So, you thought a national sales tax was a good idea???
What do you think?
There should never be a national sales tax unless the amendment making income tax constitutional is repealed. Just passing a law is not enough.
I think the author proves why we need tax reform when you need a 30% rate on goods and services just to break even with the budget.
The guy is pitching a worst case recklessly instituted scenario.
As a small business owner in a non sales tax state, I can tell you that a national sales tax is the worst idea imagineable.
Income tax is based on business records I keep anyway. A sales tax requires that I keep additional records and proofs in addition to those I keep in order to become a tax collector for the government.
Prices will not go down. This is an economy killer.
I am definitely in favor of a Flat Tax proposal of 5%-10% and making the first $30K non taxable (per wage earner, not per household) and an additional $10K per child so a single mother with 5 kids could earn 80K untaxed.
Call me crazy, but I think you'd see a business and a marriage boom, even in the inner cities.
What a load.
Aaron Zelman's a good guy, but he's just this side of an anarchist.
SOURCE: http://www.freerepublic.com/forum/a387234a60d28.htm
Top 10 Secrets of a National Retail Sales Tax
Politics/Elections Opinion Keywords: NRST, SALES TAX
Source: Self
Published: 1/4/00 Author: Always Right
Posted on 01/04/2000 09:57:58 PST by Always Right
Top 10 Secrets of a National Retail Sales Tax
1. The 23% sales tax rate turns 35%. A retailer who sells an item for $100 must charge his customer an additional $30 for federal sales tax. Most people familiar with state sales tax call this a 30% tax, since the tax is 30% of the seller's price. The NRST folks call this a 23% tax, since $30 is 23% of the final price ($130 including tax), which they call the 'tax-inclusive' rate. Neither way is technically incorrect, it is just important to understand what is really being discussed. Remember this 30% tax-exclusive rate is only the federal portion of the tax, state sales tax will also be added in. Currently, 47 states have sales tax ranging from 3% to 7%, with the most common rate being 5%. The NRST taxes services and food, so the tax base is roughly doubled and the state rate could be cut in half, or about 2.5% to obtain the same revenue. Next, the 42 states that collect an income tax leveraging off the IRS reporting must now convert this to a sales tax. This will add on average another 2.5% to the sales tax rate. Thus on average, the tax-exclusive rate that you will see at the cash register on all goods and services will be 35%.
2. 35% goes higher. One amazing fact when the NRST calculates their rate is that they assume 100% compliance. The current income tax system has about a 15% non-compliance rate. Conservatively, we could assume that the sales tax will have a similar compliance rate which will force the rate over 40%. And this is a very conservative assumption, see secret #5. Brookings Institute economist Bill Gale (National Tax Journal, September 1999) calculated that about a 50 percent sales tax would be required to be revenue neutral, more then double the 23 the NRST folks claim.
3. Hidden Taxes still exist. While the NRST does eliminate some of the 'hidden taxes' that resulted from federal payroll taxes and excise taxes, it does not eliminate the 'hidden taxes' that state and local governments imposes such as hotel taxes, cigarette taxes, gasoline taxes, property taxes, etc. So the NRST claim that there are no hidden taxes isn't true.
4. Millions must file. The NRST supporters would have you believe that only retailers need to file under the Sales Tax. That simply is not true. In order to offer the 'low' 23% rate, the NRST must tax services too. 'In 1993, 12,778,000 taxpayers filed individual returns with business income or losses, and another 1,919,000 filed farm returns. In addition, in 1992 the IRS received returns for 17,292,286 non-farm sole proprietorship businesses, 1,484,752 partnerships, and 3,868,004 corporations-all of which probably produced goods or services on which the sales tax would be levied. Thus the supposed simplicity of the sales tax turns out to be a mirage.' (Brookings Institution Policy Brief #31-March 1998) Thus over 35 million filers will still be subjected to reporting and audits, most of these are individuals. This doesn't even consider the 100 million of people who will still have their wages reported to the SSA. Also, all households must register every year with the 'sales tax administering authority' in order to receive your monthly tax rebate. Hardly the zero tax filings for individuals as the NRST supporters claim.
5. Tax Evasion will skyrocket. 20 countries have tried a national sales tax, and 20 have switched to a value-added tax. These countries have gone on record and have flat out stated a retail tax of more then 12% is unworkable. People will avoid it, especially with the internet which makes it very easy for the common citizen to purchase goods from foreign sources. The fact that businesses to business sales are not taxed, makes it very tempting to buy personal stuff under a business name. It will take a mighty powerful and intrusive taxing authority to audit all business expensive to make sure. The sales tax rates we are talking about have never been successfully implemented in the history of the world, but it hasn't been for a lack of trying.
