Posted on 03/02/2004 10:23:45 PM PST by esarlls3
Congress Must Pass the Fair Tax Act
By U.S. Rep. Mac Collins
CNSNews.com Commentary
February 27, 2004
Past Congresses have moved in the wrong direction by making our tax laws more complex and expensive for business and individuals to comply with. To keep our economy growing, Congress needs to take action now.
My colleague, Georgia Republican Congressman John Linder, has sponsored the "Fair Tax Act" (H.R. 25), a national retail sales tax on new goods and services. It would replace all individual and corporate income taxes, payroll taxes as well as capital gains taxes, estate taxes and gift taxes.
The Fair Tax replaces the way we are currently taxed, which is based on our annual income, with a tax on goods and services. The Fair Tax, basically, is a voluntary "consumption" tax. The more you buy, the more you pay in taxes. The less you buy, the less you pay in taxes.
The federal government will continue to be fully funded, including Social Security and Medicare.
The Fair Tax will reduce the costs of goods and services by 20 to 30 percent. It will allow workers to keep 100 percent of their paycheck, pension and Social Security payments with the exception being state or local withholding
The Gross Domestic Product will increase by almost 10.5 percent in the first year after its enactment because real wages would increase and tax compliance costs for business would decrease by 90 percent.
The fair tax would also be good news for investors. Real investment will initially increase by 76 percent relative to investments that would be made under our present tax laws. While this increase will gradually decline, it remains 15 percent higher than under the existing tax structure.
American exports will increase by 26 percent initially and would remain more than 13 percent above present levels under the current tax system.
Studies of the Fair Tax have shown that many U.S. companies will choose expansion here in the United States versus abroad, and in turn the United States will become more attractive to many foreign owned companies looking for expansion possibilities.
President Bush, during his State of the Union address in January, said the economy is turning around because the American people are using their money far better than government would have. The Republican majority in Congress was right to return it to the American people and not keep it in Washington.
A fresh and a fairer approach to a Federal tax system is needed. Therefore, it is time for Congress to pass the Fair Tax (H.R. 25).
As a cosponsor of the Fair Tax Act, I have asked Chairman Thomas of the Ways and Means Committee to hold hearings on this vital legislation. I am hoping those hearings will get under way in the near future.
(Congressman Mac Collins is a Republican representing Georgia's 8th Congressional District. He serves on the House Ways and Means Committee and the House Select Committee on Intelligence.)
FCA?
I paid my taxes, now you want to raise the taxes on what I buy but you can't see how I would be worse off? I'll get your spectacles for you.
A perception problem, not a real problem. You would be paying those taxes anyway, they're just hidden inside the price of the things you bought. This is replacing one tax with another, it is not adding a new tax on top of everything else.
Plus, all of your savings and investments will be tax free -- any tax-deferred (e.g. 401k) investments will really get a nice bonus out of that.
Of the 23% proposed sales tax rate, 8.91% of that will fully fund FICA taxes at today's levels. This includes employer and employee shares.
Nonsense, a new tax on everthing I buy is in addition to what it was before. It's not perception that a new car will cost me a hell of a lot more than if this doesn't happen.
You need to try that old fashioned practice of putting your hand in your pocket and counting your money before and after you buy something.
Family Consumption Allowance. Under the principles that the necessities of life should be free from tax, but that exempting specific items is a bad idea, every person is entitled to a "rebate" (actually a fixed amount paid in advance) of the taxes paid on poverty-line spending -- the poverty line indicating a subsistence level. In essence, this menas that someone spending only at that level pays no ,b>net taxes, even though they have the same marginal rate as everyone else.
I paid my taxes, now you want to raise the taxes on what I buy but you can't see how I would be worse off? I'll get your spectacles for you.
As I pointed out previously, this is replacing one tax with another, this is not piling on at all. It sounds strange, but virtually everyone will pay less in taxes because much of the cost that goes to waste and inefficiency goes away, lowering the overall burden.
Perhaps if you'd have read any of AG's links rather than complaining about them, you'd understand that the price of goods and services are inflated by an average of 20-25% due to the effect of income taxes. Remove income taxes, the price drops. Add the sales tax on top of that, and the price settles down to being within a couple of percentage points of today's prices.
