GUEST OPINION: We should pay the Fair Tax

Illinois Leader ^ | Monday, January 26, 2004 | Thomas A. Wright

[ancient_geezer]

OPINION -- As our good friend Alan Greenspan has stated recently in testimony before Congress, "Capital does not pay taxes." People do.

Under the FairTax Bill HR 25/S1493, we terminate the sham of corporate taxes.

Most people believe we instituted corporate income taxes to reduce the tax burden elsewhere - particularly on low-income/fixed-income Americans - and to ensure that our corporate citizens pay their fair share for the economic opportunities our great country offers. Unfortunately even a modest study of the history of taxation will quickly demonstrate that no corporation (or other similar corporate structure) in the recorded history of civilization has ever paid one thin dime or shekel or farthing or picayune or cowrie shell in taxes.

Collected and remitted, yes. Paid them? Never. Thus, all of this hoopla over unethical corporate tax shelters and irresponsible corporations simply misdirects our good citizens and journalists. We've been served up an incorrect target for our ire, ensuring yet another unworkable complication in the guise of a legislative solution usually called "tax reform."

Corporations do not pay taxes, people do. This is not a contest between capitalism and socialism, or good and bad, or Wall Street and Main Street. It just is. The buck does not stop at a corporation, it just passed through. This is the nature of the beast. When a corporation is taxed, any one or all three of the following pass-throughs happen in some measure.

The corporation will raise the price of its goods or services by the amount of the tax and the cost of compliance, if competition allows. Dale Jorgensen, Ph.D., Harvard economist, estimates the federal income tax system requires tax-and-compliance premiums amounting to 20 to 30 percent of each product's or service's price. These premiums are hidden in the cost of every good or service bought in or exported by our country. Think about that as we try to sell American-made goods overseas.

With the complexity of our tax code, it should come as no surprise that the compliance costs are actually higher than the tax burden. The National Federation of Independent Business estimates that ratio at 3:1 for small business: three dollars of compliance cost for every dollar of tax paid. Even those corporations that legally (if artfully) zero their taxes still have those compliance costs to pass through. Most importantly, whom do these hidden premiums really hurt? Who can least afford the increased cost? Why the low=income/fixed-income citizens we set out to protect when we taxed corporations in the first place!

Often global competition (and WalMart) will not allow pricing to absorb the entire cost of taxes/compliance. What is the next corporate move? Reduce the cost of labor. Who loses their jobs to efficiency or foreign manufacturing? It is our low-income friends again, taking it on the chin and out of their wallets.

Now, assume prices are as up as they can be and labor costs are as down as they can be, and there are still taxes/compliance costs to pay. What do corporations do? Lower profits to their shareholders. For a mom-and-pop, that means a lesser lifestyle for Mom and Pop. That means later or no retirement.

For Wall Street, that means union pension funds experience lackluster performance when invested in domestic corporations. This may not be a big concern for the low-income, working poor, but that certainly puts a double whammy on the working class. Fewer jobs and threatened pensions. And then there are the undue burdens our fixed-income retirees. Yet again, the very groups we set out to protect with corporate income taxation are those we punish most.

So, as we seek an honest solution to a fair distribution of the tax burden, we need to find the correct target to affect a successful solution.

Discussions of tax shelters and corporate irresponsibility mislead us. Attacking the wrong solution misdirects the well intentioned. Simply put, taxing corporations burdens the very citizens we seek to protect. Now, whose idea was corporate taxation? And who is writing these foolish laws anyway?

Thomas A. Wright is the Executive Director of Americans For Fair Taxation based in Houston, Texas.

[ancient_geezer]

With the complexity of our tax code, it should come as no surprise that the compliance costs are actually higher than the tax burden. The National Federation of Independent Business estimates that ratio at 3:1 for small business: three dollars of compliance cost for every dollar of tax paid. Even those corporations that legally (if artfully) zero their taxes still have those compliance costs to pass through.

An article that his this subject on the nose:

Where Have All the Dollars Gone?
How the government robs Peter to pay him back.
By James L. Payne, Reason Magazine February '94

When the overhead costs are added together, (24 percent compliance costs, 33 percent disincentive costs, and 8 percent other costs), they total 65 percent of tax revenue. Although future studies may come up with slightly different numbers, there is no doubt that the overhead costs of taxation are substantial. This means that every act of self-subsidy entails a significant waste. When the government takes a dollar from Peter to give it back to him later, there is a huge loss attached to the transaction.

