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Greenspan Touts Idea of a Consumption Tax
ABC News/AP ^ | March 3, 2005 | JEANNINE AVERSA

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 ...


TOPICS: Business/Economy; Front Page News; News/Current Events
KEYWORDS: fairtax; greenspan; incometax; taxes; taxreform
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To: Sarastro
Much more likely outcome: HR 25 -- POOF! Gone.

Why would you think this?

241 posted on 03/04/2005 6:13:47 AM PST by Principled
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To: iconoclast
I seem to recall reading on signs and invoices in Europe something to the effect that the price includes X% VAT

[Reply] Betcha dollars to donuts it was the nominal rate, not the actual percentage of purchase price.

Not sure of your point. The nominal rate is the actual percentage. If all the way along the production-distribution chain 17%, say, of value added is taxed, that is both the nominal rate and the total tax included in the final retail price.

242 posted on 03/04/2005 6:17:34 AM PST by Sarastro
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To: Ghost of Philip Marlowe
If any generation gets hit with such a transitional financial burden, it should be the baby boomers, who have given the least and taken the most from this country.

No offense to the good baby boomers out there. I'm thinking 60's Leftist boomers who, now that they are approaching retirement, will be looking for every handout imaginable.

Wow! A small minority of a whole generation offended you, so the whole generation should be punished severely. Rough justice, indeed!

243 posted on 03/04/2005 6:20:33 AM PST by Sarastro
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To: Myrddin

I'd like to see where you get this concept of "imputed rent" for a homeowner, since it's not in the NRST bill. If you own the house prior to the NRST passage, it's considered used/previously taxed. If you buy it after the NRST, you pay tax when you buy it. There's no additional "rent" bill for a homeowner.


244 posted on 03/04/2005 6:26:12 AM PST by kevkrom (If people are free to do as they wish, they are almost certain not to do as Utopian planners wish)
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To: Principled
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 [20%] or more, depending on which expert you consult.

This is true, but your interpretation that it will go away is false. That is built into prices because the employees expect a certain level of take-home, after-tax pay, so the salaries are bulked up to include the income-tax that is withheld. So far so good.

However, my argument is that, if a National sales tax is instituted, the employee will still expect the same gross salary, especially since gross prices will go up to include the new sales tax. So the sales tax will now be embedded in prices, instead of the income tax.

One reason why there is so much fire in these discussions is that there is a kind of circular reasoning going on. The pro argument: IF prices don't go up, then workers will need less gross pay and the embedded tax cost will cancel out the added sales tax. OTOH, if workers expect that same gross salary, then prices will go up by roughly the same amount as the sales tax. Which do you think is most likely?

245 posted on 03/04/2005 7:08:45 AM PST by expatpat
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To: Myrddin; Badray

 

. The government perceives this as the homeowner paying themselves "rent" for living in their own home. This "imputed rent" would be subject to 23% tax...every month. Living in your own home is defined as a taxable act of consumption. No thanks.

Bull, You care to show us that in the Bill?

The Fair Tax Act forbids the taxation of any property you own prior to the implementation or for which you have paid already paid the NRST on purchase.

 

H.R.25

Fair Tax Act of 2005 (Introduced in House)
http://thomas.loc.gov/cgi-bin/query/z?c109:H.R.25:


 

`SECTION 1. PRINCIPLES OF INTERPRETATION.

`(a) IN GENERAL- Any court, the Secretary, and any sales tax administering authority shall consider the purposes of this subtitle (as set forth in subsection (b)) as the primary aid in statutory construction.

`(b) PURPOSES- The purposes of this subtitle are as follows:

`(1) To raise revenue needed by the Federal Government in a manner consistent with the other purposes of this subtitle.

`(2) To tax all consumption of goods and services in the United States once, without exception, but only once.

`(3) To prevent double, multiple, or cascading taxation.

 

`SEC. 2. DEFINITIONS AND SPECIAL RULES.

`(a) IN GENERAL- For purposes of this subtitle--

***

`(14) Taxable property or service-

`(A) GENERAL RULE- The term `taxable property or service' means--

`(i) any property (including leaseholds of any term or rents with respect to such property) but excluding--

  • `(I) intangible property, and
  • `(II) used property, and

`(ii) any service (including any financial intermediation services as determined by section 801).

 

`(16) USED PROPERTY- The term `used property' means--

`(A) property on which the tax imposed by section 101 has been collected and for which no credit has been allowed under section 203, and

`(B) property that was held other than for a business purpose (as defined in section 102(b)) on December 31, 2006


246 posted on 03/04/2005 7:11:11 AM PST by ancient_geezer (Don't reform it, Replace it!!)
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To: unfortunately a bluestater; Zon; lewislynn

See #245.


247 posted on 03/04/2005 7:18:11 AM PST by expatpat
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To: expatpat
One reason why there is so much fire in these discussions is that there is a kind of circular reasoning going on. The pro argument: IF prices don't go up, then workers will need less gross pay and the embedded tax cost will cancel out the added sales tax. OTOH, if workers expect that same gross salary, then prices will go up by roughly the same amount as the sales tax. Which do you think is most likely?
You nailed it.
248 posted on 03/04/2005 7:24:27 AM PST by Your Nightmare
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To: expatpat

Employees will still receive the same gross pay. Why would an employee's gross pay change?


