U.S. Tax Code May Be Facing a Full Rewrite

the fair tax lobby refuses to collect tariffs,

Again, baloney, the FairTax folks say nothing in regard to tariffs, infact thier proposed legislation keeps the ones now in effect in place and leaves it to Congress what it wishes as the future may be concerned.

Furthermore the HR25 bill imposes a stiff effective tariff on all imports when sold at retail, a burden that does not exist today as regards such items.

You are not going to solve anything by adding 20% what is already and 8% tax in many locales.

Today you must earn as much as 30-40% over what you pay out for consumption paid out as income/payroll taxes to the feds as well as that 8% state sales tax for everything you buy, not including the 20-25% burden embedded into consumer prices on the corporate side of income & payroll taxes.

The NRST does not add anything to what you already give up to the federal government consumer purchases, in point of fact is actually lowers the burden on everyone earning taxable income.

A family of four, for example, could spend $24,980 per year free of tax because they will have received over the course of the year the FCA demogrant totaling $5,745. $5,745 is the amount of sales tax paid on $24,980 in expenditures. That family spending double the "poverty level" or $49,960per year will effectively pay tax on only half of their spending and, therefore, have an effective tax rate of 11 ½ percent or half the FairTax rate.

The beauty of the FairTax is that you can control how much you pay in taxes. If you happen to save, invest or spend a portion on used [previously taxed] items, you can get your effective tax rate below 9%.

To illustrate examine the tax burden that a family of four will have at various annual expenditure levels as compared to that same family under the current system:

H.R.25 "The FairTax Act

And that is not to mention the fact that individuals and most businesses are no longer required to file or account for federal taxes under an NRST as under the current system.

Come on geezer, do you expect me to believe that since sales tax was not mentioned by the founders that it is not a direct tax? tariffs are legitimate sources of revenue with the NRST folks now? property taxes should be thrown out with income tax?

I'm not even sure what you are arguing for now. So, let me tell you what I am arguing for - the complete elimination of income and property taxes. Education is the responsibility of parents. Revenues lost from income taxes should be replaced with sensible tariffs. Any shortage of revenue should be met with spending cuts. That's all. A nat'l sales tax is just a shell game. If we can not get rid of the income tax and raise tariffs, then a flat tax is the only option.

The fair tax folks are the same folks that push for open borders and free trade. To suggest that they will allow tariffs to go up since they don't mention them in their manifesto is the hight of either wishful thinking or downright dishonety.

A national sales tax will be the victim of the same kind of tinkering that the income tax is, so you solve nothing in the long term except for giving people a reason to do all their shopping at swap meets.

19% income tax is less than I am paying now,

If your are talking income tax only the max effective rate of the Fair Tax NRST would be 15%

The thing you are overlooking are the payroll taxes, you know the 15.3% of SS & Medicare that are, still collected under the Flat Tax proposals.

The Fair Tax Act HR25, eliminates all(business and indivdual) federal payroll (SS/Medicare etc. on wages) taxes as well as all federal income taxes.

so how could I possibly be against that unless I was holding out for 0%?

LOL, you want to pay the SS/Medicare plus 19% flat tax on both individual and business(whicy you pay as part of the price of buying goods and services). That is your real burden under your flat tax.

The NRST is a maximum of 23% impact on a person's consumption expenditure in comparison. Wage income, Investment and savings and earnings therefrom are not taxed under the NRST until such time they might be spent on new goods or services, and then you see the full tax on your receipt, instead of a substantial portion buried in the price of the products you pay for.

"Wonderful way to run the economy into the ground, friend. Give consumers disincentives to make purchases. Which Einstein thought that economic plan up, hm? "

That would be a good point if nearly every state in the union didn't have some sort of sales tax already...

NST is better because it is more transparent. You see how much you are being taxed on every transaction. The tax system needs more transparency.

And the country could use more regressive taxes. It would finally inspire people who have been freeloading on taxes for years to take a look at what's being taken from them and say "wait a minute - why are my taxes so high?"

Right now real taxation is hidden from the majority of people. They don't care about gross pay, they care about net. They cheer on 'corporate taxes' as a way to stick it to the big, evil corporations who just pass the taxes on to consumers.

Transparency is the key to not only fairness, but reducing wasteful spending via public pressure.

