FairTax.Org HR25

WWW.FAIRTAX.ORG ^ | Last Week | Thomas Leser

[nsmart]

The FairTax is the non-partisan national sales tax proposal that would replace all federal income taxes. These include personal, estate, gift, self-employment, alternative minimum, capital gains, FICA, and corporate and death taxes.

[groanup]

Indian reservations would become the true "no tax" havens. People would flock to them to stock up on every conceivable item. And the businesses "off the reservation" would have to "cheat" to stay in business.

Fine, 285 million people buying everything they need on indian reservations (Wall Mart shuddering).

[CSM]

Give it one last shot. If you are not taxed on your business purchases, how will your cost of business increase? 0%*X=? (X=Cost of doing business for AR)

[CSM]

"A very low flat tax would accomplish this far better than the NRST."

Is there any legislation on the board for consideration that would institute a "very low flat tax"? How many sponsors and co-sponsors are on board?

[groanup]

That's absurd! Established retailers will be forced to "cheat," to use your term, to compete with the black market, to say nothing of "The Little Shop Around the Corner" that sells "used" goods without the 30% tax which may not be exactly "used" in the traditional sense of the term.

So in your dire world a black market operates almost with impunity. Everybody is involved. Sheesh. At what point do you think we run out of used goods or do you think we call live forever off of each others cast-offs?

[Principled]

But you are giving some people back more than they paid.

How often will it happen that an individual does not purchase the necessities of life? Maybe buy-up one month to save the next month - but that means they paid last month.

What is the alternative? No rebate? Then you'd complain that it wasn't fair to everyone. You simply don't want this to happen.

In the case someone decides to grow their own food with their own seed and consume nothing - it would be easy to see this won't happen much if at all - people like being comfortable - people like electricity at home, prepared food, cable tv, cell phones, boats, etc....but in your little case you want to magnify - the alternative is no refund of taxes on necessities. That would be unnacceptable to pass the reform bill (which is your goal, I know) but not to 3/4ths of the folks who hear about this reform.

And it is a refund of overpaid taxes - any tax paid on necessities is an overpayment. It is only something different in the unlikely situation above... So only in those cases (and I'm not convinced those cases will happen) could you call it other than refund. Go ahead. But it is a refund for the people consuming their necessities.

[CSM]

You stated that the black market would hurt the economy. You used the term "legal businesses" when describing the business that would be harmed. I'm asking you, if you believe that a black market will mean manufacturers of products would be operating outside of the law.

[Iwo Jima]

Always Right seems to know his business. We would do well to listen to what he is saying.


There may or may not be savings in the cost of producing a new home under the NSRT. Always Right says that any savings would be far less than predicted. But what we do know WITHOUT ANY DOUBT is that the cost of his product to the consumer under the NRST would be 30% more than what he would otherwise sell it for.

Even in a perfect world where there is no taxation of any type and everybody has a whole lot more money to spend, consumers will always prefer to pay 30% less for a product or to just not buy (which is almost always an option).


Consider this scenario: Always Right has a new house which he has just built. There are other, older (i.e.,USED) houses on the same street. He wishes and is willing to sell his house for $100,000. The government will tax the transaction 30%, making the cost to the buyer $130,000. (I know that there is some disagreements about what the true tax % and number is, but whatever it is, it's a whopping big deal killer of a number.)

The owners of the other homes on the street put up their homes for sale, but their sales price is $110,000. The buyers prefer these offers to Alway Right's offer because there is no tax on used homes, so the bottom line is better for them. True, there are benefits to having a new home, but not enough to justify a 30% differential.

WHAT YOU HAVE DONE IS MAKE A USED PRODUCT MORE VALUABLE THAN A NEW ONE. Always Right will go out of business long before the supply of used homes is exhausted.

Now, what Always Right might do is to move his family (or a street bum) into the new house for a month and then sell it as "used." Then what will happen is that regulations, etc. will be passed outlawing whatever avoidance mechanism is being used to survive. The "IRST" (the renamed "IRS") will do audits and everything else that the NRSTers are saying they are trying to eliminate.

[lewislynn]

Why is the concept of a supply chain and taxes accumulating within it so difficult for you to grasp

Give an example of "accumlating" payroll taxes within a supply chain....

