Game, set, match.
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
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
Table 3
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
from Tax Freedom Day 2004 PDF http://www.taxfoundation.org/sr129.pdf
|
Total Effective Tax Rates by Level of Government |
|||
| 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% |
| 2004 3 | 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 Sources: Office of Management and Budget; Internal Revenue Service; Congressional Research Service; National Bureau of Economic Research; Treasury Department; and Tax Foundation calculations. |
|||