You too can have a National Retail Sales Tax, just like Ogdenville, North Haverbrook, and Brockway!

How about we solve the problem for good?

I see no better approach that has a snowball chance in h'll for enactment, that could actually achieve the real goal, smaller government.

The issue is one of visibility of the costs of government to the individual citizen and what that citizen is encouraged to call for as a result of being faced with the reality of the burdens large government places on each and every one of us. A tarrif simply is another way to hide the cost from the eyes of the electorate, just as corporate income & payroll taxes are.

For example we start with the federal taxburden as a percentage of gross consumption expenditure and discount the rate as we remove programs from the mix:.

23%........... Effective total federal tax rate with respect to gross expenditure for consumption:

15% ..... rate if Social Security and Medicare were eliminated
14% .......... rate if Nat'l Endowment for the Arts were eliminated
12%........ rate if Dept. of Education were eliminated
10%.......... rate if welfare & foreign aid were eliminated
etc.

So lets look at what the maximum it would take to fund those functions clearly authorized under Article I Section 8 of the Constitution, in current dollars:

http://w3.access.gpo.gov/usbudget/fy2001/guide02.html#Spending

$334 Billion --- Defense & Military related expenditure
$ 31 Billion ---- Administration of Justice
$ 16 Billion ---- General Government
$199 Billion ---- Interest on the Debt
=========================
$580 Billion ---- Total

Institute an across the board, Flat rate, single stage National Retail Sales Tax, which taxes all imports and domestic products with the same rate.

Replacing all current federal tax law with a retail sales tax would be 23% on new goods and services paid and receipted at the retail register. No hidden tax, no exceptions, exemptions everyone participates.

Such a tax acts in a natural manner to encourage the elimination of excess government functions through visibility of burden among all constituencies of the electorate.

The total federal government budget would move from $2,000 billions towards something less than $580 billions calculated.

The across the board federal tax rate on new goods and services would decline towards less than 6.7%.

As tax rate on sales decreases the economic burden on retail items, the sales volumes and growth in the economy would be tremendous allowing even further reductions in tax rates below that less than 6.7% theoretic level.

That is what I perceive as the ultimate achievements possible under a National Retail Sales Tax structured in the manner of the revenue bill H.R.25. Simple common sense applied to the principal of TANSTAFFEL,( no free lunch, everyone participates in paying their way in proportion to the benefit the extract from their consumption.) encourages the natural change in attitudes required of the electorate as regards the burden of government largess in their lives.

Thomas Hobbes from Leviathan

It is fairer to tax people on what they extract from the economy, as roughly measured by their consumption, than to tax them on what they produce for the economy, as roughly measured by their income

Hmmmmmm....... It's do able, with time and effort, once the blinders are removed from the electorate.

The Genuine National Retail Sales Tax will eliminate all your tax afflictions. Eliminates income tax, payroll tax, unemployment tax, Social Security tax -- any tax that ails you. Do you have a pinful audit? The NRST will eliminate all "audits"! Guaranteed or your election refunded in full!

More shell games geezer

The shell games occur when government is able to disguise or hide tax burdens from the view of the electorate as it does in the case of any business or corporate tax, which of necessity are always financed out of sales revenues or the company folds for lack of profitability.

That by the way includes tarrifs, as they are merely passed down in price of goods to the final retail purchaser, any other condition renders tarrif useless for what they are generally intended to accomplish, to equalize or give competative advantage to domestic industry through affecting the price paid by consumers for import products.

Come on geezer, do you expect me to believe that since sales tax was not mentioned by the founders that it is not a direct tax?

A sales tax is an excise, an indirect tax, not a direct tax which is a tax on real property or a captitation tax.

A sales tax is levied with respect to exchange of value between persons (commercial activity) not on the ownership of property.

tariffs are legitimate sources of revenue with the NRST folks now?

Certainly they are legitamate. However the main problem with them is they hide the cost of government from the view of the electorate. If that is what you want, and end up reducing incentives for people to push for smaller government, well go for them.

property taxes should be thrown out with income tax?

Seeing as the only property taxes are those levied by States, you have to deal with them I am afraid. If you can get a Constitutional amendment ratified by the states that removes that power from them more power to you. I would like to see the end of property taxes myself. Just don't figure it is going to happen through any process I can envision as being successful on a national basis.

