Posted on 10/19/2006 5:11:50 PM PDT by pigdog
As specified in Congressional bill H.R. 25/S. 25, the FairTax is a proposal to replace the federal personal income tax, corporate income tax, payroll (FICA) tax, capital gains, alternative minimum, self-employment, and estate and gifts taxes with a single-rate federal retail sales tax. The FairTax also provides a prebate to each household based on its demographic composition. The prebate is set to ensure that households pay no taxes net on spending up to the poverty level.
Bill Gale (2005) and the President’s Advisory Panel on Federal Tax Reform (2005) suggest that the effective (tax inclusive) tax rate needed to implement H.R. 25 is far higher than the proposed 23% rate. This study, which builds on Gale’s (2005) analysis, shows that a 23% rate is eminently feasible and suggests why Gale and the Tax Panel reached the opposite conclusion.
This paper begins by projecting the FairTax’s 2007 tax base net of its rebate. Next it calculates the tax rate needed to maintain the real levels of federal and state spending under the FairTax. It then determines if an effective rate of 23% would be sufficient to fund 2007 estimated spending or if not, the amount by which non-Social Security federal expenditures would need to be reduced. Finally, it shows that the FairTax imposes no additional real fiscal burdens on state and local government, notwithstanding the requirement that such governments pay the FairTax when they purchase goods and services.
(Excerpt) Read more at people.bu.edu ...
With the income tax system, due to its complexity it becomes difficult to the point of impossible for ANYONE to predict a least-tax path for the upcoming tax period (year) and this is shown by the many instances of submitting a given set of parameters to different tax pros (including some in the IRS) and finding there is not only no agreement among many of them (actually almost none) but that the "paths" they independently devise vary widely in results of taxation.
With the FairTax, a taxpayer has the very great benefit in the immediate time period of knowing on each and every taxable purchase what "his government" costs him on his loaf of bread, bunch of bananas, or badass BMW - and that is far more immediately meaningful and useful to his decision-making process that finding out 6 months or more later that he paid x% in tax on that item (and cannot then decide to not buy it for that reason).
Trying to pose that one's calculating "all his taxes paid" under the income tax (or any other for that matter) is meaningful in any useful way is certainly not the case and most do not do that anyway since it is not possible even under the income tax due in part to the component of hidden taxes.
It's what the whole forum is seeing - you've articulated it well. Nice post.
"These taxes are merely replaced not eliminated. Payroll, Corporate Profit and Personal Income taxes are REPLACED by the FairTax ... and it collects the same amount of tax money (supposedly.) Some will gain, some will lose. The economy will suffer, goods will cost more, the money supply is likely to be inflated ... savings will be devalued, evasion will rise, the rate will increase, most will have LESS of idea of how much tax they pay ... that's "my point.""
Your "point" is not on very solid ground. The taxes you mention are indeed eliminated by the FairTax. The funds previously provided are replaced by funds from the FairTax, but the taxes themselves are gonzo.
And indeed you can control the effective tax rate under the FairTax to a far, far greater and more immediate degree than with the income tax. As I showed in a just-previous post NO ONE can do this by looking ahead at any upcoming (or current) income tax picture since the tax money has already been taken by the government with no control over it on your part ... you don't even know how much it might be until April 15 (if then) and you certainly cannot take into account the amount of hidden taxes embedded in the costs of things. The more useful feedback on taxes is that given by the FairTax showing the tax on each and every purchase.
For the FairTax, the rate does not vary with the "tax structure". The marginal rate remains constant at 23%. The effective FairTax rate varies depending upon your consumption - and much of that that is directly up to (and controlled) by you.
As for lobbying under the FairTax, there is a far less target-rich environment than with the income tax where special things can be (and are) carved out and hidden for special entities. With the FairTax any such nonsense will be quite visible as a tax increase on all taxpayers and - like you - most of them will not sit around waiting to be stand idly by to be "raped and pillaged".
It would certainly be a shame if FreeRepublic became know as one of the "attack your opponent" blogs that are quite prevalent; they're a dime a dozen.
"BTW I have read it and heard it all. "
If so, you may have overlooked the part that says:
`(A) the State agency designated to collect and administer the sales tax imposed by this subtitle, in an administering State, or `(B) the Secretary, in a State that is neither-- `(i) an administering State, nor `(ii) a State that has elected to have its sales tax administered by an administering State.""`(10) SALES TAX ADMINISTERING AUTHORITY- The term `sales tax administering authority' means--
Which language shows that the job of administering the FairTax would fall on he states - and they are paid from the tax revenues for doing so (as the paper both defines and accounts for in its math).
And possibly you even missed the first few words of the bill when you read it which are:
"To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States. "
There is massive fraud and abuse under all the state sales tax collection system now. It will be more of the same.
Fairtaxers want to point to written words all the while not wanting to observe what is reality. For one who continually deals with state taxing authorities, the problems they create by their own mistakes is a ongoing problem. These are real time issues not so pie in the sky ideas. For those of us that deal with the problems,adding more for them to do would be down right silly. They, the states, would have absolutely no way of handling it!
"And we all know if it is said on the fairtax [sic] website FAQ's that it must be taken as gospel. How dare someone suggest that it might be more complicated than adding one line to a state tax form. No state has anywhere near the same tax base as what the fairtax [sic] does. No state taxes all services. And states will not be all that happy to assist the feds when they discover the feds are going to tax all state government expenditures too. "
Actually you might do well to take that information as "gospel" since the tune you sing is off key.
