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.)
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.
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.
Well, the US citizens among them can, at least.
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.
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?
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.
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?
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.
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.
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.
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.
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 dropsThis 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.
"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.
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.
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!
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.
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