Might get property taxes abolished on a state by state basis in those states that allow citizen referendums and initiatives to modify state constitutions though.

So, let me tell you what I am arguing for - the complete elimination of income and property taxes.

Elimination of all federal income and payroll taxes. Replacing them with a single national retail sales tax on all goods and services purchased for final consumption as opposed to business purpose.

. Education is the responsibility of parents.

So? What does that have to do with a federal tax?

Revenues lost from income taxes should be replaced with sensible tariffs.

What about SS/Medicare taxes on wages?

Furthermore, any tarrif hides the cost of government from the view of the electorate by becoming embedded into the price of goods and services they effect.

Not good, leaves the electorate with the false perception that someone else is paying the freight for more government goodies.

"So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?"
Walter Williams

Any shortage of revenue should be met with spending cuts. That's all.

Ain't happening today, you had best be figuring out why.

The Honorable James DeMint (R-SC)
United States House of Representatives
THURSDAY, APRIL 5, 2001
12:00 noon

"There has been a shift in the relationship between individuals and government, he argues, such that fewer and fewer are paying taxes at the same time that more and more are receiving increasingly generous benefits. If it becomes the case that most voters do not bear a financial burden for this largess, then there will be little to restrain--and significant political incentives to encourage--the continued growth of government.

A nat'l sales tax is just a shell game.

Shell games hide taxes from major groups of the electorate, an national retail sale tax makes sure taxes have maximum visibility to the electorate.

If we can not get rid of the income tax and raise tariffs, then a flat tax is the only option.

Now there is a shell game a VAT and a wage tax:

The Forbes/Armey Flat tax is still an income tax with VAT, requires an IRS, and still taxes business passing on such taxes in higher prices to consumers, lower wages to employees, and lower returns to investors/retirees.

Collection of Value Added Tax

Issue: What Is the Best Way to Collect a Value Added Tax?
A value-added tax (VAT) generally is a tax imposed and collected on the value added at every stage in the production and distribution process of a good or service. Although a VAT may be computed in any of several ways, the amount of value added generally can be thought of as the difference between the value of sales and purchases of a business. (e.g. Revenues - Costs = Taxable Business Income)
***
Subtraction-Method VAT. Under the subtraction method, value added is measured as the difference between a business's taxable sales and its purchases of taxable goods and services from other businesses. At the end of the reporting period, a rate of tax is applied to this difference in order to determine the tax liability. The subtraction method is similar to the credit-invoice method in that both methods measure value added by comparing sales to purchases that have borne the tax.
***
The subtraction method differs from the credit-invoice method principally in that the tax rate is applied to a net amount of value added (sales less purchases) rather than to gross sales with credits for tax on gross purchases. A business's tax liability under the credit-invoice method relies on the business's sales records and purchase invoices, while the tax liability under the subtraction method may rely on records that the taxpayer maintains for income tax or financial accounting purposes.

The flat tax is a VAT. None other than the father of the flat tax, Robert Hall of Stanford University (along with Alvin Rabushka), in his 1995 Ways and Means Committee testimony said, "The Hall-Rabushka flat tax is a value-added tax."

Which was pointed out again in additional hearings in April of 2000:

http://waysandmeans.house.gov/fullcomm/106cong/4-11-00/4-11kotl.htm

"Robert Hall, one of the originators of the proposal(Flat Tax), who describes his Flat Tax as, effectively, a Value Added Tax. A value added tax taxes output less investment (because firms get to deduct their investment.)"
"The Flat Tax differs from a VAT in only two respects. First, it asks workers, rather than firm managers, to mail in the check for the tax payment on that portion of output paid to them as wages. Second, it provides a subsidy to workers with low wages."

The Flat Tax; Chapter 3, by Robert Hall and Alvin Rabushka

Here is the logic of our system, stripped to basics: We want to tax consumption. The public does one of two things with its income—spends it or invests it. We can measure consumption as income minus investment. A really simple tax would just have each firm pay tax on the total amount of income generated by the firm less that firm’s investment in plant and equipment. The value-added tax works just that way. But a value-added tax is unfair because it is not progressive. That’s why we break the tax in two. The firm pays tax on all the income generated at the firm except the income paid to its workers. The workers pay tax on what they earn, and the tax they pay is progressive.

