Posted on 06/10/2005 11:13:37 AM PDT by Always Right
1. The 23% sales tax rate turns 37%. A retailer who sells an item for $100 must charge his customer an additional $30 for federal sales tax. Most people familiar with state sales tax call this a 30% tax, since the tax is 30% of the seller's price. The Sales Tax folks call this a 23% tax, since $30 is 23% of the final price ($130 including tax), which they call the 'tax-inclusive' rate. Neither way is technically incorrect, it is just important to understand what is really being discussed. Remember this 30% tax-exclusive rate is only the federal portion of the tax, state sales tax will also be added in. With the elimination of federal reporting, states will have to replace their personal and corporate income receipts, with a sales tax. States collected nearly $500 Billion in 2003 through income tax and sales tax. With Personal Consumption at $7.76 Trillion in 2003, that is 6.4% in tax inclusive terms, which will add another 6.8% to the tax-exclusive rate. So if you buy $100 worth of goods, you will end of paying nearly $137 once State and Federal Sales tax.
2. Even 37% is not enough. One amazing fact when sales tax calculates their rate is that they assume 100% compliance. Everyone will cheerfully report every sale. There will be no under the table or black market sales. Also, no one will try to buy goods overseas to avoid this tax. This is pure fantasy. No one could believe any tax system will have perfect compliance and zero avoidance. The current income tax system has about a 15% tax-evasion rate. Conservatively, we could assume that the sales tax will have a similar tax evasion rate of 15% and a tax avoidance (like spending overseas) rate of 5%. With these more realistic assumptions, the tax rate would have to be bumped up to 44% to be revenue neutral. And these are very conservative assumption. Brookings Institute economist William Gale (National Retail Sales Tax, September, 2004) calculated that about a 60 percent sales tax would be required to be revenue neutral.
3. Fraudulent Calculations. Besides using ridiculous assumptions like 100% compliance, the sales tax economists create money out of thin air. Their paid for economists routinely double-count savings of their plan. The biggest one is being the $1.3 Trillion that individuals pay in taxes. Under the 30% Sales Tax bill, that money would end up in the pocket of individuals, and the proponents correctly tell you that take home pay will go up. But then the Sales Tax proponents go on to tell you that prices will go 25-33% to offset their 30% sales tax. Well if individuals are pocketing 67% of the taxes that are eliminated, how are businesses going to reduce prices very much? The sales tax eliminates about $650 Billion in taxes to businesses. Considering Americans consumers spend $8 Trillion on goods and services, that only allows for businesses to lower their costs by 8%. Once the 30% sales tax is added, the final end cost to the consumer will be 20% higher if the calculation were done honestly. Even allowing for a reasonable amount of savings in compliance costs to businesses under the sales tax system, prices would still shoot up 18-19%.
4. Millions must file. The Sales Tax supporters would have you believe that only retailers need to file under the Sales Tax. That simply is not true. In order to offer the 'low' 30% rate, the Sales Tax must tax services too. 'In 1993, 12,778,000 taxpayers filed individual returns with business income or losses, and another 1,919,000 filed farm returns. In addition, in 1992 the IRS received returns for 17,292,286 non-farm sole proprietorship businesses, 1,484,752 partnerships, and 3,868,004 corporations-all of which probably produced goods or services on which the sales tax would be levied. Thus the supposed simplicity of the sales tax turns out to be a mirage.' (Brookings Institution Policy Brief #31-March 1998) Thus over 35 million filers will still be subjected to reporting and audits, most of these are individuals. This doesn't even consider the 100 million of people who will still have their wages reported to the SSA. Also, all households must register every year with the 'sales tax administering authority' in order to receive your monthly tax rebate. Furthermore, individuals that buy things without sales tax, like overseas purchases, must submit monthly forms and payments to the government. Hardly the zero tax filings for individuals as the sales tax supporters claim.
5. Tax Evasion will skyrocket. 20 countries have tried a national sales tax, and 20 have switched to a value-added tax. These countries have gone on record and have flat out stated a retail tax of more then 12% is unworkable. People will avoid it, especially with the internet which makes it very easy for the common citizen to purchase goods from foreign sources. The fact that businesses to business sales are not taxed, makes it very tempting to buy personal stuff under a business name. It will take a mighty powerful and intrusive taxing authority to audit all business expensive to make sure. The sales tax rates we are talking about have never been successfully implemented in the history of the world, but it hasn't been for a lack of trying. "Many people would masquerade as businesses" to avoid the tax, says Robert Hall, an economist at the Hoover Institution. Gale reckons that evasion would be far higher than today 's estimated 15%.
6. Big Government gets Bigger. In the 20 countries where the national sales tax has been implemented, and in each case replaced by necessity by a Value-Added Tax, the amount of federal taxes quickly grew from about 20% of GDP, as currently in the US, to 40% and above of their GDP. Not a promising precedent.
7. Underground Economy still not taxed. The NRST advocates falsely claim that the underground economy now will be taxed. Nothing could be further then the truth. Sure, when the money re-enters the legal economy the money is taxed, but that is true today. But will the drug dealers and prostitutes remit sales tax for their goods and services under the NRST? Absolutely not, this portion of the economy is still invisible to the tax collector and therefore not taxed. According to Bruce Bartlett, 'thus whatever revenue is gained when drug dealers spend their ill-gotten gains will be lost because no tax was collected on their drug sales.' (Bruce R. Bartlett, senior fellow, National Center for Policy, Analysis, November 5, 1997).