6. Big Government gets Bigger. In the 20 countries where the national sales tax has been implemented, and in each case replaced by necessity by a Value-Added Tax, the amount of federal taxes quickly grew from about 20% of GDP, as currently in the US, to 40% and above of their GDP. Not a promising precedent. 7. Underground Economy still not taxed. The NRST advocates falsely claim that the underground economy now will be taxed. Nothing could be further then the truth. Sure, when the money re-enters the legal economy the money is taxed, but that is true today. But will the drug dealers and prostitutes remit sales tax for their goods and services under the NRST? Absolutely not, this portion of the economy is still invisible to the tax collector and therefore not taxed. According to Bruce Bartlett, 'thus whatever revenue is gained when drug dealers spend their ill-gotten gains will be lost because no tax was collected on their drug sales.' (Bruce R. Bartlett, senior fellow, National Center for Policy, Analysis, November 5, 1997)
8. Lower and Middle Income pay more. Steven Sheffrin of UC Davis in a 1996 CPS brief says that a revue-neutral consumption tax even with a generous personal exemption shifts the tax burden to the lower to middle income households. A 1992 Congressional Budget Office study of consumption based tax concluded the consumption tax would decrease the tax on the wealthiest 20% by five percent, while hitting all other groups with a higher tax burden. The poorest quintile being hit the hardest with a 20% increase in tax and the 20-40% income quintile being hit with 9.3% increase in their effective tax rate. This is because the poorest spend a much higher percentage of their income each year and in many cases are even forced to borrow to keep up with their expenses. These numbers are much worst today as the federal tax liability for the bottom 20% has been greatly reduced through expansion of the earned income tax credit.
9. Elderly assets are unfairly burdened. The elderly, who have already worked and saved under the income tax system, will now be faced with paying additional high consumption taxes. This group of especially hard hit people, will not have the opportunity to earn tax-free wages, so all their already taxed wealth will be taxed again when they spend it.
10. Marriage Penalty Still Exists. The proponents of NRST boldly state there is no marriage penalty under the NRST. Looking at their rebate scheme establishes this as untrue. A typical family of four qualifies for an annual rebate of $5088 under the current NRST proposal. If this same family of four divorced, they would qualify for two annual rebates of $3790 each, or $7580. This $2492 marriage penalty is larger then the marriage penalty under the current code for this typical family.
I put this together simply because every time you try to debate the NRST worshipers you are called names such as commie, NAZI, IRS-lover, liar, and disrupter. So let the name-calling began. I don't accept many of the outlandish claims made by the NRST 'experts'. This utopia promised by the NRST faithful is no different then the disasters promised by the fear-mongering global warmers. It's all based on unrealistic assumptions and faulty computer modeling.
I would hope that none of the NRST posters on this forum are part of the $20 million effort to sell the public on the national retail sales tax. If they are, they have a long way to go. So far the public isn't buying. A recent FoxNews poll shows by a 2 to -1 margin, the public favors a flat tax against a national sales tax, and a Harris poll showed 57% oppose a national sales tax. At least the NRST followers have a lot of work on 'educating' people.
Just a thought.
Personally, I'll go with whatever Milton Friedman thinks.
Behind Reagan, he's my second hero.
Then W.
BUMP for a long read later.
If you would like to be added to this ping list let me know.
John Linder in the House & Saxby Chambliss Senate, offer a comprehensive bill to kill all income and payroll taxes outright, and provide a IRS free replacement in the form of a retail sales tax:
H.R.25, S.1493
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.Refer for additional information: http://www.fairtax.org & http://www.salestax.org
The fallacy that the FairTax advocates are laboring under is that all of the revenue that the income tax generates must be replaced. While we're abolishing the IRS, let's abolish all the rest of the unconstitutional bureaus and departments that are sucking up this money, and we won't need to replace the revenue.
...indeed the income tax is a horrible Marxist system.
Followed by this foolishness...
Here's our alternative: Nothing.
In between these two conclusions the writer has filled space with misrepresentations, misnomers and misstatements of fact.
Worse than worthless.
Let each government agency have a NPR-like pledge drive every year. What ever money citizens send in, they get to spend.
"Your “FairTax” on that home will already be a whopping $78,000, for a total purchase price of $338,000. Then government printing presses go into high gear. While you're still saving up for your down-payment, double-digit inflation takes over and the price of your house zooms 20 percent in one year. The house now costs $312,000."
That's incredibly misleading. In reality, inflation would help you out. Once you buy the house, your payments will remain set. As inflation occurs, you will be making more money, and the value of your house will go up. But your payments will not.