To measure the total amount of income generated at a business, the best approach is to take the total receipts of the firm over the year and subtract the payments the firm has made to its workers and suppliers. This approach guarantees a comprehensive tax base. The successful value-added taxes in Europe work this way. The base for the business tax is the following:

Total revenue from sales of goods and services

less

purchases of inputs from other firms

less

wages, salaries, and pensions paid to workers

less

purchases of plant and equipment

The other piece is the wage tax. Each family pays 19 percent of its wage, salary, and pension income over a family allowance (the allowance makes the system progressive). The base for the compensation tax is total wages, salaries, and retirement benefits less the total amount of family allowances.

FLAT TAX, VAT TAX, ANYTHING BUT THAT TAX; Duke Law Magazine, Spring 96:

"The flat tax is essentially a VAT, with a personalized element for wages. Thus, the business tax allows deduction of all purchases -- as does a VAT -- but also allows deduction of wages. The wage income that is taken out of the VAT base, however, is also taxed, but is assessed against the individual wage-earner, not against the business."

The fair tax folks are the same folks that push for open borders and free trade. To suggest that they will allow tariffs to go up since they don't mention them in their manifesto is the hight of either wishful thinking or downright dishonety.

The FairTax Folks have now position on tariffs other than they are another hidden tax.

Please show otherwise: Here is the AFFT web site, the folks who researched and authored the bill:

===> http://www.fairtax.org

A national sales tax will be the victim of the same kind of tinkering that the income tax is,

And you figure a flat income tax is immune? ROFLMAO.

so you solve nothing in the long term except for giving people a reason to do all their shopping at swap meets.

More power to us. After all you can sell all the used goods you want with no NRST. As well as sell anything to other businesses with no NRST. Seems like an excellant way to go.

The driving force of the NRST is, afterall, to empower the citizen, not the government.

Taxes & Government Spending:

"The income tax in effect makes us vassals to the government – the politicians decide how much income we can keep. No mere “reform” of this slave tax, such as flattening the rate, can correct its fundamental denial of control over our own money. Only the abolition of the income tax itself will restore the basic American principle that our income is both our own money and our own private business - not the government's."

"Replacing the income tax with a national sales tax would rejuvenate independence and responsibility in our citizens. True economic liberty and moral revival go hand in hand."

"A national sales tax would also put the American citizen back in control of national fiscal policy. The best way to curtail government spending is to cut taxes, because they can’t spend what they don’t get. But with a sales tax, we could deny funds to a spendthrift government – and give ourselves a tax cut – whenever we make the private choice to alter our spending and saving habits."

"As a matter of fact, what the income tax does — and this is the debate that I think we always try to get into in order to let you and him fight, see — and the people of this country are led down a path where the actual control of their resources, which in the end is the control over their will, is handed off to the government."

. . .

"The government then manipulates that will in order to destroy the freedom of our electoral system through the income tax structure, and we call the resulting slavery a free system."

"In point of fact, it is not as the founders understood, and the only way to restore real freedom is to give people back control over the income that they earn so that they won‘t, at the voting booth and in other phony issues, be subject to that manipulation."

- KEYES TRANSCRIPT (01/28/02)

I am in favor of a national sales tax. It would be easy to shift a scaled back IRS' activities to the collection of the sales tax and processing rebates/exemptions for seniors who are elidgible.

The Genuine National Retail Sales Tax will eliminate all your tax afflictions. Eliminates income tax, payroll tax, unemployment tax, Social Security tax -- any tax that ails you. Do you have a pinful audit? The NRST will eliminate all "audits"! Guaranteed or your election refunded in full!

Now that you have had your emotional outburst:

Fallacy: Appeal to Ridicule

Also Known as: Appeal to Mockery, The Horse Laugh.

Description of Appeal to Ridicule

The Appeal to Ridicule is a fallacy in which ridicule or mockery is substituted for evidence in an "argument." This line of "reasoning" has the following form:

X, which is some form of ridicule is presented (typically directed at the claim).
Therefore claim C is false.

This sort of "reasoning" is fallacious because mocking a claim does not show that it is false. This is especially clear in the following example: "1+1=2! That's the most ridiculous thing I have ever heard!"

