Posted on 03/03/2005 7:05:07 AM PST by FairOpinion
Certainly I picked just one example, but that was the only one I could think of offhand. You guys are the ones claiming hundreds of billions of costs, so give me some other examples of who the people are who are eating up these funds with their non-productive work.
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.
I have no idea how to verify the number but in my experience with estate planning there must be at least a billion dollars a year in NEW insurance premiums going into policies that would be unnecessary under the NRST.
You guys are the ones claiming hundreds of billions of costs, so give me some other examples of who the people are who are eating up these funds with their non-productive work.
You are, everytime you make a choice not to buy one thing rather than two because prices are higher than your pocket book allows while sales of goods and bottomline profitability suffers for that lack.
Others make the choice to not go for that extra overtime or wife take that parttime job as it would push them into that higher tax bracket and it just not worth the effort and costs associated. All losses impinging upon business productivity, production capacity, sales and investment.
All the $100's of billions of losses to the GDP that arise in reductions of demand, lost labor and productivity, loss of export markets due to the tax system burdens on business, the losses and expense involved in litigating and dealing with the IRS and courts the paying of fines and penalties on losses and legal fees even when nominally won, the misallocation of funds into tax sheltering schemes that misdirect capital away from productive ventures.
Your focus is totally on the "compliance cost" segment of overhead and fails to take into account all the myriad incremental ways the tax system impedes individual and business choices acting to hold back the economy resulting in limits on business growth, non-optimal pricing of goods and services, as well as retardation of individual standards of living.
Yours tends to be the static view, not taking into account the many dynamic paths that effect the economy that give rise to lower pricing though the change over from income/payroll taxation to one of a single stage, overt tax on retail sales.
Exactly right. But those are prices BEFORE the 30% "gross payment" tax is imposed.
That's not a monetary cost, that's just a choice of what to spend your money on.
Your Nightmare: Yes, I've noticed that, here and earlier. But Jorgenson does the same thing -- he counts time a guy spends doing taxes instead of watching TV as a monetary cost at $30/hr -- and he's supposed to be an economist, or have I got that wrong?
"It won't be possible to resurrect the decimated textile industry overnight, nor will it be possible to build overnight those other new factories in the US."
Given that most factories in this country are operating at WAY below capacity now, I'm not at all concerned that we will have to wait for new construction before we ramp up production.
Yes, but we've addressed that aready, haven't we? The premiums can't be counted as a cost to the economy because (a) they are invested by the insurance company, and (b) the money is returned to the beneficiaries of the insured after his death.
Look, if these are the kinds of bogus costs that you guys are including in the cost of the tax system (and a_g has just adding choosing to buy one item instead of two), then it's no wonder you're coming up with these outrageous numbers for it. They are not recoverable, because they're not there!
There's not much infrastructure left in the textile industry, and those foreign producers you say are going to move to the US are going to need a factory. GM isn't going to want to share a factory with Kia!
Yes we have discussed it but you still have absolutely no grasp of it. For the last time: The proceeds of the insurance policy have to go out of the estate to pay the estate taxes. Without estate taxes the beneficiaries would only inherit half of the estate in most situations. The premiums on some of these policies can be huge because they tend to be issued later in life.
Look, if these are the kinds of bogus costs that you guys are including in the cost of the tax system (and a_g has just adding choosing to buy one item instead of two), then it's no wonder you're coming up with these outrageous numbers for it.
The fact that you can't understand it doesn't make it bogus.
Overnight, people would move from paying, to the feds and states, roughly 50 cents per dollar earned on their supplies of labor and capital to roughly 30 cents.
It looks like someone told Kotlikoff the fairtax repeals state taxes too...
BTW, In a testimony for tax reform before the Ways and Means Committee, Kotlikoff said we needed a 25% tax INCREASE (this was before Bush tax cuts) and he also said a sales tax should include imputed tax on rent...in other words the new fairtax favorite son thinks homeowners should pay a tax on the rental value of their own homes...
Kotlikoff testimony 4-11-2000:
Eliminating complexity and distortions would be cause enough for reforming the federal income tax, but there is a much more pressing reason: notwithstanding recent wishful projections about future government surpluses, our fiscal house is not in order. Indeed, getting it in order would require not cutting federal income taxes, as some in this chamber advocate, but immediately and permanently raising them by over 25 percent.....So what does taxing consumption have to do with achieving a generationally equitable fiscal policy? Again, essentially everything. The reason is that the current elderly as well as the baby boomers, who will shortly retire, have one primary economic activity left to accomplish - consumption. And under a consumption tax, they will pay a lot more in future taxes than they would under the current tax system....
