Congress Must Pass the Fair Tax Act

CNSNews.com ^ | February 27, 2004 | Mac Collins (R-GA)

[kevkrom]

So, now instead of filing income taxes one a year with deductions, a self-employed person must file business assets once a month to get his "business use" credit? What's the difference?

I read the original question as why someone couldn't just use a "home business" as basically a shell for buying their own personal goods. The NRST provisions on conversion point out that the person would still be liable for taxes.

Now, as for a legit business, if the business owner isn't organized enough to keep business and personal expenses on separate accounts, then yes, they will have a bit of paperwork to do. Otherwise, conversions either way should be relatively rare.

And who is going to investigate whether a business asset is truly a business asset? Sounds like we won't be able to get rid of the IRS just yet...

The sales tax agency, almost certainly from local state, will have this authority. I would imagine that buisness owners would be subject to the occasional audit -- but that's better than 200+ million individual taxpayers.

I also expect that there will be some undetected fraud here. Every system has those who try to "game" it, and this will be no exception.

[ancient_geezer]

Nonsense, a new tax on everthing I buy is in addition to what it was before.

The legislation repeals all income, payroll and gift/estate taxes.

Business nolonger remitting income or payroll taxes means there is no "in addition to what was before", what was before is being repealed under the NRST.

[kevkrom]

They can however apply for FCA

Well, the US citizens among them can, at least.

[balrog666]

Remove income taxes, the price drops.

Why are you still telling this lie?

Individual income taxes will just be paid to the employee, not the state & feds. Result: No change in business costs.

Corporate income tax is less than 20% of individual income taxes. Furthermore they are not paid by Subchapter-S's, LLC's, or many small C-Corporations. Result: No change in small business costs.

[Protagoras]

The tax on a car is $1500 and it's going up to $2500 but there is no new cost to me? You guys take smoke and mirrors to a whole new level.

[kevkrom]

See my #143 for an example that shows how this works without taking corporate income taxes into account. No lies, just a truth that some refuse to accept.

[kevkrom]

The tax on a car is $1500 and it's going up to $2500 but there is no new cost to me? You guys take smoke and mirrors to a whole new level.

Care to show where these numbers come from? The tax on that car is already 20+%, but hidden in the sales price. Removing it and replacing it with a tax that makes up 23% of the price means the price is roughly the same. What part of this is so difficult to understand?

[ancient_geezer]

So what was an increase in a product's cost due to FICA tax is now an increase in costs due to sales tax. Again, it's a wash.

As it should be. It is a replacement tax, not a wholesale repeal of federal government.

But now you have a perception of higher costs that will reduce spending.

Lets see, more dollars in the pocket from receiving gross pay instead of afterwithholding pay.

Putting out the same dollars for consumption+tax that is done today.

And that will reduce spending alright.

Increased savings and investment by individuals and more the electorate jumping up and down on Congress Critters for lower taxes and less government spending is the most likely scenario.

[Protagoras]

What part of this is so difficult to understand?

The part where you predict the future, with my money.

Removing it and replacing it with a tax that makes up 23% of the price means the price is roughly the same.

In addition to your crystal ball projection, you just admitted my taxes would go up. The car would cost me 3% more of my ALREADY taxed money under your dream plan. What part of that is so difficult to understand?

[ancient_geezer]

With a NRST, how will you avoid people setting up a business in their homes and buying everything they need tax free?

Businesses require certification if they are to purchase without paying the NRST.

If you want to set yourself up as a retail business, be open to reporting requirements and audit of your operations as a business I guess you could. I suspect you had better be the business you claim to be however or expect a few problems buying things for your personal use "taxfree" as opposed to "legitimate business purpose".

Unlawful conversion of business assets is always a criminal enterprise akin to fraud, you expect it not to be?

You would be better off making more money be being a real business and quit worring about paying the same amount for (goods and services plus NRST) as you do today in your consumption.

But then there are always those willing to put there head on government's block no matter what system is set up. Have no fear, jails won't be close down for lack of customers just because we get a new tax system.

[kevkrom]

In addition to your crystal ball projection, you just admitted my taxes would go up. The car would cost me 3% more of my ALREADY taxed money under your dream plan. What part of that is so difficult to understand?

Actually, no I didn't. I said 20+% -- the 20-25% range is a conservative estimate. Some economists actually estimate the burden of taxes to be higher than that. On some products or services, you'll see a slight decrease in after-tax costs, on others you'll see a slight increase. On the whole, it should be a wash.

[balrog666]

See my #143 for an example that shows how this works without taking corporate income taxes into account. No lies, just a truth that some refuse to accept.

You said "income taxes". My point was that income taxes are paid by employees and no change in income-tax-law is going to change business costs.

As for FICA, yeah, right. I'll even throw in state and federal unemployment taxes. That's a total of just under 10% on my labor costs.

If my labor costs are 30% of my total costs, that's a 3.0% change in my costs. That's subsumed in a one-year cost-of-living increase. Result: No change in my prices.

Finally, my compliance costs won't change since I will still have to report wages paid to the Social Security Administration. Admittedly, I won't have to fill in a 941 or 940 form, so that'll save me 20 minutes every 3 months.

