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National Retail Sales Tax - You gotta be kidding!
GOPNATION.COM ^ | January 31, 2005 | Steve Pudlo

Posted on 01/31/2005 7:12:16 AM PST by bmweezer

For quite some time now there has been an organization pushing for a National Retail Sales Tax (NRST) to replace the current income tax in the US of A. The proponents thereof call it a "fair tax", and even have a web site www.fairtax.org. These folks claim that the current income tax structure is a crumbling mess, and that the NRST, a "voluntary" tax is the most equitable solution. For what it's worth, I agree wholeheartedly upon the first premise, but disagree vehemently on the second.

The NRST would be no more voluntary that the current system. What are you gonna do? Buy something and tell the cashier not to add the federal tax? Or not buy anything? (multiply that by every taxpayer and imagine the effect on the economy). And if you believe the proponents claim that they can put enough safeguards in place to make their system painless and equitable, then I have a bridge in New York that you can buy cheap.

The NRST would, by definition be a highly regressive system that would hurt the middle class far more than the wealthy, and if it ain't complicated enough in the planning stage, just wait a few years. Tax accountants wouldn't' be in any real jeopardy under the NRST, they would just have to learn a few new rules. Since the nature of any government program is to increase in complexity, watch for tax changes to increase this or decrease that, then try to factor in the cost of compliance with all this going on - guess who's gonna pay?

The premise that spending is a taxable activity is silly on the face of it. I remember my ex-wife complaining after I spent my last dime on a badly needed item "If you have $50 for that, then I can spend $50 on what I want". The proponents seem to believe that if I have 500 to spend on a badly needed washing machine, that I can also pony up another 40% or so for their agenda. This is ludicrous and insulting to the intelligence of the voting public. Just because I have 500 dollars, doesn't mean that I have 700. Just like my ex refused to believe that if I had 50 dollars for one item that I couldn't magically conjure up another 50 dollars for her. Fifty dollars is fifty dollars. It isn't an indication, hint, or promise that there's a matching fifty dollars lying around for everybody else's ideal. And under the NRST proposal, if I don't have the 700, then I can't buy the 500 washing machine. So since I don't have the 700 bucks, I don't buy the appliance. The seller doesn't make the sale, the manufacturer doesn't' get to make another one to replace it on the shelf, the deliverer doesn't get to deliver it. Everybody loses.

But wait! The NRST proponents cheerfully remind me that "large purchases" such as major appliances and automobiles would be exempt from the NRST. Ah! The first major complication. What is and what is not covered. So maybe a set of dishes would be covered. Would we care to look into what this little statement would mean? In a very few years we will inevitably see merchandise gerrymandering as to what would be taxable and what wouldn't. And someone would have to keep track of all this. I remember in Connecticut where a 75-cent milkshake was taxed six cents for a nickel's worth of malt, but the same sized milk was untaxed. Food was taxed but only if it cost one dollar or more. Clothing was taxed unless it was for a child under ten years of age. One customer buying a jacket had to pay the tax, but another didn't have to because of the age of the child. Can you keep track of this? Multiply this by the political agendas of congresscritters all over the country,. And you can see what I mean by merchandise gerrymandering.

Quite simply, it would mean that the increasing tax burden would be spread to more items of lesser value, therefore having a greater impact upon the final purchase price. So the government would have to get more from less. So the "Fair tax" might end up making that $40 set of dishes cost $80 or more. So what would be the result? Fewer people buy dishes. People who make and sell dishes would do less business, and therefore they would be hurt. The customer would be hurt by the loss of the use of the new dishes, the whole economy would take such a hit that it would take years, if not decades to recover. Discretionary purchasing could evaporate overnight.

Would there be exemptions for lower income people so that each person pays a tax burden more in line with their ability to pay? Would certain people be able to carry a tax avoidance card to not have to pay taxes due to their economic status? How would you protect the poor - who also need to buy things like dishes every now and again?

Let's look at this another way. Perhaps a person like me must spend 80 to 90 percent of their income on living expenses. Much of that would be subject to the NRST. So more of my money, as a percentage of income, would be taxed. Now let us look at someone like Bill Gates, or Ted Kennedy. Since they have vast incomes compared to me, they can afford to shelter more of their income into other areas. If the NRST is the major tax vehicle, then they would only be taxed upon the much smaller percentage of their incomes that they spend on living expenses. Because they can afford to sock away lots more money than I do, that money would not be taxed as it isn't "spent"! Yes, I know that Gates and Kennedy spend more than I do, but as a percentage of their total income, it is less. So the NRST favors the rich at the expense of the middle class!

