code that fulfills one requirement: It should fit on two pages.

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This warrants repeating:

"Ironically, the heavy reliance on income taxes makes the American system more progressive than those in Europe...One recent OECD study showed that the top ten percent in America pay a larger share of total taxes, 45.1%, than do the top ten percent in any of the 24 countries examined. In Germany they pay 31% of the taxes, in France 28%."

Shocking.

So Zakaria wants America to have a less progressive tax structure where the rich pay a smaller part of the total collected than they currently do and those at the bottom pay more.

Tough to believe, isn't it? On the other hand, doesn't it depend upon which part of the fix comes first?

If we first create a VAT, does anyone think the next step will be to "lower the income tax dramatically" and "lower the corporate tax?"

No chance, right?

As such, Fareed, I'm all for your tax reform proposal if you start by lowering income and corporate taxes dramatically. Only then can you add your VAT.

Deal?

About the Author

Noel Sheppard is the Associate Editor of NewsBusters. Click here to follow Noel Sheppard on Twitter.

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Comments

Maybe `ol Fareed knows...

Submitted by HeavyChevy on Sun, 03/25/2012 - 9:29am.

That Obama may not be reelected and trying to get back in America's good graces playing the old "Hey I'm impartial" Jedi mind trick before the other shoe drop?

Naaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa!

I think the drugs kicked in a little bit sooner then expected he'll be back to normal for the next episode.

Well, I'll be... Didn't

Submitted by ThatDude on Sun, 03/25/2012 - 9:32am.

Well, I'll be... Didn't expect Fareed to ever bring some sort of balance to his reporting. That said, how many times has he cheered progressive taxation and big government?

The answer to 1984 is 1776.

Quarterly

Submitted by KC Beach on Sun, 03/25/2012 - 9:38am.

Fareed must have had to send in his quarterly income tax payment.

Mind Reader

Submitted by CJohnson on Sun, 03/25/2012 - 10:18am.

My thought exactly; may hear same whine from Ed and Chris shortly.

Hakapelita!

Fareed Zakaria must be doing very well these days !!! ;>)

Submitted by Paarl on Sun, 03/25/2012 - 9:44am.

probably bought some Apple stock ..... or has some appreciated assets..or maybe just a 7 figure income that is getting slaughted by the IRS !!! ;>)

this is what Rush calls a 'random act of journalism' by the MSM ....I wonder if he is going to be denounced by Angrier Mitchell and the other mental midgets of the lamesteam media...

Paarl of Rhodesia

Still living off those Rhodesian dollars of yore !!!

paarl

9 9 9

Submitted by Denny Crane on Sun, 03/25/2012 - 9:50am.

That plan looks pretty damn good.

Too bad the best candidate got knocked out by stupid lies and antics.

Be on the lookout for random acts of journalism from the MSM~h/t Rush

We Are The 53%

If he was in the conga line

Submitted by ricklail on Sun, 03/25/2012 - 10:07am.

If he was in the conga line of morons on MESSNBC he'd be fired for that.

A well regulated militia being necessary to a free state, the right of the people to keep and bear arms shall not be infringed.

... or at the very least, a permanent 1-week suspension.

Submitted by SickofLibs on Sun, 03/25/2012 - 10:42am.

That Griffin fellow is one tough nut.

The cynic in me...

Submitted by seen the light on Sun, 03/25/2012 - 10:32am.

says that he is trying to give the appearance of being impartial: "see? I'm not such a lefty after all! Look what I just said!".

and/or, as most liberal hypocrites, he is sick of paying high taxes himself! Socialism for thee, not for me.

This Smells Like A Leftist Setup

Submitted by HardRightTurn on Sun, 03/25/2012 - 10:39am.

What could they be up to? Whatever it is, you can bet your last tax dollar it's no good.

I predict the Leftists are setting a trap for House Republicans to force them into one of their so called 'compromises'.

To more fully comprehend the Left, one must read “Leftism As Psychopathy” by John Ray, M.A., Ph.D. Caution, it might scare you a little bit.
http://jonjayray.tripod.com/psycho.html

Doh!

Submitted by sngnsgt on Sun, 03/25/2012 - 10:35am.

Fareed has a Homer Simpson moment and we're shocked. How 'bout the 2% oil myth? How 'bout Obama's mountain of regulations? How 'bout the corporate tax rate? Keep actually checking things, Fareed. We fly overs are patient and we vote.

Sounds like Fareed just got a

Submitted by celator on Sun, 03/25/2012 - 10:53am.