It should be noted that showing that a claim is ridiculous through the use of legitimate methods (such as a non fallacious argument) can make it reasonable to reject the claim. One form of this line of reasoning is known as a "reductio ad absurdum" ("reducing to absurdity"). In this sort of argument, the idea is to show that a contradiction (a statement that must be false) or an absurd result follows from a claim. For example: "Bill claims that a member of a minority group cannot be a racist. However, this is absurd. Think about this: white males are a minority in the world. Given Bill's claim, it would follow that no white males could be racists. Hence, the Klan, Nazis, and white supremists are not racist organizations."

How about a reasoned argument against replacing the current income/payroll tax system with a National Retail Sales Tax.

It would have to be a 54% NRST to be revenue neutral at todays retail prices. You claim retail prices would drop under the NRST -- therefore the NRST would have to be even higher than 54%.

Game, set, match.

Congressman Lampson's Testimony on the National Retail Sales Tax

Budget Committee Testimony

The Honorable Nick Lampson

Consumption Tax and Flat Tax
October 6, 2004

Thank you, Mr. Chairman, for holding this hearing and allowing me to testify today. I believe there are dangers inherent in the proposed National Retail Sales Tax. I am glad we finally have an opportunity to discuss the proposal seriously.

I am deeply concerned about potential problems with this proposal, that it will hurt home builders and automobile manufacturers, state governments and small businesses, and most importantly seniors and the middle class. I am also concerned that this supposedly simple proposed tax structure would be incredibly complex in its implementation, the cost of which has been grossly understated.

Under the current National Retail Sales Tax proposal, an additional $30 in taxes would be levied against every $100 in goods and services. That means southeast Texans would pay $130 for $100 in groceries. Where I come from that's a 30% sales tax - not the 23% many supporters claim.

Even this outrageously high projected rate is too low. Many economists estimate a true estimate between 50% and 60%. Even Harvard economist Ken Jorgenson, cited by many sales tax defenders as confirming a 30% or 23% tax rate inclusive, indicated that the rate would need to be 40% or 28.5% tax inclusive.

Former Republican leader Dick Armey discussed the many failures of a National Retail Sales Tax in a 1995 Policy Review article. He cites a 1993 report by the Organization for Economic Cooperation and Development arguing that while several countries have tried, almost no industrialized country has managed to sustain a National Retail Sales Tax above 12%.

A high tax rate assessed at the cash register would increase demand for black market goods. Consumers receive large price savings for engaging in what some consider low risk and minor criminal behavior. To prevent this we could assess the tax not at the cash register, but instead have each firm pass the tax on to consumers by charging it to their distributors. European nations have done this through a Value Added Tax ("VAT"). Unfortunately, administering a VAT requires government oversight and careful tracking by companies, creating additional work to our business community and a new, large governmental bureaucracy.

The National Retail Sales Tax also hurts small businesses. In states that use a sales tax, like my home state of Texas, small businesses generate between 20% and 40% of all sales tax revenue. Small businesses are not supposed to be impacted by state sales tax, yet if employees head over to Office Depot periodically to pick up supplies, that small business would pay an additional 30% tax on those items, unless it keeps all their receipts and asks the government for a refund. This amounts to a heavy tax levied against businesses. It's reasonable to assume that a similar 20% to 40% of the total revenue raised by a National Sales Tax would come from the same small business community.

The impact of this proposal on automobile dealers and home builders is also alarming. The National Sales Tax only taxes new goods. That means an $85,000 new home in my hometown of Beaumont would now be a $110,500 home, while an equivalent older home would still cost $85,000. This is a strong disincentive for people considering the purchase of a new home or a car. As a homeowner, this might be good for me because my home's value would go up, but what is the impact on new home sale rates our Administration sees as signs of recovery?

Many people would turn away from new consumer durables like cars and home appliances, instead opting to maintain older items or purchase older, used versions of the same items. Antique dealers and repair shops may benefit heavily from this, but our nation's automakers, dealers, and major retailers would suffer greatly!

Under this proposal, it is estimated that the Texas state government would now owe the U.S. government over $20 billion. The only way to make up that money is to increase an already high sales tax - further driving up home, health, food, and energy costs - or increase property taxes by around 82%. This does not even include the money Texas would now spend enforcing the federal government's new tax laws. This added cost would fall most heavily upon Americans whose paycheck is largely spent on housing. Rental rates would increase, and between losing their mortgage tax exemption and the increase in property tax rates, lower and middle income homeowners may be unable to pay for their current housing.

