Posted on 02/20/2006 3:30:35 PM PST by Bigun
Written by Jan Larson
Sunday, February 19, 2006
The Internal Revenue Service reported [1] last week that $345 billion (not a misprint) in taxes owed for 2001 has not been collected. Not to worry, the report also indicates that IRS enforcement efforts will recover approximately $55 billion of this “tax gap.” Bully for the IRS.
Even if the IRS is successful in recovering the amounts they seek, there is simply no way that a $290 billion shortfall can be justified regardless of how it is spun. There are several reasons why taxes rightfully owed are not collected. Many taxpayers underreport income and/or claim undeserved deductions. In other words, a lot of people cheat on their taxes. Is anyone surprised?
Another factor that significantly affects tax compliance is the complexity of the tax code. According to a report [2] from the Americans For Fair Taxation [3], the federal tax code, rules and IRS rulings comprise more than 60,000 pages. While complexity undoubtedly leads to some paying more than they rightfully owe, that complexity also results in billions in unpaid taxes.
The report also indicates that individuals and businesses spent over six billion hours at an estimated cost of $265 billion dollars attempting to comply with the maze of tax rules and regulations. This is equivalent to a workforce of over 2.8 million people spending the entire year doing nothing but tax compliance.
To cover the uncollected taxes, the 130 million U. S. taxpayers are effectively subsidizing the tax cheats to the tune of over $2600 each. In other words, if the cheaters were prevented from cheating, the average taxpayer would see reduction in his or her tax bite by over 30%.
If the tax gap and compliance costs were in and of themselves not sufficient reason to scrap the tax code, the tax code also hurts the U. S. in other ways. The income and payroll taxes ostensibly paid by businesses (but are in fact simply passed along to consumers) make U. S. products less competitive on world markets. This leads to job losses in the U. S. and, as we also saw last week, record trade deficits. The complexity of the tax code also enables politicians to reward and punish via the tax code. This is probably the single worst aspect of the U. S. tax system.
The sheer lunacy of a tax system that fails to collect billions owed, enables political manipulation, hurts the economy and in general works against the taxpaying public is astounding.
There is a solution however. It is a solution that would eliminate individual compliance requirements and make April 15 just another day. This solution would greatly reduce business compliance costs and similarly reduce the size and scope of the IRS. This solution would lead to job growth and economic expansion. This solution would eliminate most of the opportunities for tax cheats and political manipulation. The solution? The Fair Tax.
The Fair Tax would eliminate all income and payroll taxes and would replace them with a national sales tax paid on the retail purchases of new goods and services. The Fair Tax protects low-income individuals and families by rebating taxes paid up to the poverty level.
The first reaction by many people to the idea of a national sales tax is that prices of goods and service would go through the roof. Under the Fair Tax, this is not the case. Consumers are already paying for the corporate income and payroll taxes embedded in the price of virtually all goods and services. It is estimated that these embedded taxes average approximately 22% of the retail price of goods and services. Make no mistake; you are paying these hidden taxes.
Under the Fair Tax individuals would incur no compliance costs and businesses would remit Fair Tax receipts similarly to the way state sales taxes are remitted today. No more armies of lawyers and accountants to figure out IRS regulations. The IRS (or some similar agency) would need to ensure compliance from just the approximately 25 million businesses instead of 155 million businesses and individuals, as is the case today.
Maybe most importantly, the Fair Tax would eliminate the patently unfair manipulations of the tax code that Congress uses to hand out favors to wealthy constituents and lobbyists. The elimination of the incentive and ability to tinker with the tax code would go much farther toward making members of Congress more “ethical” than any other type of reform.
The Fair Tax has been introduced in both the House (H. R. 25) and Senate (S. 25). The House version already has 48 cosponsors. The Americans for Fair Taxation estimate that it would require just 3000 active supporters in each congressional district to make the Fair Tax a reality. Each of the 435 districts represents approximately 300,000 taxpayers. That means that if just one percent of taxpayers became vocal supporters of the Fair Tax and took the time to write and/or call their representatives in Washington, the Fair Tax could become law.
The Fair Tax would be the most significant tax reform since the Boston Tea Party. Don’t leave this reform to others. Take a few minutes to let those in Washington know that the time for the Fair Tax is now. Think about that as you pore over your 1040 this year.
[1] http://www.irs.gov/newsroom/article/0,,id=154496,00.html
[2] http://www.fairtax.org/pdfs/Tax_compliance_facts.pdf
About the Writer: Jan A. Larson is currently employed in private industry in Texas. He holds a bachelor of science degree from the University of Nebraska, a master of science degree from the University of Kansas, and an MBA from Colorado State University. jan@pieofknowledge.com.
