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 ...
Wow! 49%, 64%, and rising. Principled and ancient_geezer didn't share that with us!One of the reason the rate is so low is that they have the federal government paying the FairTax on it's purchases and the wages of government employees. They count this as revenue but don't account for the increase in expenditures that would be necessary to pay these taxes.
If they did not do that, it would be like giving every government employee a huge raise equal to whatever they would have paid in income and payroll taxes under our present system. I don't think that's a "trick" to get more money out of the system. It's necessary to either do that, or do an accross the board reduction in gross wages for all government employees.
Please correct me if I'm misunderstanding something here.
If they did not do that, it would be like giving every government employee a huge raise equal to whatever they would have paid in income and payroll taxes under our present system.Why is that? The employees would still have to pay the FairTax.
It's necessary to either do that, or do an accross the board reduction in gross wages for all government employees.Why? How is a government employee any different from any other employee?
I don't think that's a "trick" to get more money out of the system.The "trick" is in not accounting for the increase expenditures required to pay the tax. They have the government giving themselves money, counting it as revenue, and not accounting for it as an expenditure. Using this method, we could eliminate all taxes on individuals and just charge the federal government a 1000% sales tax. That would generate tons of revenue.
Inflation to prices?...You wouldn't be adding words to their conclusions that aren't there would you?
Do you have links to those studies?
Try this:
The notion espoused by some that pre-tax prices would drop some 20-30 percent under a NRST (so that after-tax prices would not rise and may even decline) is a peculiar one. This could only happen if all of the personal income tax, the corporation income tax and payroll taxes are currently embodied in retail prices. Tax incidence -- that is, who actually bears the ultimate tax burden -- is an elusive question that has been the focus of many economic papers, because the answer is not clear. However, the general consensus among economists is that perhaps a portion of the corporate income tax may be passed on to consumers in the form of higher prices, but that the majority is ultimately paid by corporate owners in the form of lower after-tax profits and by employees in the form of lower compensation. Most economists concede that personal income taxes and payroll taxes are ultimately borne by labor and are not passed on to consumers in the form of higher prices.
I'll give you a link to that testimony before the Ways and Means Committee when you provide links to yours.
How does the FairTax differ, and how does it avoid this problem?
"Offhand I don't know what percentage of embedded costs the employees share of payroll taxes make up of the total amount of embedded taxes that the fairtax removes."
It is the employER's share of payroll taxes which (arguably) get imbedded into the cost of production here in the US, not the employEE's.
i fear you are correct. No NST without the 16th amendment repealed first!
Maybe I'm misunderstanding what it is you are refering to. Are you refering to Government Enterprises charging tax on taxable products and services?
I thought I remembered reading the tax on wages portion before, but can't find it. I'll keep browsing. Point me to what you are referring to if you are willing.
But you told me that the NST would piggyback on the State sales tax collection, thereby allowing the IRS to disappear and the collection and compliance costs to vanish! How can you do that and collect taxes on food, medicine, and doctors when many states do not tax them?
"Seems to me it prsupposes that consumer behavior won't change. I think consumers will think twice when a big chunk of tax is added to large purchases.
That will discourage consumption so while you will have lots to invest with, what will you invest IN?"
No, it does not presuppose no change in consumer behavior. It presupposes that when we eliminate the preference that our current tax system provides to foreign producers over and above domestic producers, price shifts in favor of US producers will create a significant increase in the demand for US goods - in many markets around the world, including our own. That increase in demand for US produced goods will cause a big increase in GDP (more than 10% in year 1!), even though total consumption will temporarily decrease in the USA. That decrease is comprised of a significant decrease in the consumption of imports, partially offset by an increase in demand for US produced goods. Because of faster growth of the economy, total consumption would catch up to where it would have been under a continuation of the current system by about the 4th year .... and that consumption would be much more heavily skewed toward the consumption of domestically produced goods.
"That will discourage consumption so while you will have lots to invest with, what will you invest IN?"
If you are smart, you will invest in US companies, the demand for whose products will be increasing significantly.
"Most of my after tax savings are sitting in stocks. The only 'deal' in NRST for me is avoiding income tax on the 401K."
I think that you missed the most important benefit of all for people like yourself. A couple of nationally known money market managers have told Congressman Linder, the bill's primary sponsor, that they forecast that the DJI will double within the first 24 months of the FairTax's enactment. That will dwarf any changes in your net taxation on consumption during that time period.
The disturbing issue here is that "imputed rent" is viewed as a legitimate concept. It acknowledged as legitimate in the table and excluded (for now) to get us to drink the KoolAid.
What would be disturbing would have been not reducing the GDP personal consumption tax base by that amount, as no one recognise's imputed rent as a taxable quantity.
I expect the exclusion would survive for a very short time.