Maybe you could do the one where you say prices are "well over 99% tax"...do that one.

Here's one:

$1 million in gross sales

Minus $500,000 gross labor = $38,250 employer paid payroll tax

$500,000 minus cost of goods (from the supply chain) sold $250,000

$150,000 overhead

$100,000 profit

35% tax on $100,000 = $35,000

$35,000 + $38,250 = $73,250

Percentage of possible price reduction = 7.325%

That's a long ways from 30% or even 20%

[CSM]

I never disputed the price effect of a sales tax. What I am trying to understand is why the claim was made that the cost of business will go up AND the price to the customer will rise.

AR claimed that in order to offset the cost increases, he would have to lower wages, pay less for supplies, or any number of offsets. How does his cost increase? That is the question I am asking.

With regards to the price effect, do you assume that population does not grow and the housing needs remain constant?

[Iwo Jima]

Everybody getting a monthly check from the government is socialism. I'm against it. You can try to justify it however you want, but a pig is still a pig.

The only thing that I am "uptight" about is the severe disruption to our economy, the loss of freedom, the growth of the power of government, and the harm to our social structure that an NSRT would bring. I'm not really all that uptight, though, because I know that it's not going to happen.

[CSM]

Can you provide an example of a business that only has one level in its supply chain?

[Principled]

There may or may not be savings in the cost of producing a new home under the NSRT.

You are the only one saying that.

But what we do know WITHOUT ANY DOUBT is that the cost of his product to the consumer under the NRST would be 30% more than what he would otherwise sell it for.

Holy Cow! That's really, really wacky.

Nobody believes that prices will increase by the amount of the tax, nobody.

The argument is just how much prices will fall before adding the nrst.

[Principled]

Everybody getting a monthly check from the government is socialism.

Oh, so you DO think it's socialism? Your tax refund is socialism. OK... whatever you say. (snicker)

[Your Nightmare]

It's a national sales tax and e-bay is domiciled in the USA. ALL e-bay transactions for new merchandise will be taxed by the NRST.

Don't you mean all eBay transaction for new merchandise is suppose to be taxed under the FairTax. Saying they should pay the tax doesn't make it happen.

The FairTax is a brick and mortar tax in an electronic world. It's actually easier for me to go online and buy my stuff from an off-shore internet store than to go to Best Buy. And there is no risk involved in not paying the taxes because I'm not required to pay the tax until I receive the item. So who's going to check if I pay the tax? Customs? So they catch me and I pay the tax. No risk. Also, as I understand it, the FairTax also allows for $400 of imported purchases tax free. I could just say that this purchase was part of my $400.

Lots of reward, no risk.

[Iwo Jima]

How do you know that the goods being sold on the street aren't used? Let's say you took a new DVD player out of the box and put it back in. Is is "used" now? How about if you play it one time?

You want to throw these people in jail and take away their homes? How are you any different from the existing tax masters at the IRS?

You should consider the ramifications of a governmental edict making a used item more valuable than a new one.

[Principled]

So they catch me and I pay the tax. No risk.

Just like the IRS, huh?

[CSM]

"Let's say you took a new DVD player out of the box and put it back in. Is is "used" now? How about if you play it one time?"

Where did the DVD player in your example come from? Is the manufacturer on the street selling DVD's?

[Iwo Jima]

You may not think that that is so fine if your own a business or work for one but are not an Indian. An artificially unleveled playing field of 30% between a business on a reservation and other businesses will destroy many a business and many a job.

Plus, as a consumer, you may not like driving hundreds of miles to the nearest reservation in your U-Haul to shop.

[Principled]

An item is used if it's had the tax paid on it. It doesn't have much to do with boxes or streets.

And just like today, when people buy something (a house?), they pay tax at purchase, finance it, and recover it when sold... under the nrst, the same thing will happen. THere is no reason to think anything different will happen.

Why would someone who paid $100,000 for a home sell it for $77,000? Hell no- they'll recover their costs.

So there won't be any tax reason that prices of used stuff will change. Used stuff doesn't become cheaper - the seller still wants to recover his costs to the same extent as today.

[Principled]

Plus, as a consumer, you may not like driving hundreds of miles to the nearest reservation in your U-Haul to shop.

Gee. Realistic.