National Retail Sales Tax - You gotta be kidding!

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?

I've volunteered to homeschool him in US history and economics. He's only 4 months old so I have a few more months before I can start. ;-)

WHAT???????????? You should have started 2 months ago. My husband was teaching our daughter that while she was still in the womb. I learned more about US history while I was pregnant than I ever did in school. Hubby was well known for getting kicked out of history classes because he knew stuff that was lied about in the textbooks.......and that was back in the 60's and 70's. I can only imagine how bad the books are now.

Basically Americans for Fair Taxation is the volunteer activist organization for promoting the Fair Tax Act.

After a bit of googling around

The original nefarious Houston plotters for demise of the current federal tax code were

Leo Linbeck, Jr., Linbeck Construction Corp.
Bob McNair, Cogen Technologies Chief Executive and
Jack Trotter Houston attorney

From there it grew.

Some Fair Tax Act history and information:
http://www.txfb.org/TexasAgriculture/2003/060603/060603fairtax.htm

AFFT got its start in 1994 when three Houston businessmen began cussing and discussing the Federal tax code over lunch. At this particular lunch, however, the three decided to do something about it and each pledged $1.5 million in seed money to hire the best tax experts in the country to identify the faults of the current system, to determine what American citizens wanted to see in tax reform and then to design the best tax system possible.
The three went on to raise an additional $17 million, which funded focus groups with citizens around the country and studies with nationally prominent experts in tax policy.
The final result became a bipartisan bill sponsored by Rep. John Linder (R-GA) and Collin Peterson (D-MN). Originally submitted to the House of Representatives as HR 2525, "The Fair Tax of 1999," it was resubmitted in the 107th Congress and again in the 108th Congress as the "Fair Tax Act of 2003."

I think that your natural instincts are serving you well. The insights that you've shown are brilliant. Once you were able to get into it, you quickly saw the many benefits that this has to offer. As we both agree, if not perfect, but it's damn good.

As I work with others here in Western PA to educate people, I haven't been as involved in the details of the plan as much as I have the political and philosophical aspects. The details are where the devil is, as they say, but I let others brighter than I, like Conservative Goddess, handle that.

I see the good that comes from it's enactment and that excites me. After living with the horribly abusive system we have now, I'm not looking for perfect. I just want more freedom and I am willing to pay a price for it.

WHACPACSACPAC

Sure I remember. I didn't say where you had the drink or what you did with the cigarette so I am still within the bounds of the blood oath that we took. ;-)

There is a difference between the queries of the disruptors that show up on these threads and the intelligent questions that you asked. A huge difference.

No matter how often we answer their questions, they come up with another objection. They are never satisfied. There are so many good things about this plan, but they never see any of them. That's the tipoff and the difference between them and someone like you who is genuinely interested and understands the logic.

I would like to know why they want the current system to continue to burder us and our children. What is the price these days to sell out the liberty of one's children? Do you think that they'll ever answer those questions?

Nah. Me neither.

The proposed Fair Tax is simply treated as another sales tax, added to the subtotal of items purchased.

Example:

Subtotal of items purchased ___ 100.00

Federal 'Fair Tax' 30% ________30.00

State Sales Tax 7% ____________ 7.00

Total ___________________ $137.00

FairTax
Address:http://www.fairtaxvolunteer.org/smart/faq-main.html Changed:11:33 AM on Wednesday, July 28, 2004

"How is the tax collected? Retail businesses collect the tax from the consumer, just as state sales tax systems already do in 45 states; the FairTax will simply be an additional line on the current sales tax reporting form."
629 jonestown

Sorry, jonestown, but you most certainly mistaken. I was confused by this intially, too.

From the FairTax FAQ you linked to:

I know the FairTax rate is 23 percent when compared to current income taxes. What will the rate of the sales tax be at the retail counter? 30 percent.

Note that no matter which way it is quoted, the amount of tax is the same. Under an income tax rate of 23 percent, you have to earn $130 to spend $100.

Spend that same $100 under a sales tax, you pay that same $30, and the rate is quoted as 30 percent.

631 Your Nightmare

Fine, -- you've made your point that the actual rate proposed is 30%.

I have no idea what actual point is intended to be made by the tax 'inclusive/exclusive' rhetoric.
Do you?

Congratulations and welcome aboard.

If you ever experience doubts due to a question or an answer that just doesn't sit right with you -- ask.

I've been involved now for almost a year and I still have questions. If you can't find the answers to any of your questions on your own there is help at the National site

www.fairtax.org

or the PA site

www.pafairtax.org

ancient_ geezer has probably the best links in his posts. He's my go to guy when I need info. Anyway, we're here to help.

I didn't say where you had the drink or what you did with the cigarette so I am still within the bounds of the blood oath that we took. ;-)

ROFLMPJO!!!!!!!!! WHACPACSACPAC ....indeed!

I understand your comments differentiating the queries. At times I enjoy playing the role of "devil's advocate" in order to get someone to defend a position. That was not what I was doing today, which you have obviously surmised.

I am well aware of the disruptor questioners.....you should see them on the smoking threads..... I do like this idea...but as time goes on, I will probably be asking more questions.......not to be a pain, but to be better versed in it as I am just new to the discussion.

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