I've read the arguments about how the Texas state government already pays taxes to the U.S. Government. Any reputable economist would acknowledge that employees of the state government are the ones who pay in the form of their income and payroll taxes. Unless the Texas state government offsets its new tax burden by cutting state employees wages, it would have to increase its property taxes.

The biggest question is not how this proposal impacts big or small businesses or state governments, but rather, how does this proposal affect average Americans?

This proposal would crush seniors in my district. Currently seniors pay little or no income tax, spending from their savings and pensions. The most horrifying tax increase will be upon them. Seniors will surely be surprised to see the price of all their goods rise by 30%, and appalled as the cost of medication and health care also increase by the same percentage. Many seniors currently find it very hard to balance their budgets. This policy would make that task impossible.

Even with a reasonable exemption, this policy would amount to a tax increase on the poorest Americans. Under current law, the refundable earned income tax credit actually provides income subsidies to the poorest Americans. This essentially gives them a negative tax rate, meaning the government pays them more than they pay in taxes. Current provisions in this bill aim to give these Americans a zero percent tax rate, ignoring secondary effects from increased rental rates. Even with this optimistic assumption, it still amounts to a tax increase.

The richest Americans would benefit from this policy. If someone has the means to own two Ferraris, he or she likely has the ability to put more money into investments or the bank. All that money would go untaxed in a National Retail Sales Tax scheme. Some people estimate that their tax rates would drop to as low as 5%, while many less well-off Americans would experience rates much closer to 30%.

Even if one grants generous assumptions about how well poorer Americans would do under this proposal, one must ask where the tax burden falls if the rich go untaxed and the poor go untaxed. We talk a lot in this body about helping the middle class, but it is very clear that this proposal means bad news for the middle class. Ultimately, the consequences of a National Sales Tax are burdens that come to rest on the shoulders of America's working families. I hope the Members of this Committee will agree we must not be the ones to put them there. Thank you.

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.

Retailers Oppose National Retail Sales Tax
WASHINGTON, Oct. 06 /PRNewswire/ --

WASHINGTON, Oct. 6 /PRNewswire/ -- The National Retail Federation today urged Congress to reject a national retail sales tax, saying that the proposal could bring significant declines in employment, consumer spending and the national economy.

"The National Retail Federation is strongly opposed to a national retail sales tax because of the detrimental effect it would have on the economy," NRF Senior Vice President for Government Relations Steve Pfister said. "Although there may be advantages to replacing the current system with a totally new type of tax system, this also would cause major economic disruption that many businesses might not be able to withstand."

"A national retail sales tax would amount to a huge tax increase for those who can afford it least: low-and middle-income taxpayers struggling to afford life's daily necessities and senior citizens who pay for their purchases with savings that have already been taxed," Pfister said. "In addition, it would create a huge incentive for black market transactions to avoid tax payment."

Pfister's comments came in a letter to members of the House Budget Committee, which is scheduled to hold a hearing today on a variety of federal tax reform options. Among the bills to be discussed is H.R. 25, the Fair Tax Act of 2003, sponsored by Representative John Linder, R-Ga. The Linder legislation would replace the current federal tax system with a national sales tax that would add 30 percent or more to the cost not only of retail merchandise but also to a wide range of goods and services currently not subject to sales tax such as new home sales, health care and prescription drugs.

Pfister cited a study commissioned by NRF in 2000 that found that a national sales tax would bring a three-year decline in the economy, a four- year decline in employment and an eight-year decline in consumer spending. Pfister also cited an analysis by the congressional Joint Committee on Taxation that said a 57 percent rate would be necessary to replace all current federal tax revenue.

Pfister said Congress should consider all options as it debates tax reform, including revisions to the existing income tax system. Congress should also carefully consider the economic disruptions that would come with a fundamental change, he said.

The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet and independent stores as well as the industry's key trading partners of retail goods and services. NRF represents an industry with more than 1.4 million U.S. retail establishments, more than 23 million employees -- about one in five American workers -- and 2003 sales of $3.8 trillion. As the industry umbrella group, NRF also represents more than 100 state, national and international retail associations. http://www.nrf.com/.