And the most prices can drop in your example is the amount of the ACTUAL TAX PAID, right?
And the amount received by the government in tax revenue is the amount of ACTUAL TAX PAID, right?
And the "cascading" raises the prices by EXACTLY the amount of the ACTUAL TAX PAID, right?
So where does your example show prices rising MORE than the amount of ACTUAL TAX PAID, all of which is replaced by the FairTax ...
... or is that too complex for you to follow?
Oh, but my example does illustrate something real - exactly what I claimed ... the mechanism of cascading taxes and how they get embedded into prices.
The numbers you pull out of published data are just that - numbers and illustrate nothing about how price increases due to taxation works. You "draw your conclusions looking at your real numbers" without understanding their significange or how they work and interact to boost prices. You even refuse to look at your Nightie-sidekick's handiwork (which surely needs it) and that's an illustration of how helpful your "numbers" are ... not at all.
You merely look at "your numbers" (and of course they're not yours at all but taxpayer-funded and so are equally as much mine) and then guess what you think they might mean - with no real basis for doing so - while I prefer to see the mechanism by which taxes build and cascade and become embedded into prices.
I'll leave the numbers determination to some real economists rather that some jack-leg amateur that is narcissisticaly overwhelmed with his own ego and self-importance and demands to tell everyone else what the should think. BS.
Your patience is admirable! In fact it is BEYOND admirable but I must tell you that it has become quite obvious that you are wasting your time trying to explain something that is apparently two or three orders of magnitude over the heads of the dufi you are engaging here!
And that would still be a lot more than you, Dimp-Dimp.
My example illustrates exactly what I claimed and whether you like it or not the mechanism is as stated. I've always told you the numbers were not the meaningful thing in the example but you've never been willing to accept that always instead pretending that I have somehow errer or lied or misled because I wouldn't play your "numbers" game. I've done none of that Dimp-Dimp. What's your excuse??
You seem to think the world is made of nothing but numbers and by claiming others have to use "your numbers" as you do or else be wrong, a liar, or both is preposterous nonsense.
Ever find an authoritative source to corroborate your discovery? ANYONE?
No doubt, with such an important discovery, the AFT would be breaking down your door to publish you and finally "seal the deal" on price behavior in the economy. Why, you'd be hailed as the great economic savior!
Don't ya ever think that if you were really on to something here, that someone, SOMEONE, after SIX years of unveiling your discovery and analysis here of Free Republic, that SOMEONE in the world of economics, taxes, taxreform, accounting, business, heck even the world if Excel, might have taken notice? SOMEONE?
Don't ya think that after all this time, you (or SOMEONE) would have been able to find at least ONE reference to "the mechanism" in a published, authoritative source? JUST ONE???
Why gee, Dimp-Dimp - yes, I think I understand what you have claimed since your implication leaves no doubt that I am a liar, cheat, fraud, etc.
There's only one thing wrong - and it stems from the fact that you do not and never have understood the example or what it shows.
In fact all 5 of your charges are incorrect in one or more particulars but having already said I'll not waste more time trying to educate you I'll not do so. You'll have to live with you misunderstandings until the FairTax becomes law ... and even then I'll doubt you'll grasp what's involved. It's certain you don't now.
This post clearly indicates you haven't grasped the educational material (or, more likely, don't wish to). Go right on with your anti-FairTax agenda since I think most readers will grasp what you're up to.
I don't know what sort of life's work you do but it surely must not be economics. Are you, perchance, just a professional complainer?
How could that possibley be Dimp-Dimp since such an economic/statistical giant as you cannot grasp what is involved???
I think there are a LOT of common people like me who understand what's involved better that you pretend to.
Whether it's over their heads or not (and probably it is since after 6 years Dimp-Dimp still hasn't a clue but keeps trying the derision tactic), but I'm not going to continue the wasted time.
I've heard form a number of people who DO understand what is being said.
... the numbers prove you wrong!
Not even your OWN example has one cent of "hidden tax cost" over and above the ACTUAL TAX PAID. Every time you're asked to show how much the "cascading" increases the price over and above the ACTUAL TAX PAID, you punt and run for the shower.
Profit at every level is NEW MONEY entering the pricing structure, never taxed before, and never taxed again. The input cost is NEVER multiplied by ANY amount to determine the tax, only the PROFIT determines the tax.