Unfortunately, the bad news doesn't end there. Peter is never going to see this dollar, even if it is destined for him, because of the waste in the system for disbursing subsidies."

So, as we seek an honest solution to a fair distribution of the tax burden, we need to find the correct target to affect a successful solution.

John Linder in the House & Saxby Chambliss Senate, offer comprehensive bills to kill all income and payroll taxes outright, and provide a IRS free replacement in the form of a pure consumption tax:

H.R.25
SPONSOR: Rep Linder, John (introduced 01/7/2003)
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.

S.1493
Sponsor: Sen Chambliss, Saxby [GA] (introduced 7/30/2003)
Title: A bill 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.

Refer: http://www.fairtax.org & http://www.salestax.org

[ancient_geezer]

Ping and mark for reference.

[jonno]

bump.

[Jaysun]

Oh so true. People always bash corporations, but what are corporations if not a group of people? The CEO pays taxes on his paycheck. The VP pays taxes on his paycheck. How is anyone avoiding taxes by working for a corporation? They aren't.

[kennedy]

It will never happen. It should, but the liberals and their allies the media will demonize anyone who attempts it.

[agitator]

Yawn...

[explodingspleen]

We have control of the Senate, the House, and the Presidency.

Perhaps our representatives in Congress might be pursuaded to stop passing the Democrat's spending bills and reform the taxcode? Maybe? Pretty please?

[balrog666]

Dale Jorgensen, Ph.D., Harvard economist, estimates the federal income tax system requires tax-and-compliance premiums amounting to 20 to 30 percent of each product's or service's price. These premiums are hidden in the cost of every good or service bought in or exported by our country. Think about that as we try to sell American-made goods overseas.

And as has been demonstrated many times, this estimate (of 20-30% compliance costs) is pure bull$hit. Lying to people is not a good way to get them to support changing the current system.

[afraidfortherepublic]

How the government robs Peter to pay him back.

A wise man once said, "When the government robs Peter to pay Paul the government can always count on the support of Paul."

[afraidfortherepublic]

We have control of the Senate, the House, and the Presidency.

Not yet, we don't. Our President cannot appoint judges because he doesn't have 60 votes in teh Senate to sustain his appointments. Without conservative judges we are up a creek without a paddle. We need a filibluster proof majority before Bush can set things right around here. Until then he has to work with the Dumcarts and occasionaly toss them a bone.

[ancient_geezer]

Last I heard the Congress Critters that enact legislation and are responsible for tax law, are still elected by us.

We do make a difference, when their cushy positions in Congress are at stake the do indeed change laws or are removed by the consituents that demand the change.

The key is assuring that the electorate pushes for the change desired, where it will make difference in Congress.

If want the change, its upto you, joining with your family & neighbors to see it happens. The Fair Tax folks and others have created the vehicle in the form of Legislation introduced in House & Senate. Making sure your representives are on board & supporting it is your job. If your current Congress Critters won't support tax reform, then support others who will and work to replace the mules.

There many grass roots organizations working for this change, one is http://www.fairtax.org the source of the Fair Tax bill. Check them out, they provide links to other organizations and websites supporting a National Retail Sales Tax and additional information as well as providing an advocacy groups through which you can participate.

[ancient_geezer]

And as has been demonstrated many times, this estimate (of 20-30% compliance costs) is pure bull$hit. Lying to people is not a good way to get them to support changing the current system.

Perhaps you can show where this has been "demonstrated many times" by credible studies.

For quite the contrary it has been demonstrated many times that 20-30% is a reasonable expectation.

The following article covers the mechanism on how the current Federal tax system propagates and is embedded into consumption expenditure.

DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation

The 24% in the article considers only those factors actually paid to government out of imposititions on business in complying with the income, payroll, excise & tariff tax laws.

I refer you to the section of the following article about the Income/Payroll tax system and its impact on our economy "A. Hidden Upstream Taxes. " paragraph 39.

"[39] Dr. Dale Jorgenson, Chairman of Harvard University's Economics Department, believes that the price of goods and services are inflated by about 20 percent or more by upstream taxes consumers ultimately bear. In a recent paper Dr. Jorgenson estimated the built-in taxes contained in the price of goods and services. /22/ In the chart above, he quantified the hidden component of tax, estimating that producer prices would fall on repeal of upstream taxes an average of about 22 percent."

