The FAIRTAX: A TROJAN HORSE FOR AMERICA?

Jews for the Preservation of Firearms Ownership ^ | October 14, 2004 | Claire Wolfe & Aaron Zelman

[taxtruth]

One more thing AG,I want all freepers on this post to go to www.hearliberty.com to see the federal court case filings that were on cspan2 in which over a million people viewed so they can get a good look at the charges against the doj,irs and the treasury dept.Then come back and say we need a silly new direct tax on the people as AG always pushes for on FR.

[taxtruth]

One more thing AG,I want all freepers on this post to go to www.hearliberty.com to see the federal court case filings that were on cspan2 in which over a million people viewed so they can get a good look at the charges against the doj,irs and the treasury dept.Then come back and say we need a silly new direct tax on the people as AG always pushes for on FR.

[AFreeBird]

I liked their candybar example but they didn't actually do any numbers on it.

How many candybars are sold in this country a year? Is 1 billion (for all brands) too many for a country of some 280 million? At .23 or .30 cents for each, quite a bit of money from just candybars is going to the fed.

[ancient_geezer]

Nobody thinks tax evasion will disappear. It would be stupid to think that.
It is equally as stupid to assert that black markets will disappear.
Nobody who supports the NRST is saying these things.

Of course not - they've ignored it completely

Baloney, if you intend to make a point, you should at least do a minimal look to find out the truth of the matter.

see ==> Tax Evasion: The Underground Economy

*** SNIP ***

The FairTax and Tax Evasion
Opponents of the FairTax like to assert that a federal sales tax would increase tax evasion. It is more likely, however, that the FairTax would increase tax compliance while reducing compliance costs at the same time. It is impossible to argue in good faith that the current approach is doing its job since the problem is getting worse with the passage of time despite major and ever more intrusive attempts to address the problem.

Estimated Tax Gap by Source[14] for 1981 and 1992, in Current Dollars (Dollars in millions)
Description	1981 Tax Gap Amount	1992 Tax Gap Amount
Individual filers Wages and salaries	$2,378	$1,919
Interest	1,969	1,891
Dividends	2,075	2,142
State tax refund	127	102
Alimony	124	253
Capital gains	1,822	11,535
Form 4797	217	1,264
Pensions and annuities	456	144
Taxable unemployment	107	388
Farm income	2,350	1,909
Partnership income	2,755	2,246
Small business (S) corporation	912	729
Estates and trusts	49	73
Rents and royalties	2,012	4,481
Non-farm sole proprietors	18,714	30,173
Other income	4,366	3,465
Taxable Social Security	0	44
Adjustments to income	752	694
Deductions	3,540	3,889
Exemptions	1,844	2,224
Credits	1,313	1,274
Math errors	487	1,521
Individual non-filer tax gap	5,231	10,233
Individual remittance gap	8,300	11,400
Total individual tax gap	$61,900	$93,994
Small corporation tax gap	4,461	6,999
Large corporation tax gap	8,638	23,716
Unrelated business income gap	56	218
Fiduciary tax gap	111	202
Corporate remittance gap	800	2,000
Total corporate tax gap	$14,065	$33,135
Total tax gap	$75,966	$127,129

Some of the problems regarding the underground economy that exist under the income tax would remain under the FairTax, particularly those involving cash transactions made in the illegal economy or with the explicit intent of evading taxation. However, as the costs of compliance shrink and the perceived fairness of the tax system increases, some of the hostility to the tax system will decline. People who are in noncompliance because they perceive the present system as unfair or illegitimate may choose to comply with the FairTax. Most importantly, because of lower marginal tax rates, the benefit from lawful tax avoidance or illegal tax evasion will be much less at the margin relative to either the present system[15] or competing alternative tax systems, such as the USA Tax or flat tax[16], that have higher marginal tax rates, particularly on wages or self-employment income.[17] Research has confirmed the intuitive relationship between higher marginal tax rates and higher rates of evasion.[18] Lower rates, all other things being equal, imply lower evasion because the benefits from evasion decline while the costs of evasion remain comparable.