[ancient_geezer]

And who is going to investigate whether a business asset is truly a business asset?

The same state tax authority folks that do that job right now. Just no federal IRS presence breathing down the neck of every single individual in the nation.

Being a business is a choice one makes in full cognizance of state tax requirements, why should that change under a new system of federal tax?

Sounds like we won't be able to get rid of the IRS just yet...

IRS a federal agency goes bye bye, the state tax authority just does the job it does anyway keeping track of its retail businesses.

IRS does indeed go, state tax people keep doing the same as always.

[kevkrom]

Quote me out of context, and you can make me say whatever you like. I originally said:

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

This is the whole kit and kaboodle, not just individual or corporate taxes per se. That includes payroll taxes, income taxes, compliance, etc. for you and any of your suppliers. Many of these effects grow over multiple layers of production.

If your business is the exception to the rule, then it is. As I said, the savings is on average, that means in some cases it will be more, and in other caes, it will be less.

[Your Nightmare]

What is the burden of taxes for a corporation that isn't making a profit and therefore doesn't pay income tax or gets a tax credit? Does this theory suppose they reduce the retail price of their products?

[Final Authority]

I have been an advocate of eliminating the IRS for years but the so-called fairtax is not going to do it. I wrote this a while back and thought I should re-post it for all to see the error of their ways with respect to the so-called fair tax. BTW, using a legal dictionary, please cite a legal definition of "fair". You nor I can, because it doesn't exist.

There will be a steady stream of so-called FairTax supporters copying and pasting evidence that their tax is best but of late they have backed off on one important detail I think. For many the idea of a sales tax is to eliminate the IRS but the FairTax plan intends to re-imberse "taxpayers" monthly to keep progressive alive. The only way this would work is if everybody who wants a monthly check would have to prove they made money and spent it. Who wouldn't want a check? Who could afford to opt out of the system? Only the very rich is who or still, the criminal earner is the answer. There would have to be a government entity collecting this data, subject to fraud, and to pay the checks. The monthly checks would make everybody tied to the government as the liberals always hoped for with programs like social security and the information collected by the government would have to be verified and audited. It seems to me that the government tax collecting body would have to be even larger than it is now.
The big question for me however is that, why would congress scrap the income tax entirely? Americans living abroad still would have to be taxed and since they aren't spending in the USA they would have an income tax imposed. Liberals would soon see that even with a monthly check the sales tax wouldn't be progressive enough without imposing an additional income tax on the rich in society. For many of us if you want to know who the rich is just look in the mirror.

The ultimate solution is to go back to the US Constitution and tax Americans only for those federal functions that are the prime mission of the federal government. That is to facilitate commerce (roads, courts, FDA, USDA, etc.) and for national defense from enemies foreign and domestic. If states wish to tax for social programs in addition to the things states do that is fine. Redistribution of income from those who produce to those who sit on their butts is not a constitutional mission of the federal government. But how else can one buy votes?

[kevkrom]

What is the burden of taxes for a corporation that isn't making a profit and therefore doesn't pay income tax or gets a tax credit? Does this theory suppose they reduce the retail price of their products?

"Employer's share" of FICA. Accounting costs above that required to run the business. Benefit programs to help employees avoid taxes. Lost opportunity costs. Higher interest rates. And so on.

In many cases, businesses don't post profits even when they are making money. They either put money in some form of deductable tax shelter or have "carry-over" losses from previous years -- especially true for start-ups in their early years of profitability. Many of the "losses" you see are accounting tricks to avoid taxation.

[balrog666]

If your business is the exception to the rule, then it is. As I said, the savings is on average, that means in some cases it will be more, and in other caes, it will be less.

I have owned and operated a number of different types of businesses. In fact, my model is the norm. And 10% of payroll is an average number.

Nobody pays that mythical extra 15-20% of total costs that you need for your argument about compliance costs. In real life, I don't, my suppliers don't, my business customers don't. Nor do they do so in any business outside of the Fortune 500.

[Protagoras]

Actually, no I didn't. I said 20+% -- the 20-25% range is a conservative estimate. Some economists actually estimate the burden of taxes to be higher than that. On some products or services, you'll seeI PREDICT a slight decrease in after-tax costs, on others you'll see a slight increase.

On the whole, it should be a wash.

And you will send me the cash if it isn't?

I'm a Investment advisor, among other things, and next year I estimate you will make 1000% on your money if you pay me a 5% management fee. So lets go, send it in!

[kevkrom]

The only way this would work is if everybody who wants a monthly check would have to prove they made money and spent it. Who wouldn't want a check? Who could afford to opt out of the system? Only the very rich is who or still, the criminal earner is the answer. There would have to be a government entity collecting this data, subject to fraud, and to pay the checks. The monthly checks would make everybody tied to the government as the liberals always hoped for with programs like social security and the information collected by the government would have to be verified and audited. It seems to me that the government tax collecting body would have to be even larger than it is now.

Not so. The FCA is paid based strictly on family size and is the same for all US citizens (ok, different amounts for adults than children, but other than that, the same). No one has to prove that they made any money. No one has to prove they spent it.