February 18, 2005 Unless The People Rise Up, Here's What's Coming: Federal Consumption Taxes PLUS The Income Tax http://www.givemeliberty.org/RTPLawsuit/Update2005-02-18.htm Conflicts of Interest Apparent In President's Tax Panel Panel Focused on Economic “Modeling” NO Voice For The Constitution Presidents Bush's Advisory Panel on Federal Tax Reform held their first public meeting in Washington on Wednesday. At that meeting, the first witnesses appearing before the panel put forth facts and professional opinions to establish the framework the panel will build upon as it moves toward its recommendations this coming July. The panel's discussion focused extensively on econometric “modeling,” the rapidly growing federal revenue requirements and technical factors affecting the efficiency of tax administration and enforcement. Despite the full-page ads placed by this Foundation this week in the Washington Times, and information packages sent by the Foundation to each individual panel member, NO discussion took place regarding the impacts of the panel's recommendations on the protection of the rights of People or the Constitutional limitations that explicitly bind the taxing authority of Congress. If the projections arising out of the financial “Perfect Storm” depicted by the panel regarding the need for greatly increased federal revenues are accurate, and if the President and Congress adopt the reforms apparently already emerging from the panel, the People will soon experience a new, and never-before-seen condition of economic slavery, openly achieved through the tax "laws" of this nation. Although the panel's work has allegedly only begun, it is likely, based on the positions and information offered at this meeting, that the future life for Americans appears to now include not only taxes on wages and salaries, but NEW federal consumption taxes on the products that are purchased with what remains of their paychecks, in order to fund the desires of those at the public trough, those that serve them, and those that extend credit to them. One panel member, Elizabeth Garrett, a professor at the University of Southern California, while commenting on the fact that corporate income taxes have dropped to about 10% of federal revenues said, "That’s good. Let’s not tax the corporations, let’s tax the workers who get their money from the corporations.” The balance of this article contains a short chronology of events leading to yesterday's public meeting and the comments of WTP Chairman Bob Schulz, who attended the 3-hour session. Chronology President Bush announced he is making tax reform a key priority of his second term. On January 7, 2005, by Executive Order, the President created an Advisory Panel on Federal Tax Reform, naming nine members to the panel: Connie Mack III (Chairman), Senior Advisor, Shaw Pittman LLP and former U.S. Senator. Senator Mack served as Chairman of the Joint Economic Committee and was a member of the Finance and Banking committees. John Breaux (Vice-Chairman), former U.S. Senator. Senator Breaux served on the Finance Committee and the sub-committee on Taxation and IRS Oversight. William Eldridge Frenzel, former Member of the U.S. House of Representatives. Mr. Frenzel served on the Budget Committee and the Ways and Means Committee. Mr. Frenzel is a Guest Scholar at the Brookings Institution. Elizabeth Garrett, Sydney M. Irmas Professor of Public Interest Law, Legal Ethics and Political Science, University of Southern California. Ms. Garrett served as Legislative Director and Tax and Budget Counsel to former U.S. Senator David L. Boren. Edward P. Lazear, Senior Fellow, Hoover Institution and Professor of Human Resources, Management and Economics, Stanford University's Graduate School of Business. Mr. Lazear is the founding editor of the Journal of Labor Economics. Timothy J. Muris, Foundation Professor, George Mason School of Law and Of Counsel, O'Melveny & Myers LLP. Mr. Muris served as Chairman of the Federal Trade Commission from 2001 to 2004. James Michael Poterba, Department of Economics, Massachusetts Institute of Technology. Mr. Poterba serves as Associate Department Head. He has taught at MIT since 1982. Charles O. Rossotti, Senior Advisor, The Carlyle Group. Mr. Rossotti served from 1997 to 2002 as Commissioner of Internal Revenue. He formerly served as the President, Chief Executive Officer and Chairman of the Board of American Management Systems. Liz Ann Sonders, Chief Investment Strategist, Charles Schwab. Ms. Sonders joined U.S. Trust, a division of Charles Schwab, in 1999 as a Managing Director and member of its Investment Policy Committees. On January 31, 2005, Connie Mack III, the Chairman of the Tax Reform Panel announced that the Panel will seek input from individuals, businesses, associations, organizations and members of Congress and will hold its first meeting in Washington DC on February 16, 2005. On Monday, February 14, 2005, each member of the Panel received written input from the We The People Foundation for Constitutional Education, including a request for answers to 43 specific questions regarding the constitutional and statutory authority behind the current direct, non-apportioned tax on labor. The Foundation advised the Panel members that there can be no meaningful reform until the government answers those fundamental questions. The Panel members were respectfully asked to let the Foundation know if they intended to answer the questions. They were further advised that Bob Schulz, the Chairman of the Foundation, would be attending meeting on the 16th, and wished to receive a note regarding the Panel’s intent to answer the questions. The Panel members were advised that Bob would be identifiable because he would be carrying a placard