Posted on 12/18/2005 4:46:00 PM PST by FairOpinion
YES! 83% (8832 votes) A consumption tax would be great for the American economy. Do away with complicated income taxes!
NO! 17% (1761) A consumption tax would not be fair for low-income households. Keep the current income tax system!
We'll send your vote to your congressional representative and senators.
He he... yup.
"Either income taxes are a cost of production or they are not. I say they are not."
I think I see the issue here. You think that only production costs have to be recouped via the pricing mechanism. Indirect costs such as S&M, G&A and R&D are recouped via some other mechanism, as are income taxes.
Again I ask a very simple question: where does the money come from to pay those other costs?
"Right. I will just stick with the experts' theories of price formation. Little wonder that microeconomics is avoided so much, it is tough sledding."
You keep making broad, sweeping generalizations with no substantiation whatsoever. Who are these "experts" who have a different theory of price formation? Can any of these experts answer the question I have asked several times on this thread with no response: if non-production costs are not recouped via product sales, where does the money come from to finance them?
The FairTax has been endorsed by a number of respected economists, one of whom is a Nobel laureate.
http://www.fairtax.org/pdfs/Open_Letter_President.pdf
Can you point me in the direction of some of your "experts" who have a different view of price formation than these gentlemen?
"It is not part of the pricing calculation according to everyone who has studied this."
Who the hell is "EVERYONE"? I have been around this issue for several years now and I have yet to hear anyone except you argue that non production costs don't have to be recouped through operations (which means product sales).
Are these "experts" as zealous in guarding their anonymnity as the SQLs on FR? Or are these "experts" and the FR SQLs one and the same?
"Then there are always the decisions of when to expense certain deductions and thereby reduce income taxes. These often cannot even be made until the results for the year are known."
What you are saying is inconsistent with the real world of accounting and finance. There are rules defining when revenues and expenses are recognized. True enough, those rules differ for GAAP (Generally Accepted Accounting Principles) and taxes. However, the vast majority of transactions can be readily classified and determining which accounting period to book them in is relatively straightforward. There may be some items that are somewhat subjective (such as the size of the bad debt reserve), but those are relatively insignificant in the overall scheme of things.
I must emphasize here that I am speaking of reputable companies which don't "cook their books". I am well aware of the shinanegans of firms such as Worldcom, Enron and others. There are undoubtedly smaller firms who get away with creative accounting on a smaller scale for some time. Those houses of cards eventually tumble, however.
Speaking of creative accounting, your contention that the time sequence of a transaction makes all the difference in the world in its classification and that income taxes cannot be associated with the business activities which produced them would seem a vivid example. Your assertion that income taxes cannot be estimated and anticipated is counter to my 20 years in corporate financial management. I can't imagine not booking any provision for income taxes on the monthly financial statements all during the year and at year end saying to my boss, the CEO "surprise! We have to pay income taxes this year". His logical response would be "What do you mean, it's a surprise? We have been profitable every month this year! How can it be a surprise that we have to pay income taxes at year end?" I don't think I could have ever gotten away with your line of reasoning when I was a CFO.
"Who has claimed companies don't make provisions for paying taxes and report on those provisions?"
You asserted that income taxes were not an expense to a business. I gave you one example which contradicted that unsupported assertion. There are many, many more examples of businesses reporting income taxes as an expense.
"What do you think that explained that was not clear?"
That business expenses (including income taxes) influence the "market" which you see as a detached, disconnected and abstract concept.
"Or that it is strange that companies want to keep as much of their profit as possible? Or will take advantage of schemes to lower their taxes? Gee what a shock."
1. You assert with no support offered that business decisionmakers are influenced solely by pre-tax ROIs and that since taxes are a constant, post tax ROIs are irrelevent.
2. I offer an example or two which contradicts your unsupported assertion. There are, of course, many other examples.
3. You disengenuously pretend that you aren't surprised that business decisonmakers want to minimize taxes. IOW, you disavow your original statement.
It would appear that we are now in agreement.
"Behind the back slander and misrepresentation of motive are not likely to win many advocates either."
Posting in a public forum is hardly "behind the back". As far as the "slander" goes, I have a right to my opinion that you are both arrogant and very lacking in any real understanding of economics, your puffery and self congratulations notwithstanding.
As far as you becoming a supporter of the FairTax, I have yet to see anyone who thinks they have all the answers and has no capacity to listen grasp the "outside the box" concepts that are required for appreciating the FairTax. Having been at this for some time, I don't have the energy or the patience to change your whole way of thinking.
There are many, many more examples of businesses reporting income taxes as an expense.The most interesting part would be where you can use that Intel report as an example to show how they can reduce their prices 20+% by eliminating their income tax.
"It's not a matter of if consumption-based sales tax will gain dominance the world over, but when, and which country will lead the charge and which countries will play catch up."
Well said, Zon. That is one of the most lucid posts on this thread.
Globalization is sweeping the planet. It is THE economic megatrend (to borrow a phrase from best selling author Alvin Toffler) of our times - a trend which will shape all other trends. What is going on in India and China is already having a major influence on our economy and, as we say in the south "you ain't seen nothing yet". China's economy will catch up to ours in size sometime by the middle of this century. Cisco believes that China will be at the center of information technology sometime between 2020 and 2040 and they are developing strategic plans to be a Chinese company by then. NYT syndicated columnist David Brooks wrote in Nov of 04 that in 1990 there were about 473 MM people living in extreme poverty ($1 per day or less)in Asia and the Pacific rim. By 2001 that number had dropped to about 272 MM and by 2015 it will be reduced to about 39 MM (I am going from memery here, but the overall thrust is correct). That is about a 96% reduction in extreme poverty in that part of the world during a 25 year period that we are right in the middle of. Amazing stuff. Brooks attributes it to trade liberalization and strengthening of property laws.
