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 ...
It's more than a little queer that these posts by you fairtax advocates always end up about me rather than address the debate.
Me and others have asked endlessly for any proof other than empty words by some one (hired) economist sitting in some room full of government hacks somewhere...
You've now joined the ranks of other airheads being perfectly capable of parrotting lies and distorted numbers you can not only NOT prove but can't comprehend.
As to addressing Congress, I won't need to, they aren't going to fulfill your dream. You're going to have to continue your miserable life without the big government coming to your rescue.
Any moron capable of a thought can figure out that a company earning less than 80% profit at a 30% tax rate couldn't lower their prices 23%.
You seem to be convinced they can...so if you think you can do it without the name calling, demonstrate how.
I have a business for over 22yrs. When I was told I would be forced by competitition to lower my prices 23% I was suspicious how...I do my own taxes and know what percentage of my gross is attributed to taxes..it isn't even close to 20%.
Needless to say I'll still be in business after my "competition" goes under after they take your (expert?) advise and lower their prices 23%.
I didn't read Jorgenson's biography (nor do I care to) but maybe you could produce just one business he's endeavored for 20+ yrs, especially one he's done the taxes for every year.
Your response further confirms post 427Whatever. But need to realize what economics is and what economists are capable of.
Have you even read this paper? It does not show a 20-30% price reduction.
Yes, and find that the paper does not model the effect on price of the Fair Tax legislation. In fact it does not even model or simulate the legislation of the tax system proposed in HR25 at all.
The most it does is comment that the Fair Tax legislation exists with a high 23%(tax inclusive) 29.87%(tax exclusive rate.):
| http://post.economics.harvard.edu/faculty/jorgenson/papers/BURDEN_web.pdf Page 27. Americans for Fair Taxation (AFT)have advanced an alternative proposal for a National Retail Sales Tax.The AFT proposal replaces personal and corporate income taxes,estate and gift taxes,and the payroll tax with a 23% national retail sales tax on a tax-inclusive base similar to that of the ST proposal (29.9% on a tax exclusive base). The AFT proposal is more ambitious than the ST proposal in that it replaces the payroll tax, used to fund entitlements such as Social Security and Medicare,as well as the income tax system. This has two important implications. The first is that the unfunded liabilities of the entitlement systems would ultimately have to be funded through the sales tax. The second is that a revenue neutral tax rate would be very high. |
Obviously a 23% tax of consumption purchase is very high. DUH. So are the federal income/payroll tax on wages that it replaces.
Then Jorgenson references the claims of the 1999 paper by William Gale, a Deputy Director and Senior Fellow of the Brookings Insititute, liberal thinktank.
Which merely refers to the FairTax legislation then proceeds to modify the taxbase and make conclusions about a tax system that Congress will never enact that is not in anyway related to the actual Fair Tax Act as proposed in HR25.
A paper, the dominant points of which, were solidly rebutted here as you well know, being a participant in that particular discussion: http://www.freerepublic.com/focus/f-news/1115410/posts
In "Efficient Taxation of Income", Jorgenson "the preeminently a master of the territory between economics and statistics"and Yun calculate that a progressive NRST would have to have a rate of 40%!
To be noted is an analysis is of an NRST that is not the the Fair Tax Legislation as proposed in HR25.
It is an adhoc example, with an base rate set for an arbitrarily small (half sized)tax base and large effective personal exemptions , to make it equivalent to the Hall Rebuska and Armey Shelby flat tax variants he analyzes. Further he assumes that state & local tax system are the same as the federal system and added the state/local rates to the test examples.
The result is a progressive NRST that has none of base characteristics (taxbase size replacing federal revenues only) of HR25.