Is this the best you can come up with? If that were the case you would be paying income tax on that "imputed rent" right now.
Your use of the perjoritive "drink the KoolAid" reveals demogoguery and disingenuous in your position. That sort of thing only detracts from reasonable debate, it does not add to the understanding of the real issues involved.
"If the employee is only getting the same paycheck, then he's getting screwed, because he himself has to now pay the employer's share of the FICA tax, which is now in the sales tax. See #60."
He has to pay it now; it is imbedded in the cost of his consumption purchases. There is no free lunch. COnsumers ultiamtely pay all taxes anyway, the FairTax just makes it more visible.
No one here has seen the research...Do you have a link to it?
And since business purchases are not taxed, there is a savings of 22% or so to the producers. Then, add the nrst and prices are back to today's level.
I tried your math. It doesn't work.
Minus 22% then plus 29.87% doesn't come out to the same price.
100 minus 22 = 88
88 plus 29.87% = 114.29
I don't expect you to understand but that's a 14.29% increase in price by any logic...except yours of course.
The Fairtax simply continues what is already happening you IDIOT!
What do you suppose would be the result of taxing all goods and services sold in the private sector but NOT taxing those same things when the purchase is made by governments?
Never mind I'll tell you because you will NEVER figure it out and if you did you wouldn't admit it!
In that scenario there would not BE a private sector for very long because the government would have a distinct price advantage when it came to delivering ANY good or service! Is THAT what you want?
GEEZ!
"Income taxes are NOT included in a product's price. One doesn't even know what they are going to be from year to year."
Where does the money come from to pay corporate income taxes?
But you told me that the NST would piggyback on the State sales tax collection, thereby allowing the IRS to disappear and the collection and compliance costs to vanish! How can you do that and collect taxes on food, medicine, and doctors when many states do not tax them?
Are you trying to tell us a state tax agency is incapable of collecting retail taxes from service businesses?
Expanding the federal base to include collecting an NRST from the consumer for services is not a great stretch for state agencies, which is doable in the view of the Texas Comptrollers Office in testifing in regard this issue.
| House Ways & Means archives 106th Congress: Statement of Billy Hamilton, Deputy Comptroller, Testimony Before the House Committee on Ways and Means Hearing on Fundamental Tax Reform April 11, 2000 My name is Billy Hamilton, and I am the Deputy Comptroller for the State of Texas. Carole Keeton Rylander, the Texas Comptroller of Public Accounts, was delighted to receive an invitation to testify before this committee regarding the Fundamental Tax Reform measures under consideration today. Unfortunately, Comptroller Rylander's schedule did not permit her attendance, and she has asked me to testify here on her behalf. My comments today are directed only to the feasibility of state administration of the Fair Tax proposed by H.R. 2525. I do not intend to comment on the economics or any other aspects of the proposal. The Texas Comptroller's office has administered a sales and use tax since the 1960's, and I have been involved with administration of the tax since 1982. Last year, the Texas Comptroller collected $13 billion in sales tax revenue from more than 600,000 businesses. I offer my own experience with sales tax administration, as well as the size of Texas' sales tax program, as the basis of my qualification to speak to you about the administerability of H.R. 2525. As you know, H.R. 2525 would permit states to collect and administer the Fair Tax on behalf of the federal government. In my opinion, Texas would be well-equipped to administer the Fair Tax based on our experience in administering our own sales tax. Even though the base, rate and other characteristics of the Fair Tax are significantly different from the Texas sales tax, it would be feasible for our office to collect the Fair Tax by expanding and enhancing the systems we currently have in place. For example, we would:
The expansion of our systems to administer the Fair Tax, in the manner I've just described, would be sizable. Under the Fair Tax, we would serve approximately 900,000 more filers than we do currently. We estimate that serving that many additional taxpayers would require 1,100 to 1,600 more full-time employees. The Texas Comptroller currently employs about 2,700 people on a full-time basis. In spite of this large expansion, the compensation for collecting the Fair Tax that would be provided to states under H.R. 2525 [HR25 currently] would likely cover our projected costs. As a first approximation, we estimate that the cost to the Texas Comptroller's office for collecting the Fair Tax at full implementation would be $100 to $150 million per year. I emphasize, however, that there would be significant costs to begin collection, including the cost of facilities to house the additional processing facilities, the capital costs of information technology and revenue processing equipment, and the costs of notifying, registering and educating taxpayers on the new tax. In closing, I believe that if the Fair Tax is to become a reality, the U.S. government would be well-served to make use of the existing expertise of the states. Many states have administered consumption taxes since the 1930s and have developed particular capabilities in this area. We also have extensive experience in dealing with the affected businesses. As long as the administrative fee paid to the state is adequate in relation to the costs of collection, I see no reason that the State of Texas could not effectively administer the Fair Tax. |
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