Fair Tax?

[lewislynn]

The savings realized through the implementation of the NRST filters through the entire supply chain, not just the cost of manufacturing the product.

The so called “supply chain” of hidden taxes.

Manufacturer’s Vendors:

Vendor A) Sales price: $100,000
Cost of goods sold: $90,000
Profit/gain: (10%) $10,000
Income tax on profit/gain @ 30% rate: $3,000
Tax as percentage of gross: 3%

Vendor B) Sales price: $100,000
Cost of goods sold: $90,000
Profit/gain: (10%) $10,000
Income tax on profit/gain @ 30% rate: $3,000
Tax as percentage of gross: 3%

Vendor C) Sales price: $100,000
Cost of goods sold: $90,000
Profit/gain: (10%) $10,000
Income tax on profit/gain @ 30% rate: $3,000
Tax as percentage of gross: 3%

Vendor D) Sales price: $100,000
Cost of goods sold: $90,000
Profit/gain: (10%) $10,000
Income tax on profit/gain @ 30% rate: $3,000
Tax as percentage of gross: 3%

Vendor E) Sales price: $100,000
Cost of goods sold: $90,000
Profit/gain: (10%) $10,000
Income tax on profit/gain @ 30% rate: $3,000
Tax as percentage of gross: 3%

Total Vendor sales (A thru E): $500,000
Total cost of goods sold: $450,000
Total (vendor) profit/gain: $50,000
Total taxes paid (vendors A thru E) $15,000
Total Tax as percentage of gross (vendors A thru E): 3% (NOT 15%)

Total possible percentage of gross reduced for NST…3%

And so it goes into infinity…..

Oh, you say what about the payroll tax?

Lets make the stretch that the entire “cost of goods sold” from ALL 5 vendors is US labor subject to payroll taxes (not likely these days), no materials.

I’ll also make the stretch that employers won’t have to give up their half of the payroll tax to their employees.

The employer portion of FICA (payroll taxes) is 7.65%…

So, 7.65% of $450,000 (.0765 X $450,000) = $34,425

What percentage is $34,425 of $500,000 (gross)?…A) 6.9%

Total possible percentage of reduction from all vendors: 9.9%

NST (gross) increase of prices: 30%

Net loss to consumer 20.1%

Oh yea and those “compliance costs”….businesses would no longer have to might not have to fork over $60.00 for a TurboTax program every year.

[ancient_geezer]

and raises the payment for imported retail products.

Slightly wrong on this, thinking it out abit, a given import still must compete with domestic products, quality for quality.

As a consequence pricing will tend to follow what ever domestic competition leads. An import can see a hit on profitability, because of more competitive domestic pricing NRST.

If an import's price is greater than an equivalent domestic product, it is going to loose market share if it does not find a way to match the compitition with NRST imposed.

Guaranteed, that lewislynn's hypothetical 83% import profit margin is going to get trimmed down under the NRST to maintain competitive position against domestic products.

[ancient_geezer]

Total Percentage of price reduction from vendors A thru E to manufacturer for NST: 2%

If businesses are operating at 83% profit they don’t need a sales tax to reduce their costs.

 

I have never made but one prayer to God, a very short one: "O Lord, make my enemies ridiculous." And God granted it. -- Voltaire

 

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.

All wages and the taxes on them are paid for out of sales receipts to business,(i.e. consumption expenditure).

• Total fed taxes as reflected through gross family income is 23.5% (taxfoundation)
• Total state taxes reflected through gross family income is about 10.2% (taxfoundation)
• The current net personal savings/investment rate is about 1.2%.(BEA personal income)

family consumption expenditure is gross income less taxes and savings.

Federal tax revenues collected as % of family consumption expenditure = fed/(1-state-fed-savings) =

23.5/(1-.235-0.102-0.012) = 36.09%

 

If we add in the cost of federal tax compliance, planning, litigation & enforcement, the percentage that truely represents the burden on the family due to the Federal income/payroll tax system, product prices are increased by more than 55% over taxfree prices.

Where Have All the Dollars Gone?
How the government robs Peter to pay him back.
By economist 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.

Current total Federal tax revenues are about $1900billion, more than $1,000 billion additional dollars are added on onto consumption prices due to the business costs of complying with the federal income/payroll tax laws.

(Payne '97, Pilla '95, AGCCA 2000, Williams 2000)

The percent total current federal burden (taxes + compliance costs) of consumption dollars = 36*(1900+1000)/1900 = 54.95% economic burden added on to base retail(i.e. taxfree) prices.

Too bad that citizens don't get a receipt detailing those "hidden sales taxes" buried in their consumption purchases. If they ever did, some of those 70% of the public clamoring for more from government, thinking someone else foots the bill, might be tempted to change their mind.

[Joe Bfstplk]

I'm for it if I can buy tax-free over the internet!

