Posted on 12/01/2004 8:25:22 AM PST by Tumbleweed_Connection
...President Bush and House Speaker Dennis Hastert (search) have both said the idea of a national sales tax deserves a serious look. For many, the idea of a world without the Internal Revenue Service is very seductive.
"We spend about $400 billion a year complying with the tax code. We spend $200 billion a year just filling out IRS paperwork," said Rep. John Linder (search) , R-Ga., who has proposed a bill that would create a national sales tax.
Proponents have spent millions on research and have concluded that a national sales tax can replace the income tax, payroll tax, estate tax and corporate tax. Advocates say the new tax would lower the cost of manufacturing and job creation and attract foreign investments, among other things.
"If we were to get rid of the sales or the income tax and the payroll tax and all compliance costs, we would be so ferociously competitive in a world economy that corporate America would not be competed with unless foreign corporations started building their plants in America," Linder said.
Proponents seek a 23-cent national sales tax on all retail goods, everything from groceries to clothes, cars to electronics. Everyone would pay the same rate, which critics argue is part of the problem.
"If you consume $40,000 a year and you make $50,000 a year, would you feel it is fair if a guy who made a half a million dollars a year but spent $40,000 a year paid the same tax you do? I think you wouldn't feel it's fair," said Buck Chapoton, former assistant treasury secretary.
(Excerpt) Read more at foxnews.com ...
I think I'd rather see a 'flat rate' on income tax. I can't imagine food being included in that big sales tax!!
How could they "not be subject"? The manufacturer would be the end user of these products. Another good example is computers & software. Suddenly this manufacturer's computers & software will cost 30% more. The mfr is not going to absorb these costs - he is going to pass them on to his consumers.
Jeez, I put the entire section on the corporate income tax. That isn't context enough? 359
No it's not enough.
Below are two examples that demonstrate how honesty outlives the lie, spin and deception -- always has and always will.
Example 1:
The self-exposure trap depends on one thing: The accused being free to fully respond. If innocent, the accused only needs to put all the facts into context. Justice will follow. ...Consider the oversimplified self-exposure trap of John O'Grady:
|
In 1944, I saw John O'Grady premeditate and then purposely kill a man. John O'Grady is a murderer. He should be jailed for life. True facts. Incomplete. Out of context. Unjust conclusion. Then the Accused Appears I, John O'Grady, saved a platoon of men in 1944 during the Battle of the Bulge at Bastogne, Belgium. Trapped beneath a snow-covered ledge by a Nazi machine gunner, I premeditated a plan. I then scaled an icy cliff. Wounded twice, I shot and killed the machine gunner. I saved the twenty men left in my platoon. True facts. Complete. In context. Now, with the facts integrated in full context, one's view and opinion of the accuser versus the accused inverts: The accuser becomes the guilty villain and the accused becomes the innocent hero. |
Once all the facts are locked together to reveal the full picture, the accuser often becomes revealed as the guilty. That process of connecting all the facts into accurate context is the process of honesty. And that process of honesty is called Neotech. Supporting-Document #2- The Map to our World of Tomorrow
* * *
Below is the excerpt that Your Nightmare posted to support his assertion that corporate taxes aren't passed on to the consumer. . Following that is an excerpt posted by ancient-geezer from the same document Your Nightmare got the excerpt he posted, showing that the full context of the document does not support Your Nightmare's assertion.
Example 2:
Assertion based on incomplete context
Here is Your Nightmare's post at 340
Here is the complete section on the corporate income tax. People can just for themselves:
[Editor note: "complete section" is not the complete context of the document as it pertains to Your Nightmare's assertion.]
The Corporate Income Tax
Initial Incidence of the Corporate Income Tax. No competent student of taxation believes that corporations pay the corporate income tax. Only people pay taxes. Things and abstractions do not pay taxes. A corporation is, in law, a legal person, but that is, in fact, a legal fiction. Therefore, corporations do not really pay the corporate income tax. Conservative Nobel Prize–winning economist Milton Friedman is well known for espousing that view, but liberal economists share it as well. The liberal Nobel economist Wassily Leontief told The New York Times 20 years ago:
Corporate income taxes fall ultimately on people. Economists have tried but have never succeeded in finding out how the weight of these taxes is ultimately distributed among income groups. There can be little doubt that elimination of corporate income taxes would simplify our tax system and limit its abuse.[35]
Ultimate Burden of the Corporate Income Tax. Tax analysts generally assume that the corporate income tax is borne, at least in the first instance, by shareholders. As the Treasury put it, because corporations are owned by shareholders, corporations have no taxpaying ability independent of their shareholders. Corporations pay taxes out of the incomes of their shareholders.[36] However, the analysis does not stop there.