Looking at the accompanying chart, the range of values from industry to industry appears to be about 12-25%.

Economists Gary and Aldonna Robbins of the Texas-based Institute for Public Policy examined the case of dry cleaning a shirt, with a particular eye toward uncovering the hidden costs of taxes in price.

The Robbin's attributed over 33.6% of "consumer prices" to be due to federal taxation passed on to the customer.

The Federal Tax System
http://www.cbo.gov/showdoc.cfm?index=2125&sequence=0&from=1#pt1

From the Table 1 we may extract the proportionate contributions of each sector of taxes as they contribute to consumer price for the year 2000.

• Total revenues collected by Feds in '00 = $1945billion ( 33.6% of consumer price)

Those tax components which will not change prices as a consequence of enactment of HR2525

• Individual Income Tax(Labor) = 945billions,
• Employer half of Social Insurance = 653/2 = 326.5billions,
• Excises = $68billion
• Customs Duties = $19Billion
• Miscellaneous = $40Billion

============================

• Total constant price factors = $1358.5 billion
• Remainder federal tax components affecting price = (1945-1358.5) = $586.5

Adjust for a conservative $600billion(1995 figure, AGCA '00, Payne '95, PillaBartlettNorquist '95 ) interest & cost of compliance effects.

• Total tax related factors affecting consumption price = (600 + 586.5) = $1186.5billions

Estimated change in consumption prices as consequence of enactment of a National Retail Sales Tax, repealing all business income and payroll taxes:

33.6*(1186.5/1945) = 20.5% in consumption prices

Which compares well with the Jorgenson empirical study of 22% fall in producer prices.

The two sources are in reasonable agreement, and I see 20-23% a reasonable value to expect prices to fall not only for customers here in the United States, but in our exports as well making them far more competitive on international markets.

---

Indeed,

Lying to people is not a good way to get them to support changing the current system.

So why indeed are are implying a lie, unless you are against changing the current system.

[eccl1212]

As you well know, the purpose of the current tax structure of the USA is various levels of enforcement and influence over personal freedoms and social policies.

Though I agree that ANY tax that is not used primarily to "control" us, rather than its legitimate purpose, that of raising necessary revenue for the USA... I have NO faith that regardless of WHAT we ask for or propose, the bureaucracy, now fully invested in the business of social policy formation and enforcement ... will NEVER ALLOW TO BECOME LAW.

Even if we were to revolt.
Nothing will change, until it all collapses under its own weight.

I used to believe if we had enough conservatives in congress and the white house, we could effect change. As it is, the current president is spending money on social programs out the kazoo. Supposed conservatives who once bristled at "it takes a village", now enthusiastically cheer for it's NEW and IMPROVED nomenclature "no child left behind" (which clearly admits in no uncertain terms the village aka our government, IS after all responsible for YOUR kids and mine).

Hillery care is giving way to bush care, in smaller steps, but moving along just the same.

I am rather discouraged pal: "What the hell difference does it make?" what we propose or support.
the congress won't pass it.
the president won't sign it.
and if they both did, the courts would simply order us to pay, for some made up constitutional reason.

in other words... we are doomed.
it's a nice idea though and thanks for bringing the sense of "nostalgia" back to the site, as in the days of Cheif Negotiator.
WE had a better chance of changing tax law with Clintong in office, than we do with tax and spend republicans, it seems.

[balrog666]

So why indeed are are implying a lie, unless you are against changing the current system.

Take your sleazy innuendos and stuff them where the sun don't shine. I hate the current system more that you will ever know, but I don't want an even worse system, or worse yet, the current system and a more corrupt system added on top of it.

What? You don't remember all those posts from the last thread on the NRST? You better get some Alzheimer's medication before it's too late. Do you really want me to show you how to do a Google search one more time?

[cpdiii]

Congress loves the tax on coporations. This tax is simply another tax on the public that is in the cost of the goods sold. They get the revenue and then can tell the people that bought the product that the corporation and not the consumer paid the tax.

My taxes last year:
Social Security and Medicad 15%
Income Taxes 19%
Property Taxes 3%
Sales Taxes 4%
Hidden taxes 2% gas, import duties, tel bill

Since I live in Texas I do not pay state income tax.

I pay approximately 43 percent of every dollar I make to a government agency. If you include the taxes that you do not see in the cost of goods due to corporate tax my total tax burden is around 50%.