Much is made from the fact that a federal sales tax would place the responsibility for tax collection with the retailer, a sector of the economy in which small businesses are better represented. Small businesses are viewed as more likely to evade taxes since the owner, and beneficiary of tax evasion, is more likely to also be responsible for keeping the books and filing the tax returns. While there is, of course, some truth to the proposition that evasion rates among small businesses are higher, it is highly implausible to suggest that evasion would increase under the FairTax. First, those small businesspersons that are inclined to cheat on their sales tax are probably already cheating on their income tax and would be inclined to do so under any tax system. Second, the economic importance of small firms in the retail sector is usually grossly overstated According to the Joint Committee on Taxation (JCT), small firms only account for 14.9 percent of gross receipts by all retailers, wholesalers and service providers.[19] Since the gross receipts of wholesalers would not typically be subject to tax, the true scope of the small "problem" companies is smaller still. However, sole proprietorships, perhaps the most likely to evade tax under the present system and under the FairTax, are not included in the JCT figures.

Share of Total Gross Receipt by Firms with less than $1 million of Gross Receipts[20] ($ millions, 1993)
Industry	Entity Type	Firm Sales Under $1 mil.	Firm Sales All Firms	Small Share Percent
Retail and Wholesale Trade	C Corp.	116,929	2,663,541	4.4%
Services	C Corp.	91,383	610,438	15.0
Retail and Wholesale Trade	S Corp.	358,566	959,501	37.4
Services	S Corp.	98,721	283,680	34.8
Retail and Wholesale Trade	Partnership	22,938	112,112	20.5
Services	Partnership	30,783	187,588	16.4
Total	Combined	719,319	4,816,860	14.9

Third, the necessary corollary of the tax collection point being concentrated at retail establishments, rather than with individuals or other businesses, is that there are fewer points where revenue agents must concentrate their enforcement efforts. The collection points in the FairTax system would be perhaps 10 percent of those under the current income tax system or other alternative tax systems.[21] Because the number of collection points is so much lower, if enforcement funding is held equal then the audit rate for potential evaders would increase considerably, and the likelihood of them being apprehended is correspondingly higher. In other words, the risk of detection would increase and risk-adjusted cost of evasion would increase. Increased evasion due to the greater concentration of small businesses in the retail sector would be outweighed by greater compliance due to greater simplicity and perceived legitimacy of the tax system, from reduced temptation due to lower marginal tax rates, and from higher risk of detection due to a smaller taxpayer population. Fourth, some small business owners evade taxes because they feel the present system is unfair or overly complex and burdensome, or that they have been wronged by the system.  They are much less likely to feel that way about the FairTax. Fifth, and perhaps most importantly, the marginal benefit from evasion will decline under the FairTax since the marginal tax will decline. Thus, the incentive to cheat will decline markedly.

Any one of the 118 million income tax filers can cheat the income tax system today, and a great many do so. Under the FairTax, however, only retailers (about 14 million-tax filers altogether) would be in a position to cheat In addition, the vast majority of retail sales, 90 percent, are made by large firms that are less likely or find it more difficult to cheat. A retailer who cheats under the income tax system has very similar, if not the same financial gain, as a retailer who cheats under the FairTax system. If a retailer under the FairTax system, failed to report taxable sales, the government would lose and the evader would gain by an amount equal to the sales tax on the good or service purchased. In an income tax system, the government loses and the evader gains by an amount equal to the marginal income tax rate times the amount not reported. An income tax evader will see his taxable income go down dollar for dollar, for every dollar of income not reported. Typically, failing to report a small fraction of a business' gross income will be sufficient to drive its reported profit to zero.