National Retail Federation
CONTACT: J. Craig Shearman of the National Retail Federation,
+1-202-626-8134, or shearmanc@nrf.com

It would have to be a 54% NRST to be revenue neutral at todays retail prices. You claim retail prices would drop under the NRST -- therefore the NRST would have to be even higher than 54%.

Baloney, you've tried that one before.

Your taxbase does not conform to the parameters of the proposed legislation in HR25.

Implemented as required by HR25, on the retail sale of new goods and services reported under the GDP/NIPA date without exception. the revenue neutral tax rate as measured against the 1997 tax law would be 23% of gross consumption expenditure.

Here is how to do an actual calulation by example:

Cato Policy Analysis No. 272

Calculating the Tax Base

Perhaps the most difficult issue with respect to the national sales tax is deciding what tax rate to impose. To establish the proper rate, we need to first define the proper tax base. What is to be taxed? An ideal NST should have a wide tax base with few, if any, exemptions. Exempting certain goods and services--such as food and medicine--is problematic for two reasons: First, the more exemptions that are carved out, the higher the rate will be on everything else. Second, exemptions inject distortions into the tax system and eliminate the neutral tax treatment of goods and industries.

Thus, the NST should be imposed on gross payments for the use, consumption, or enjoyment in the United States of any taxable property or service. Taxable property and services include any tangible property (including rents and leaseholds on tangible property) and services. Securities, contract rights, copyrights, patents, and the like are not taxable. Housing, financial intermediation services, government goods and services that are sold to the public--such as bus rides, postage stamps, and publications of the Government Printing Office--gaming services, and the unrelated business activities of not-for-profit organizations are also included in the tax base. Property (or services) produced or rendered outside of the United States (imports) would be taxed at the point of sale. Thus, virtually any consumer good (ranging from food to video games to cars) would be taxed. Apartment and house rents and home purchases also would be subject to tax. Goods purchased abroad by consumers would be taxed upon entry into the United States. ^[28] Services to individuals and households (including, for example, services provided by barbers, plumbers, therapists, accountants, lawyers, doctors, and the like) would also be taxed.

The sales tax base is not exactly equivalent to personal consumption expenditures as defined in the national income product accounts. Adjustments, both enlarging and reducing the tax base, must be made, as shown in Table 1. ^[29] Using 1995 as the base year, the total sales tax base was $5,978 billion. This includes all final-use goods and services including government expenditures except education.

How would an NST plan prevent tax cascading? Cascading refers to the repeated taxation of the same items as they are sold and resold at successive stages of production and trade. Cascading is a deficiency of many state sales taxes. ^[30] Under an NST, exemptions should be provided for purchases for resale, purchases to produce taxable property or services, and exports. A good or service should be defined as "purchased for resale" if it is purchased by a person in an active trade or business for the purpose of reselling it in the ordinary course of trade or business. The term "purchased to produce taxable property or services" is a general exemption meant to exempt business inputs generally. The exemption is available if the property or service is purchased for use in the production or sale of other taxable property or services. Education and training services are treated as investment expenditures rather than consumption and thus would not be taxed. Wages paid by an employer engaged in an active trade or business are not treated as taxable services. By contrast, wages paid by a household to an accountant, a maid, or a gardener would be taxable since they are providing a final-use service.

Table 1
Tax Base for National Sales Tax (billions of dollars)

Description of Taxable Item	Tax Base (1995)
Personal consumption expenditures	$4,924.9
Purchases of new homes	156.4
Improvements to single-family homes	73.9
Imputed rent on housing	-534.3
Additional financial intermediation services	53.0
Foreign travel by U.S. residents (one-half)	-26.4
Expenditures abroad by U.S. residents	-2.7
Food produced and consumed on farms	-0.4
State and local government consumption	682.6
State and local government gross purchases	159.1
Federal government consumption	453.8
Federal government gross purchases	62.7
Less: Education expenditures	-97.5
Plus: Expenditures in U.S. by nonresidents	73.1
NST Base	$5,978.2
Source: National Income Product Accounts, Survey of Current Business, August 1996.

The NST plan must avoid cascading to ensure the same effective tax rate across all types of property and services (horizontal equality), irrespective of the number of companies or stages of production that were necessary to bring the good or service to market (vertical equality).