Economists also recognize that corporate taxes, though initially coming out of shareholders' incomes, have further economic repercussions that shift part of the ultimate burden to others. As the Treasury report continues:
Importantly, the burden of the corporate income tax may not fall on shareholders. A corporate tax change could induce responses that would alter other forms of income as well. For example, some of the burden may be shifted to workers through lower wages, to consumers through higher prices, to owners of non-corporate capital through lower rates of return on their investments, or to landowners through lower rents. This shifting might not happen quickly, so the short-run incidence could well differ from the long-run incidence.[37]
(Note the Treasury's interchangeable use of the terms incidence and burden, for both the short-run own-market effect and the long-run general equilibrium outcome.)
In years past, the Congressional Budget Office has also suggested that the corporate tax falls about half on owners of capital and about half on the workforce, arguing that the tax depresses capital formation and therefore depresses productivity and wages, shifting at least some of the burden to labor.
More recently, the Treasury and the CBO have assumed that the corporate tax is borne by owners of all capital (corporate capital and competing non-corporate capital), and none by workers. Most economists believe that the burden of the corporate tax is borne to some extent by shareholders, workers, and consumers (who are often the same people in different roles), but they do not agree on the division of the burden. Because of the uncertainty in the profession, the JCT has stopped assigning it to anyone in the official burden tables. If the corporate income tax were raised and individual income taxes were cut by equal amounts, the burden tables would show a reduction in the tax on the population with no loss of federal revenue—an ultimate (and quite impossible) free lunch!
Of course, someone pays the corporate income tax even if the JCT cannot point out who it is. In fact, a modern view of the corporate tax in the context of an open, globally integrated economy holds that the burden of the corporate tax falls primarily on labor after all adjustments are taken into account.
Varying Views of the Corporate Tax. In 1962, Professor Arnold Harberger produced a seminal article on the incidence of the corporate income tax.[38] The article did more than analyze the corporate tax; it showed the importance of going beyond narrow partial equilibrium analysis in looking at the effects of taxation.
The early Harberger work suggested that the corporate tax was borne by the owners of all capital, not just corporate capital. Harberger assumed a closed economy with a fixed total capital stock. The capital could be allocated either to the corporate or to the non-corporate sectors, which were assumed to produce somewhat different goods and services.[39] If a corporate tax were imposed, raising the tax rate above that of the non-corporate sector, capital would migrate to the non-corporate sector. Gross returns would rise in the corporate sector and fall in the non-corporate sector to equalize after-tax yields between the sectors. Thus, a portion of the corporate tax would be shifted to non-corporate capital. There would also be an efficiency (dead weight) loss that would make the burden greater than the amount of the tax itself.
In later work, Professor Harberger changed his assumption that the economy is closed and concluded that the corporate tax is borne largely by domestic labor, at least in the case of a small open economy that has little impact on the world rate of return.
Putting a tax on the income from corporate capital would simply lead to adjustments whereby less capital would be at work in that country…. Where would the capital go? It would go abroad…. In realizing that the presence of the tax implies that significantly less capital will be combining with the same amount of total labor (in the small developing country), it should come as no surprise that the equilibrium wage has to be lower. But there is an additional and more critical reason (above and beyond simple capital labor-substitution) why labor's wage must fall: the need to compete with the ROW [rest of the world] in the production of manufactures (corporate tradables). The tax is a wedge that has been inserted into the pre-existing cost structure. The prices of corporate tradable products cannot go up because they are set in the world marketplace; the net-of-tax return to capital cannot go down (except transitorily), because capital will not be content to earn less here (in the small developing country) than abroad. Some element of cost has to be squeezed in order to fit the new tax wedge into a cost structure with a rigid product price at one end and a rigid net-of-tax rate of return to capital on the other. The only soft point in this cost structure is wages. If they do not yield, the country may simply stop producing corporate tradables. Or, if the country continues to produce such goods, then wages must have yielded—by just enough to absorb the extra taxes that have to be paid….[40]
Harberger goes on to point out that the United States is a large country, not a small one, so the exit of U.S. capital would somewhat depress the rate of return to capital in the world, which would somewhat mitigate the capital flight and reduce the share of the tax burden passed on to U.S. labor. Nonetheless, he estimates that U.S. labor would still have to bear seven-eighths of the corporate tax.[41] Harberger assumes an unchanged world capital stock, i.e., that the world stock of capital does not fall to restore after-tax returns to the levels they enjoyed before the imposition of the U.S. tax. If one instead adds the assumption that the world capital stock is elastic over time with respect to the rate of return, then even this modest offset to the impact of the U.S. corporate tax on U.S. labor would vanish.
