It at least doubles the incentive (30% v 15%) and would attract more people into forming a corporation just for the purpose of tax evasion.
I do not think the 23% comes close to accounting for this avoidance. That is my concern (one of them, anyways).
I think that's a valid point. But then my next question would be, "so?". There are definitions in place to specify what can be considered busniness use. If they can spend within those guidelines, then they are within the boundaries of the law.
I do not think the 23% comes close to accounting for this avoidance. That is my concern (one of them, anyways).
Two things, first the 23% is calculated on the basis of the GDP data series which excludes evasion activities(un-reported transactions) from sales and income data. The denominator used in calculating the rate is consistent with current evasions of the tax system including your wrongful business asset conversion scams which is quite rampant under the current system of taxes that the NRST replaces.
Secondly the 23% was established prior to the current Bush tax cuts, and as a consequence actually over estimates what the true revenue neutral figure ought to be with those cuts made permanent. This is one of the factors that is currently being dealtwith though a full economic study of the Fair Tax Act being undertaken by the Congressional Research Service economics staff, hopefully to be released with taxreform hearings latter in this session of Congress.
The following gives some idea of the magnitude of difference in NRST tax rate once adjusted for the current level of federal taxation.
refer Tax Freedom Day 2004 PDF http://www.taxfoundation.org/sr129.pdf
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Total Effective Tax Rates by Level of Government |
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| Year | Federal | State | Total |
| 1997 | 21.8% | 10.3% | 32.1% |
| 1998 | 22.4% | 10.4% | 32.8% |
| 1999 | 22.5% | 10.4% | 32.9% |
| 20000 | 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. 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. 0 Last year of Clinton administration when of HR25 rate estimated Sources: Office of Management and Budget; Internal Revenue Service; Congressional Research Service; National Bureau of Economic Research; Treasury Department; and Tax Foundation calculations. |
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Just cuious, how do yoy come with with the 15% number? Payroll taxes alone on the self-employed is 15.3%, up to the high $80k mark. Income taxes on top of that should then be starting at about 25% or so, gradually getting as high as 35-40%. Unless I'm missing something?