"... states will not be all that happy to assist the feds when they discover the feds are going to tax all state government expenditures too ... "
As described in this paper (and others using the NIPA data) the FairTax already takes those expenditures into account and studying this paper shows that clearly.
"... No state taxes all services ..."
Certainly true enough but many states DO tax certain services and almost every service is taxed by one or more states - but not all services by any single state. With the FairTax, though, states will have the opportunity to confirm their tax systems to the FairTax, thereby eliminating state income taxes (and the associated state administrative costs) and its costs to taxpayers. Actually there are movements afoot in some states to have a "state FairTax" and here is one for Mighigan that apparently even has a "state prebate".
The FairTax has the very attractive benefit to the states of providing them tax revenue from out of state sales via mail order and Internet sales ... something the states have long hoped for. Since the FairTax is a destination principle tax it offers that large benefit to each state.
even if states do not explicitly tax services, all services already have tax costs in prices - they're just hidden.
how else would service providers have revenues with which to pay their own income taxes (or utility bill)?
of course, the taxing of services with a sales tax intead of an income tax merely makes the cost of government more visible.
who is against that?
As always, I'd like a sales tax PROVIDED the income tax is first removed from the constitution.
Without that, we will end up with both...it would only be a matter of time.
The great benefit of the sales tax is the freedom that it would promote. There would be freedom to pay tax when one decides whether to buy or not, there would be the freedom from government meddling in family life, church life, and business life that comes with IRS & Congressional big-brotherism, and there would be the freedom from volumes of paperwork and requirements.
I would even pay a bit more for that.
"They, the states, would have absolutely no way of handling it!"
Actually, they would and there has been testimony to the Ways and Means committee to that effect from one or more states. Keep in mind that the states are paid to do this from the FairTax receipts.
Since you choose to disbelieve the written words of what may very well become our new tax law, I'm sure that nothing I can write would convince you either, but a Federal office called "the Sales Tax Agency" (or "the new IRS" if you prefer) which would deal only with the 50 state sales tax agencies would certainly be dramatically smaller, less intrusive, and less costly (current IRS budget is 11 - 12 billion per year) than the current tax collection nightmare - with police powers vs the individual - that we now have.
You really enjoy stroking your pet, don't you.
"I would even pay a bit more for that. "
Actually you won't have to pay more since your effective tax rate will actually decline under the FairTax most likely. It will for most people and there's a way for you to find out. Here is the FairTax Rate Calculator which is anonymous and, if used with some thought will give you an accurate reading .. but remember - GIGO.
Removal of the income tax from the constitution is a two step process - first pass a tax law (such as the FairTax) that provides government revenue but does not require the income tax and then pass the bill to repeal the 16th amendment - and such a bill is before Congress now. Part of the language of the FairTax bill is a call for the repeal of the 16th amendment and the FairTax organization is quite serious about the repeal of the amendment.
Thank you for providing another example of your desire to avoid talking about the benefits of tax reform.
For example, the income tax makes US exports more expensive overseas. Imports to the US have their tax costs removed (this is called border-adjustability).
The income tax is NOT border-adjusted. This is one of the main factors in the loss of manufacturing in the US. Manufacturing, as a % of GDP, has declined more than 50% in the last 50 years. The nrst IS border adjusted. So our exports would be cheaper overseas.
Of course you know the flat tax is not border adjusted either.
"In your thousands of posts you have never once admitted an error. You always choose the path of lying and spinning to defend your errors."
Both of these sentences are patently untrue.
... or do you???
Abolishing the IRS is just a slogan to hype the plan.
Abolishing the IRS is in the Fair Tax Act H.R.25 bill! Section 301 states" Appropriations for any expenses of the Internal Revenue Service including processing tax returns for years prior to the repeal of the taxes repealed by title I of this Act, revenue accounting, management, transfer of payroll and wage data to the Social Security Administration for years after fiscal year 2009 24 shall not be authorized"
Eliminating funds for the IRS will eliminate the IRS!
BTW I have read it and heard it all.
Based on your comments above and in your previous posts you obviously haven't read anything, particularly in H.R.25. Whatever you heard was misinformation. I suggest you read the bill before you make anymore erroneous statements.
"For simplicity, let's assume that under the FairTax, the magnitude of the tax base is the same,"
There is certainly no reason to assume such a thing since it isn't the case. This - and the remainder of your post - suggest that you haven't read the paper in the lead-in post. In fact, these statements clinch that observation:
BTW, the problem is a bit different at the state and local level, but Kotlikoff, in the very paper cited above, agrees that S&L governments will need to raise their own tax rates to collect enough money to pay their FairTax ... ""... That is why the FairTax is flawed from a Revenue Neutrality perspective.
... since the paper clearly shows that the 23% FairTax rate is eminently feasible - and that the consumption requirements of state and local governments are also encompassed in the bill.
No federal agency is smaller than when conceived.
So yes, nothing you can write will override what is really happening.
The Treasury now has police powers. So do state taxing authorities. Thus it will be States vs the individual in a far greater bureaucracy.
Basically the Fair tax is burden shifting. It will not make the current taxing problems go away. Fair taxers don't want to recognize the down sides. There is always idyllic words from them . Yet when faced with what is really happening they chose to not acknowledge it or think it isn't happening or will happen.
"Thus it will be States vs the individual in a far greater bureaucracy."
Not at all the case since the individual (the taxpayer) has no further dealings with, responsibility for, or contact with the taxing authority after he purchases the thing from the seller and pays for it, receiving his receipt.
From that point onward in dealing with taxing authorities, it is the merchant (who has agreed in writing to do so and is also paid to do so) who is the focal point of tax enforcement - not the taxpayer.
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