Harberger reiterated his analysis in a recent interview in the IMF Survey conducted by Prakesh Loungani.[42]
Loungani: The effects of some economic policies are better understood thanks to your academic contributions. You did path-breaking work on whether capital or labor bears the burden of the corporate income tax.
Harberger: There are interesting developments to report on that front. In the closed-economy case that I analyzed in the 1960s, the natural result is that capital bears the burden of the tax and can easily bear more than the full burden. But my students and I have now analyzed the open-economy case, which is more applicable to today's global economy. The result in this case is that labor bears the burden and can easily bear more than the full burden.
Loungani: That's quite a flip. Why does it happen?
Harberger: Think of the so-called tradable goods sector of an open economy, the sector that produces goods that are traded on a world market. The prices of these goods are determined in the world market. And, with an open economy, the rate of return to capital is largely determined in the world market, because capital can flow from country to country in search of the highest return. Now the government gets in there and tries to impose a corporation income tax on capital. Well, who bears the burden? Capital can move across national boundaries to try to escape the tax. So it's labor, the factor of production that can't easily escape national boundaries, that ends up bearing the burden of the tax.
In this analysis, part of the fixed quantity of U.S. capital relocates abroad, and domestic labor suffers a loss in income and therefore bears the entire corporate tax, plus a dead weight loss. One could go two steps further in refining the analysis, however.
First, one could note the effect of the shift of U.S. capital abroad on foreign labor and world capital returns while retaining the idea of a fixed total world capital stock. This would put some of the burden of the corporate tax back on U.S. capital. If the United States were a very small economy, the shift in U.S. assets abroad would have little impact on global rates of return, and the Harberger result for the U.S. would follow. Given the size of the U.S. economy, however, there would be some effects abroad. The tax on domestic U.S. corporations would drive some investment offshore, but that investment would have to compete harder for available foreign labor. Initially, the foreign capital–labor ratio would rise, increasing returns to foreign labor but reducing returns to foreign capital, consisting of the expatriate U.S. capital and the pre-existing foreign capital. The misallocation of the fixed world capital would depress capital returns here and abroad. At least temporarily, all capital, U.S. and foreign, would suffer some loss of income due to the U.S. tax. Nonetheless, U.S. labor would bear most of the burden of the tax, which would exceed the tax revenue due to the added dead weight burden of the economic distortions.
Second, however, one really must relax the (still partial equilibrium) assumption of a fixed quantity of domestic and world capital. Capital formation has been shown to be sensitive to the after-tax return. Over time, there would be a reduction in the quantity of foreign-located capital (whether foreign- or U.S.-owned) to restore its normal after-tax return, reducing the gains to foreign workers. Foreign returns to capital would not decline significantly. The reduction in the quantity of U.S. capital would restore its original after-tax return as well. Capital would bear very little of the burden of the U.S. corporate income tax. In the long run, one should expect a general equilibrium result that the main losers would be U.S. workers.
Other analysts have a different view of the corporate income tax in an open, or partially open, economy. For example, Jane Gravelle and Kent Smetters construct a model in which the largest part of the corporate tax can be borne by domestic capital in spite of trade and capital flows, in effect restoring the old view of who bears the corporate tax.[43] They get this result by assuming imperfect substitution of domestic and foreign capital (people prefer the stocks and bonds of their home country governments and businesses) and imperfect substitution of domestic and foreign goods and services. They also assume a fixed total capital stock to abstract from the issue of the elasticity of saving.