[ancient_geezer]

A wise man once said, "When the government robs Peter to pay Paul the government can always count on the support of Paul."

True, however the trick is to get those Peter's who are footing the bill to out vote the Paul's.

Many of those Pauls are simply uniformed of who is paying. Show them the reality that they are really Peters and watch change happen.

Only 50% of registered voters vote. That means the less than 13% of uncommitted voters that can be persuaded to a popular idea will make the difference on Critters elected to Congress, the folks that make the real difference in our tax laws.

Reach that 13% and convince em, and getting even a fraction of the committed on phones yelling at their Congress Critters. The Fair Tax will become law of the land removing the income/payroll tax from everyone's back.

Consider that 15.3% SS/Medicare tax on the 1st $75K of wages/self-employment income, plus the 6% Federal/State Unemployment tax, all of which are but a portion of the effect of federal taxes embedded the price of all products we purchase. Taken together with the Individual tax rates above we all pay more than:

Effective Total Federal Tax Rate (Percent of reported income)
Income Category	1977	1979	1981	1983	1985	1987	1989	1991	1993	1995	Projected 1999
All Families	22.8	23.4	23.5	21.4	21.8	22.6	22.5	22.6	23.5	24.7	24.2

Data from IRS collections statistics and The Bureau of Economic Analysis as compiled in tabular form by the Congressional Budget Office.
http://www.cbo.gov/showdoc.cfm?index=1545&from=4&sequence=0

The Individual Income Tax return(1040) that captures everyone's attention each April, is merely a partial VAT accounting sheet the government cons individuals, held at ransom, into filling out. Its misdirection puts blinders on the eyes of the electorate, and totally distorts their perceptions as to the real impact of taxation in their lives.

Every man woman and child in the nation, pays federal taxes through that VAT.

DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation

The full impact of the federal tax system(taxes in gross wage/salaries & other compensation + business income/payroll taxes) added onto the base(taxfree) price of retail consumption goods and services is 36% for federal taxes alone.

Everyone pays those taxes. Everyone is funding the largess of government. Get that message across to even a fraction of the 60% of the voters that PERCEIVE no problem with the taxrates and vote for polidiots that promise to bring home the most bacon because they are the only ones that benefit from higher taxes with more spending on socialistic "gimme" programs. And change will be fast and furious.

[#3Fan]

An "eliminate the corporate tax to save jobs" bump!

[ancient_geezer]

Take your sleazy innuendos and stuff them where the sun don't shine.

Sleazy inuendo:

• Balrog666: Lying to people is not a good way to get them to support changing the current system.

You don't remember all those posts from the last thread on the NRST?

I sure do, but it is obvious you don't:

Fair Tax Act of 2003 (H.R. 25)
http://thomas.loc.gov/cgi-bin/bdquery/z?d108:h.r.00025: ^
Posted on 01/30/2004 1:07:06 PM MST by looscnnn

Do you really want me to show you how to do a Google search one more time?

Search all you want, you will find no refutation of falling consumer prices due to NRST by a credible source.

Go to it laddy, each FR thread that has addressed this issue has been debated in full, and those that claim that price declines cannot be supported, have been shown to be full of it.

The best you find are merely personal opinions and blanket assertions with no substantive studies backing them.

[balrog666]

Do you remember this one:

But, seriously, how will you get the 50% of voters who pay no income taxes now to vote for someone who promises to tax them with a NRST?

181 posted on 04/23/2003 8:55:44 AM CDT by balrog666 (When in doubt, tell the truth. - Mark Twain)

[balrog666]

Here's anothe blast from the past:

To: ancient_geezer

[snip]

Oh, you just make me tired.

Where do you think that current state-of-the-art manufacturing plants are being built today??

Here's a clue: it's China, Malaysia, and surrounding countries.

And no marginal change in USA labor rates is going to compete with slave labor wages. And then you still have to consider the oppressive business environment of the US caused by unconstitutional environmental regulations; EEOC-inspired no-work quota systems; out-of-control, business-hating liberal courts; corrupt and politicized unions; Jesse-Jackson-type shakedown artists; and cash-hungry, favor-selling politicians. Did I leave anyone out? Just add them to the top of the pile.

221 posted on 04/23/2003 1:24:07 PM CDT by balrog666 (When in doubt, tell the truth. - Mark Twain)