That's why, even in YOUR example, the amount of price attributable to tax effects is EXACTLY the amount of ACTUAL TAX PAID on ONLY the PROFITS earned throughout the chain. There's not a cent of "hidden tax", "artificially inflated price" or any other effect.
If there were, you'd have shown us how much it was by now.
I think there are a LOT of common people like me who understand what's involved ...... and they'd be just as wrong as you are.
The question is really not where the money in "hidden taxes" goes since it is not a tax at all, but where it comes from ... it comes from the consumer in the form of unnecessarily higher pricesYou especially wouln't want to answer where the phantom money goes, since it doesn't exist anywhere but in your mind. But, simple business accounting needs to know where the money goes.You would know what simple means if it wasn't about ten levels above your capabilities?
"Unnecessarily higher prices" that you won't (actually can't) account for...anywhere. "Unnecessarily higher prices" that don't affect profits or taxes. Because the higher price is unnecessary so too must be the money that's collected from them?
You Fairies are always worried about what the lurkers read...YOU should be especially worried.
If you want to know why the Fairtax is failing, look in a mirror, all of you Fairies.
Your patience is admirable! In fact it is BEYOND admirable but I must tell you that it has become quite obvious that you are wasting your time trying to explain something that is apparently two or three orders of magnitude over the heads of the dufi you are engaging here!LOL! You see what piggy sees, too! That is just too funny.
Who, besides YOU, on this planet, sees what you see in your magical, mystical spreadsheet? ANYONE?Evidently, Bigun sees it too!
"To be ignorant of one's ignorance is the malady of the ignorant."
LOL! You see what piggy sees, too! That is just too funny.pigdog's and now Bigun's secret/hidden tax that really isn't a tax at all but a mechanism to unnecessarily raise prices to consumers (conspiracy?) for no advantage that even thay can't describe or account for is really a phenomenon that only "special" people can see...They know it's there, YOU just can't see it.
Actually, Looey, even YOU should be able to understand what's said in #323.
NOTHING!
But, then that is the answer isn't it? Your "cascading" doesn't increase prices any more than the ACTUAL TAX PAID does it? All that spewing you've done about "hidden taxes" that are not actual taxes, but inflate prices more than the actual taxes do is, well, BUNK.
You claim it's there, you just can't figure out how to show anyone how big the effect is ... because the effect is NONEXISTENT.
You want us to consider costs other than the ACTUAL TAX and compliance cost PAID? Then show us that ANY such costs exist! So far, you've not shown a PENNY of cost in ANY example that is not ACTUAL TAX PAID, ACTUAL PROFIT, or ACTUAL BUSINESS COST; not a penny!
If these costs are so egregious, how hard could it be to show how much they are in SOME example?
So far, YOUR example has 33.88% of price as ACTUAL TAX PAID on 98.5% ACTUAL PROFIT and 1.5% ACTUAL COST (where's the "hidden tax" cost?) HINT: there is none.
In Your Nightmare's example we've got 4.76% of price as ACTUAL TAX PAID on 6.4% ACTUAL PROFIT, and 93.6% ACTUAL COST (where's the "hidden tax" cost?) HINT: there is none.
Your claim that taxes do not cause raising of prices is, I say again, more "preposterous nonsense".Again, you can't seem to get it right: I have always maintained that taxes raise prices by NO MORE than the ACTUAL TAX and compliance cost PAID!
You're the one who keeps shopping this fictitious "Prices go up more than the taxes" nonsense thorough the fictitious "cascading" mechanism that "artificially inflates prices" beyond the amount of the actual taxes. PROVE IT. Show us ANY additional cost in ANY example that is not ACTUAL TAX PAID, ACTUAL PROFIT, or ACTUAL BUSINESS COST.
Go ahead. Show us SOMETHING greater than ZERO.
We're all still waiting ...
Of course you have! It is plainly there for ANYONE who WANTS to see it!
Of course, it is sufficiently complex that the demagogues can and will do their thing as the LONG term evidence on this board bears more than sufficient witness to.
Actually Looie most SANE people see it readily! In fact, there is little argument about it anywhere other that here and there only because it serves the purpose of those like YOU who only wish to muddy the water!
Do as you wish but you really should save your money and buy some reading comprehension classes for yourself and a few others on this board!
I'll venture a guess that I am as well read on the subject as anyone on your side and EVERY microeconomics textbook I have ever seen says that ALL costs must be both accounted for and recovered if one wishes to stay in business for very long!
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