The point is that globalization is sweeping the planet like a tidal wave. I personally don't think that the FairTax will bring our manufacturing sector back to where it was 15 years ago. I do think it is crazy to continue into this environment with a tax system which impairs our ability to compete in the global marketplace. The challenge that we face is enormous. We have a massive trade deficit that something has to be done about. If foreign banks lose their confidence in the USD as the safest and most stable currency in the world, the implications of that are horrendous for our economy.
I agree that we have to go with a consumption tax sooner or later. I just hope that it is before we have an economic armageddon, rather than afterwards.
WOW! Unbelievable.
Who made you the arbitor to decide any of this?
You should seek professional help to get over your anger.
Do you care to name those whom you want to divest of their ill-gotten gain? Or is it anyone above a certain level of wealth?
I agree that we have to go with a consumption tax sooner or later. I just hope that it is before we have an economic armageddon, rather than afterwards.
Who would most benefit from economic armageddon?
Free market dynamics aside, US government has the most influence on the international politics of tax competition.
The OCED under the guise of thwarting money laundering is an end-run means to pressure/squeeze tax havens to undermine their financial privacy laws. Almost all tax haven financial-services providers (banks, trade brokerage houses, etc.) have strict identification requirements a person or business must meet in order to open an account.
All financial service providers, mostly banks, that I have researched will break their privacy protections when a solid case for terrorist or drug money laundering is presented. Most clearly state that tax avoidance or evasion issues brought to them by a foreign government will not penetrate the privacy protection measures. United States government is viewed by offshore financial service companies as the most demanding and threatening to their privacy protections and some will not accept new accounts from US citizens. Many offshore centers are blacklisted by OCED member countries.
Get this. United States and Lebabon are the only two countries that tax their respective citizens wherever the citizens resides in the world and wherever in the world the citizen or business's income is derived. The United States going one step further, any person that relinquishes their US citizenship has to pay federal income tax for the following ten years. It is the law. Doubtful that any person that has given up their citizenship has ever complied. But just the arogance to create the law in the first place speaks voulmes.
But that's not the main point being made. The French government, this goes back a few years, wanted to tax their citizens and businesses whose income was derived from inside the United States. The French government thought the US government, with it's iron fist income tax would help France "spy" on it's citizens and businesses toward that end. Wrong. The US government refused.
Most OCED member countries will comply with IRS demands to investigate US based companies operating in the OCED member country's borders. Yet the US government refused to help France.
Akin to many, if not most, politicians and bureaucrats that want to maintain the income tax control over US citizens and businesses, foreign countries that aren't considered tax havens, especially the OCED member countries, have no desire to give up their ability to control their respective citizens and businesses to an unobtrusive consumption-based tax system.
What's The Point?
It's this... foreign governments, like K street lobbyists have considerable reasons to pressure/influence US tax policy. As shown above with France and OCED pressure on non-member tax havens, the US government has the strongest hand in the arena of international tax competition. But there's reason to think that will go into decline if a major industrialized country is first to replace their tax system with a consumption-based tax system.
US government may be able to successfully pressure a foreign government to not replace their tax system with a NRST, but it's not likely to happen in reverse. Just as the FairTax grass roots must be more persuasive than K street, it must be more persuasive than foreign governments.
With much US influence on global market competition and international tax competition, the underlying policies that negate economic freedom will flip to foster economic freedom here and abroad. Sending the US economy into orbit (to barrow a phrase from CG) will impact the global market as the invisible hand of free market competition, thus aligned with intelligence and brute forces fighting terrorism overcomes and obsoletes the penultimate enemy, kill-em-all terrorists.
Juxtaposition of pros and cons of a consumption-based tax replacing the income tax is a mountain of positives to a molehill of negatives.
"How the taxes are collected is a side-show which could be argured until the cows return. Center-Ring is spending."
I think we disagree on this one. As Ancient Geezer has posted on many occasions, as long as most Americans don't perceive the tax burden that they are under, chances for getting real reductions in spending and taxation levels are remote.
By making the taxes that we all pay more visible, the FairTax will serve to exert downward pressure. Some consider it a weakness of the FairTax that there will be "sticker shock" when Americans see their tax burden for the first time. Supporters of the FairTax consider that a benefit.
Some consider it a weakness of the FairTax that there will be "sticker shock" when Americans see their tax burden for the first time. Supporters of the FairTax consider that a benefit.When did Fairtax supporters switch from price reductions and paycheck increases to "sticker shock" prices being a benefit?
I've already posted at least twice my formula as a starting point for when someone's annual earnings become unfairly large.
My formula uses as its base the average annual earnings in America, so it rises and falls as the average earnings.
Roughly, the unfair amount is around more than a million a year.
The idea is that no one is so much better than average to be able to earn that much fairly--which doesn't mean necessarily that he cheats, it could simply be that the laws unfairly benefit such high earners (at the very least by not taxing them enough)
Do you consider yourself to be a conservative?
You sound more like a Marxist.
How did you get here and why do you stay here with economic theories like yours?
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