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Abolish the IRS with National Sales Tax?
Fox News ^ | 11/3/04 | tgusa

Posted on 11/03/2004 10:42:24 AM PST by tgusa

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To: RKV

What I am concerned about is what happens to retired people of fixed means. I am not one of them, but I do have parents who are

Here's one example: a loaf of bread that costs a dollar has 22 cents tax embedded in it. Strip out the embedded taxes -- which the NRST does --  and the loaf of bread costs 77 cents. But now you have to tack on a 23-cent retail sales tax  to the bread. Thus, the same loaf of bread still costs 77 cents plus 23 cents in tax. Retired people on fixed incomes will ultimately pay the same prices they are now.

Actually, it's better than that. Under the income tax there is no sales tax on medicine. But, a $50 bottle of pills still has roughly 23 cents of tax embedded in it So even though the total price for the bottle of pills is the same under both tax schemes, the prebate check from the government pays the 23% tax.

201 posted on 11/03/2004 3:03:15 PM PST by Zon
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To: RKV
What I am concerned about is what happens to retired people of fixed means

  1. As has been mentioned several times, current prices are inflated by having roughly 20-25% of their cost as the result of income taxes. Remove that cost, and with the NRST proposed 23% rate, prices should stabilize in the roughly +/- 5% of today's rpices.

  2. Any income received (pensions, investments, Social Security, whatever) will be tax-free

  3. The family consumption allowance (FCA) offsets the NRST up to the federal poverty line. This especially helps those on low, fixed incomes by making virtually all of their spending effectively tax-free.

See FairTax.org's research paper for futher analysis.

202 posted on 11/03/2004 3:09:25 PM PST by kevkrom (Power corrupts. Absolute power corrupts absolutely. But it rocks absolutely, too.)
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To: kevkrom

Thank you - finally a link to a detailed discussion.


203 posted on 11/03/2004 3:24:19 PM PST by RKV ( He who has the guns, makes the rules)
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To: Zon

So the NRST replaces all corporate taxes (which is what is embedded in the price of a good or service in your example)? I guess I need to read up a bit more since this "prebate" thing eludes me.


204 posted on 11/03/2004 3:26:07 PM PST by RKV ( He who has the guns, makes the rules)
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To: All
As it is now, congress empowered the IRS. Congress must rectify the problem they facilitated. The IRS can and has destroyed thousands of people financially with impunity The IRS has destroyed start up business before they were able to create new jobs and grow the economy. 

The IRS, a thinly camouflaged collection agency is a tool for social manipulation and control. It's imperative that the IRS be held accountable for its attrocities and eliminated. IRS Abuse Reports -- The Case Against the IRS

A word to the naysayers: Maybe you have immunity--a "get out of jail free card". Ninety-nine-point-nine percent of us don't.

205 posted on 11/03/2004 3:29:28 PM PST by Zon
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To: RKV
Yes, and yes. www.fairtax.org
206 posted on 11/03/2004 3:31:22 PM PST by Zon
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To: RKV
You're quite welcome. Most questions and concerns about the proposed NRST have been anticipated and answered over the years, and the FairTax website has the most common questions and concerns answered in their "Research and Support" page.
207 posted on 11/03/2004 3:32:05 PM PST by kevkrom (Power corrupts. Absolute power corrupts absolutely. But it rocks absolutely, too.)
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To: BearCub
A number of us here have explained to you that the feds are NOT getting another 'shot' at taxing your savings. Taxation costs estimated at 23% are already built into the cost of all goods sold.

I support a national sales tax, but I have to disagree with you here.

You disagree because you don't understand the economics of the Fair Tax scheme.

Person A pays $25 on his earned $100 and saves it. After the NST, he spends his $100 on a widget costing $100 and pays another $25 in taxes.

After the effect of the Fair Tax kicks in, lowering manufacturing & selling costs, he spends $75 on a widget that formerly cost $100 and pays another $25 in taxes.

Given, -- lower costs do not happen overnight. Income Taxes must be abolished substantially before the sales taxes are put into effect.

208 posted on 11/03/2004 4:05:25 PM PST by tpaine (No man has a natural right to commit aggression on the equal rights of another. - T. Jefferson)
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To: FreedomCalls
Apparently I am paying less in income taxes than I would under a NST.

Again, it's not an NST, it's an NRST. There's an important difference. Maybe that's why you're confused.

BTW how much income tax, payroll tax, any gift or estate tax do you pay? Add those amounts to te 22% federal tax costs you pay in EVERY purchase - new or used. How much faster would your savings/investments grow if not for income taxes? Would you choose different investments not tax handicapped? or just let your investments grow faster? Would you be able to buy a larger home if interest rates fell to the tax free rate (a decline of say 25%)?

etc....

you're tied to the income tax b/c you don't pay any, huh?

209 posted on 11/03/2004 4:19:46 PM PST by Principled
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To: RKV
1) Overall taxation would be the same as it is now - it equals what the government spends plus or minus surplus or deficit spending. This plan in no way cuts spending, it only changes the method of paying for government. It may cut compliance costs and increase privacy which are good things in and of themselves.

While hr25 is not advertised as a spending reduction bill, IMO having every single individual pay the tax on every retail purchase will lead to pols actually wanting to be the one to lower taxes for everyone.... as opposed to today's system in which pols ignore cost and promise benefits. The way to lower taxes is increased productivity, more efficiency, and *gasp* lower spending. Wow- gov't with incentive to spend less.... So I think it will lead to reduced spending - jmho.

