GOP Discusses National Sales Tax

FOX ^ | Dec 1, 2004

[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.

[lewislynn]

Here's one of Jorgensen's accomplishments maybe Zon and the other AFFT supporters didn't want us to know about. I remember all the talk about the 2500 morons signing on to this scam. It turns out that Zon's favorite esteemed economist is one of the drafters of the scam.

THE ECONOMISTS' STATEMENT ON CLIMATE CHANGE

This statement was endorsed by over 2500 economists including eight Nobel Laureates:

1. The review conducted by a distinguished international panel of scientists under the auspices of the Intergovernmental Panel on Climate Change has determined that "the balance of evidence suggests a discernible human influence on global climate." As economists, we believe that global climate change carries with it significant environmental, economic, social, and geopolitical risks, and that preventive steps are justified.

2. Economic studies have found that there are many potential policies to reduce greenhouse-gas emissions for which the total benefits outweigh the total costs. For the United States in particular, sound economic analysis shows that there are policy options that would slow climate change without harming American living standards, and these measures may in fact improve U.S. productivity in the longer run.

3. The most efficient approach to slowing climate change is through market-based policies. In order for the world to achieve its climatic objectives at minimum cost, a cooperative approach among nations is required -- such as an international emissions trading agreement. The United States and other nations can most efficiently implement their climate policies through market mechanisms, such as carbon taxes or the auction of emissions permits. The revenues generated from such policies can effectively be used to reduce the deficit or to lower existing taxes.

The original drafters of this statement are: Kenneth Arrow, Stanford University; Dale Jorgenson, Harvard University; Paul Krugman, MIT; William Nordhaus, Yale University; and Robert Solow, MIT.

The Nobel Laureate signatories are: Kenneth Arrow, Stanford University; Gerard Debreu, University of California, Berkeley; John Harsanyi, University of California, Berkeley; Lawrence Klein, University of Pennsylvania; Wassily Leontief, New York University; Franco Modigliani, MIT; Robert Solow, MIT; and James Tobin, Yale University.

All signatories endorse this statement as individuals and not on behalf of their institutions.

So is the purpose of curbing climate change to help the environment or just confiscate more of our money?...Imagine your energy bills with an embedded "carbon tax", buying auctioned off "emissions permits" from third world countries and China PLUS a 30% sales tax. He never found a consumption tax he didn't like, I guess.

[ancient_geezer]

Jorgenson doesn't even agree with his 8-year-old, outdated paper.

LOL, Gale doesn't agree you mean, since all Jorgenson does is cite Gale as a discenting view to AFT claims.

Jorgenson has never established anything near the Gale BS, in any analysis of his own using FairTax legislation and NIPA data series as basis.

But then. Gale has a few problems with how he calculates things for his liberal Brookings hit pieces.

Gale rebuttals, by Argus Group, Burton & Mastomarko

so it is not suprising.

I do find it interesting you hold so closely to your liberal sources for talking points.

[demkicker]

Z.OI'd like to know more about this. In principle, I like the idea.

Trouble is that W. wants to do what is right and turn Washington around on a dime, and that isn't going to happen. I'd love for W. to truly get behind and champion a National Sales Tax. I think ALL the people (or most) would support him! The media needs to wake up. Camelot of the 21st century has arrived in the footprint of George W. Bush!

[ancient_geezer]

ROTFLMAO! 23.8% is 30% higher than 18.4%.

1996 remember = 18.4%, 2020 = 23.8%

It is now 2004. Duh. 23% on a limiting curve. Projection set on Clinton era '96-'97 tax law. Sorry about that. You stretch as always, but never quite get there.

But then, revenue neutral under permanent Bush tax cuts is much lower than revenue neutral when that projection was made. Great for the NRST, gonna be lousy for your DNC feathered friends in trying to demogogue the FairTax.

No wonder Crats are fighting the Bush tax cuts tooth an nail, it's killing them.

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%	32.7%
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 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.

[Zon]

That puts the FairTax at 38.8% exclusive!

[ancient_geezer]

With the embedded taxes being reduced, shouldn't we have seen a drop in prices?

