Kerry Raps Bush's National Sales Tax Quip

AP on Yahoo ^ | 8/12/04 | Nedra Pickler - AP

[NormsRevenge]

CARSON, Calif. - John Kerry (news - web sites) said Thursday that President Bush (news - web sites)'s musing about a national sales tax is an insult to financially struggling voters and would amount to "one of the largest tax increases on the middle class in American history."

The Democratic presidential nominee, during a speech at California State University, Dominguez Hills, tried to reverse partisan stereotypes by portraying the Republican president as the tax raiser and himself as a tax cutter.

Kerry said if Bush wants to create a national sales tax without increasing the deficit, people will end up paying at least 26 percent more for purchases on top of state and local sales taxes.

"We know exactly who that's going to hurt," Kerry said . "That's going to hurt small business. It's going to hurt jobs. It's going to hit the pocketbooks of those who need and deserve tax relief most in America."

Bush has suggested that overhauling the tax code would be a second-term priority if he is re-elected. While campaigning in Florida Tuesday, he said replacing the income tax with a federal sales tax is "an interesting idea that we ought to explore seriously."

Kerry seized on Bush's comments even as White House officials downplayed the idea and denied that any such plan is under consideration.

Kerry said Bush has failed to offer a plan for improving the economy in his second term. He said the president's tax cuts have resulted in a tax increase on the middle class because their state and local taxes have been increased to compensate for loss of revenue from the federal government. He said a national sales tax would only further burden the middle class.

"I call it one of the largest tax increases on the middle class in American history," Kerry said. "And this is coming from an administration that has offered almost no new ideas for our economy, and the few ideas that they have offered have only hurt middle class families. This new idea is no different."

Kerry repeatedly invoked the memory of better economic times under another Democratic president, Bill Clinton (news - web sites). He said Clinton's advisers were helping craft his economic plan and that he will be "a champion for the middle class" by cutting their taxes while lowering the deficit.

Kerry said he would offer tax breaks to help pay for health care premiums, child care and college tuition, paid for by repealing Bush's tax cuts for people earning more than $200,000 a year.

"They will go back to paying the same taxes they paid when Bill Clinton was president," Kerry said. "That was a time when every American rich got richer."

Bush campaign spokesman Steve Schmidt said Kerry cannot pay for his tax plan.

"John Kerry's numbers don't add up," Schmidt said. "He has spent his tax hike more times than anyone can keep track of."

He was also fighting Bush campaign's charge that Kerry has a long history of voting for higher taxes during his 19-year career in the Senate.

[be4everfree]

The problem is what the definition of "INCOME" will be and what the definition of "CONSUMPTION" will be ?

If I own ten rental property's = I pay a consumption tax.

If I am a renter, is my rent equal to consumption ? and then taxed ?

As a Landlord/Investor can I depreciate (damage done by tenents), If not, why would I want to be a landlord ?

Would landlord's raise rents to cover the "potential damage done ? ...........Insurance ?

Is the premium paid for insurance equal to consumption ? and therefore taxed ?

Is the Insurance co.'s premiums collected taxable ?.........

What is Their consumption ?........
Claims paid ?..........

What would they do to reduce their tax burden ?

Why would I want to be a landlord ?

Just a Thought

[Remember_Salamis]

"The national sales tax IS a bad idea. The most absurd thing about it is that when they calculate the rate, they do so in such a way that it appears to be smaller than it is.

For example, let's say the tax rate is 30%. If you buy something for $1.00, you pay $.30 in taxes, for a total of $1.30. But when proponents of the sales tax calculate the tax rate on that purchase, they divide the amount you pay in tax, $.30, by the TOTAL, $1.30, which makes the tax rate look like 23%. Very dishonest way to advance the agenda."

