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?"
I think lewislynn is trying to infer that state taxes would be taxed at the FairTax rate in addition to the item price
State/local taxes are neither taxible property nor service, thus cannot be subject to the NRST per the statute:
Sec 101(a) IN GENERAL- There is hereby imposed a tax on the use or consumption in the United States of taxable property or services.
There is N O T H I N G to stop that from happening now.
With passage of HR 25 -- The FairTax -- the IRS is dismantled. It's gone. The code is gone. Audits are gone.
The current system C A N N O T be fixed. Everytime they 'fix' it, it get's more convoluted.
We have not been vigilant and the result is the mess we have now. Well, we're on guard now and we will get this done. Companion legislation repeals the 16th Amendment to prevent what you suggest will happen.
If we, or our children, must fight off an attempt to do this, at least we will have the experience to do so. But for you to call for this mess to continue is ludicrous. Why should be not do something good because 20 years from now (or even a year from now) something might happen?
Instead of cowering in fear of mights and maybes, stand up and demand that the current mess end. Come up with another plan if you don't think this one is good enough. But to defend this on the flimsy ground that something might happen only makes you look silly. Or worse.
Do you have a clue to what the words "of the gross payment means"?...
What is deceitful about the definition of "of the gross payments"?
`(5) GROSS PAYMENTS- The term `gross payments' means payments for taxable property or services, including Federal taxes imposed by this title.
Can you make full (gross) payment on a product or service without paying all the taxes?
The tax is imposed on (actually of) the payment... not the price of the product or service.
I understand you don't like it but that's what the law (not me) says.
Actually, as wrong as he was on his main point, he is right on that telephone tax. It was started to generate money for teh Spanish American War (1898 IIRC) and is still in place.
Of course that tax is justified because that war is still ongoing. ;-) Isn't Eastasia always at war?
algore learned from that experience and did the same thing with the internet wiring scheme for schools.
The point I'm trying to make here is that hyping the lower 23% 'rate', when it is actually 30% is a pretty odd way to sell anything..
I still get confused on the inclusive v. exclusive stuff. I just quote the 30% if I mention any rate. Generally, I talk in terms of the benefits of going this route and destroying the IRS. Often, that's enough to bring people on board.
839 Badray
Thanks for your honest answer. I agree, our main effort should be to destroy the IRS.
I was and am being polite.
You think about where we have encountered each other before.
Same amount? That cannot be. On a $100 purchase the tax paid would vary by $6.86 --- Can you explain further?
Under tax inclusive the total payment is used to calcualte tax paid out of the payment tendered.
For $100 tendered in payment tax = 0.23*$100 = $23 price = $77And for a $100 purchase the tax paid would be $29.86, a tax rate of 29.86%, not 23%, correct?
The federal NRST tax rate is expressed as a fraction of total payment, just as the federal income tax rate, or federal payroll tax rate, is expressed as a percentage of the income out of which the tax is paid.
For a $100 received by a business the tax remitted government by the seller is $23, the seller receives the remainder, 77$.
A tax rate of 23% = 100*23/(23+77)
If I have a product price $100, the tax would be 29.86. The total payment for the product would be $129.86. The tax rate= 23% = 100*29.86/(129.86)
If you have a price only, and wish to calculate what your total payment will be, you use the ratio of payment to price to determine that (1.2987 * $100) = 129.86 for an item with a $100 price.
The NRST is not a state tax, it is a federal tax to replace other federal taxes that are calculated on the tax inclusive basis, the rate is determined from the perspective of the person remitting the tax to government the seller.
Well there goes my reputation. Shot. Just for being nice one time. LOL
Thanks. : )
You are trying to make the case that "gross payments" includes state sales taxes. The quote you profer defines "gross payments" as "payments for taxable property or services, including Federal taxes...". State taxes are not "taxable" property nor "taxable" services, and therefore NOT INCLUDED IN THE DEFINITION OF "GROSS PAYMENTS". You are being deceitfull, and misleading, as I have observed in other threads on this topic.
Gabz has apparently formed a similar opinion of your typical tactics as I, and others, have.