It is purely a test scenario, having little to do with the Fair Tax proposal.
| http://post.economics.harvard.edu/faculty/jorgenson/papers/BURDEN_web.pdf Page 31. In order to develop alternative plans,we first construct a prototype sales tax and a prototype labor income tax. The labor income tax is based on the HR Flat Tax proposal. The sales tax is a Flat Tax rate with personal exemptions. We set the proportion of total exemptions in retail sales equal to the proportion of total exemptions in HR,which is 0.3516. Assuming that the federal sales tax rate is 17% as in Aaron and Gale (1996), table 1.1, we estimate that the corresponding average tax rate is 11.02%. In order to represent the current sales taxes,used mainly by the state and local governments,we add a Flat Tax of 5.8%to the progressive tax system we have derived.At this point,we have a progressive NRST with a marginal tax rate of 22.80%and an average tax rate of 16.82%
Page 32. In Plan 1, a progressive NRST replaces the capital and labor income taxes. Since the revenue requirement is very large in relation to the sales tax base, we start with tax rates twice as high as those of the prototype, that is tC =2 *(0 .17 +0 .058)=0 .4560 , and taC =2 *(0 .1102 +0 .058)=0 .3365 , tmL = taL = 0 , where tC is the average marginal tax rate and taC is the average tax rate. These sales tax rates serve as the starting values for our simulations and will be adjusted to meet the budget constraints of the government sector. |
Your out of context reditions once again showsyour disengenuous style of debate.
The the "progessive NRST" of the analysis is not HR25's at all, and has an arbitarily small tax base as well as not being "revenue neutral" with tax law, rather is based on arbitrary budget constraints rather than revenue neutrality for the analysis purposes of comparing the Hall-Rubuska and Armey-Spector Flat Tax systems against an equivalent NRST.
Yes Flat Taxes with their limited taxbase, and very large personal exemptions result in high overall taxrates if an NRST were constructed as an equivalent to them. DUH.
The Fair Tax has a much larger tax base and lower exemption structure, than the HR and AS Flat tax systems its rates as a consequence are much lower. A whole bunch lower.
Then Jorgenson references the claims of the 1999 paper by William Gale, a Deputy Director and Senior Fellow of the Brookings Insititute, liberal thinktank.What does the Brookings Institute have to do with it? You discount his work just because he's from Brookings?
It is purely a test scenario, having little to do with the Fair Tax proposal.When has Jorgenson model the FairTax in it's current form? I sure would like to see that paper. Can you give me a link?
A paper, the dominant points of which, were solidly rebutted here as you well know, being a participant in that particular discussion: http://www.freerepublic.com/focus/f-news/1115410/postsThat thread does not come close to "solidly rebutting" Gale's point. Jorgenson obviously read Gale's paper and didn't seem to have a problem with it. You don't trust his opinion? Or do you just pick and choose whatever fits you needs?
It is an adhoc example, with an base rate set for an arbitrarily small (half sized)tax base and large effective personal exemptions , to make it equivalent to the Hall Rebuska and Armey Shelby flat tax variants he analyzes.He used the same base for the NRST as the flat tax in this paper: The Economic Impact of Fundamental Tax Reform. It was OK for you then.
Further he assumes that state & local tax system are the same as the federal system and added the state/local rates to the test examples.Is that a problem? Because that exactly what he did in the paper you quote so much that claims a 20% drop in producer prices.
It is purely a test scenario, having little to do with the Fair Tax proposal.As is any economic model, including the ones Jorgenson did previous to this paper.
Your out of context reditions once again showsyour disengenuous style of debate.Your selective disagreements with elements of Jorgenson's analysis shows your's.
Yes Flat Taxes with their limited taxbase, and very large personal exemptions result in high overall taxrates if an NRST were constructed as an equivalent to them. DUH.Jeez. For being such a genius at modeling tax policy, this guy sure is a screw up. I mean, this paper was two whole years after "The Economic Impact of Fundamental Tax Reform." Didn't he learn anything? It seems he's gotten dumber. How can we trust anything he says?
You're Disingenuous style?...Look who's calling the kettle black.
You know you're on to something when the posts start becoming more about you than the subject.
You're Disingenuous style?...Look who's calling the kettle black.Really. Who's claiming there are more "embedded taxes" in prices than all the taxes collected from all sources! I have never seen so much made of one line in one paper. You would think that if prices were inflated that much by taxes we would hear a little more from other economist about it.