Sounds like Fareed just got a nice pay raise or bonus and doesn't want to send a big chunk of it to the IRS. Or he finally looked at his pay stub and realized how much he's giving to Obama. Either way, it's about time he woke up.

"This is not your mother's Democratic Party"--Andrew Breitbart, CPAC, February 2012

Some liberals have a

Submitted by mustango on Sun, 03/25/2012 - 11:13am.

Some liberals have a surprising capacity to be fiscally conservative. Jim Cramer is another example. Sometimes mathematics still trumps ideology.

VAT Tax - European Style

Submitted by Kingfish17 on Sun, 03/25/2012 - 11:11am.

Collect a tax that is for all purposes hidden from the masses and then redistribute it back to the masses to garner political power and favor, while at the same time keeping a huge chunk for patronage and graft and slush funds. Sounds like a socialist's dream come true.

-------------------------------------------------------------------------------------------------------

"You can’t go take a trip to Las Vegas...on the taxpayer’s dime." Barack Obama

Exactly, K-17

Submitted by Galvanic on Sun, 03/25/2012 - 12:50pm.

Those of us who've lived in Europe understand how subversive this is. Unlike state and local sales tax in the US, the VAT portion of a purchase isn't listed -- it's folded into the price of the goods and services. When the VAT is increased, the consumer only sees a rise in the cost of everything and not necessarily linked to the government.

In the UK, I believe the VAT began at 8%. It has recently been elevated to 20%.

The "tax behind the curtains" VAT is essential to a socialist economy, because it hides the redistribution of wealth. All the people know is they buy things, and they get government services. It's working real well in Greece (?), Italy (?), Spain (?) . . .

I believe it also creates an underground economy that evades the VAT. When I lived in Italy, my landlord only accepted cash for rent and never gave me a receipt -- keeping transactions hidden from the government is rampant.

I favor a flat tax, but no VAT.

VAT-tricide: The death of an economy through hidden taxes

Submitted by pockets64 on Sun, 03/25/2012 - 2:56pm.

Oddly enough, I watched this show today. He was pushing the VAT big time.

His point was that income taxes as we have it are institutionalized corruption. He made some reference to the "better" European way where the corruption is done under the table in brown envelopes.

He also said that there is too much consuming going on in this country. A good European-style VAT would reduce consumption. He left out the part where reduced consumption would mean reduced everything good in this country.

VAT isn't a fair tax either.

Submitted by MPH on Sun, 03/25/2012 - 11:29am.

There's only one fair tax.

We're all supposed to be equal under the law. We all should benefit equally from government. So we should all bear the burden equally. The only way to do that is a per person fixed fee. Everyone pays the same amount, regardless of income level or net worth, and so everyone has an incentive to encourage thrift in their representatives. If you're concerned about the poor being unable to pay, there's a simple solution for that: let them sell their vote to anyone who pays their taxes. It's only fair that if you pay more, you should have more say over who your representative is.

a head tax/poll tax will not pass political scrutiny even from

Submitted by Paarl on Sun, 03/25/2012 - 5:55pm.

conservative GOPers....there was a head tax in Rhodesia...every adult of a certain minimum wealth or educational level paid a fixed tax. Even in a country as conservative as Rhodesia this method of taxation did not go down well and was abandoned in favor of a flat percentage tax . The flat rate tax last several years until war costs in the 1970s led to a graduated tax.

Head taxes are pretty retrograde and really contrary to Lockian and Jeffersonion principles

paarl of Rhodesia

paarl

Also on "Fareed Zuckatash GFY"...

Submitted by bigdaddy on Sun, 03/25/2012 - 11:27am.

Fareed discovers....

WATER IS WET

BEARS POOP IN THE WOODS

POPE MAY BE CATHOLIC...

Stay tuned!

If I ever see a non-citizen

Submitted by poseA on Sun, 03/25/2012 - 12:00pm.

If I ever see a non-citizen progressive news correspondent on the street, I might do them bodily harm.

You'll never hear about it in the news because I'll first do a mic check complaining about the evil 1%, how oral contraception is a right, and how conservative misogyny is unacceptable.

-- As kind as possible and as unkind as necessary.

VAT is a bad idea

Submitted by CM on Sun, 03/25/2012 - 12:27pm.

It will be a disincentive for people to buy things. How does that help the economy?

“Families will get a long overdue tax break, and millions of poor will be dropped from the tax rolls altogether." -President Reagan, November 15, 1986

The 1% and the 99%

Submitted by CO2Maker on Sun, 03/25/2012 - 12:37pm.

Remember that? They still want households with the top 1% of income to pay 99% of the taxes, so everyone else can pay their fair share, 0%.

