Posted on 09/28/2005 12:14:25 PM PDT by hripka
1. Prices of old and new homes are the same. Meaning that old homes will have a 'FairTax' premium built into the price. This is the ultimate VIRTUAL 'embedded tax', OR
2. New homes are 23% higher than old homes. This kills the new home construction industry. (Personally I believe the rate would be MUCH higher).
And your opinion as which of these two scenarios is correct is . . . ?
My 30% 'inclusive' rate estimate is based on TWO-THIRDS of our 12.5 billion GDP, which is the proportion of CONSUMER spending. And remember, this 30% rate 'inclusive' rate does NOT factor in the COST of the so-called 'prebate', so the 30% sales tax rate would be Much higher.
A Comment on the 'FairTax' book, pg. 149: By having the solvency of the Social Security/Medicare system determine the 'FairTax' rate, the 'FairTax' is guaranteeing increases. I know, the limited scope of Boortz's book prevents looking at spending.
May I repeat: we haven't even yet tried to get rid of withholding!
I would say that it is easier to evade a sales tax than a W-2 based income tax.
What could be easier than to just not report cash income?
You are aware that those who are inclined to evade an income tax need only do their transactions in cash and rely on hiding out behind 120million or so taxfilers swamping the system. W2's are entirely irrelavent in the small service business bent of evading under any kind of income tax.
Also, since the 'FairTax' concentrates so much in one Massive Sales/Use tax, the incentive to cheat/smuggle will be huge, much bigger than the current, burdensome, income tax.
Not and make a living at it. To make a living requires many customers and visibility inorder to maintain market sales. Many more potential witnesses to sales activities and paper-trail in the form of issued receipts as evidence of sales, backup up by a concentration of resources into one tenth as many tax reporting entities to oversee.
If one does not issue such receipts to their customers that becomes a clear indication of illegal trade to any with whom such a business would deal with. A high risk enterprise indeed as receipts not only please customers, they are required under the FairTax legislation.
High risk of detection with potential returns of less than 23% of sales provides substantial disincentives to any more than marginal amount of tax evasion. The average service sector business under an income tax has much greater opportunity to escape detection and evade successfully for potentially more gain due to the high marginal tax rates on such endeavors which is why they are the primary evaders under the current income/payroll tax system.
Concentrating all of the government's revenue into one source drives up that ONE rate which encourages evasion, and in this case smuggling.
1. Prices of old and new homes are the same. Meaning that old homes will have a 'FairTax' premium built into the price. This is the ultimate VIRTUAL 'embedded tax', OR
Virtual embedded tax paid to whom? Taxes are paid to governments not the owners of property selling in open markets.
I can handle receiving 23% more for my home to recover past tax payments against a competitors sale of a new home.
I have no problem with that at all.
If so, how else would you explain the similarity in price?
Are you telling me that Section 903 still REQUIRES employers to collect wage information and send it along to the Social Security Administration DESPITE the passage of a 'FairTax' and DESPITE the elimination of the Income Tax?? Now why would that be????
You do want your Social Security benefits due you do you not?
By having the solvency of the Social Security/Medicare system determine the 'FairTax' rate, the 'FairTax' is guaranteeing increases.
The FairTax only funds on the basis of current tax revenues for SS/Medicare and does nothing to resolve the solvency problem of SS/Medicare. Solvency is for SS/Medicare reform and left to another bill to address not the FairTax legislation.
OTOH, We could however go ahead and incorporate both as some have suggested and take care of the problem from the git-go. Which is the ideal situation.
In fact the method suggested there, I can heartily endorse and go along with. Much better than merely funding the same amounts that current law requires. Get it all under control.
May I repeat: we haven't even yet tried to get rid of withholding!
Ahhm, may I repeat" the FairTax legislation is designed to get rid of tax witholding, so yes we are in the process of trying regardless of any assertion of your's to the contrary.
If you are saying that home prices will be the same, for both taxable new construction and for tax-free 'used' homes, then you are saying that the 'used' homes have a premium built into the price.
You figure that home owners are not going to try to sell for what the market provide.
While not a tax, this premium drives up (or prevents from falling) the price of existing homes.
So?
Anytime there is a differential to be arbitraged out in the market it will be. The newhome falls in price as buyers turn to better value in olderhomes. The prices trend towards each other removing any differential for same perceived quality. That is true under the current system as much as under a retail tax system.
Today embedded taxes on business are incorporated into pricing and not separately stated is all that is really different, under a retail sales tax system the tax is made visible at point of sale. Any premium existing over newhome producer price, is to the benefit of the homeowner selling his property, I see no problem with that at all.
If so, how else would you explain the similarity in price?
Why should I explain further, wherein lay any problem?
