Posted on 04/15/2008 11:54:07 AM PDT by Man50D
I was very careful to not claim all embedded taxes would be removed. Employees still get their gross checks which leaves some embedded tax. However, removing corporate income tax, employers share of SS and the associated compliance costs will result in major cost savings. I trust the free market to reduce prices in response to lower costs in a competitive market.
Of course "X" excludes food and energy price increases.
And, of course, X is adjusted periodically, as is any index related to the cost of living. And the adjustment lags behind any change in prices. So how does this make the FairTax refund adjustment inferior to any other cost of living adjustment?
You are expecting perfection in a replacement for the income tax, for crying out loud. Please tell us, with all its perceived imperfections, how the FairTax is inferior to the our present income tax.
To claim major cost savings by eliminating corporate income tax when 61% of US corporations pay no income tax now is pure fantasy.
Likewise, to figure that the employee will receive their gross pay after the FairTax, particularly when employers are treated differently under the FairTax is also wishful thinking. For instance, if government pays the 30% FairTax on certain employee wages, and the employee gets his gross pay, the cost of those employees has just increased by 30%. Either the employee gets a pay cut, the cost of government goes up, or government employees get laid off.
And, of course, X is adjusted periodically, as is any index related to the cost of living. And the adjustment lags behind any change in prices. So how does this make the FairTax refund adjustment inferior to any other cost of living adjustment?
The point is that as food and energy prices increase, so does the FairTax. We're paying close to $4 a gallon for gas where I live now, the FairTax would add another $1.20 to the current price without a concomitant increase in the prebate. Do you think that gas at $5.20 a gallon would increase economic activity, or slow it further?
One very big disadvantage to converting from the income tax to the FairTax is that it would have a profound impact on every aspect of our economic lives. The devil is in the details, as they say. The bill doesn't define, for instance, what part of withholding and payroll taxes goes to the employer and which to the employee. While you imagine that 100% of your paycheck means gross pay, your employer might imagine it means your current take home pay so that he can fulfill the FairTax promise of lower prices and the company that employs your plummer decides his prices remain the same with the 30% tax added to current prices.
Simply put, the income tax is a known, imperfect as it is. We don't know what the transition costs of the FairTax might be, or unintended consequences as all that isn't defined in the bill shakes out. You may think you're willing to pay the price now, but how do you know until you know what the price is?
You got that right. With the 30%+ sales tax A new Chevy or Ford Will cost you an additional $10,000.00 + out the money you already paid tax on in the past.
They never mention that SS tax started with a tax on, I think it was, 1.5% on $3,000.00. And what Congress conjures up congress can change at their leisure.
When SS was passed there was never to be any tax on your SS benefits. Clinton put the tax on during his watch.
We have all these liberals from DU trying to act like conservatives and they just don't cut it on FR.
Are you aware that the fair tax is refunded to everyone for the poverty level of spending? It is not law yet nd these are liberal talking ponts to get the sheeple to accept their ultra liberal tax program.
Fair Tax = Sales Tax! There is no such thing as a Fair Tax
To get the refund will a tax return have to be filed. Probably.
Congress critters will not get rid of a cash cow that allows them to pilfer your pay check even before you see it. Mark my word. I refuse to argue with these liberals on FR spewing this fair tax garbage.
What makes you think the legislation has any effect on the contract between employer and employee? Under the current tax regime the employer is simply an agent who collects taxes from the employee and remits them to the Treasury. If the Treasury loses authority to tax income why wouldn't the employee receive his/her entire paycheck after remaining deductions?
We’d best get going on that latter suggestion then. Before things get really bad...
And contracts are never renegotiated when conditions and/or rules of the game change?
If the Treasury loses authority to tax income why wouldn't the employee receive his/her entire paycheck after remaining deductions?
Ask Linder, the bills perpetual Congressional sponsor, and Boortz, the guy who wrote the book with Linder.
These embedded taxes include the combined tax burdens of all entities involved in bringing those goods or services to market, and that includes you, the employee, and the taxes you incur as a result of your employment.