-- It's not dishonest, and I'll tell you multiple reasons why:

1. THe National Retail Sales Tax (NRST) would replace the income tax. The income tax, as you know, is quoted in TAX-INCLUSIVE Terms. Usually sales taxes aren't. But to fairly compare a replacement, you use to use the same standards. Here's an example -

Let's say your income tax rate is 25%. that 25% is tax-inclusive:
Income before it's taxed - $100,000
Income after it's taxed - $75,000, a 25% tax-INCLUSIVE rate
Now, if we were to quote it like we do a standard sales tax, we would calculate (1) taxes paid over (2) remaining income after taxes ($75,000).
That's a 33.33% tax-EXCLUSIVE rate.

Now, to fairly compare a NRST to the income tax, either the income tax is going to have to be quoted in different terms, or the NRST is going to have to be quoted like an income tax. We want to compare apples to apples, it's that simple.

2. Another reason is because how the tax is going to be remitted to the government. What is going to happen is the government will tax 23% of a retailers TOTAL SALES. The retailer simply raises his prices to compensate.

Two good reasons to quote it this way.

[Remember_Salamis]

John F'ing Kerry has NOT READ THE BILL!

That doesn't really surprise me since he rarely votes anyway.

He is not aware of the monthly Family consumption allowance, which would make the NRST actually PROGRESSIVE. Every american AT the poverty line will pay a 0% tax rate, and it will slowly progress from there.

He WILL have egg on his face when that becomes public knowledge.

This is a HUGE opening for Dubya to make Kerry look like an ill-informed, pro-IRS JACKASS.

[Remember_Salamis]

"One way (there are others) to make a national sales tax work is to give low and middle income Americans a sales tax rebate based on their income. Higher income will not get any rebate. Set it up to be an automatic thing that occurs every month and few will complain.

The funny thing about all of this is that there are so many low and middle income people out there that truly believe that the wealthy never actually spend their money. They think the wealthy are like Scrooge McDuck and just have rooms of money laying around when in fact it is being spent hand over fist just like any other income class, just on much more expensive items such as business investments, travel, real estate, etc."

-- You know what? The legislation in the House and Senate ALREADY call for for a rebate! Every american at the poverty line will pay a 0% tax rate. That includes payroll taxes. It will progress from there. Why? because the rebate will make up a smaller and smaller porportion the higher up the income ladder you go. Read the bill:

http://thomas.loc.gov/cgi-bin/bdquery/z?d108:h.r.00025:

[Remember_Salamis]

"As it happens, I have no idea why we're even debating something that has the support of about 50 members of the House and as many as two members of the Senate. It's never going to happen, so why even bother."

-- I've got four reasons why it will pass:

1. Tom DeLay, the House MAJORITY LEADER, is a sponsor of the bill. The GOP sheep will follow, but it takes time for them to stick their necks out.

2. Speaker Hastert. He's come out publicly supporting it.

3. Dick Cheney. A couple years ago he said he would support such a plan.

4. President Bush. He likes it too.

Wanna see who's on board and who's not?

There's 61 congressmen officially supporting the legislation, and 57 congressment leaning towards it. That's 118 supporters.

There's only 28 congressmen officially against the legislation, and 40 congressmen leaning against it. That's 68 official opponents of the bill.

253 congressmen "Will Not Committ".

So, supporters outnumber opponents 2-to-1, with over 1/2 undecided. I know the numbers add up to 439, that's because the 4 non-voting members from US territories all oppose the bill. So, it's really 118-64.

Go here for a sheet of supporters:

http://www.fairtaxvolunteer.org/scorecards/house.pdf

[Remember_Salamis]

"After all, the income tax is one of the planks in the Communist Manifesto."

-- The second plank in fact.

[Remember_Salamis]

"The big problem is that a sales tax hits the poor harder than it does the rich. Therefore I suggest that this be offset by rebating to EVERYONE, rich or poor, an amount equal to the tax that would be paid by a person at the poverty level. The really poor end up paying no tax at all. For everyone else, the more you spend, the more tax you pay."