But the NRST folks won't tell you that. In fact, they'll flatly deny it hoping that you don't notice the vast amounts of income that the very rich sock away into investments, etc. that wouldn't be taxed (unless they want yet another complication in their system), and focus our attention upon their SUV's. The net gain for the rich would have to be made up for by the rest of us - resulting in a higher tax rate for the middle class and for the poor. The poor subsidizing the rich - reverse Robin Hood!

Let's go back now to the concept that people spend a predictable portion of their income. Every person has basic needs - food, housing, clothing, etc. that must be met. These needs are similar for everyone across the income spectrum. To the extent that these items will be subject to the NRST, everybody pays the same flat fee. If your income is above the minimum, then you can spend a little more, which would be taxable, and perhaps sock a little away. That would not be taxable, apparently, so you gain an incentive not to spend, not to buy. That amounts to putting a damper on the economy in the area of discretional spending. Maybe I don't need those new dishes after all. Multiplied by the number of people who would be affected by the NRST, you have a serious downturn in the economy, resulting in loss of jobs, wages, resulting in severe economic hardships for just about all of the middle class. Of course, the rich wouldn't be affected as much.

So let's look again. The more you make, the less a percentage of your income you need to meet your basic needs. That means that you don't have to spend so much of your money to live. You can shelter more from the government, an option not available to the lower income brackets who often lead hand-to-mouth existences. They'd be the ones hit the hardest. This is the definition of regressive taxation. The social consequences are considerable, and beyond what I am prepared to discuss at this point, but there are historical precedents that are not good.

But wouldn't you benefit from an immediate pay raise by the amount you would normally pay in income taxes? Certainly, and I would welcome that. However, since the entire tax burden on the whole country would remain constant (which means ever-increasing), and since the rich would be paying less overall taxes (the richest 5% pay 85% of income taxes, or something like that), that loss of governmental income would have to be made up by people like me, so logically, there cannot be anything but a net loss for me - I'd end up subsidizing the likes of Kennedy and Gates!

And let us not forget that complication in that some things would be taxed while others would not be taxed. This would be a boon to the politicians - in that they can reap huge amounts of revenue simply by adding an item to the "Taxable" column, it would have a huge negative impact upon those who would be doing the collecting. Oh yeah - remember those? That burden would fall upon business owners and establishments that sell taxable items to the public. The reasoning of the NRST crowd seems to be that if they can collect income taxes for the state, they can collect for the feds. No prob. What they overlook is the increased cost to these businesses, many of them barely breaking even, to collect the deferral taxes. Not only must they follow the whims of state politicians, but they would have to attune themselves to the federal politicians as well! They'd have to absorb the costs of the paperwork required, increased bookkeeping, reprogramming computers, etc.. But you and I know full well that these costs would have to be passed on to us customers. So again, we will pay more for less. OR at least the middle class will. And presumably the poor - unless the poor become exempt, in which a whole new level of beauracracy would be needed - and we know who will have to pay those costs!

Let me give you an example. Support toothpaste isn't taxable. Then some politician figures out that the taxes on a three dollar tube of toothpaste can pay for the next congressional pay raise. It's only a buck or so, so the average guy won't get too upset, but that dollar turns into more than one dollar when you factor in the costs of reprogramming grocery store computers all over the country to reflect that this item is now taxable. So the price increase is closer to a buck fifty. Then some other politician wants to be reelected, so he proposes eliminating the tax on laundry detergent. Here we go again. That one - dollar price decrease translates into a mere 50 cents by the time compliance expense is factored in.

And nowhere would there be any addressing the real problem of federal taxation - the spending glut. The feds are simply spending too much money. The more they get, the more they spend, the government simply cannot exercise any fiscal restraint. The federal government has never had a revenue problem they've always had a spending problem. They spend too much. Where would be the incentive for them to spend less if we give them new pockets to pick?

The solution to the tax problem isn't a misnomer - a "fair tax" in name only, it will have to be a system in which everybody bears a share of the burden commensurate to their ability to pay, not their need to spend. It has been said that if everybody had to pay a fair share of the total tax burden, that people would demand reduced federal spending. THAT is the solution to the problem. Or at least, create a viable environment for the kind of fiscal triage that has been sore lacking in all levels of government.