We write in The FairTax Book that the competitive pressures of the marketplace will force prices down when embedded taxes disappear from the cost of retail goods and services, and we cite 22% as the average amount of those embedded taxes. Does this 22% include the income and payroll taxes that are paid by employees? Yes, it does...
http://boortz.com/nuze/200509/09152005.html
If embedded taxes are not removed, but just undergo a name change, then FairTax claims start to unravel. There is far less room for prices to fall. US made products are not more competitive in the global market, and imports are still attractive, price-wise, to US consumers. The cost of a new GM truck (I doubt they're paying any corporate income taxes at the moment) remains the same with the 30% sales tax added.
I agree with you that taking money away from employees is a hard sell, even if that money never made its way into their checking accounts, perhaps that's what the prebate is for.
Prices will not fall by the equivalent amount of the FT rate. They will tend to fall around 10-15% after the removal of corporate taxes, corporate payroll tax and compliance. Gross pay goes up by 20% and prices go up by about the same amount after the consumption tax is levied.
The same place where it says prices will fall 10-15% and gross pay goes up 20%.
Inn other words, NOWHERE.
So, when your write Prices will not fall by the equivalent amount of the FT rate. They will tend to fall around 10-15% after the removal of corporate taxes, corporate payroll tax and compliance. Gross pay goes up by 20% [I assume you mean take home pay, not gross pay] and prices go up by about the same amount after the consumption tax is levied. you admit you just made it up.
Can you prove that corporate income taxes (61% of US corporations pay no income taxes) and compliance costs along with the employer's share of payroll taxes add up to 10-15% of retail prices?
The bill says that income and payroll taxes are repealed, not that they are added to the employee's take home pay. Boortz and Linder say your employer will make the decision when the time comes and that that decision could well result in take home pay remaining the same after the FairTax as it was before.
Again, the FairTax promise of making US products more competitive in the global market depends on US worker's receiving less overall pay.
No I can't. And you can't prove that it doesn't. That is why I use a range. 7.65% of payroll is the place to start.
Again, the FairTax promise of making US products more competitive in the global market depends on US worker's receiving less overall pay.
Only in Boortz's mind.
Wrong. First, my congratulations to the tax accountants for the 61%. I'll bet the compliance costs for the 61% were significant. The 61% number is for the years 1996-2000, under Clinton taxes. Second, a corporation doesn't need to pay income tax to have embedded taxes or compliance costs. If they withhold social security from employees, their share of social security is an embedded tax. If their suppliers pay any federal tax, there is an embedded tax. The "large" corporations, those with over $50 million gross income, had no where near 61% not paying income tax. And, using 2006 numbers, corporate income taxes were 15.7% of net collections of all taxes.
To deny the effect of embedded business taxes is purely delusional.
Likewise, to figure that the employee will receive their gross pay after the FairTax, particularly when employers are treated differently under the FairTax is also wishful thinking.
Net pay is gross pay minus deductions. If the deductions go to zero, net pay becomes gross pay. Would the FairTax negate every employment contract? I'll bet the unions would agree to that. (/s)
The point is that as food and energy prices increase, so does the FairTax.
And when my income goes up, of course my income tax will stay the same. And that is the reason the income tax is better.(/s) Where do you get logic like that?
I am not one that is looking for my federal tax bill to go down, at least not initially. I expect it to be very close to the same, since the FairTax is designed to be revenue neutral. If the same amount of revenue is raised from the same number of individuals, the average per individual will be the same. The average tax goes down if the number of individuals goes up or if the visibility of the tax creates pressure to cut spending.
I am looking to getting rid of the April 15 deadline and all of the aggravation associated with it. I expect my FairTax to be paid with the income tax I don't pay plus price reductions from elimination of embedded tax and tax compliance costs. I am looking forward to the economic activity generated when embedded taxes are removed from our exports and when corporations world-wide see a tax-free environment for their corporations.
Gosh, I hope so. There will certainly be withdrawal symptoms from not saving every scrap of paper involved in generating income or justifying a deductible expense. I really dread not telling the IRS every aspect of my financial and philanthropic life. The income tax system IS deeply ingrained in our culture. Just like one telephone company and three TV networks and 55 mile per hour speed limits were. I think I could adjust.
