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.

[Iwo Jima]

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?

For all practical purposes we would never run out of used goods. A new shirt that cannot be sold today becomes tomorrow's used shirt. A missing button has increased its value by 30%.

All land is used,correct? I don't know that they are making any more of the stuff, leaving aside lava from volcanoes. So any house which is sold would have to be apportioned between the value of the land versus the value of the new home on the used land. And you think that this is going to be simple and straightforward?

Every buyer and seller would agree that that sales price of the land was the bulk of the total purchase price. Oh, that house was really just thrown into the deal, I sold that to him for my costs.

And so on, until we are right back where we were, but in my opinion much worse off.

[Principled]

A new shirt that cannot be sold today becomes tomorrow's used shirt. A missing button has increased its value by 30%.

No. An item is new until tax has been paid on it... irrespective of buttons... it is new until it's taxed and once it's taxed it's used.

[Always Right]

Give it one last shot. If you are not taxed on your business purchases, how will your cost of business increase?

OK, it has to do with the new sales tax I now have to charge my customers. On $7.5 million in sales, I have to charge my customers $2.25 million in sales tax. Under NRST, I would have to cut my costs $1.725 million so I can charge my customers the same gross amount. I look at all my compliance costs, I look at all my payroll taxes, I look at all my subcontractors taxes, and there is no where close to $1.725 million to save. Absolutely impossible. Under NRST there is no way around me having to charge customers a lot more to buy a new house. And I mean a LOT more.

[Always Right]

For all practical purposes we would never run out of used goods. A new shirt that cannot be sold today becomes tomorrow's used shirt.

When you buy a used shirt, make sure you get the original sales receipt which shows that the sales tax has already been paid. Under the NRST, the consumer is liable for tax unless he has the appropriate reciept showing he paid the sales tax to a properly licenced business.

[Iwo Jima]

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?

I'll let Always Right speak for himself. But what I say is that when your sales are in the tank, you have to lower wages, pay less for supplies, etc. to try to stay in business. The damage done to the income side of the ledger will require serious pruning on the expense side of the ledger.

[Your Nightmare]

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.

No, since the tax would be collected at retail, manufacturers won't even have an opportunity to "operate outside the law."

[Principled]

Under NRST there is no way around me having to charge customers a lot more to buy a new house.

If your vendors don't adjust price, find one who will. Just like today, you manage decisions on cost. Vendors will adjust their prices or lose business. Vendors will have cost cuts too - and so will their vendors and labor, and all of them will have analagous savings, and so on until the beginning of the chain. And your business purchases are not taxed...neither are the business purchases of your vendors or their vendors or their vendors' vendors....

Whatever adjustments you are forced to make in price will be the same adjustments other builders must make. The whole world isn't coming after always right to put him out of business.

THe overall economy will have stable prices - those products with longer production chains will save more - those products with fewer links in the production chain will save less - but it will be the same for all in the sale of that good.

[Principled]

Under the NRST, the consumer is liable for tax unless he has the appropriate reciept showing he paid the sales tax to a properly licenced business.

The consumer is liable for payment of the tax - but the consumer doesn't keep receipts for tax purposes anymore. It is the business that keeps receipts.

Seems you've got two things mixed up here. The isn't any more revenue agents coming after individuals - only business.

[Iwo Jima]

A DVD manufacturer made it. Maybe they're in the United States,maybe from outside the US. Maybe the manufacturer is on an Indian reservation. Indian reservations would become like Swiss banks are or used to be -- a place where tax free transactions could occur and your income could be sheltered.<br

In any event, the purchase from the manufacturer is not taxed. The tax is supposed to occur when it is sold as a new good. But if it becomes "used" before it is sold, why can it not be sold tax free as a used good? Even if that's not the way it is supposed to work, that's the way it would work. And the established businesses would have to adapt in much the same way or suffer the consequences.

[Iwo Jima]

I think so but I don't know. The last bill I was familiar with was Dick Armey's flat tax proposal.

[Always Right]

The consumer is liable for payment of the tax - but the consumer doesn't keep receipts for tax purposes anymore. It is the business that keeps receipts.