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Were the very staid and well established businessmen and women who advocate the Fair Tax to proclaim that their tax reform 1) levies a tax on the holdings of wealth, 2) provides a highly progressive tax rebate, and 3) implies an increase in Social Security benefits and, most likely, transfers to the poor, they would probably be viewed as members of a vast left-wing conspiracy. But this is precisely what they are recommending.
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Simulation analysis and a variety of empirical calculations suggest that the retail sales tax rate needed for revenue neutrality under the Fair Tax, assuming no decline in the real value of government purchases, would be roughly 30 percent when measured on a tax-inclusive basis. This tax rate could be expected to decline by 3 or so percentage points over time as the economy expands. Moreover, if the Fair Tax were structured to include the consumption of existing housing services in its tax base, the initial Fair Tax rate would probably be about 3 percentage points lower. This could be accomplished by assessing the tax on the imputed rent on housing, where the calculation of imputed rent is based on a fair market valuation of housing real estate. This valuation could be done by local municipalities in the course of appraising houses for local property taxes.
A tax-inclusive consumption tax rate of 30 percent translates into a tax-exclusive consumption tax rate of 43 percent. While the 43 percent rate sounds very high, proper comparison of the Fair Tax tax rate with the current payroll and income tax rates requires evaluating the consumption tax rate on a tax-inclusive basis. Even a 30 percent tax rate may sound like a high rate. But one needs to bear in mind that middle and upper income households in America are typically in combined income tax and payroll tax marginal tax brackets of 40 percent or more and that low income Americans are typically in even higher tax brackets once one considers the phase out of the earned income tax credit. Hence, given the state of U.S. marginal taxation, 30 percent is a low number.....
The fairtax clowns would normally run from the honesty of this guy like scalded dogs...But they won't as long as he mutters the word "fairtax" once in awhile.
That's not a monetary cost, that's just a choice of what to spend your money on.
It is a loss to business profit, when marginal demand driving sales is the factor that decides whether or not a sale is made. It is directly attributable to tax where that loss in demand occurs as a consequence of tax and tax related costs lower income to labor or investor or raising price to customer.
Where a person choses not to produce because of the tax on that next dollar earned exceeds that level that makes leisure of greater value. That my freind is a cost to the economy, to the individual and business in loss of demand and consequent contraction of the economy.
Remove the tax, the value of labor becomes higher than the value of leisure to the individual he choses to earn and produce with consequent expansion of the economy.
That cost is termed an implied subsidy to leisure and is equal to the marginal tax rate on labor income.
Under the current income/payroll tax system the marginal tax rate exceeds 40% in federal tax on labor alone. That essentially is a disincentive to produce, to sit out the game instead of participate, and costs the economy in both loss of earnings as well as loss of consuption to the amount that leisure is chosen over work for tax reasons.
Our nation's economy has been performing remarkably well in recent years, but our economic success is no reason to be complacent about a tax system that is extraordinarily complex and highly distortionary and that plays a critical role in an overall fiscal system that is likely to visit enormous burdens on our children and grandchildren.
The complexity of the tax code doesn't just drive taxpayers crazy. It also costs them a significant amount of time - time that could be spent working or time that could be spent enjoying life. Having just spent three days doing my taxes, I have a refreshed sense of the substantial costs to the man in the street and the nation as a whole of complying with the federal income tax code.
So far it sounds very consistent with his article. I'm trading now, but I'll read his testimony and see what else LL selectively published for all the world to see.
1. Do you agree that the money is invested back into the economy while the insurance company has it, and is therefore not a cost to the economy during that time?
2. Now the insured dies. Do you agree that, on the average, the insurance company returns to the beneficiary most of (i.e., less a profit) the premiums paid in plus the investment gain?
3. Now we look at what happens to the money. The benficiary uses this money (or any other money he has) to pay off a debt, namely a legal debt to the IRS. We can argue about the merits of the estate tax, but that money goes back into the economy as welfare payments, social-security payments, purchases of warships, etc. that would be made anyway. Do you agree that we can't consider that money lost to the economy any more than we can claim that the money taken by a Fair sales tax is a loss to the economy?
