Posted on 08/29/2004 7:17:58 PM PDT by det dweller too
Income Taxes - The fool’s game
The political season is heating up again and the politicians are busy playing the fool’s game of appealing to our darker instincts. They call on us to tax the rich and everyone cheers, except a few that are immediately labeled as selfish and thereafter ignored. In the end, the politicians usually get their way by convincing the majority to raise income taxes on the rich.
The reason it is a fool’s game is the sad fact that the income tax operates as a hidden fixed cost on domestic business. If you put a large income tax load on the business owners, even if you deduct 100% of the income taxes from the workers, the price of the products they make still goes way up. In the past this was met with a yawn and a shrug as everyone paid the new price, but today there are alternatives. The businessman today that loses profitability because of higher taxes simply can turn to sources outside the US for products that are beyond the reach of our income tax laws. In this way, the businessman can support the tax change voted in by the majority while at the same time maintaining his profit margin by switching to imported products that undercut the pricing from domestic businesses. As the domestic businesses try to compete, they look for ways to cut costs. Since the tax costs cannot be avoided, the only area left to cut is the cost of their domestic labor. In the end it is the majority who voted on taxing the rich that end up losing their jobs, benefits, and wages.
The only effective way to quit this fool’s game is to stop hiding the cost of income taxes in our domestic products. Instead of income taxes, we should consider a simple excise tax on all products sold in this market, regardless of where they are made. Note that this is not a sales tax or value added tax, which can be abused by taxing the same product multiple times. Taxing a product once when it is brought to market takes the cost out of the product itself and puts it into the act of marketing the product here. Import and domestic products marketed here would be taxed at the same rate and exports would not be taxed at all. This will remove the hidden cost penalty that have been causing the loss of jobs in the US and immediately improve US global competitiveness.
F. Kelly
Canton, MI
I fear you are correct in that assessment.
What is most depressing is to run into those who argue that we should maintain the current system to force the nation into collapse and that violent revolution.
I suspect such folks have never experienced what real anarchy is all about.
I was having those thoughts not to long ago. Luckily, I realized that all is not lost already and if support can be gained for some real change, then that violence can be avoided. I have sent quite a few people to lurk on the heated discussion threads around the NRST and most of them are supportive of the effort.
I think a real grass roots opportunity is bubbling with this one. Yet, I am still trying to accumulate some "hard" assetts.......Just in case...
Send these folks an email and they'll put you in touch with people in your area. Thanks for your interest.
info@fairtax.org
LOL, that's just abiding by eht Boy Scout's motto.
1)
Every advantage you list about the NRST can also apply to a national excise tax; the excise tax would be even easier to administer since it could be paid at the distribution point instead of thousands of cash registers. We do excise taxes on cigarettes and liquor and gasoline now and it is not hard to handle. The excise tax also doesn't zing you each time you purchase something by showing you the before and after costs on the receipt. Many here think that is a good idea, but you do NOT persuade people by zinging them. The reasoned arguments can get some people to reluctantly go along. People will know that an excise tax is being included in the price, but it will just not zing them.
2)
The original point in the article is that the current income taxes are hidden in our domestic business costs so that the average citizen doesn't realize he is paying them each time he purchases something, even if he pays 0% income taxes directly. The reason the politicians have been able topush them up so high, currently over $2 trillion and growing, is because it is so well hid. I think the first step in changing to either the NRST or an excise tax is to make the case to joe six-pack that he is currently paying the tax with his purchases and lately with his job because the switch to imports hits the lower wage people first.
You don't persuade people by hiding the truth from them either.
You point to the original article suggesting that an excise tax be put on the product when it enters the market. You are embedding the cost again, hiding it from the consumer who is the ultimate tax payer, and placing it on business. What's the point?
Be honest about it and the constant reminder of the cost will make it harder for politicians to raise the rate.
Remember, the tax isn't about the product's cost. It's about the cost of government.
I hope others who are more eloquent will answer as well.
You are embedding the cost again, hiding it from the consumer who is the ultimate tax payer, and placing it on business.At least 30% of the taxes that would be collected by the FairTax will not be paid by citizens at the cash register, it would be paid by the federal, state, and local governments. The citizen will only see this hidden, embedded tax in increases in their state sales tax, their property tax, and state income tax.
1. Its simpler. You would be collecting the tax from a small number of distributors or wholesalers instead of a very large number of small and medium size businesses That would drop the cost of administering it way down.
2. It would be far less intrusive. With a NRST every small businessman may be subject to audits. Also as individuals, if you sell your car or have a garage sale you may get a visit or a call by the IRS. With an excise tax, the tax is paid once at the distributor. That would also allow the IRS to get smaller. And therefore the tax is less "on business" than a sales tax.
3. It is flexible. A NRST would have ONE rate for everything. With an excise tax, as we do today, you can have different rates based on the comodity, high on sin taxes like liquor and cigarettes and low on produce and food.
Apparently, the price of products and services to government are immune to the laws of supply and demand. When the cost of the embedded taxes goes away, it goes away for government too. With the cost coming down, there is no legitimate reason for other taxes to rise to offset it.
Eternal vigilance is still required. Government mus still be held accountable.
The IRS processes 140 million individual returns now. The states, who will have primary responsibility for collection and auditing business, are already doing so in most states, so it's nothing new for them. How hard is it to process (sales X xx%)?
Under the FairTax, the IRS is gone. Under the FairTax, you can sell your car to anyone and no one cares because used goods are not taxable. No tax, no audit.