249 posted on 03/04/2005 7:24:43 AM PST by Principled
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To: expatpat

Employees' gross pay stays the same, and prices stay the same.


250 posted on 03/04/2005 7:26:14 AM PST by Principled
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To: Principled
The FairTax proposal is a comprehensive plan to replace federal income and payroll taxes, including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment, and corporate taxes.

The FairTax proposal integrates such features as a progressive national retail sales tax, dollar-for-dollar revenue replacement, and a rebate to ensure that no American pays such federal taxes up to the poverty level.

Included in the FairTax plan is the repeal of the 16th Amendment to the Constitution. The FairTax allows Americans to keep 100 percent of their paychecks (minus any state income taxes), ends corporate taxes and compliance costs hidden in the retail cost of goods and services, and fully funds the federal government while fulfilling the promise of Social Security and Medicare.

251 posted on 03/04/2005 7:27:21 AM PST by Principled
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To: FairOpinion

Did you see the CNN online poll yesterday? 52% for the national sales tax (the last time I looked at it).


252 posted on 03/04/2005 7:28:01 AM PST by KurtAZ (So they've got us surrounded, good! Now we can fire in any direction, those bastards won't get away)
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To: expatpat; Principled

However, my argument is that, if a National sales tax is instituted, the employee will still expect the same gross salary

Which is true, wages will not decline as a consequence of the enactment of the Fair Tax Act. People will receive their full pay.

especially since gross prices will go up to include the new sales tax.

Gross price including NRST is actually expected to fall 3-10% over time as compared to gross price paid for goods and services today with embedded business taxes and tax related costs which will be removed on repeal of the income/payroll taxes on business.

 

The reduction in price received by the producer ( i.e. cost paid by the customer less taxes) arises from the reduction three components of loss to the business:

1) repeal of the taxes collected from business per-se (i.e. income and payroll taxes paid by businesses)

2) the overhead costs associated with those taxes, they include:

3) the losses due to reduction of demand for products due to the higher prices that must be received by business to finances all of the above.

Repeal of the current income/payroll taxes on businesses removes the above losses associated with the conduct of business under the current tax system. All business transactions upstream from retail sale are no longer burdened with the above costs implicit with the federal income/payroll tax system, and business to business purchases are free of the NRST. The result allows business to reduce prices by the amount of savings realized yet maintain current profit and contractual wages to their employees.

Thus, as an average the shelf(before tax) price of products are expected to fall in the range of 15-25% in the first year of the NRST, depending on industry and the length of the production chain involved in producing a particular product.

Essentially that would mean the total amount(NRST included) paid by the consumer for goods and services, on average, would be roughly the same as they pay today for a specific basket of consumption products under the income/payroll tax system.

The net result of all this would be to provide over time, a very conservative estimated 15% increase in economic standard of living with under the Fair Tax Act (HR25) as compared with the current federal tax system it replaces.

253 posted on 03/04/2005 7:29:53 AM PST by ancient_geezer (Don't reform it, Replace it!!)
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To: expatpat
..my argument is that, if a National sales tax is instituted, the employee will still expect the same gross salary

I agree. There is no reason for a change. If you agree to $50k per year, that's what you'll get. But under the nrst, your taxes will be paid when you spend, not be taken form you before you even put your hands on it!

254 posted on 03/04/2005 7:33:30 AM PST by Principled
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To: Your Nightmare
G'day YN. What's your preference today?

VAT ?

Flat income tax?

Graduated income tax?

Anything but the excises and tariffs designed by our founders, eh?

255 posted on 03/04/2005 7:42:15 AM PST by Principled
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To: ancient_geezer
Thus, as an average the shelf(before tax) price of products are expected to fall in the range of 15-25% in the first year of the NRST, depending on industry and the length of the production chain involved in producing a particular product.
You have one study that states this and that study allows for nominal wages to drop. You have no evidence that nominal wages would stay the same and tax exclusive (producer) prices would drop significantly. None.

I have presented numerous sources that state the opposite.
256 posted on 03/04/2005 7:44:58 AM PST by Your Nightmare
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To: Your Nightmare
I have presented numerous sources that state the opposite.

Except that your postings are taken out of context in such a way that misrepresents the assertions of the authors.

Taken in total, your sources say what geez is saying.

257 posted on 03/04/2005 7:46:36 AM PST by Principled
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To: Principled
G'day YN. What's your preference today? VAT ?

Flat income tax?

Graduated income tax?

Anything but the excises and tariffs designed by our founders, eh?
I see you're still working hard to marginalize any opposition. You can always tell when you are getting to you FairTaxers. The frequency and level of attacks goes up.
258 posted on 03/04/2005 7:47:02 AM PST by Your Nightmare
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To: Principled
Except that your postings are taken out of context in such a way that misrepresents the assertions of the authors.
No they weren't. Just because you say they were doesn't make it so. It's just a lame attempt at damage control on your part.


Taken in total, your sources say what geez is saying.
Spoken like a true Kool-Aid drinker. Cherry or grape?
259 posted on 03/04/2005 7:48:51 AM PST by Your Nightmare
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To: Your Nightmare
I see you're still working hard to marginalize any opposition.

Opposition is healthy. Discussion is productive.

Your misrepresentations are neither.

260 posted on 03/04/2005 7:49:23 AM PST by Principled
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