Lets see, 20% * .2 = 4 basis points drop from 20% originally to 16%. We've had that much in just pure rising costs of fuel & energy and other factors across that time to push consumption prices higher than any decline in taxation rates against GDP.

More than taxes affecting costs, my friend, but you know that as well. Besides we still have the damnable federal income tax code and the IRS to deal rising in complexity and overhead costs to deal with. Unfortunately the NRST has not been enacted YET to cut those business tax related costs which really don't decline whether or not the amount of the tax rate changes.

[GOPJ]

The black market exists now, has always existed, and will continue to exist... The amount of revenue lost to the black market is negligible compared to the revenue lost under the current system.

A black market exist for drugs -- beyond that, almost nothing. The system we have now -- where the top 10% pay almost all the taxes -- works because that group has too much to lose by not paying. That won't be the case with millions of small time retailers.

To this day there are windows bricked up in England -- a testament to a silly idea. Someone came up with the idea that it would take too long to figure out the value of people's home's -- and that a short cut would work as well: people with large homes have more windows, so taxes would be collected based on the number of windows a home had...

Bush can change the system, he just has to find a natural tipping point -- then back off from it.

[ancient_geezer]

. The system we have now -- where the top 10% pay almost all the taxes -- works because that group has too much to lose by not paying. That won't be the case with millions of small time retailers.

 

Not really, as more than 80% of retail dollar's flow through less than 20% of businesses. It is the big retailers that have the most too lose in the NRST and are least likely to take the risks involved in tax evasion.

 

Tax Evasion: The Underground Economy

 

Much is made from the fact that a federal sales tax would place the responsibility for tax collection with the retailer, a sector of the economy in which small businesses are better represented. Small businesses are viewed as more likely to evade taxes since the owner, and beneficiary of tax evasion, is more likely to also be responsible for keeping the books and filing the tax returns. While there is, of course, some truth to the proposition that evasion rates among small businesses are higher, it is highly implausible to suggest that evasion would increase under the FairTax. First, those small businesspersons that are inclined to cheat on their sales tax are probably already cheating on their income tax and would be inclined to do so under any tax system. Second, the economic importance of small firms in the retail sector is usually grossly overstated According to the Joint Committee on Taxation (JCT), small firms only account for 14.9 percent of gross receipts by all retailers, wholesalers and service providers.[19] Since the gross receipts of wholesalers would not typically be subject to tax, the true scope of the small "problem" companies is smaller still. However, sole proprietorships, perhaps the most likely to evade tax under the present system and under the FairTax, are not included in the JCT figures.

Share of Total Gross Receipt by Firms with less than $1 million of Gross Receipts[20] ($ millions, 1993)
Industry	Entity Type	Firm Sales Under $1 mil.	Firm Sales All Firms	Small Share Percent
Retail and Wholesale Trade	C Corp.	116,929	2,663,541	4.4%
Services	C Corp.	91,383	610,438	15.0
Retail and Wholesale Trade	S Corp.	358,566	959,501	37.4
Services	S Corp.	98,721	283,680	34.8
Retail and Wholesale Trade	Partnership	22,938	112,112	20.5
Services	Partnership	30,783	187,588	16.4
Total	Combined	719,319	4,816,860	14.9

Third, the necessary corollary of the tax collection point being concentrated at retail establishments, rather than with individuals or other businesses, is that there are fewer points where revenue agents must concentrate their enforcement efforts. The collection points in the FairTax system would be perhaps 10 percent of those under the current income tax system or other alternative tax systems.[21] Because the number of collection points is so much lower, if enforcement funding is held equal then the audit rate for potential evaders would increase considerably, and the likelihood of them being apprehended is correspondingly higher. In other words, the risk of detection would increase and risk-adjusted cost of evasion would increase. Increased evasion due to the greater concentration of small businesses in the retail sector would be outweighed by greater compliance due to greater simplicity and perceived legitimacy of the tax system, from reduced temptation due to lower marginal tax rates, and from higher risk of detection due to a smaller taxpayer population. Fourth, some small business owners evade taxes because they feel the present system is unfair or overly complex and burdensome, or that they have been wronged by the system.  They are much less likely to feel that way about the FairTax. Fifth, and perhaps most importantly, the marginal benefit from evasion will decline under the FairTax since the marginal tax will decline. Thus, the incentive to cheat will decline markedly.