Even if, however, we were to make the unlikely assumption that evasion rates would be higher under the FairTax system than under an income tax system, they would have to be much higher to justify the income tax's huge compliance costs (estimated to be over $225 billion in 1996), many of which are incurred by businesses and are deductible as a business expense. Moreover, if compliance proved to be a problem, information reporting along the lines of present law (1099's) could be implemented to facilitate cross-checking by government auditors. These 1099s would reflect the quantity of product sold to retailers. An auditor could then ensure that the retailer's books either reflected a sale of these products or that the products were in inventory. The FairTax requires all businesses (including non-retailers) to keep business records kept in the ordinary course of business that would aid cross checking by government auditors.

Conclusion
Tax evasion will undoubtedly be a problem under any tax system. It is a major and growing problem under the current tax system, despite very substantial efforts and increasingly harsh treatment of the taxpaying public. Almost 40 percent of the public, according to the IRS, is out of compliance with the present tax system, mostly unintentionally due to the enormous complexity of the present system. This breeds disrespect for the tax system and the law, and makes a system based on taxpayer self-assessment less and less viable.

The FairTax is likely to reduce rather than exacerbate the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system will induce more compliance. The roughly 85 to 90 percent reduction in filers will enable tax administrators to address instances of noncompliance more effectively, and increase the likelihood that tax evasion will be discovered. The relative simplicity of the FairTax will promote compliance. Businesses will need to answer one question to determine the tax due: how much was sold to consumers? Finally, the dramatic reduction in marginal tax rates will reduce the gains from tax evasion. If the cost of noncompliance remains comparable (or even increases due to the increased likelihood of getting caught caused by the much smaller number of filers), then both the expected profit from and frequency of tax evasion will decline.

 

[ancient_geezer]

At .23 or .30 cents for each, quite a bit of money from just candybars is going to the fed.

True, as it is for the income & payroll tax system in spades.

Consider the total cost of that candy bar to you includes not only the corporate income & payroll taxes and the overhead associated with dealing with those taxes embedded into its price, it also must include the amount of additional income you must earn above the store price of that candybar in order to have enough takehome pay to afford to buy it.

[Taxman]

Your point is well taken, and quite possibly that is their agenda.

IOW, oppose any move to restore FReedom to the American people and support (sub-rosa) the continued erosion of our FReedoms and Liberties until the American people revolt against their government?

FRankly, I'd prefer to elect a (Tom Clancey's character) John Ryan to the Presidency and elect 535 non-lawyer, non-politicians to Congress. I'd wager that with Real Americans in charge, we could fix America in about two years!

[Zon]

I'd wager that with Real Americans in charge, we could fix America in about two years!

Depending on how you look at it, it would probably take twice that long to gain roughly ninety percent of the annual benefits. Conversely, like building a house, the day the ground is broken America is set on course to be fixed. Only acts of terrorism would be able to stop it -- by killing us all before we get them.

The Honesty Revolution 
An Idea Whose Time Has Come

An armed rebellion would be chaos. Even if won it would still require the population to acquire a mindset to recreate/fix America. The parasitical elite would still need to be exposed, rendered impotent/obsolete and reeducated to learn how to earn happy prosperous lives. The unredeemable would soon enough be forgotten.

From America the honesty revolution can clean sweep the world.

"There is one thing stronger than all the armies in the world, and that is an idea whose time has come." -- Victor Hugo

[Taxman]

Two years. Four years. Whatever.

The important thing to get started!

LESSGO!

[Taxman]

"There are sites on the web of socialist groups touting the FairTax as a way to deliver the USA into the world of pure Socialism.

Links, please?

Generally speaking, the LIEberal/Socialist/Marxist Bastard's agenda forces them to violently oppose any form of taxation other than steeply progressive income taxes (second plank of the Communist Manifesto).

For that reason, I'd be very much surprised if any legitimate LIEberal/Socialist/Marxist Bastard group supports the Fair Tax!

Those of us who do support the Fair Tax are 100% opposed to the Communist Manifesto! Right Bigun?

FRom time to time, we will see a poster on these tax threads make the accusation that we are socialists or somesuch, but I have always believed that those who call us socialists are scaremongering or, perhaps, projecting?