Where is the inefficiency here, apart from the check-cashing and check-writing overhead in the insurance company?
Oh come on, a_g. The guy bought one of item a ($100) instead of two, because $100 of his money went to pay taxes. First of all, that tax money probably went to a welfare recipient or a senior, who buys item b with it and therefore makes a compensating GAIN to business profit for the producer of item b. Secondly, the Feds are going to get their pound of flesh with any system; therefore that "loss to business profit" you talk about is going to happen in any tax system, since someone has to provide the $100 that the Feds are going to get one way or another.
Yes. Why is that neutral? Why would the insurance company make better investment decisions buying GE, etc. than the owners of say a small business that employs 50 people?
2. Now the insured dies. Do you agree that, on the average, the insurance company returns to the beneficiary most of (i.e., less a profit) the premiums paid in plus the investment gain?
No. The insurance company pays the face amount of the policy minus any policy loans, etc. If there is a gain in the policy it pays that too. Most of the time it is just the face amount. The premiums paid are gone forever (to the insurance company).
3. Now we look at what happens to the money. The benficiary uses this money (or any other money he has) to pay off a debt, namely a legal debt to the IRS. We can argue about the merits of the estate tax, but that money goes back into the economy as welfare payments, social-security payments, purchases of warships, etc. that would be made anyway. Do you agree that we can't consider that money lost to the economy any more than we can claim that the money taken by a Fair sales tax is a loss to the economy?
We are getting into philosophical politics. I don't agree that money taken at the point of a gun (as taxes are) and used by an inefficient bureaucratic government, minus it's lucrative take, for social programs is in any way a more efficient use of those assets than would be made by individuals for their own profit.
Where is the inefficiency here, apart from the check-cashing and check-writing overhead in the insurance company?
You are stating that the government can more efficiently use the resources of, say a family business, than can the sons and daughters of the owner. You might want to rethink that.
What you say here is correct for the individual case. However, I said "on the average" since we are dealing with a large number of cases/billions. The actuaries set the premiums so that they expect to get a reasonable profit after all face amounts are paid out. So, I suggest that the response to #2 should also be Yes, given the averaging involved.
I would like to emphasize that I am not "stating that the government can more efficiently use the resources of, say a family business". I don't believe that, myself. The ground rule imposed is that the tax system be revenue neutral, so the Feds get their pound of flesh whether we like or not. An attack on the Fed's need and use for money can certainly be made, but that's outside the scope of this thread.
Oh come on, a_g. The guy bought one of item a ($100) instead of two, because $100 of his money went to pay taxes.
Once again you miss the point/ At the point that necessity is covered, and where extra dollars aquiered out of earnings are worth less than the value of leisure to the individual, neither government nor the economy gets a thing out of it. No tax to government, no sale to turn the engine of consumption, no production, no investment. At its worst a total bow out of all participation, lesser levels amount to low level trade by barter and underground cash economy transactions among like minded folks at minimal economic value, or simply work days cut short, a common practice in England and Scottland from my direct observation and among some small businesses even around my corner of the US. The latter not only effects the owner of a business in making such decisions but those who work in such businesses as well.
It can go as far as a total dropout when disgust levels get triggered in some folks, I actually know to have gone that far, to merely deciding a dayoff sounded better than forking over half of the day to the government.
First of all, that tax money probably went to a welfare recipient or a senior, who buys item b with it and therefore makes a compensating GAIN to business profit for the producer of item b.
Nothing earned or spent, sorry feds don't get a penny to distribute to someone else, business doesn't make a sale, no production of item to sell later, no investment made out of which to spend later, just total economic dropout.
Secondly, the Feds are going to get their pound of flesh with any system; therefore that "loss to business profit" you talk about is going to happen in any tax system, since someone has to provide the $100 that the Feds are going to get one way or another.
Not where there is no value in play to grab. Though some consider uncompensated and forced accounting work in making tax and earnings reports to the government to be no less than slavery, one one could say some non-productive action can be aquired by government for whatever. Don't see as how that does anything for the economy the electorate or anyone else for that matter except maybe justify work for bean counters to be paid for out of tax dollars taken from someone else so they can buy less.
Not if you're the one paying the premiums. Go back to the example I laid out about timber owners. What if they have to gradually harvest timber to pay the premiums? Their land becomes less valuable in the process. Sigh. I do appreciate you challenging all of us. It keeps us honest. (We were to begin with, you know.)
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