Any one of the 118 million income tax filers can cheat the income tax system today, and a great many do so. Under the FairTax, however, only retailers (about 14 million-tax filers altogether) would be in a position to cheat In addition, the vast majority of retail sales, 90 percent, are made by large firms that are less likely or find it more difficult to cheat. A retailer who cheats under the income tax system has very similar, if not the same financial gain, as a retailer who cheats under the FairTax system. If a retailer under the FairTax system, failed to report taxable sales, the government would lose and the evader would gain by an amount equal to the sales tax on the good or service purchased. In an income tax system, the government loses and the evader gains by an amount equal to the marginal income tax rate times the amount not reported. An income tax evader will see his taxable income go down dollar for dollar, for every dollar of income not reported. Typically, failing to report a small fraction of a business' gross income will be sufficient to drive its reported profit to zero.

[concretebob]

Drugs are a large segment of the underground economy, but not the only thing.
Prostitution, hijacked goods, illegal gambling.
The income derived from these activities is not taxed under the current system.

[concretebob]

The point being, all income is spent, at some point, to purchase ligitimate items. Even bank robbers will have to pay taxes.

[phil_will1]

"Since when is pointing out facts, 'bashing'?"

In post #545, you referred to Dr. Jorgenson as a "moron economist". That is not a statement of fact, most people would consider that "bashing".

With reference to that insulting comment, you are more than welcome to post your professional qualifications and credentials in the area of economics so that other readers on this thread can compare them to Dr. Jorgenson's. Dr. Jorgenson's have been posted and linked numerous times on these threads.

[InterceptPoint]

I see at least two problems:

1. A big impact on the Real Estate market.

2. The tax systems of most states would continue to be based on income, at least for awhile and maybe indefinitely. Thus much of the "savings" in a reduced accounting load would not be realized.

[freepatriot32]

this is a very bad idea we need a flat tax not a sales tax this will just shoot thr price of products through the roof

[freepatriot32]

this is a very bad idea we need a flat tax not a sales tax this will just shoot thr price of products through the roof

[Your Nightmare]

LOL, Gale doesn't agree you mean, since all Jorgenson does is cite Gale as a discenting view to AFT claims.

Are you implying that Dr. Jorgenson is just Gale's puppet? That he can't read a economic paper and determine if it's BS or not? That his words are not his own?

For being such a screw-up, you sure do put a lot of stock on Dr. Jorgenson's opinion.

[Your Nightmare]

I do find it interesting you hold so closely to your liberal sources for talking points.

My source was Dr. Dale Jorgenson of Harvard University. Is that a liberal source?

[EternalVigilance]

A 'flat tax' is still an income tax.

As a 'free patriot', you should know that the income tax is one of the planks of the communist manifesto.

[Your Nightmare]

Lets see, 20% * .2 = 4 basis points drop from 20% originally to 16%. We've had that much in just pure rising costs of fuel & energy and other factors across that time to push consumption prices higher than any decline in taxation rates against GDP.

But weren't the taxes taken out of the fuel and energy costs? I thought all prices drop with the "embedded taxes" removed.

[Your Nightmare]

Drugs are a large segment of the underground economy, but not the only thing.
Prostitution, hijacked goods, illegal gambling.
The income derived from these activities is not taxed under the current system.

Not entirely true. A guy who goes to a prostitute has already paid income tax on the money he's using. Same with a lot of the other examples. With a NRST, the john won't be paying taxes, but the prostitute will (if she doesn't buy her stuff from the hijacked goods guy, whose doing killer business).

It's basically a wash.

[ancient_geezer]

I thought all prices drop with the "embedded taxes" removed

I have never made but one prayer to God, a very short one: "O Lord, make my enemies ridiculous." And God granted it.
-- Voltaire

You may have "thought" anything. It is obvious with that statement when measured against reality that prices are composed of more than just taxes or even the additional cost burdens imposed by them that you don't "think", you demogogue.