Your effective purchasing power also goes up. The FCA essentially "untaxes" the first X dollars (based on family size) you spend. Your savings becomes tax free. And most of all, you and your descendants are free of the IRS forever.
Your prognosications about future price levels are hypothetical. No sale.
Until it's implemented, everything is a hypothetical. Show me one economic study that shows that what I'm saying won't happen and we'll talk, because there are already studies that back me up.
Ok, let's try it,,,,,, after I'm dead.
The FICA portion is pretty much a wash, yes. The remainder of the savings come from broadening the base of the tax and removing the system inefficiencies. Remember that all taxes are eventually paid by individuals -- the same number of dollars (minus overhead costs, which are much less under the NRST) are going to be collected from individuals either way. We are talking about changing the mechanism, not the amount.
But now you have a perception of higher costs that will reduce spending.
I disagree. People will have more money in their pockets and prices should, on average, show little post-tax change. That sounds like an encouragement to spend rather than a disincentive. I'd be more worried about inflation that I would be about a drop in consumer activity.
The NRST has provisions for conversion of business assets to personal use and vice-versa.
You won't. The IRS thugs will have a new job, kickin in the doors that are left unkicked after the Drug agents are done.
D. Jorgenson, "The Economic Impact of the FairTax" (a report to Americans for Fair Taxation) (Nov. 25, 1996). Replacing the Federal Income Tax, The Economic Impact of Taxing Consumption: Hearings Before the House Committee on Ways and Means (Vol. II), 104th Cong., 2d Sess., (statement of Dale Jorgenson, Ph.D., Chairman Harvard University, Department of Economics on March 27, 1996, at p. 105) (reprinted in Joint Economic Committee, Roundtable Discussion on Tax Reform and Economic Growth, 104th Cong., 1st Sess. 1996 at. p. 79).
I could not find the original '96 paper above on the net, I did find this that was comparing Retail Sales Taxes with the Armey?Shelby flat tax providing a comparable analsys.
Economic Impact of Fundamental Tax Reform
Jorgenson & Wilcoxen 1996 revised 1999
http://www.economics.harvard.edu/faculty/jorgenson/papers/baker.pdf
Page 26.
9. Since producers capital and workers would would no longer pay taxes on profits or other forms of income from no longer pay taxes on wages, prices received by producers under the Sales Tax, shown in Figure 13, would fall by an average of twenty percent in 1996. Figure 14 shows that prices received by producers would fall by an average of twenty-five percent by 2020. The impact of the Flat Tax on prices received by producers is much less dramatic. Prices decline in the range of six to eight percent for most industries in 1996 and five to seven percent by 2020.
Based on a 15% 1996 rising to 21% in 2020 Retail Sales tax with prepaid consumption allowence replacing Income Taxes as compared to the Armey Shelby 1996 Flat Tax with personal exemptions doing same.
The original paper was more specific to the HR25 version of the NRST. I'll do some checking around to see if I can't locate the original paper somewhere and have it made available on the net if possible.
How does the government collect what use to be the employer's portion of FICA? Somebody's got to pay it.
The entire FICA is paid in the NRST 8.09% targeted to replace FICA, 14.91% for replacement of income taxes.
[I don't buy it. This is snake oil.]
That's fine, You asked, the correct answer was provided, and you are entitled to retain your personal opinion.
But incase you are wondering how that can be,
On repeal of all business income and payroll taxes, under competition retail prices fall 20-25%.
The NRST plus the new market price will equal what people pay for personal consumption today.
The average person who pays income and payroll taxes, and buy retail products now, will gain the advantage of their full gross pay check, a monthly Family Consumption Allowence serving the same function as personal exemptions in the income tax.
Those not paying taxes now, would indeed find themselves paying through the NRST, interestingly they would percieve not advantage over the current system however as they would still buy the same amount of goods and service. Such folks just wouldn't have a change from receiving gross pay since they already have that now.
Thus your "deadbeats, drug dealers, and day laborers", I like your euphemism for off the books employements, pay taxes and will not indeed see any real change. They can however apply for FCA, that is if they don't have a problem with government knowing where deliver there check LOL.
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