-- It's in the bill already (HR 25).
http://thomas.loc.gov/cgi-bin/bdquery/z?d108:h.r.00025:

There's 61 official sponsors of the bill with 57 "leaners" for a support of 118 congressmen. Only 28 officially oppose the plan and only 40 are "leaning" against it. That's an opposition of only 68!

118-68, with 249 who "will not committ". It looks pretty good.

[babygene]

"If it replaces the current personal and corporate income taxes, several good things result."

You missed the biggest advantage. It taxes foreign made goods exactly the same as American made goods. To that extent it becomes an import duty, making it cheaper to manufacture in the U.S. ...

[Your Nightmare]

Actually it's not a matter of preference whether to use the inclusive or exclusive tax rate for a sales tax. Using an inclusive rate for a sales tax is just wrong. Just like using an exclusive rate for income tax would be wrong.

Because an income tax is subtractive, if you change one of the tax rates being applied, the other taxes still collect the same tax because the amount being taxed (gross income) doesn't change. So if a person has $50,000 income, adjusting the income tax rate or the payroll tax rate does not change the fact that those taxes are being applied to $50,000. The inclusive rate is natural and correct for a subtractive tax like the income tax.

A sales tax is additive, if you change one of the tax rates being applied, the other taxes collect more or less tax because the amount being tax (gross payment) has changed. The inclusive rate is unnatural and incorrect for a additive tax like the sales tax.

Example:

Tax Inclusive General Revenue Rate	14.91%
Combined OASDI & Medicare Rates	8.09%
Total Rate	23.00%
Gross Payment on $1000 item	$1,298.70
Amount going to General Revenue   (14.91% x $1,298.70)	$193.65
Effective Tax Exclusive General Revenue Rate	19.37%

Now with an increase in the combined OASDI & Medicare rates (the ones set by the SSA) and keeping the statutory 14.91% general revenue rate.

Tax Inclusive General Revenue Rate	14.91%
Combined OASDI & Medicare Rates	10.09%
Total Rate	25.00%
Gross Payment on $1000 item	$1,333.33
Amount going to General Revenue   (14.91% x $1,333.33)	$198.80
Effective Tax Exclusive General Revenue Rate	19.88%

So you have a general revenue tax increase without changing the rate. I really don't see how this situation is tenable.

This clearly illustrates that exclusive rate is the only correct rate to use for a sales tax. If you want to compare the tax exclusive sales tax rate to the tax inclusive income tax rate, the conversion is very simple.

Now a lot of the FairTax supporters have become very dogmatic about the inclusive rate and y'all will be inclined to go into attack mode. Instead I would suggest you take a close look at what's going on in this illustration and ask if having a rate that has a slight relation to the current system that y'all want to abandon and have forgotten worth the effect shown here. I haven't seen this effect shown anywhere previously (it may have been, but I haven't seen it) so I'm guessing most of you weren't aware of it.

Changing to the exclusive rate doesn't change any of the fundamentals that y'all believe make the FairTax such a great idea, but it's obvious that the way the rate is expressed will have to be changed before this becomes law. The sooner the better for your cause.

[Your Nightmare]

Don't forget the Senate:

http://www.fairtaxvolunteer.org/scorecards/senate.pdf

(3 for)

[sixmil]

What's even more absurd is that they would never suggest raising tariffs to 30% or it would kill trade. Somehow a 30% sales tax wouldn't kill sales though.

[lewislynn]

ask if having a rate that has a slight relation to the current system that y'all want to abandon

They may want to, or claim to want to abandon it, but suspiciously, you won't find bigger defenders of the income tax either.

[Taxman]

Hanoi John Effing Kerry's dumbass remarks about the Fair Tax may be just what we NRST supporters have needed for years!

Keep it up John -- you are the best publicist we could ask for!