with the words “No Answers, No Taxes.” On Tuesday, February 15, 2005, the Washington Times Daily edition ran our Open Letter To The President’s Advisory Panel on Federal Tax Reform, a full-page message to the Panel. On Tuesday, February 15, 2005, Washington Times subscribers located all around the country, began to receive this week’s edition of the National Weekly Edition of the Washington Times, which also included our full-page “Open Letter” to the tax reform panel. On Wednesday, February 16, 2005, the Panel met in Washington DC to obtain input from four witnesses: Fred T. Goldberg, Jr., Attorney and partner at Skadden, Arps, Slate, Meagher & Flom, LLP in Washington, DC. He first joined Skadden, Arps in 1986, following two years as Chief Counsel of the Internal Revenue Service. Previously, Mr. Goldberg served as Commissioner of the IRS and Assistant Secretary of the Treasury for Tax Policy. Mr. Goldberg received his B.A. and his J.D. from Yale University. Louis Kaplow is currently the Finn M.W. Caspersen and Household International Professor of Law and Economics at Harvard Law School. Dr. Kaplow received his B.A. from Northwestern University, his J.D. from Harvard Law School and his M.A. and Ph.D. in Economics from Harvard University. William G. Gale is the Arjay and Frances Fearing Miller Chair at The Brookings Institution and the Co-director of the Urban-Brookings Tax Policy Center. From 1991-1992, Dr. Gale served as Senior Staff Economist at the President's Council of Economic Advisers. Previously, Dr. Gale was Assistant Professor of Economics at the University of California, Los Angeles. Dr. Gale received his B.A. from Duke University and his Ph.D. from Stanford University. Stephen J. Entin is currently President and Executive Director at the Institute for Research on the Economics of Taxation. Mr. Entin is a former Deputy Assistant Secretary for Economic Policy at the Department of the Treasury. Prior to joining Treasury, Mr. Entin was a staff economist with the Joint Economic Committee of the Congress. Mr. Entin is a graduate of Dartmouth College and received his graduate training in economics at the University of Chicago, majoring in macroeconomics, monetary policy, and international economics. The 3 hour and 9 minute program was covered by the print and broadcast media and was taped by C-SPAN, which aired the program on February 17th. A copy of the C-SPAN tape/dvd can be ordered on-line from C-SPAN at www.C-SPAN.org for $105.00 (Program ID 185571-1). Schulz's Observations Bob Schulz attended the meeting. The following are Bob’s observations: The Panel is apparently not being guided by the limitations of the taxing clauses of the Constitution as it considers substantive changes to the federal tax system. The Panel is showing no interest in looking into the fundamental questions about the constitutionality of the operation and enforcement of the current direct, non-apportioned tax on labor, questions that have been respectfully submitted to every member of Congress, and to the President and other top officials of the this and the former Administration, including Treasury Secretary Snow and Commissioners Rossotti and Everson. Conflicts of interest may not have been considered. For instance, the key witness at the meeting was Fred Goldberg, a partner at Skadden, Arps, Slate, Meagher & Flom. Skadden, Arps (www.Skadden.com) is one of the largest law firms in America with 1750 attorneys in nine U.S. offices. They run substantial and lucrative tax litigation and trust-estate practices, giving it a significant vested interest in the status quo – i.e., retaining the current income tax system. According to a New York Lawyer article from 2003, Skadden equity partners averaged approximately $1.6 million each in profit sharing. Another panel member with a readily apparent conflict of interest is Charles Rossotti, the former IRS Commissioner who received a full pardon from President Clinton for his allegedly criminal acts related to his direct conflicts of interest as IRS Commissioner that arose from his financial interest and selection of Rossotti-owned American Management Systems (AMS), which was selected as the primary vendor to re-model the IRS’s computerized data management and enforcement information systems. To the extent Rossotti maintains a personal financial interest in the entities that now maintain the IRS’s current income tax computer system (or the vast array of other government and state tax related contracts related to his interests), Rossotti would not want to see the IRS abandon the current income tax system. According to government watchdog group Judicial Watch, Rossotti's wife was also a major shareholder in AMS at the time Rossotti was Commissioner and prior to its sale to two outside technology firms, (CGI and CACI) for a total of approximately $1.2 billion. Rossotti is now a consultant to the Carlyle group which has strong ties to the Bush administration. Each of the Panel’s witnesses gave a PowerPoint presentation and then answered questions from the Panel members. Only copies of Mr. Goldberg’s testimony were made available to the audience. Mr. Goldberg (of Skadden) was the star witness and appears to have been paid by the Treasury Department to prepare his testimony. Hundreds of copies of Mr. Goldberg’s sixty-nine page presentation were handed out to the audience by Treasury Department employees. (RIGHT-Click to download the presentation, 1.5 MB, .pdf format) The presentations by Messrs. Kaplow, Gale and Entin focused on central concepts related to both “Income” and “Consumption” taxation. These presentations were more “nuts and bolts” oriented than was the presentation by Mr. Goldberg, and discussed the results of economic surveys and theoretical