What you tout as a benefit is a huge detriment. Varying rates open up the system to what we have now -- political bickering, lobbying for favored status, vote selling and buying. The FairTax has no exceptions, no exemptions, no deductions.
Having one rate provides uniformity, fairness, and simplicity.
It seems that you are passionate about an excise tax. It's also probably a fairly good plan. Considering that the FairTax has been around and talked about for almost ten years and is gaining ground -- in the public and Congress; considering that there has been millions spend to study the effects, costs, and benefits of the FairTax; considering that 'our' plan has the support of House leadership; who do you know that can finance your plan until it reaches the level of acceptance than 'our' plan has? Who will champion it?
Do we really want to wait another 4 or 6 or 10 more years when this plan (which I think you'd agree is pretty darn good) could be passed in 2006 in the House? Bush will sign this plan. Will the next president sign your plan?
Finally, what rate would you have to charge to provide the revenue needed to run the leviathon? Will it cover the expenses needed to sustain the viability of the SS and M/C systems? How will it handle the regressivity that the demogogues will target as the reason to shoot your plan down? Do you exempt certain products or categories of products?
But you say that the different rates possible in the excise tax open it up to political gimmicry. Then you tell me that selling a used car is not covered in the NRST. Well if I buy a used car now I have to pay state sales tax on it, so the lack of it in the NRST is also a form of gimmicry .
What I am trying to do is take a good idea and refine it. I can certainly live with a NRST, if you can get it passed. My problem is in watching the political monkey-business, that the democrats have gotten so strident and so radical that I think they will literally do anything to keep this from passing. The fight with them on this will be a drain.
Finally you question on the final rate, I have another study I prepared where I discuss that the fixed cost in our domestically produced products from the income tax is high enough that when we start pulling that out, that it will offset most if not all of the price increase in either the NRST or excise tax replacement.
I just think the excise tax is a refinement of the NRST that improves some significant weaknesses. But either way I'm OK. What I can't live with is the current system that is burying my kids in a shitty system where decent jobs are becomming as rare as virgins in a whore house.
I would go one farther. Any place that you own property or a business and so pay local taxes you should be allowed to vote in the local election. You shouldn't get more than one vote for President but you should be able to vote for Mayor and City Council if you are paying city taxes.
Admittedly there are more GOP than Dem cosponsors, but one of the original sponsors is a Dem. There is a lot of interest in certain Dem circles but they are facing a lot of pressure from leadership to oppose it.
"What I can't live with is the current system that is burying my kids in a shitty system where decent jobs are becomming as rare as virgins in a whore house."
Here we fully agree. And that's the thing that confounds me so much. Everyone knows how bad the system is, but some defend it because their particular ox *may* get gored.
To my thinking, even if we pay more but rid ourselfs of the IRS and the Federal Income Tax code, we will be lightyears ahead in passing liberty to our children and grandchildren.
Apparently, the price of products and services to government are immune to the laws of supply and demand. When the cost of the embedded taxes goes away, it goes away for government too. With the cost coming down, there is no legitimate reason for other taxes to rise to offset it.What makes you think consumer costs would go down to make up for the sales tax?
"At least 30% of the taxes that would be collected by the FairTax will not be paid by citizens at the cash register, it would be paid by the federal, state, and local governments. The citizen will only see this hidden, embedded tax in increases in their state sales tax, their property tax, and state income tax."
And what exactly is wrong with driving all levels of governmental expenses out into the open and giving people the knowledge of the costs associated with these "services"? It will force people to chose between necessary services and frivolous entitlements, my guess is that an overall reduction at all levels of government would soon follow.
And what exactly is wrong with driving all levels of governmental expenses out into the open and giving people the knowledge of the costs associated with these "services"? It will force people to chose between necessary services and frivolous entitlements, my guess is that an overall reduction at all levels of government would soon follow.How is paying hidden federal taxes through our state and local government taxes "driving all levels of governmental expenses out into the open and giving people the knowledge of the costs associated with these 'services'"?
"The truth is not hidden from anyone. For example, a few years back Ross Perot proposed a 50¢/gal federal gas tax [excise] and all hell broke loose. People know the tax is there and how much it would cost them. There is just a whole lot of advantages for an excise tax over a sales tax besides the "in your face" zing factor:"
Those same people have forgetten that the price of fuel contains these excise taxes today. If the appropriate levels of government were willing to fore-go the revenues they receive from the gas taxes, then the price would be reduced tremondously. Michael W. Smith proposed this to Jenny from the (Canadian) Bloc and she quickly changed the subject. The average citizen will gripe about a raise in taxes, but they will soon forget. The "evil corporation" crowd wins that battle. That is why we need all citizens to be reminded every day what their government costs them.
That is what I meant when I carried it forward "to all levels". We're on the same page....
How is the sales tax, that everyone must pay and is keenly reminded of, "hidden"? How is it "hidden" when the local politicians will try to blame the Federal government for the revenue shortfalls?
"3. It is flexible. A NRST would have ONE rate for everything. With an excise tax, as we do today, you can have different rates based on the comodity, high on sin taxes like liquor and cigarettes and low on produce and food."
Isn't that how we ended up in the mess we have today? Wouldn't that open the door to lobbying efforts and politicians capability to bribe certain interest groups with favorable tax rates? Why is it acceptable for the government to determine what is appropriate for the citizens to purchase? (at least more appropriate than other items)
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