In their four-sector model, they get the usual result of a corporate tax shifted mainly to domestic labor when substitution elasticities are very large: Capital moves abroad, equalizing the domestic and foreign after-tax rates of return. The capital flight depresses rates of return to foreign capital (exporting some of the tax) and raises foreign wages. Wages of domestic labor (the immobile factor) fall. But assuming lower elasticities, which the authors feel are more plausible, less capital shifts abroad (because it is assumed to be somewhat immobile too). People are willing to accept a drop in the after-tax return on capital to own domestic assets, and the tax can open a permanent differential between rates of return at home and abroad. As a result, the bulk of the corporate tax falls on domestic capital, less on domestic labor. Some capital is exported, which shifts some of the tax to foreign capital with some gains to foreign labor, but less than in the high-elasticity case.
There are several areas of concern with the Gravelle–Smetters approach:
- The assumption of a constant world capital stock is unrealistic, just as it is in the Harberger analysis, and simply throws out the bulk of the adjustment process. The quantity of capital has been seen to vary substantially to restore its after-tax rate of return to normal levels over time following a tax change. The lower worldwide return on capital post-tax would depress global capital accumulation and shift the tax back to labor.
- The assumption of a low substitutability of domestic and foreign capital appears to be at odds with observed international flows of financial and physical investment. Even if savers and investors on average display a home country preference, the capital markets act very open if even a few large savers are, at the margin, willing to move capital freely across borders. It may be that many people never buy foreign securities and many companies prefer to invest at home, reducing the average ratio of global to local assets in domestic portfolios. At the margin, however, there are many people, businesses, and institutions that freely arbitrage across borders. Multinational financial and non-financial corporations send funds and direct fixed investment all over the world. Consider that the outflow of U.S. capital has been averaging roughly $400 billion a year and foreign investment in the U.S. has been averaging over $500 billion a year for some years. The sum of the annual cross-border investment flows has been about $1 trillion—almost as large as total annual investment in the United States.
- In the cases where the corporate tax falls on domestic capital, the Gravelle–Smetters model implies that a tax increase can lower the after-tax rates of return on capital for a very long time and can lead to prolonged differences in the after-tax rates of return on domestic and foreign capital. This is disturbing on two grounds. First, in the modern world, returns on global assets of similar risk and quality do not display wide and permanent differentials. Second, taxation of capital has risen drastically over the past hundred years with the inventions of the corporate and personal national and sub-national income taxes, property taxes, and estate and inheritance taxes, yet there has been no correspondingly large change in the real, risk-adjusted after-tax yields on capital, either financial or physical. It appears that capital, by adjusting its quantity, is able to shift a large part of the taxes aimed at it onto other factors.
Additional context from the same document that shows the above excerpt doesn't support Your Nightmare's assertion.
Here's ancient_geezer's post at 346
Be sure to not leave out the caveats and hyperlink of that paper of yours, so folks can read it all, in context:
|
Tax Incidence, Tax Burden, and Tax Shifting Who Really Pays the Tax *** Snip *** The distribution of the corporate income tax is so uncertain that it is left out of most burden tables but is thought to be borne mainly by either shareholders (at least in the short run) or workers (in the long run, as capital adapts). These taxes are described as if workers, savers, and investors offered their labor and capital in totally inelastic supply, undiminished in quantity, when the tax cuts their compensation. It is assumed that they make no demand for an increase in compensation in response to the tax, so they swallow the entire burden of the income and other factor taxes that they pay. *** Snip *** In effect, the analysts pretend that producers can shift consumption taxes onto their customers but must absorb income taxes placed on their own earnings. Supply is infinitely elastic and infinitely inelastic at the same time. This is an inconsistent approach to tax shifting that is at odds with both economic theory and real-world experience. |
I think I'd rather see a 'flat rate' on income tax. I can't imagine food being included in that big sales tax!!
With the Fair Tax you would be able to buy your groceries and walk out of the store with more money in your pocket than under the income tax. The FCA (family consumption allowance) you'd get a "check at the beginning of each month that covers the NRST up to the poverty level. For a family of four it's $361 each month.
Plus...
Barb has $130 income. She pays 23% of that in income tax, leaving her with $100 in her pocket. Barb spends the $100 on four shirts at $25 each.