[Principled]

I paid tax on my earnings over the years and saved quite a bit of what was left instead of spending it all. With the national sales tax, I'd now have to pay taxes on the same money AGAIN as I spend it?

Yes. But didn't you already know that your earnings and savings were going to be taxed again when spent? You were already going to pay an equivalent amount of federal tax AGAIN when you spent it anyway.

The federal income tax inflates all prices of goods (new and used) and all prices of services by 22% or so. You just didn't see it itemized on your purchase receipt.

There will be no significant change in the amount of federal tax paid at purchase point. That you would assert otherwise indicates that you are unaware of the existing portion of ALL prices that is actually just federal tax.

Folks who were smart, worked hard, and saved for retirement will NOT have to pay anymore in tax at the register than if we kept the income tax. They will, however, be able to continue hard work and savings to accumulate wealth tax free. They will also be able to pass their wealth on to whomever they choose - with zero tax consequence. They will also be able to recover taxes paid on necessity-level spending. They will also receive paychecks free of any federal deductions. Their SS will no longer be taxed.

Well, shoot. Just look here. They make some good points in just 5 paragraphs.

[Principled]

Guys, you have the wrong idea about investments with respect the nrst.

It is NOT the case the folks living off investments will be hurt. Indeed they will be better off.

here and here give some quick points why. Check 'em out. They're both less than one page long.

[Principled]

Even these people need washers, dryers and autos to drive to work. They can't afford the increase such a tax would place on the price of modern day necessities.

Well there will be no increase in prices of modern day necesities. In fact there will be no increase in any prices. There will be price stability. What made you think prices would go up anyway??

To the wealthy, it's nothing.

Well, since there will be no increase in prices, this is trivial. But the class warfare is tired.

Afterall, their incomes have gone up from 10 to 29% according to Lou Dobbs.

You get your "facts" from CNN? That error in judgement aside, isn't it GOOD that folks get richer? Are you saying you don't want anyone to get richer??

They're getting much richer.

That's the idea. Make more money. Hire more people. Make more goods. Sell more stuff. Make more money...etc.

That is untrue of the rest of us.

Speak for yourself, pitiful one. If you want to make more money nothing is stopping you but yourself. But from what you've said, you think it's bad that some people get richer. But your post also connotes your own desire to get richer. What's the deal? You dislike folks who become wealthier but you want to become wealthier yourself?? You have some issues, sir.

Our meager 2% hasn't kept pace with the increases we've all faced.

If you're not happy with your place, why not find another place instead of moaning about other people's success and comparing it to your own perceived failure? C'mon man - chin up!

It disproportionately hurts lower incomes because they just do not have the money to pay extra.

Again, this assertion is based on an assumption that is flawed at a fundamental level. Nobody will have to pay extra, therefore your assertion is baseless.

[Neets]

Hello!!!

How is your husband doing?

http://www.freerepublic.com/focus/f-news/1086363/posts

I keep asking you for an update, but you must be missing those posts and my freepmail.

[ImaGraftedBranch]

And then the 150K guy purchases a 70K Mercedes and pays 15% tax on that which comes up to .07 of his income. So it all works out, doesn't it?

Thanks, I was waiting for someone to point out the logical next step of the guy with more cash.

[phil_will1]

"Let me give you another side. They have estimated that there are upward to 50 million illegal aliens, drug dealers and other illegal money earners in this country that pays no income tax."

You are correct, Wassup, illegal immigrants (as well as foreign visitors) would go onto our tax rolls for the first time. But its even better than that. Because they would not be eligible to file for the rebate (FCA/PCA), they would, unlike US citizens, be paying the sales tax on dollar one of their taxable purchases. IOW, illegals and foreign visitors would be paying taxes at a rate that is disproportionate to the rest of us.

[phil_will1]

"The only people for whom it really would be a problem would be the "low income" people,..."

Actually low income people do extremely well under the FairTax. That is because the market research that went into developing the FairTax indicated that Americans are overwhelmingly opposed to a regressive system.

As previously stated, the rebate/PCA removes the tax effect of consumption spending up to the poverty level. However, families spending up to the poverty level will get the benefit of the decrease in (pre-tax)prices as the cost of the current system is removed by competiton from the pricing mechanism. In effect, families spending at exactly the poverty level will see a substantial increase in their purchasing power. Even those spending at twice the poverty level for their size families will see some increase in purchasing power. This doesn't even count the effect of keeping your entire paycheck. The FairTax is the best thing that could happen to lower income individuals.

[kevkrom]

Actually low income people do extremely well under the FairTax.

Don't forget to add in that even if they pay $0 in income taxes, low-income people still pay 7.65% FICA taxes. Not having to pay that would put an additional 8.3% of their current take-home pay back into their pockets.