Posted on 03/03/2005 7:05:07 AM PST by FairOpinion
WASHINGTON Mar 3, 2005 — Federal Reserve Chairman Alan Greenspan on Thursday embraced the notion of overhauling the nation's tax system and said that some form of a consumption tax such as a national sales tax could spur greater economic growth.
"As you know, many economists believe that a consumption tax would be best from the perspective of promoting economic growth particularly if one were designing a tax system from scratch because a consumption tax is likely to encourage saving and capital formation," Greenspan said.
(Excerpt) Read more at abcnews.go.com ...
Closing accounting/law schools in favor of technology majors----you're right, that would definitely be good for America.
You've come up with an interpretation that I've never heard before. Perhaps one of my esteemed and more knowledgable associates might be better able to field your question.
I am going to guess though that you are reading something into it that is not there. I don't think that anyone of the people that I know who support this would support a provision like that.
Deferring to the experts. . .
Principled said "It is lunacy to assert that costs (including profit) are not the determining factor in price."
Supply and demand are also factors. If the workings of the market do not allow you to sell your product for a price that covers your costs plus a profit, you will probably go out of business. If your costs suddenly drop (eg, if income tax were eliminated), would you drop your price automatically or would you wait to see how market forces (supply and demand) worked out? If market forces allowed you to sell at the higher price (without reduction for the income tax savings), you probably would and just make a higher profit. But, probably in real life, with the sales tax added, dropping your price for the income tax savings would be necessary or you would lose customers.
"American based business would have a huge competitive advantage. I think you'd see a new era of economic prosperity and job growth in the US."
That is an excellent point. Also presumably with a sales tax across the board, foreign products would also be charged on it.
Right now only American made products you have to pay the taxes on.. (that is the income taxes of the American workers who made it).
And indeed like you say it would be a huge competitive advantage, as right now most of our competitors have very high income taxes.
Of course it MUST be as Greenspan says if the tax system is built from the ground up. Knowing the Washington politicians, they will want to 'phase' out income tax while 'phasing' in the sales tax.
With that we would quickly have income tax the same as it is now, AND a 20% sales tax. It must be done in one bold move.
What country has put in a national retail sales tax without an income tax on top? I don't think any country has put in an nrst alone.
By all means, do an analysis then. If you haven't looked, you'll see that the sales tax base is much, much larger than the income tax base.
The point I was making is that the base for payroll tax is smaller than the base for the sales tax, but the same point can be made with your post. If the payroll tax base were made larger, say to include ALL income, then they could raise the same amount of $ with a lower rate. That's an exampmle of a larger base resulting in a lower rate.
The payroll tax base is much smaller than the income tax base - and the income tax base is much smaller than the sales tax base. So it should be clear then that the employee's portion of payroll tax (currently on a relatively small base) could be lowered by using the sales tax base (a much larger base).
So it's not true that the entire portion of FICA currently paid by employee will still be paid by the employee - he can pay less due to larger base.
Business won't cut prices just to be nice, they'll have to do it or lose market share, profits, and maybe go out of business. Maximizing price does NOT necessarily maximize profit. If it did, we'll all be paying infinitely large prices - because the idea in business is o maximize profits.
That's already the situation we're in! We pay an income tax, payroll tax, and we pay 25-33% the price of every product to pay other federal taxes and tax costs.
The nrst removes the income tax and leaves the sales tax part. So we still pay the same prices at the register as today, but we get our paycheck free of deductions for income tax and payroll tax - and there's no tax bill coming due.
L:But they aren't 20 to 30% of the price of a product.
According to lewislynn, that is.
According to PhDs in Ecomonic from harvard, stanford, boston university and LLMs in taxation the amount of inflation to prices due to the income tax system is that much or more, depending on which expert you consult.
And Zon, how dare you denote that prices have to include enough to pay the utility bill, water bill, pay wages and other costs. Don't you know price is not influenced by costs? /sarcasm
The farmer's price to the miller has to include the farmer's cost for seed, plow, fuel, etc and tax costs (like income tax, payroll tax, compliance costs). The miller's price to the bakery has to include the miller's costs for electricity, wages for employees, transportation costs, etc and tax costs (income tax, payroll tax, compliance costs). The bakery's price to the public has to include all of the baker's costs too - or he will go out of business.
So the price of the donut you buy from the baker has to be high enough to pay the baker for his tax costs, the miller and his tax costs, and the farmer andhis tax costs too. The more links in the chain of production, the more hidden, embedded tax in price.
It is obvious that to stay in business, sales revenue (the only indefinite income stream) must be adequate to pay costs. This fundamental, trivial fact is ignored by some anti-reform individuals because it's the only way they can say that there are no taxes hidden in prices - which is preposterous.
One of the pillars of the nrst is that it eliminates these hidden embedded taxes and 90% of compliance costs. The nrst also eliminates your personal income tax, payroll taxes (among others.
When the hidden taxes and tax costs are eliminated, prices will fall due to competition (remember it is th epurpose of business to maximize profit, not price)... then when the nrst is added, prices go back to today's prices.
So there will be little or no change in prices (prices are aslikely to fall slightly as rise slightly) and we will have our whole paychecks without withholding. No payroll tax, no income tax..and no tax bill coming due either. Your employer will not pay his "contribution" to FICA anymore either (that's part of the hidden, embedded costs to business that go away).
No it isn't. Buying a new home would be taxed, just like it is today.
If you bought your home already, you've already paid tax on it. What makes you think you'd still/again have to pay tax on it?
Similarly with rent today, rent payments include enough to pay the landlord for his costs (maintenance, etc and including enough to pay his income taxes and compliance costs).
The nrst is a replacement, not in addition to.
Betcha dollars to donuts it was the nominal rate, not the actual percentage of purchase price.
LOL!
For many years I have joked with friends during political discussions that if they would get me elected President, elimination of withholding would be the the first law I would have passed! ;o)
I'm not aware of any such provision in the bill. I did a quick search of the bill, looking for "Home" and "Residence" and the hits did not reveal any mention of inputed tax on the rental value of a home.
This mistaken notion probably arises as a result of the Freep posters who have suggested that rent must be inputed to homeowners in order to equalize the treatment of owners and renters. That is nonsense. Existing homeowners have paid the embedded tax in the purchase price of the home and new construction will bear the FairTax burden in an open and visible form.
Unlike the claims of some DU types, the impact of the FairTax on the real estate market (reduced interest rates and the ability to make principal and interest payments with tax-free dollars) will actually make it easier for renters to achieve the American dream of home ownership.
You are correct Badray, if the bill contained such a provision, I would not support it.
POOF! Gone.
Much more likely outcome: HR 25 -- POOF! Gone.
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