2) It does increase the amount of taxes on my existing stock of capital since under the present method of collecting taxes, the rate of taxation on the goods and services purchased is lower than it would otherwise be because income and capital gains are taxed (and make up revenue to the government which would need to be offset).

I don't follow this at all. How does eliminating the tax on investment growth make the investment less valuable??? The tax paid when spending occurs doesn't change - you're already paying 22% at the register for fed tax costs in goods and 25% in fed tax costs on services. So your investment grows faster and is taxed at the same rate when spent. Please explain if I've misunderstood your point.

3) I do take seriously the history of the income tax and am quite aware that the founders did not want this method of taxation (which required a constitutional amendment to legalize).

Me too. And the income tax was legal before the 16th- the 16th just allowed the tax to be unapportioned?Under a national sales tax, the tax on those goods must go up to cover the lost revenue to the government caused by the loss of income taxes...

No. Taxes at the counter will stay about exactly the same. Econ 101. Joe will have no federal deductions from his paycheck and will pay very nearly the same tax at the counter.

210 posted on 11/03/2004 4:37:27 PM PST by Principled
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To: Principled
you're tied to the income tax b/c you don't pay any, huh?

I told you earlier I pay approx 25% of my total income out in income taxes. Total federal income tax (not including SS payroll taxes or federal excise taxes) divided by annual gross income.

211 posted on 11/03/2004 4:50:44 PM PST by FreedomCalls (It's a joke, people!)
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To: FreedomCalls
Where is this "hidden tax" on a $50 microwave oven that was made in China that I buy at Wal-Mart?

Well rehearsed line.

Anyway, the "hidden tax" is in the price. Not because of taxes in the product made overseas- but because products manufactured and sold in the US contain a tax component of 22%. This means that the prices of imported goods could be less because they are manfuctured for less- but since all comparable products have higher prices (due to embedded tax costs), imports rack up their prices to just nearly the same as domestic prices to maximize their profit.

OTOH if imports had the NRST placed on them, they would not have that gravy train anymore - they'd have to compete :0). All those imports - and we get lots - would have to have the nrst slapped onto their price.

Of course, since
a)most imports have the tax component removed via gov't subsidy before coming in and
b)importers are running huge profits on imports b/c they can still charge the prices that do indeed include a tax component
- then the nrst can be slapped on them without affecting their price much if at all.

Instead of the US taxpayer subsidizing imports, foreign companies would have to play on a more even field - 'course we still have payroll issues- but man what an improvement it would be.

212 posted on 11/03/2004 4:51:38 PM PST by Principled
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To: Principled
Would you be able to buy a larger home if interest rates fell to the tax free rate (a decline of say 25%)?

No because I would not be able to afford a house 25% more expensive (actually more because I don't get to deduct mortgage interest under the NRST).

BTW a decline of 25% off of current 6% mortgage rates takes it only to 4.5%. Some ARMs are in the 3% range already.

213 posted on 11/03/2004 4:54:32 PM PST by FreedomCalls (It's a joke, people!)
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To: FreedomCalls
Perhaps you people have a hard time understanding this because you have no savings -- but I do. It's already been taxed and now you want to tax it again when I spend it.

It is you who is pretending not to understand.

Savings, whether taxed under the income tax or the NRST, are treated the same with respect to fed income tax costs tax at the counter.

Under the income tax, you'll pay 22% in federal tax costs on every good and you'll pay 25% in federal tax costs on services. Under the NRST you'll pay 23% on items for retail consumption and services.

You're just pretending not to understand this fundamental concept - and beginning to look, well.... you're pretending.

214 posted on 11/03/2004 4:57:09 PM PST by Principled
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To: RKV
What I am concerned about is what happens to retired people of fixed means.

If that is your concern, then I think you will like the NRST.

FAQ

215 posted on 11/03/2004 5:02:00 PM PST by Principled
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To: Principled
Under the income tax, you'll pay 22% in federal tax costs on every good and you'll pay 25% in federal tax costs on services. Under the NRST you'll pay 23% on items for retail consumption and services.

I have ALREADY PAID the "22% in federal tax costs on every good and ... 25% in federal tax costs on services" on my savings!! Now you want me to pay an ADDITIONAL "23% on items for retail consumption and services" under the NRST.

Why will you not address this very important point? I'm not talking about any future earnings. I'm specifically addressing my PRESENT savings which I would spend in the FUTURE under the NRST. You want me to pay both inthe transition period.

216 posted on 11/03/2004 5:04:28 PM PST by FreedomCalls (It's a joke, people!)
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To: BearCub
Take a look here. I've tried - maybe this will help you.

Savings, whether pre or post tax, whether spent under the income tax or the nrst will have the same fed tax cost bite at the counter. Their is no difference. Please take a look at the quick link.

From the link, "...some erroneously believe that people who have invested in Roth IRAs will never pay taxes on this money again....

217 posted on 11/03/2004 5:06:29 PM PST by Principled
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To: Zon

And their is no tax on SS benefits. And investments grow fastr tax free. And estates are passed on tax free.....


218 posted on 11/03/2004 5:08:28 PM PST by Principled
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To: tpaine

Go look at my example (post 199) again. In that example, the widget formerly cost $125. Now Persons A & B are paying $100 for it plus $25 in tax. But Person A has already also paid $25 income tax on his money and Person B has not.


219 posted on 11/03/2004 5:08:36 PM PST by BearCub
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To: FreedomCalls
I told you earlier I pay approx 25% of my total income out in income taxes.

Apologies for missing that, FC. And so it is clear that you would pay less under the NRST, as its maximum possible rate is 23%.

220 posted on 11/03/2004 5:13:00 PM PST by Principled
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