Posted on 01/31/2005 7:12:16 AM PST by bmweezer
The threshold for folks to attain and continue the use of that certification is actual sales for which the NRST is being collected and remitted by the business.No it's not. It's any business. Robertpaulsen's "one-man 'consulting' firm" consults for other businesses. He has no retail sales.
Too little NRST flowing from a "business" with large claims of input purchases is one big red flag for an audit to assure the integrity of those claims.But how would you know his inputs unless every business, not just retail businesses filed paperwork showing their sales.
If one want to avoid paying the NRST on something like a computer it would be far less risk involved to just go buy a used one with no NRST in the first place, same is true of many such items that are targets for abuse.A used computer? Geez, you really are ancient. Robertpausen is smart enough to buy a new "white box" PC from a "wholesaler," (his cousin who only sells to family).
When all is said and done, I see no reason to believe there will be any increase of such evasions beyond what already exists and is accounted for in the NRST rate.It ain't called the FairytaleTax for nuthin'!
"Do you agree that one-man "corporations" will increase dramatically beyong the number of "S" corps that exist today to take advantage of the tax exempt status?"
"I understand your point, however, I also realize that this dynamic is present in our own system. The people who work the system now come up with ways to account as much of their spending as possible as business expenses, including the cars they drive, justifying a vacation as being a busniess trip, etc. I don't see how the FairTax will increase or decrease that practice. It'll be the same game we have now... 'How can I make this purchase a business expense?'"
OHelix makes a good point, as usual, but I would add that the resources being freed up to enforce compliance would be enormous. If you accept the number of pages as a rough proxy for the complexity of the system, we are talking about something like a 98% reduction in complexity of the tax system and about a 90% reduction in the number of points of collection/enforcement. That means that even with a dramatic reduction in the resources committed to enforcement, we could do a much better job of policing the system than we do now.
There will certainly have to be some monitoring of corporations buying "stuff" for personal consumption. There are certainly ways to do this with far fewer resources than we now allocate and still get significantly better coverage.
The assumption that there will be a proliferation of corporations popping up to funnel personal consumption items through and avoid paying the sales tax is founded on the belief that the risk-reward ratio will encourage that behavior. I am of the opinion that if we do the job properly and evaluate the new risks carefully in terms of allocating enforcement resources, the risk-reward ratio will say to American consumers: This just isn't worth it.
Does a sales tax present compliance challenges which are different than an income tax? Absolutely.
Are these challenges so great that we should abandon the idea of stimulating our economy and freeing up our citizens from this horrid system? Certainly not. If we can figure out how to bring democracy to the middle east, we can certainly figure out how to enforce a sales tax - and with fewer resources and less intrusion than we have in the current system.
I'm in! that way all those folks who dont pay taxes because they work for cash (pimps, prostitutes, illegal aliens, drug dealers, gamblers, etc.) all have to pay tax. In the end it would cost us all much less than what we pay the IRS now! Let's do it!
People on both sides are afraid of liberty. Just because I don't like a private consensual activity of yours, it doesn't give me the right to force you to stop any more than you have a right to compel me to adopt it.
As somewhat of an aside, In over 50 years on this orb, I've never met a drug 'pusher'. I've met plenty of willing drug buyers and available dealers, but I've never been approached by anyone trying to sell me drugs or give them to me for free.
No. You posed a question and I answered.
Do you agree that one-man "corporations" will increase dramatically beyong the number of "S" corps that exist today to take advantage of the tax exempt status?
No. Some may, but I don't think that people will be lining up to file false papers with the government. Do you?
How much fraud is built into that 23%? Any?
I don't have a clue. I don't even particularly care about how this watch was built. I just think that it's time has come. Nothing. Repeat NOTHING can be as bad as what we have now. I'm going to get hit and I'm willing to pay because I believe that the current system is destroying the country and our liberty.
The FairTax changes the whole dynamic and removes the chains from the people and the economy.
There is no question that the law will have be written to define who is exempt and who is not. The IRS has always been very good (and sometimes even fair) at determining what is a taxable event and what is not. I should think the new entity would be able to the same. For instance, RP's assertion that everyone would set up a corporation to avoid sales taxes wouldn't be too hard to prevent. If those corp's were subject to audit it would mean that all of the former tax CPA's would have a new market. It would also mean that if you set up a corp to buy gas at the net price you also would have to keep a set of books, etc. If the law defines what is and what isn't exempt I'm sure at some point someone will have enough incentive to try to buck the system. Will it be worth it? I don't know.
"...The compliance costs of a NRST would be much lower than the current system. How much is the question...."