The federal NRST tax rate is expressed as a fraction of total payment, just as the federal income tax rate, or federal payroll tax rate, is expressed as a percentage of the income out of which the tax is paid. For a $100 received by a business the tax remitted government by the seller is $23, the seller receives the remainder, 77$. A tax rate of 23% = 100*23/(23+77) If I have a product price $100, the tax would be 29.86. The total payment for the product would be $129.86. The tax rate= 23% = 100*29.86/(129.86) If you have a price only, and wish to calculate what your total payment will be, you use the ratio of payment to price to determine that (1.2987 * $100) = 129.86 for an item with a $100 price. The NRST is not a state tax, it is a federal tax to replace other federal taxes that are calculated on the tax inclusive basis, the rate is determined from the perspective of the person remitting the tax to government the seller.
Thank you. In other words, -- my comment is correct.
Yes, but for other reasons on another topic.
I thought I was engaging properly, but apparently not. I'm done with any discussion of ANY topic with lewislynn.
If I understand how you are percieveing it (like a state sales tax), your statement is correct. However, it is also correct to represent the tax rate as 23% of the total payment of $129.87. To use this confusing distinction to represent the FairTax as being equivelent to a 23% state sales tax is misleading. Likewise, to use this confusing distinction to obfuscate and acuse the FairTax as misrepresenting the rate is also misleading.
Thank you. In other words, -- my comment is correct.
Evidently I don't understand the purpose of your comment, what it is that you are trying to compare legislation's tax rate with?
You two are both new to these discussions.
I suggest that rather than involve yourself with lewislynn and YourNightmare, that you just ignore them.
I'm not sure why they are devoted to preserving the current monstrosity, but I assume that it is for money -- one way or another.
$23 Million dollars have been spent on economic studies to make this proposal viable and realistic. But these two want you to believe that they have all of the answers and that there is something nefarious about the FairTax and it's proponents. I've not met anyone yet who is involved with promoting this plan who isn't intelligent, honest and trustworthy. Many of them are Freepers that you will see on other threads and will be on the same side of those issues as you and I are. I've never seen these two anywhere but on FairTax threads and with the intent to impugn the plan and it's proponents and their integrity by innuendo, snide remarks, and misrepresentation.
My tendency was to argue with them too until cooler and wiser showed me the error of my way. These 2 will not concede that there is anything redeeming about the plan. You'd think that an honest debater would find something worthwhile, but pointing out a major flaw or two. That they present this as evil incarnate tells me that their opposition is bought and paid for and that they are not honest enough to say so.
If you have a price only, and wish to calculate what your total payment will be, you use the ratio of payment to price to determine that (1.2987 * $100) = 129.86 for an item with a $100 price.
Thank you. In other words, -- my comment is correct.
Evidently I don't understand the purpose of your comment, what it is that you are trying to compare legislation's tax rate with?
I am trying to establish what the proposed rate would be, -- not to compare it with anything else.
You have finally confirmed it to be 29.86%... --- Congrats.
Hmmm... I feel compelled to come to Your Nightmare's defense to a certain degree. I agree completely that Lewislynn has nothing to offer but logical sleight of hand and obfuscation. However, YN does seem to be very well read, and offers some very valid criticisms of the FairTax, and should not be grouped in the same class as Lewislynn and the "Lord of Pork" from this thread.
I will share my observation that YN seems to be involved on these threads only to criticize the FarTax at any oportunity. However, he has with very little exception, in my experience, engaged in outright deception, and has benefitted my understanding of several issues.
I suppose my point is, he is not to be summarily dismissed, like Lewislynn. It is my experience he will admit a point if forced to. And at the very least, plays the vital role of an effective devil's advocate. Test what he says and hold him accountable, but I think it would be inappropriate to just dismiss him without consideration.
I am trying to establish what the proposed rate would be, -- not to compare it with anything else.
You have finally confirmed it to be 29.86%... --- Congrats.
That's good, because you now know that the effective federal income/payroll tax the NRST replaces is exactly the same rate when measured the same way. --- and??
Yes, you're comment is correct. The so-called "fair tax" is roughly 30% of the purchase price.
You may well ask why the screaming "fair tax" flying monkeys try so hard to disguise this very obvious truth.
856 Iwo Jima
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