modeling. The most telling part of the meeting came during the lengthy Q & A sessions that followed each presentation. Based on the questions from the Panel members and the responses from the witnesses, the Panel appears headed toward a recommendation to the President that a much broader based consumption tax be added to the current mix of federal taxes, including the current (and unconstitutional) direct, non-apportioned taxes on labor. The Panel appears headed toward a recommendation that the current income tax be made more efficient, in terms of enforcement and loopholes, but that a federal consumption tax, like those already in place on every gallon of gasoline, pack of cigarettes and bottle of alcohol, be added to most of the other goods and services that individuals and corporations routinely purchase. Mr. Goldberg made it very clear that the federal government must raise more revenue and do it soon, because the “Perfect [financial] Storm” is taking shape. He pointed out that federal expenditures are approaching 28% of the Gross Domestic Product with entitlements (money transferred from those who earn it to those who do not) and interest on the national debt as principal factors. When the Chairman of the Panel asked Mr. Goldberg if he thought it would be possible to move entirely to a new consumption tax and scrap the existing system, Goldberg replied, “Impossible. It would be a waste of time to even consider it.” Some of the Q&A focused on existing and anticipated problems associated with compliance and enforcement of the existing income tax and a broader based consumption tax. Panel member Elizabeth Garrett appeared to have at least one personal preference -- taxing workers rather than corporations. In commenting on the fact that corporate income taxes have dropped to about 10% of federal revenues she said, “That’s good. Let’s not tax the corporations, let’s tax the workers who get their money from the corporations.” (Click to read Garrett's opening speech.) Panel member Rossotti, the former IRS Commissioner, appeared disinterested in, or unable to comprehend the fine points of the presentations. However, he gave a clear signal as to what he favors. One of the witnesses (not Goldberg) said one of the options is not to adopt a new consumption tax but to continue to rely on the current income tax, making it more efficient. At that point, Rossotti leaned back in his chair and moved his head up and down as if to say, “Yes. Yes.” With placard in hand, Bob arrived outside the main entrance of the Reagan Building at 8:30 am. Bob and his sign were on hand for the duration of the meeting. No representative from the Panel approached Bob to let him know whether the Panel intended to answer the Foundation’s questions. “More revenue is urgently needed by the self-anointed ruling class of intellectual, political and financial elite to support a behemoth, out of control central government with its addiction to money, power, control and social engineering here at home and imperialism abroad,” said Schulz. “Unless the working men and women of America find their voice in the next few months and take serious offense over the government’s breach of our most fundamental legal and moral codes, the yoke of involuntary servitude will be tightened.” The next public meeting of the tax advisory panel is scheduled for March 3, 2005 in Washington. WTP intends to continue its campaign to put forth provocative educational messages to force public discussion of the Constitutional issues related to the income tax fraud and any proposed tax reform. Get Color Reprints & Run The Ad In Your Local Paper Several individuals have already contacted WTP so that they can run the recent full-page WTP ad in their local papers. The ad is pictured just below. RIGHT-click here to download the readable version. The most cost effective way to run the ad is to call your local paper and obtain a price quote for a non-profit, tax-exempt ad. If you donate the funds to the 501(c)3 WTP Foundation (tax deductible!) WTP will contract with the paper to run the ad and work with the paper to get them the correct electronic format. One paper in Wyoming already ran the ad this week for about $600 . Others are being scheduled. We have also ordered thousands of full-size color reprints so that you can distribute them at your local freedom events or in your neighborhoods, etc. We are making these available for a $30 donation for a bundle of 100. This includes USPS shipping (media rate). Click here to go to the WTP on-line store to order a bundle or three. You can also order the reprints by mail using cash, check or money order: We The People Foundation 2458 Ridge Road Queensbury, NY 12804 Click here to access selected pages of the "Press Information" kit containing the opening statements of the tax panel's Chairman and Vice-Chairman. (272 KB, .pdf) (RIGHT-Click to download the presentation, 1.5 MB, .pdf format) Click Here to help WTP continue its ongoing campaign of provocative educational messages to expose the income tax fraud and to insure that any tax reform proposals are fully Constitutional. Please consider making a one-time OR monthly tax-deductible donation and help us pay the costs of bringing these crucial messages to the attention the media, our government officials and the members of the tax reform panel. Our Sincerest Thanks. All donations to the 501(c)3 tax-exempt Foundation are tax deductible. Click here to access the special link contained in last week's full-page Washington Times ads. The link contains copies of the ad and copies of the information packets WTP sent to every tax panel member. Click Here to read the Second Circuit's recent decision in Schulz v. IRS where it tells IRS, "No Court Order, NO Enforcement."