I agree wholeheartedly. And I suspect that total costs, including the administration of the prebate, will in fact be much lower than the total costs we incur today....although precise measurement will prove elusive.
In addition to the nominal dollar benefits, we should see rapid growth resulting directly from removal of entity level taxation. Moreover, IMHO, the liberty enhancing benefits of this system of taxation cannot be overstated, but it is impossible to value liberty in dollars.....some would say it's priceless.
In your example at a 15% tax rate, I expect it would be more incentive under the FairTax. However, it would not be as much as you presented in your example, because you compared the 15% income tax rate with the 30% Fairtax rate. The acurate comparison would be the 23% rate.
If I understand the estimates concerning the effects of the tax rebates being made permanent, the appropriate rate to compare with may be lower than 18%.
Ah, there is the great unknown. One could make the case that if we are free to pay our taxes when and as much as we want to the result would be phenomenal. What are the penalties of starting your own company? Regulations are probably the first on the list. Taxes have to be the second. Why in the world have we gotten to a point that payroll is so complicated that a huge industry has grown up around it? I have a strong feeling that those who have a vested interest in one of the thousands of payroll companies in America would bitterly oppose the NRST.
Robertpaulsen's "one-man 'consulting' firm" consults for other businesses. He has no retail sales.---
--- how would you know his inputs unless every business, not just retail businesses filed paperwork showing their sales.
Learn to read the cites quoted:
"The FairTax requires all businesses (including non-retailers) to keep business records kept in the ordinary course of business that would aid cross checking by government auditors.[22]
Conclusion
Tax evasion will undoubtedly be a problem under any tax system. It is a major and growing problem under the current tax system, despite very substantial efforts and increasingly harsh treatment of the taxpaying public. Almost 40 percent of the public, according to the IRS, is out of compliance with the present tax system, mostly unintentionally due to the enormous complexity of the present system.
This breeds disrespect for the tax system and the law, and makes a system based on taxpayer self-assessment less and less viable.
The FairTax is likely to reduce rather than exacerbate the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system will induce more compliance. The roughly 85 to 90 percent reduction in filers will enable tax administrators to address instances of noncompliance more effectively, and increase the likelihood that tax evasion will be discovered.
The relative simplicity of the FairTax will promote compliance.
Businesses will need to answer one question to determine the tax due: how much was sold to consumers? Finally, the dramatic reduction in marginal tax rates will reduce the gains from tax evasion. If the cost of noncompliance remains comparable (or even increases due to the increased likelihood of getting caught caused by the much smaller number of filers), then both the expected profit from and frequency of tax evasion will decline."
It ain't called the FairytaleTax for nuthin'!
Yet for you two, the 'fairytale tax' is a nightmare... Why is that?
Ricebowl problems, I'd bet..
Uh, those would be the state administrators? Those being paid .25% of revenue they collect for the Feds?
And how much revenue is being generated by the thousands of new "consultants" who manage to expense every revenue dollar in gasoline, family room office furniture, computers, dinners with the wife clients, phone bills, etc.
Yes, yes. They can do that today. BUT, today, that is maybe worth 15% (to offset corporate taxes).
After the NRST, those "business" expenses are worth 30% plus state sales taxes (9% in Chicago).
I'm saying that's a big temptation to existing small companies, plus it encourages the formation of new one-man "consulting firms" to take advantage of the savings, legal or otherwise.
"The FairTax requires all businesses (including non-retailers) to keep business records kept in the ordinary course of business that would aid cross checking by government auditors.[22]How would the government even know to audit a non-retail business?
Thanks, I've been off this thread for a while. (I do have a real job, and, uh, golf.)
You're right. But what a huge conflict of interest. Removing the contingent/deferred tax liability from all those cash values and annuities would be a monumental boon to all of the policy holders yet it would be fought tooth and nail by the companies because it would affect the way they do business.
Which brings up another point that hasn't been discussed here. The power of compounding. Life insurance companies sell those fee generating machines called variable annuities. When stock market returns inside those things compound without taxation it makes regular mutual funds look like penny ante poker. Imagine the wealth creation that can take place with the fair tax.
"...Life insurance companies sell those fee generating machines called variable annuities...."
There's also that wonder called a variable universal life policy. When handled correctly, it can escape ALL Taxation......even on the death of the insured. That's a powerful sales tool that the industry will not give up without a fight.
Things are heating up in the tax return prep business....so I won't be posting as much as I have been.
Agreed. The reason most people have such large life insurance policies is to offset the possible/probably death taxes. No death taxes, the need for life insurance will go down.
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