The bill doesn't define, for instance, what part of withholding and payroll taxes goes to the employer and which to the employee.
I had always considered my take-home pay to be gross minus deductions. I had always thought my employer considered that my pay was my gross pay, but there was an obligation to deduct part of it and send it off to the tax people. But I suppose there might be employers that try to cut wages. Let union contracts and the free market sort that out.
Simply put, the income tax is a known, imperfect as it is.
I think you just told me that if you go west from Spain, you will fall off the edge before you reach the New World.
In 1950, corporations paid 32.1 percent, so what's your point?
Would the FairTax negate every employment contract? I'll bet the unions would agree to that. (/s)
Unions have been making concessions in pay and benefits for some time now.
A stunning marker of this new era was the demand by Delphi last fall for wage cuts of more than 60 percent from its unionized workers. Never since the modern union movement rose in the struggles of the 1930s has a major company made that sort of demand. Delphi has since backed off a little, but it still is seeking reductions of more than 50 percent of pay levels.
Northwest's pilots have seen pay cuts totaling 35 percent over the past 15 months but face more demands for concessions from the airline.
http://seattletimes.nwsource.com/html/businesstechnology/2002822905_laborgivebacks23.html
Pay cuts do happen and unions do accept them.
And when my income goes up, of course my income tax will stay the same. And that is the reason the income tax is better.(/s) Where do you get logic like that?
Its your logic in defense of the FairTax, not mine.
I am looking forward to the economic activity generated when embedded taxes are removed from our exports and when corporations world-wide see a tax-free environment for their corporations.
If its true that you get less of what you tax, then you can expect a decline in retail sales following the implementation of the FairTax. For us, in the US, that means a decline in economic activity and increased unemployment.
If its not true, then untaxing savings and investments will have no effect on that segment of the market.
A form will need to be filed, one time, that tells who is included, their SS numbers, and where to deposit the refund. It will need to be filed again if any of that changes. Compare that with the financial anal exam required every year to file your income tax and recover any refund.
Mark my word. I refuse to argue with these liberals on FR spewing this fair tax garbage.
Fortunately, you are not the recognized definer of conservatism for this site. I will match my conservative credentials with anyone here.
So I presume this is the last of your uninformed comments about the FairTax. Good.
According to Boortz and Linder, there is another way of looking at payroll taxes and withholding. While their point of view may be irrelevant under the current tax system, that doesn't guarantee it would remain irrelevant if the FairTax were passed.
The FACT is that the bill says payroll and income taxes are repealed, it doesn't say where they go. Boortz and Linder say its up to the employer to decide who's pocket the money ends up in. To assume that repealed taxes will end up in your paycheck is to buy a pig in a poke.
I think you just told me that if you go west from Spain, you will fall off the edge before you reach the New World.
No, I'm telling you that just because something is revolutionary, doesn't make it good or better than what it replaces.
The consumption tax, on the other hand, can only be regarded as a payment for permission-to-live. It implies that a man will not be allowed to advance or even sustain his own life, unless he pays, off the top, a fee to the State for permission to do so. The consumption tax does not strike me, in its philosophical implications, as one whit more noble, or less presumptuous, than the income tax. Murray Rothbard
I am reminded of a game we used to play as children called "Mother May I". One had to ask permission from "mother" before any move could be made. In the FairTax version, one must pay "uncle" before indulging in a bowl of oatmeal, first for the oatmeal, then for the water, next for the energy to cook the oatmeal, and a payment for each and every item added.
The real issue is total spending by government, not tax reform. Ron Paul
A touching image, tugging at our compassion. Except it isn't realistic. The poor soul, wondering where to get his next bowl of gruel, will pay "uncle" with the prebate and pay for the gruel with whatever resources he uses now. The FairTax refund undercuts that old "don't tax the poor" mantra.
It is convenient for the refund to be forgotten by FairTax opponents, except when they start referring to a refund as a welfare payment.
Sure, right after he pays "uncle" his 30% for the roof over his head and a buck-twenty for the gallon of gas he needs to get to work.
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