[Remember_Salamis]

Everything you said is meaningless if you addressed my other reason for quoting it inclusively: how it will be collected:

On the retailer side it will be 23% as well. In it's simplest terms, the NRST will tax 23% of a retailers TOTAL SALES. Make $10,000 in sales this month? Remit $2,300 to the government. Retailers charge whatever the hell they want to make up for the tax burden. State and local sales taxes can be taxes this way too; their rates would have to slightly adjust. Most states are going to modify their tax system to accommodate the new federal system anyway.

In fact, it will make tax collection streamlined to the point where it's painless.

OK, you're Bill the Retailer. The Feds say they want 23% of your sales, the State wants 3%, and the City/County want 1.5%. You (Bill the Retailer) then raises his prices enough to cover these costs. 27.5% of your sales get remitted instantly from the register.

Quick. Simple. Easy.

As for the receipt printed off, it looks like this:

---

Sticker price: $100
23% FED: $23
3% STATE: $3
1.5% CITY: $1.50

---

Total Taxes: $27.50

---

Item X: $72.50

---

Total Paid: $100

---

Customers are STILL reminded every time they buy something how much of that item was taxes.

It's not hard to use subtraction instead of addition.

It may be easier to think about it as a "Single-Layer VAT".

-- Remember, our $100 sticker price is merely the hypothetical final price after the retailer raises his prices to compensate for the tax burden. If Bill the Retailer needed to raise prices to $110 instead, then there would be a $110 sticker price.

[Remember_Salamis]

Give the Senate time. Spineless RINOs follow suit eventually.

Here's a quiz: How many true conservatives can you count in the Senate:

Zell Miller
Chambliss
Santorum
Frist
Kyl
McConnell
Ensign
Inhofe
Graham
Cornyn

What's that, 10? Hatch is a moderate.

All of our conservatives are in the House; Senators ALWAYS go which way the wind blows any way

[Your Nightmare]

Senators ALWAYS go which way the wind blows any way

I'm afraid you have that backwards.

[kevkrom]

Of course, with a national sales tax you also pay sales tax on hospital bills, college tuition, and things like that. I find this detail curiously absent from most rhetoric extolling the benefits of a national sales tax.

You're right on hospital bills, but wrong on tuition -- tuituon is considered an investment, not a service, and is not subject to the NRST.

[balrog666]

Actually the price of everything should decrease if the effect of corporate taxes are no longer calculated into the price of goods, even with the sales tax included. Stuff that costs $1.00 now, includes about $.50 in taxes in the price. The final cost of the product with a 30% sales tax would be $.65.

Actually the price of everything should decrease SLIGHTLY if the effect of corporate taxes are no longer calculated into the price of goods, even with the sales tax included. Stuff that costs $1.00 now, includes about $.10 in taxes in the price. The final cost of the product with a 30% sales tax would be $1.17.

[ancient_geezer]

Stuff that costs $1.00 now, includes about $.10 in taxes in the price. The final cost of the product with a 30% sales tax would be $1.17.

Actually, stuff that costs now include more 20-25% in taxes and associated costs of tax compliance which would go away with repeal of the those taxes all up and down the chain of production from raw materials through manufacture & final sales.

Thus the final total cost of a product with a 30% sales tax added would be between $0.97 and $1.04

Considering that one receives thier full gross pay (no witholding or SS/FICA) that becomes a strong net plus to the average person.

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,
• Employee 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) = $586.5billions

Adjust for the approximate reduction of interest & cost of tax compliance (

Adjust for a conservative $800 billion cost of tax compliance, (The Flat Tax; Hall & Rabushka, '95,What the Income Tax Costs the American People: quoting James L. Payne estimates 65cents for each dollar of revenue collected).

• Total tax related factors affecting consumption price = (800 + 586.5) = $1386.5billions

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

33.6*(1386.5/1945) = 23.9% reduction in consumption prices

Which more than verifies the Jorgenson empirical study of 22% fall in producer prices.

The two sources are in reasonable agreement, and I see 20-25% a reasonable value to expect retail 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.