[Taxman]

Actually, this is the best statement in the article:

"Finally, many, many ordinary freedom-loving people, weary of the present outrageous system, are cheering the FairTax as a great improvement."

[Taxman]

And, BTW, each & every one of the author's anti-Fair Tax arguments are bogus. All have been refuted by competent authority many, many times on these threads.

[Maigrey]

placemark

[Final Authority]

Check out http://www.widerquist.com/usbig/links.html . These links and brief descriptions are all about establishing the concept of BIG or basic income guarantee worldwide, if you need the definition please do a simple search, where the FairTax.org is listed as an advocate of a BIG in the USA to help establish their tax policy. Essentially, the advocates of a BIG, FairTax.org included, believe that all persons should have a level of income guaranteed regardless of the productivity of that individual, that is, they should share at the outset equally in all forms of production. Therefore, they are indeed communists.

Your comment about the liberals not wanting the so-called fairtax because it is regressive brings me back to one of the central themes of right thinking people who may be against the NRST and it is very simple. Do you or any sane person really think that the income tax will be totally abandoned? The fact is, we will have both, either as a Federal/State tax structure or at a minimum, a NRST at the federal level and the income tax and sales taxes at the state and local levels. The liberals are always looking for a way to get more of my and your money so they can do good and give it to people who will never contribute to our economic prosperity. That is the FairTax in a nutshell. Bad idea, period.

[Taxman]

"Essentially, the advocates of a BIG, FairTax.org included, believe that all persons should have a level of income guaranteed regardless of the productivity of that individual, that is, they should share at the outset equally in all forms of production. Therefore, they are indeed communists.

Essentially, this statement of yours is bullshit! No one affiliated with AFFT promotes the notion that "all persons should have a level of income guaranteed regardless of the productivity of that individual, that is, they should share at the outset equally in all forms of production."

The "prebate" concept is a means to keep the necessities of life untaxed and instill a measure of progressivity into the Fair Tax in an effort to keep the demagogues at bay.

The prebate is not a BIG! And AFFT does not support such a cockamamie concept! And I for damn sure don't!

[Taxman]

Do you or any sane person really think that the income tax will be totally abandoned?

Yes, I do.

The fact is, we will have both,. . .

Fact? Fact! Yours is more defeatist pessimism, based on fear and mistrust of government. We are the government! And not all CongressCritters are enamored of the income tax. We can do this, but not if you and others keep nay-saying. Help us vote out the bad guys and vote in the good guys!

. . . either as a Federal/State tax structure or at a minimum, a NRST at the federal level and the income tax and sales taxes at the state and local levels.

The Fair Tax is about replacing the federal income tax structure with a National Retail Sales Tax. What the states do is of no concern to AFFT. HST, what your state does should concern you. If your state wishes to keep an income tax, and you don't like it, movethehellout!

The liberals are always looking for a way to get more of my and your money so they can do good and give it to people who will never contribute to our economic prosperity. That is the FairTax in a nutshell.

I agree that LIEberals are always looking for a way to get more money to "do good." The Fair Tax is not about anything more than replacing the income tax with a National Retail Sales Tax and abolishing the IRS.

Oh, the Fair Tax is about FReedom and economic growth, too. And Fair Trade. And bringing jobs back to America. And treating people with equality at the economic bar. Stuff like that.

[quietolong]

I think Property taxes are what should be abolished.

[Remember_Salamis]

"There are sites on the web of socialist groups touting the FairTax as a way to deliver the USA into the world of pure Socialism."

-- No offense, but I think this comment is a complete fabrication. Please show me where you found this.

[ancient_geezer]

"Essentially, the advocates of a BIG, FairTax.org included, believe that all persons should have a level of income guaranteed regardless of the productivity of that individual, that is, they should share at the outset equally in all forms of production. Therefore, they are indeed communists.

Let me see if I've got this right, the NRST tax rate is 23% of expenditure, the NRST FCA is 23% of expenditure at povertyline, and some EU socialist considers that to be a livable income guarantee.

ROTFLM(_|_)O!!!