First of all, I would propose to classify all monies coming into an individual as income. Investments, capital gains, interest, wages, compensation - anything coming IN will be classified as income. All incoming monies are income, all income is treated the same. That income would be taxed at a flat percentage, and that percentage would be the same for everybody. If Ted Kennedy pays the same percentage of income that I do, he still pays a lot more, whether he spends more than I do or not. If someone who makes less than I do has to pay the same percentage, they pay less, more fitting to their abilities.

Nothing would affect people's ability to buy dishes, cars, or anything else because purchasing would be relatively independent of taxation. If you don't' tax it, you don't stand in the way of people who want it. You don't collapse the whole economy for the sake of a political agenda. Purchasing would be minimally affected.

If people don't want to pay their fair share (I would even tax welfare because everybody should be stakeholders), then they can get after their representatives to cut spending. I predict a huge groundswell, and things like beekeeper subsidies and research in to the sex lives of insects would be subject to a lot more scrutiny, and spending would go down. That solves the problem.

The "fair tax" is highly unfair. It hurts far more than the middle class. It only helps the rich - those with the highest proportion of discretionary income. The NRST cannot help but hurt the working classes, the welfare classes, small businesses, and the national economy. The proponents of the NRST dangle the tax deductions in your paycheck like a carrot before your eyes, so that you don't see the huge stick that you're gonna get whacked with if this goes through. I predict that if the NRST gets passed, that within two years there will be a depression that would be far worse and longer lasting than the "Great depression" of the 20's.

Oh! And finally - they claim that they will get rid of the IRS. Really? Who's gonna police the collectors to make sure they collect the right taxes from the right goods?

Can you say "we're being hoodwinked?"


TOPICS: Culture/Society; Government
KEYWORDS: fairtax; repeal16thamendment; taxes; taxreform
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To: Badray

referring to Karl Marx >He said "From each according to his abibities to each according to his needs." My ---, Doll. Why do you want to cling to a failed system?<


You must have responded to someone else's post, Badray. I never posted anything like that. You'll never find anyone more anti-Communistic than I am.


601 posted on 01/31/2005 12:27:38 PM PST by Paperdoll
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To: Darksheare; Darkshadow; Darkchylde; Conspiracy Guy
Things to do before I die:

Document a "Darks" family reunion.

(Twisted Smiley.)

-good times, G.J.P.(Jr.)

602 posted on 01/31/2005 12:27:43 PM PST by Do not dub me shapka broham (Beware the wrath of the Bolivarian Bucket-head Brigades.)
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To: Conservative Goddess
You're getting hit twice regardless......invisibly under the current system.......or visibly under the FairTax.

People will see the definite imposition of a new tax on spending the very money they have already been taxed on for earning. You respond with the hope that prices will go down and that it will be a wash.

I don't think your hope will win the day.

There should be no resistence to exempting after-tax money previously saved unless this really is a scheme for the government to make money in the short-term to help reduce the deficit.
603 posted on 01/31/2005 12:27:47 PM PST by BikerNYC
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To: Badray; Gabz
Why? What'd I say? What'd I do?

Well, Gabz (whom I consider a FReeper FRiend) is on this thread, she's learning about NRST for the first time, she's been asking intelligent questions and YOU, dear fellow, have been giving clear, intelligent answers to many posts. I've enjoyed reading them--nice exposition. I admire that. Gabz has benefitted as have all readers of this initially unpromising thread.

On the internet, what can you love except someone's mind, as revealed by their posts? Hence, a proper "love" from a FReeper hillbilly granny. Not much, but it's the best I've got. ;-D

604 posted on 01/31/2005 12:30:07 PM PST by Judith Anne (Thank you St. Jude for favors granted.)
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To: Do not dub me shapka broham

You just have to remember to return things to the correct library! This morning I tried to check out videos at a Union County branch with my Mecklenburg County card.


605 posted on 01/31/2005 12:30:24 PM PST by Tax-chick (Some people say that Life is the thing, but I prefer reading.)
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To: Tax-chick
I hate when that happens!

:)

606 posted on 01/31/2005 12:33:23 PM PST by Do not dub me shapka broham (Beware the wrath of the Bolivarian Bucket-head Brigades.)
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To: Do not dub me shapka broham

There's a Starbucks in GAP???? YUCK....that totally desicrates that magnificent structure.

I never used the main branch in mid-town until AFTER I left Brooklyn College and was going to technical school in mid-town.