With a cascading tax, the effective rate increases, depending on the number of times a good changes hands before it is purchased by a consumer. There is thus a major incentive for vertical integration and for firms to perform as many functions in-house as possible, reducing economic efficiency and distorting the marketplace (largely to the detriment of small firms that do not have the capital or other resources necessary to source everything in-house). The number of firms involved in getting a product to the consumer should be thoroughly irrelevant to how heavily the good is taxed. ^[31]

A sales tax is not a value-added tax (VAT). A value-added tax is levied at each stage of production on the value added by the firm. ^[32] Value added is typically defined as gross receipts from sales less purchases from other businesses. In Europe, VATs are levied by imposing a tax on sales, whether to consumers or businesses. Businesses are then allowed to add up the taxes paid on their inputs and receive a credit for taxes paid against tax due.

Calculating the Tax Rate

In the previous section we defined the total consumption tax base for the national sales tax in calendar year 1995 as $5,978 billion. Now we ask, What rate of sales tax would need to be imposed to collect the same amount of revenue that was gathered from the income tax? Table 2 shows the total amount of federal revenues collected from taxes that would be replaced with the national sales tax. In fiscal year 1995 those revenues amounted to $803 billion ($1,293 billion if payroll taxes are also included).

Putting together the information in Tables 1 and 2, we discover that an NST with no rebate could collect the same amount of revenue ($803 billion) as the current income tax regime with a tax inclusive rate of 11.8 percent, as shown in Table 3. This tax inclusive rate with a rebate to fully protect the poor from the tax (as discussed below) would bring the rate to 14.2 percent. Throughout this study we use a rate of 15 percent, which would offset any losses from tax avoidance beyond the amount that occurs with the current income tax.

Table 2
Tax Revenues to Be Replaced by National Sales Tax, 1995 (billions of dollars)

Income tax	$759.9
Estate and gift taxes	15.1
Excise taxes (estimated)	28.0
Subtotal	803.0
Payroll taxes	490.3

Total	$1,293.3
Source: Federal Receipts, Analytical Perspectives, FY 1997 Budget of the United States Government. Calendar year basis.

Table 3
Calculation of National Sales Tax Rate

	Tax Base (billions)	Revenues to Be Collected (billions)	Tax Rate (tax exclusive)	Tax Rate (tax inclusive)
No rebate,
excluding payroll taxes	$5,978.2	$ 803.0	13.4%	11.8%
With rebate,
excluding payroll taxes	4,841.1	803.0	16.6	14.2
No rebate,
including payroll taxes	5,978.2	1,293.2	21.6	17.8
With rebate,
including payroll taxes	4,841.1	1,293.2	26.7	21.1
Source: National Income Product Accounts, Survey of Current Business, August 1996; Federal Receipts, Analytical Perspectives, FY 1997 Budget of the United States Government.

The following provides a fair approximation of what the revenue neutral HR25 tax rate, (making the Bush tax cuts as permanent) would be for 2004.

from Tax Freedom Day 2004 PDF http://www.taxfoundation.org/sr129.pdf

Total Effective Tax Rates by Level of Government Percent Net National Product(NNP)
Year	Federal	State	Total
1998	22.4%	10.4%	32.8%
1999	22.5%	10.4%	32.9%
2000	23.1%	10.4%	33.5%
2001	22.2%	10.5%	33.7%
2002 ¹	19.7%	10.2%	29.2%
2003 ²	18.5%	10.1%	28.6%
2004³	17.9%	10.0%	27.9%
Notes: Leap day is omitted to make dates comparable over time. Positive and negative percentages in parentheses after legislation indicate the first-year fiscal impact of the bill,measured as a percentage of NNP. Since depreciation is not available to pay taxes, GDP is an overstatement of spendable income for the purpose of measuring tax burdens. Depreciation is netted out of NNP. 1 Economic Growth and Tax Reform Reconciliation Act of 2001 2 The Job Creation and Worker Assistance Act of 2002 3 Job Growth and Tax Relief Reconciliation Act of 2003 Sources: Office of Management and Budget; Internal Revenue Service; Congressional Research Service; National Bureau of Economic Research; Treasury Department; and Tax Foundation calculations.

that is the plan and has been since before Bush was elected the first time. He already has all the findings laid out. This is just the dog and pony show for the public.