Under the Fair Tax Barb goes to the store with $130 in her pocket. She sees that the price of the same shirt is $19.25 because roughly 23% of hidden taxes that are embedded in the supply chain of making the shirt and bringing it to market have been eliminated via the Fair Tax. Barb buys the same four shirts as above for a total cost of $100.
4 shirts X $19.25 = $77 plus $23 NRST = $100
Barb walks out of the store with four new shirts and, has $30 dollars in her pocket. Thirty dollars she wouldn't of had if she bought the shirts under the income tax.
They are not subject via sections 102a and 102b of the Fair Tax legislation:
102(a) IN GENERAL- For purposes of this subtitle--
(1) BUSINESS AND EXPORT PURPOSES- No tax shall be imposed under section 101 on any taxable property or service purchased for--
(A) a business purpose in a trade or business, or
(B) export from the United States for use or consumption outside the United States, if, the purchaser provided the seller with a registration certificate, and the seller was a wholesale seller.(b) BUSINESS PURPOSES- For purposes of this section, the term purchased for a business purpose in a trade or business' means purchased by a person engaged in a trade or business and used in that trade or business--
(1) for resale,
(2) to produce, provide, render, or sell taxable property or services, or
(3) in furtherance of other bona fide business purposes.
Thanks for the explanation. I didn't know about the FCA allowance.
It's very involved as all government things are!
How could they "not be subject"? The manufacturer would be the end user of these products.
Office supplies, furniture, computers, software, fork-lifts, lights, hard hats, security systems etc., and employee wages are all needed to produce the product to be sold at retail. Those are the cost of doing business and are not taxed. Only they bird house (widget, gadget, product) sold at the cash register is subject to the NRST. The consumer consumes the product for personal reasons. The business (a non person) uses the product for business reasons.
But that's at the discretion of the House leadership. They could continue to keep that designation, or they could start all over.
The sales tax is actually "23% of the gross payment". Is the 8.25% tax you pay, part of the "gross payment of products and services"?...I thought so.
Here's your $100.00 item's cost AFTER the federal sales "gross payment" tax:
$100.00 + 8.25% (state/local tax) = $108.25
$108.25 + 29.87% federal tax = $140.58 (gross payment)
$140.58(gross payment) minus 23% (gross payment tax) = $108.25
Why would the Feds collect tax on the tax?
They like your money any way they can get it...Republicans and Democrats alike
LOL, another fool falls
Not only is that a lie, it's mathematically impossible without wage reductions...there goes your phony $30,000 richer dream.
A.D.D.?
Once again the subject is
s-a-l-e-s
t-a-x
r-a-t-e-s...And prices would be increased by 30% by sales tax rates not income percentages.
Please, no more 55 word or three page essays to explain your phony rate...
I get it. you don't
The same can be said for the people who think those same people in control are going to give it up to make life better for the ones they control....
Still no mention of the the FairTax prebate in the MSM(which makes the FairTax progressive ann basically unopposable).
Assertion based on incomplete contextYou are really a joke.
Here is Your Nightmare's post at 340
I don't have a hang-up about eliminating the current system. The graduated income tax is atrocious- and there may be a good arguement that it violates the equal protection clause. I prefer the flat tax- everyone pays the same rate regardless of income. Some one who made $100,000 should pay the same rate as someone who made $100. I would like for double taxes to be eliminated. If I buy a house with taxed money and will it to a kinsman, the kinsman should not have to pay an estate tax. If I give $10,000 to someone, that person should not have to pay income tax on it because I already paid income tax on it. Corporate income taxes and capital gains taxes need to go. Dividend earnings should be counted as income just as wages are. If we want to keep corporate income taxes, then we need to eliminate dividend taxes.
Now, given the choice between the current graduated income tax and the proposed national sales tax, I would go with the national sales tax.
Well, those F-18's and stealth bombers aren't free.
True enough. However they ger to choose when they are taxed rather than that money being pilfered at the point of a gun. Therein lies the rub folks.
Managing tax exempt status is going to require a bureaucracy just as large as the IRS, and just as rife with fraud.
How exactly is a retail outlet like Home Depot going to differentiate between a builder buying a box of nails (which would theoretically be tax exempt), and a homeowner buying the same box?
So should we push this or should the debate continue for a little while. Who will advertise this? Who will push it to the public?
The same way they do it now.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.