Oh, btw, did you notice that Fareed did say that a VAT--the flat tax--is very regressive compared to a progressive tax code based on "the more you make, the higher your rate" mechanism? Progressive = good; regressive = bad.

Make every able, competent income earner pay something. No exemptions. Put in your ante, get skin in the game, participate along with everyone else.

I also was shocked when I heard this early this morning...

Submitted by bigtimer on Sun, 03/25/2012 - 12:49pm.

Like they say...even a broken clock is right twice a day.

'Doubling down on stupid is not a particularly good idea'~Breitbart

Even a blind squirrel finds a

Submitted by robert108 on Sun, 03/25/2012 - 1:03pm.

Even a blind squirrel finds a nut every now and then.

Lol...

Submitted by bigtimer on Sun, 03/25/2012 - 1:15pm.

I like that much better than mine...wished I'd have thought of that.

Good one...fits him much better.

'Doubling down on stupid is not a particularly good idea'~Breitbart

I'm betting good old

Submitted by hbnolikeee on Sun, 03/25/2012 - 1:09pm.

Achmed the Terrorist just spoke to his accountant and found out what HIS FAIR SHARE is.

Achmed

hbnolikeee

Expect him to

Submitted by fivestring_assassin on Sun, 03/25/2012 - 1:24pm.

be summarily dismissed from CNN and his secret de-coder ring confiscated

A Recession is when your neighbor is out of a job. A Depression is when YOU are out of a job.. A recovery is when OBAMA is out of a job Hat tip to Ronald Reagan

A what added tax?

Submitted by CobraMan on Sun, 03/25/2012 - 1:50pm.

A "value-added tax," talk about an oxymoron! Where's the "value" in adding to the cost of anything? Somehow I just don't see retailers running a commercial that says: Our prices have jumped 10 percent, what a bargain! Or: If you find a lower price somewhere else, the government will raise the taxes to match ours!

The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States. The US Constitution

Unless you're a fetus. The US Supreme Court

Or Anwar al-Awlaki.

The 'value' is what the

Submitted by killa37 on Sun, 03/25/2012 - 2:33pm.

The 'value' is what the government gets out of it..................I don't like it either. In my world, when a job estimate/cost comes in too high, the owners and/or architects want to do a process called 'value engineering', which usually ends up being a fancy term for - what will WE do to keep what THEY want, for LESS money!!!

Wow! Is Fareed Zakaria sliding to the Right as he ages?

Submitted by Rush Fan on Sun, 03/25/2012 - 5:52pm.

I guess if Ronald Reagan can start out as a Democrat before becoming a Conservative, there is hope for Fafreed.

Among the advantages of a flatter tax is that it would save billions in tax preparation, as well as the enormous costs associated with IRS tax collection and enforcement.

But the VAT is fraught with potential fraud and hidden taxes. Steve Forbes describes VAT as: "It's a way of taxing consumers without telling them they're being taxed."

Curtis S. Dubay at The Heritage Foundation in an article titled Value-Added Tax: No Easy Fix for the Deficit contends that "Fraud persists with the VAT despite the theoretical advantages," and outlines the four major forms of fraud.

Still Fareed Zakaria is pointed in the right direction. However, once the Obama administration views the CNN transcripts, I would expect his relationship as an adviser to Obama would be strained or severed.

C-SPAN VIDEO Mark Levin: Ameritopia: The Unmaking of America

It's not just the simple

Submitted by big.league.slider on Sun, 03/25/2012 - 10:19pm.

It's not just the simple income tax burden disparity that is problematic, we also need to consider the disparity in benefits paid out. If the tax burden on higher income brackets is added to the net benefits paid out to those in low income brackets, the disparity becomes much more skewed . For example, if the value of federal benefits is added to income, the percentage of those in the top income brackets becomes becomes even smaller.

Musta just got his tax return done - whata shocker !

Submitted by snowwwizard on Sun, 03/25/2012 - 11:29pm.

Ol' Fareed probably got a raise last year and is just findin' out how much tax he's gotta give up to his leaders ....... LOL !!

Two Sides

Submitted by bmacdmac on Sun, 03/25/2012 - 11:47pm.

I lived under the VAT for five years and didn't like it. Every store was the same price for everything, very very high! Now the bright side, why compare, if Tim's had it for $39.45 so did Ed's. I actually went to London to buy a turntable, it was $844 vs $234 vs $595 in the States. Little things like smokes were $1.xx here (US) while they were $5.4x there. I was never so happy to leave any place in my life, where I had choices.