"HR:2525"
That was the bill number in the previous congress. It is Hr 25 now (and s 1493). It will have to be reintroduced in January when congress' next session reconvenes.
"Too much centralized control that would make it real easy for the DC politicians (demoncRAT, pubbies & indep) to start increasing the sales tax--at first it would start to creep, then bang it'll increase quite noticeably all under the disguise of 'we've got to balance the budget but we won't decrease spending.'"
"It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, 'in political arithmetic, two and two do not always make four.' If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them."
Alexander Hamilton in Federalist #21
"Holy cow, can you imagine what that would do to the real estate market?"
Yep, it would BOOM! Pre-tax prices fall as the cost associated with the current tax system are wrung out by competition so that when you ad the sales tax, you are back where you were before. Workers keep their entire paychecks, so saving for a house takes less time and interest rates drop because lenders would no longer pay taxes on interest income. This would more than offset the loss of the home mortgage deduction. The housing market would be very robust.
"The IRS is not going anywhere."
“I discussed the importance of abolishing the income tax because of its tendency to form a habit of servility in the souls of a people that accept it. Servility of soul is bad not only in itself, it is also an open door through which will soon walk the abuses of ambitious government power. Leaders who find themselves with governmental power over a servile people will be quick to conclude that such a people exist to serve them.”
Alan Keyes “The Power of the Purse”, WorldNet Daily, August 27,1999
"But 23 percent sems high; for a $20,000 car, you'd pay $4,600 in federal tax. Who's going to support that?"
If the car was produced in the US, you are already paying about 22% as the imbedded cost of the current system. When you remove that system, pre-tax prices will drop (assuming it is a US produced good)and you are back to about where you are with the current price. Not to mention, you get to keep your whole paycheck.
Of course, if you choose to buy imports, you will be paying more than now. The preference that our system gives to foreign producers would be history.
This idea is one of those ideas that sounds good in theory but I fear will be a disaster to implement. Most communities pay anywhere from 5-9% in sales tax already. So, we are talking not about a 23% tax but a 28-32% tax on a $30,000 car? You mean I pay $10,000 tax to buy a new car? Forget about it. The large ticket items will grind to a halt.
"Not exactly, don't forget SS witholding and those who have state income taxes will still be ponying up. LOL"
The FairTax replaces SS payroll, as well as individual income, taxes.
Few, if any states would continue to tax income with no federal income tax to piggy-back onto.
"Besides, I would rather the government's income be based on production, not consumption. I want our nation to be a nation of producers, not consumers."
That statement doesn't make sense. When you tax something, you get less of it. If you want more production, you should favor a consumption tax.
"You are exactly right. That is why the national sales tax will never pass. Why would Uncle Sam wait for you to make purchases to collect his loot when he can take it right out of your check before you even see it?"
“I discussed the importance of abolishing the income tax because of its tendency to form a habit of servility in the souls of a people that accept it. Servility of soul is bad not only in itself, it is also an open door through which will soon walk the abuses of ambitious government power. Leaders who find themselves with governmental power over a servile people will be quick to conclude that such a people exist to serve them.”
Alan Keyes “The Power of the Purse”, WorldNet Daily, August 27,1999
One more time, these guys in Washington WORK FOR US. They have no power, none whatsoever, except to the extent that we voters grant it to them. We are not here to serve them.
"If you are talking about corporate taxes, would corporations really be exempt or would all purchases be taxed the whole trip from manufacturing to consumption?"
The corporate income tax and the payroll tax would be eliminated.
".....most economist believe capital holders pay it through lower returns on their investments and labor pays it through lower wages."
Who are "most economists"?
Explain the fundamental difference between tax costs and other production costs that would explain the difference in their incidence, please. Or are you suggesting that all production and operating costs are borne by investors and workers, too?
"FYI, both the flat tax and VAT are consumption taxes, too."
You mean the flat INCOME tax, don't you? More precisely, the flat income tax mimics a consumption tax in some respects, but is still at its foundation a tax on INCOME. In addition, history teaches that it won't stay flat for long.
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.