Not true. What does the bill say:

SEC. 509. RECORDS.
`Any person liable to remit taxes pursuant to this subtitle shall keep records…

and just who is liable according to the bill:

(d) Liability for Tax -
`(1) IN GENERAL- The person using or consuming taxable property or services in the United States is liable for the tax imposed by this section, except as provided in paragraph (2) of this subsection.
`(2) EXCEPTION WHERE TAX PAID TO SELLER- A person using or consuming a taxable property or service in the United States is not liable for the tax imposed by this section if the person pays the tax to a person selling the taxable property or service and receives from such person a purchaser's receipt within the meaning of section 510.

So don't be throwing those receipts away anytime soon, because it is your burden to produce them if asked!

[kevkrom]

SEC. 509. RECORDS. `Any person liable to remit taxes pursuant to this subtitle shall keep records…... (d) Liability for Tax - `(1) IN GENERAL- The person using or consuming taxable property or services in the United States is liable for the tax imposed by this section, except as provided in paragraph (2) of this subsection.

You're confusing liability for the tax itself with liability for remitting tax receipts. They are not the same thing.

[kevkrom]

In any event, the purchase from the manufacturer is not taxed. The tax is supposed to occur when it is sold as a new good. But if it becomes "used" before it is sold, why can it not be sold tax free as a used good?

"Used" is a short-hand definition. What is actually the subject is whether or not the item has been taxed for retail sale in the past -- if yes, then it is not taxable on resale, if no, then it is.

In your example, the "used" DVD player would be subject to the tax, because it had never been previously taxed.

[CSM]

So a business that is liscensed to purchase goods for retail sale, therefore without the sales tax, would risk that liscense to sell the goods cheaply. Is that your premise?

Don't you think it would be easy to identify a retail liscensee that never submits any tax?

[Principled]

But if it becomes "used" before it is sold, why can it not be sold tax free as a used good?

It only becomes used after the tax is paid.

[Principled]

What you posted is what I said. THe consumer is liable to pay the tax. WHat makes you think you as consumer will have to keep receipts? Are you thinking about today's system where we do indeed have to keep receipts?

[Always Right]

Seems you've got two things mixed up here. The isn't any more revenue agents coming after individuals - only business.

There is nothing in the bill that limits audits to business. Anyone liable for tax, which includes consumers, can be audited and penalized. There is no protection for consumers. Here's another interesting bit out of the bill:

`SEC. 506. BURDEN OF PERSUASION AND BURDEN OF PRODUCTION.

`In all disputes concerning taxes imposed by this subtitle, the person engaged in a dispute with the sales tax administering authority or the Secretary, as the case may be, shall have the burden of production of documents and records but the sales tax administering authority or the Secretary shall have the burden of persuasion.

So there is nothing from stopping the government from asking for your papers, and you have the 'burdon of production of documents"! I think you may just be a little mixed up on what exactly this bill does.

[Iwo Jima]

An item is used if it's had the tax paid on it.

So there is no such thing as a used good before the tax goes into effect? And after the NRST goes into effect, a 20 year old car would be taxed as a new good the first time that it was sold? Are you saying that LAND is ever taxed as "new"? If that's the way this thing is supposed to work, its supporters are being very deceptive. No ordinary person would define "used" in that way.

Does anybody else agree with this? So much for the argument that you can avoid the tax by buying used goods.

And tell me this, how do you know if a tax has previously been paid on an item or not? You're not going to tell me that we have to keep records for every item bought or sold to determine if the tax was properly paid, are you? Think of the paperwork!!

[Principled]

So there is no such thing as a used good before the tax goes into effect?

Wrong. Anything produced under our income tax system has already been taxed. It's those pesky production chain taxes passed thru to final consumer.

[Always Right]

What you posted is what I said. THe consumer is liable to pay the tax. WHat makes you think you as consumer will have to keep receipts?

If you are liable for tax, you have the burdon to produce the documentation. There are no excepts for individuals. The bill is as clear as can be. "Let me see your papers" is all the government has to do.