Prices for assets of perceived equal quality command similar prices that just supply/demand. If I pass consumption tax onto the next consumer and am able to recover that amount representing the tax on what I have not consumed but the next buyer will, where's the beef? Why should the first buyer get stuck with tax on what he does not consume but another does? To not recover the differential is patently silly where market economics automatically provides the proper equilization.
How about not reporting a cash sale?
Take the case of the house painter who makes 10% profit from his list prices. He agrees to paint your house for $1000 (plus $300 sales tax). The house painter says that for an additional $500 cash (tax free) he'll paint your detached garage to match (his list price would have been $462 + tax). But, if you want the garage itemized separately on the receipt, or you want to pay by check, he'll have to charge you $600 (tax included)
You agree to the cash deal, get your house and garage painted for $1800, the painter pockets $184 and remits $300 sales tax for the $1000 "on the books" sale.
If you had paid by check, it would have cost you $1900, the painter would have pocketed $146 and remitted $438 in taxes.
By going "off the books," you save 5% ($100), the painter makes an additional 26% ($38) and the gov't takes in almost 32% less in tax revenue ($138).
And the painter is unlikely to be caught since he has proof of a legitimate sale on which he paid the full tax (the $1000 paint job).
Creative people will find creative ways of avoiding the tax ... and make a better living while doing it.
You describe this as "recovery" of tax previously paid. It sounds more to me like the dreaded "embedded tax cost" monster I hear you and other FairTax supporters drone on and on about. You appear to be advocating building the cost of the tax into the cost of the non-taxable product ... talk about "hidden costs"!!! I thought eliminating such hidden embedded tax cost burdens was a central theme of the FairTax !!!
I meant to ping you on posts 389 and 390 above ...
What could be easier than to just not report cash income?
How about not reporting a cash sale?
With all your customer's bearing receipts, any one of which could be used as evidence of a sale not reported? Your competitors, unhappy customers, ex-whatever, or just plain sales tax administrators checking up on your business are all that is required and one tenth of the number or reporting entitites to hide out behind.
In an income tax situation, there is but one required to file, one that cares, and ten times the filers to get lost behind.
Take the case of the house painter who makes 10% profit from his list prices. He agrees to paint your house for $1000 (plus $300 sales tax). The house painter says that for an additional $500 cash (tax free) he'll paint your detached garage to match (his list price would have been $462 + tax). But, if you want the garage itemized separately on the receipt, or you want to pay by check, he'll have to charge you $600 (tax included)
You agree to the cash deal, get your house and garage painted for $1800, the painter pockets $184 and remits $300 sales tax for the $1000 "on the books" sale.
I'm not about to deal with said painter for two reasons.
1) making good any errors he might make, if he skips out on the government, guaranteed he is just as inclined to disappear when I have a complaint.
2) I'm not interested in being drawn into a situation where I could be held to account as well.
I've passed up such "deals" in the past and guaranteed I shall pass them up in the future.
And the painter is unlikely to be caught since he has proof of a legitimate sale on which he paid the full tax (the $1000 paint job).
Except I and any other "customer" are aware of the deals and under pressure would definitely squeal rather than take on his liability to remit the tax.
Creative people will find creative ways of avoiding the tax ... and make a better living while doing it.
And sooner or later get caught up in it by dealing with a wrong "customer".
Today, the majority of actual evasion occurs on just the level you describe. Even should it persist as it probably would, it would be a greater risks for similar rewards (cost of materials is usually neglegible against the charges of labor hence a high gain to be made in income/payroll tax marginal case where cheating is the most prevalent as well.)
All you have stated is what already happens at lower risk today. There is no reason to believe an increase in such activity will occur as it is that seller (i.e. nominal business) that holds the greatest liability, turning states evidence on such a dealer presents little risk to the customer/witness and great risk to the perp under a sales tax regime.
Face it. With the prostitute, anyway, you are buying a used product.
Which raises a question. When someone hires me as a consultant, they hire me to use my brain. It has been used before, hired out for that purpose. Does that make my consulting fees exempt?
Which raises a question. When someone hires me as a consultant, they hire me to use my brain. It has been used before, hired out for that purpose. Does that make my consulting fees exempt?
Definition of "used property" in the legislation is that the tax has previously been collected or expressly grandfathered under the legislation as having been held for other than business purpose prior to implementation of the statute.
Most consulting fees are for a service rendered, not for the aquisition and ownership of a brain however extensively excercised it may be. Of course if it is being sold for possession that may may explain why so many of the consultants I have had to deal with seemed to have little brain left.
They would not survive long in the oil industry, then...
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
They would not survive long in the oil industry, then...
The one's selling off pieces of brain rather than merely selling their services don't survive long in any industry, or anywhere else for that matter.
OTOH, a consultant that doesn't bother to investigate the particulars of that which he spouts off about doesn't survive long either.
H.R.25Fair Tax Act of 2005 (Introduced in House)
`SEC. 2. DEFINITIONS.`(a) In General- For purposes of this subtitle--
|
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.