I don't care to relate the date of the last time I was on the BC campus, so can't comment upon any recent changes there.


607 posted on 01/31/2005 12:33:43 PM PST by Gabz (Anti-smoker gnatzies...small minds buzzing in your business..............SWAT'EM)
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To: kevkrom
For someone who's constantly harping about published studies, I assume you have something handy that shows that evasion will be higher under a sales tax than it is under an income tax?
How about common sense? Do I really have to provide papers that say sales tax evasion will be higher at ~36% (state + fed) than at 6%?
608 posted on 01/31/2005 12:34:18 PM PST by Your Nightmare
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To: OHelix
I'm not sure what you mean by the FairTax "base". Do you mean the companies which would have to collect the FairTax from it's customers?
The amount of sales and services that would be taxed under the FairTax.
609 posted on 01/31/2005 12:35:31 PM PST by Your Nightmare
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To: Gabz
Don't worry.

We FReepers know how to keep a secret.

:0)

-good times, G.J.P.(Jr.)

610 posted on 01/31/2005 12:36:14 PM PST by Do not dub me shapka broham (Beware the wrath of the Bolivarian Bucket-head Brigades.)
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To: Do not dub me shapka broham; DarkshadowNY; Darkchylde; Conspiracy Guy

I think that would be a "good idea/Bad idea" moment.


611 posted on 01/31/2005 12:36:19 PM PST by Darksheare (Trolls beware, the icy hands of the forum wraith are behind you!)
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To: Your Nightmare
Do I really have to provide papers that say sales tax evasion will be higher at ~36% (state + fed) than at 6%?

No, what you need to provide is any sort of resource that says that evasion will be higher under the sales tax than under the income tax. Any tax system has people who evade it -- if you want to claim that the NRST underestimates the impact of evasion, you need to show that net evasion will increase.

612 posted on 01/31/2005 12:36:25 PM PST by kevkrom (If people are free to do as they wish, they are almost certain not to do as Utopian planners wish)
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To: Badray

Oh, I see what happened. In my post I quoted a paragraph from the article in replying to 92. You thought those were my words. It can happen to anyone.


613 posted on 01/31/2005 12:36:54 PM PST by Paperdoll
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To: Conspiracy Guy
Behave? What is that?

Beehive. Behoove. Behave.

614 posted on 01/31/2005 12:37:01 PM PST by Badray (This tag line under construction.)
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To: Darksheare
You're probably right.
615 posted on 01/31/2005 12:37:36 PM PST by Do not dub me shapka broham (Beware the wrath of the Bolivarian Bucket-head Brigades.)
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To: Judith Anne; Badray

and I "love" you both........in the internet sense of the word!!!!

This has been very informative and I will pick it up later...but right now I've got to go start my car to warm it up so that when the school bus deposits my daughter we can head for the store (i can also sit in the warm car waiting for the bus)

Later gators!!!!


616 posted on 01/31/2005 12:37:40 PM PST by Gabz (Anti-smoker gnatzies...small minds buzzing in your business..............SWAT'EM)
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To: Do not dub me shapka broham

*chuckle*

Dunno, actually.


617 posted on 01/31/2005 12:38:49 PM PST by Darksheare (Trolls beware, the icy hands of the forum wraith are behind you!)
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To: Gabz

>> Eliminating all federal withholdings from the paycheck puts more money in the bank each payday. Less money going to the government out of my paycheck means increased money for me.

It is then up to me to decide how to spend it.

Under the current system I must control my spending because I DON'T control the taxes. Under this proposal I still control my spending but by doing so I DO control the taxes.<<

Precicely why I like the concept!

It aint gonna happen though - unless it morphs into something just as unfair as the one we have.

I would be all for a flat income tax. And by flat, I mean FLAT! Rich or poor, it doesn't matter.

And the only way I would support a federal sales tax is if the government was no longer concerned with how much money I earn - which will never happen.


618 posted on 01/31/2005 12:42:12 PM PST by RobRoy (I like you. You remind me of myself when I was young and stupid.)
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To: Darksheare

Is this the blindfold round?


619 posted on 01/31/2005 12:43:22 PM PST by Conspiracy Guy (If only I used my evil genius for good !)
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To: Do not dub me shapka broham

Sounds scary but interesting.


620 posted on 01/31/2005 12:44:08 PM PST by Conspiracy Guy (If only I used my evil genius for good !)
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