8. Lower and Middle Income pay more. Steven Sheffrin of UC Davis in a 1996 CPS brief says that a revue-neutral consumption tax even with a generous personal exemption shifts the tax burden to the lower to middle income households. A 1992 Congressional Budget Office study of consumption based tax concluded the consumption tax would decrease the tax on the wealthiest 20% by five percent, while hitting all other groups with a higher tax burden. The poorest quintile being hit the hardest with a 20% increase in tax and the 20-40% income quintile being hit with 9.3% increase in their effective tax rate. This is because the poorest spend a much higher percentage of their income each year and in many cases are even forced to borrow to keep up with their expenses. These numbers are much worst today as the federal tax liability for the bottom 20% has been greatly reduced through expansion of the earned income tax credit.
9. Elderly assets are unfairly burdened. While people currently working will get to keep more of their paycheck, people on fixed incomes will stay the same. Elderly, who have already worked and saved under the income tax system, will now be faced with paying additional high consumption taxes. This group of especially hard hit people, will not have the opportunity to earn tax-free wages, so all their already taxed wealth will be taxed again when they spend it. Come January 1, 2007, if someone's rent was $1000, they will owe an additional $300 in federal tax alone, and many without any additional source of income.
10. Government Taxes Itself. One amazing thing is under the Sale Tax is that government somehow raises money by taxing itself. Whereas this is an interesting way to reduce government, it is typical of the smoke and mirrors the fraudulent analysis of the so-called fair taxers use. Under the plan, the government is considered the consumer and most of it's purchases and employee salaries are taxable. So if the state of Alabama pays its clerk $30,000 in salary, it would be liable to pay the federal sales tax of $9000. The same applies to the federal government, but it pays itself. An interesting way to raise revenue, but it more fraud on their part. If government could truely tax itself, why not just put 100% sales tax on government and then no one else would have to pay taxes.
11. Auto and Housing Industry Hit Hard. As the luxury taxes have proven in the past, adding a large sales tax on item deters people from buying. In 1991, after the Democrats snuckered Bush Sr. into signing the Luxury Tax, Yacht retailers reported a 77 percent drop in sales that year, while boat builders estimated layoffs at 25,000. And that was only for a 10% tax! With new homes and autos having to compete against existing homes and used cars, paying the additional 30% sales tax will be hard to swallow for most consumers.
OK, where do consumers get this 30% more income to spend when prices are raised by the "EviL NRST"™ ?That's the point. They don't get 30% more to spend when prices are raised.
This point is made to tell you why the eliminated tax costs will be squeezed out of prices after the elimination of the income tax, payroll tax, and 90% of compliance costs.
When those costs are eliminated, business will enjoy a much larger profit margin. Hence, they can reduce their prices and still earn the same profit margin.
If one business sees this (and they all see it already), they can gain market share by lowering prices below their competitor's price - and still make the same profit.
How much this can be done depends on exactly the same things as today. - which is why some business is successful and others aren't.
Uh Huh and what happens to that product on the shelves that is thirty percent higher but the consumer does not have a 30% increase in spedning income? (Considering now that Corps will be making higher profits by not paying income taxes and not wasting money on compliance with income taxes.)
No, but as I said, its not acceptable as.....
I'm afraid the meaning of that long sentence eludes me.
Then lets make is bare bones simple.
The common meausure used between tax systems is the tax inclusive measure rejected by opponents of the NRST.
What is it?
Effective tax rates as a percentage of CBO's pre-tax comprehensive household income:
refer:CBO: Historical Effective Federal Tax Rates
For definition of comprehensive income, and usage.
(Considering now that Corps will be making higher profits by not paying income taxes and not wasting money on compliance with income taxes.)I can't answer that for them but maybe you can.
I was looking at a new G.E. refrigerator yesterday, it was made in Mexico. Not long ago I was looking at a John Deere tractor, it was made in Germany. How much U.S.income tax and compliance cost do you think there is built into foreign made products?...Which most products are by the way.
Yes you can, you just don't want to answer it.
Considering now that Corps will be making higher profits by not paying income taxes and not wasting money on compliance with income taxes.)Maybe you could explain how 20 to 30% of the gross (retail) price is tax and compliance when tax is imposed on profit that is 10% or less of the gross.
Yep, time to change the subject! QUick!!!
Hoisted on his own petard as it were... LOL
>>> One thing about the sales tax is used goods are exempt, ...
Really? That's very interesting...
The FairTax legislation taxes all goods and services once but only once by design.
Used goods, are either assumed to be paid under the income/payroll tax system and grandfathered by the legislationl, or have been explicitly by collecting national retail sales tax on new products produced after the implemention date of the bill.
I wonder why he won't tell us the real reason he opposes tax reform. We believe from previous posting history he's been involved with the tax protestors .... hmmmmm
If someone isn't filing now and isn't paying any FICA now, he sure would be opposed to a system that would make him pay his fair share....
Why can't you answer it. Are you being obtuse to avoid the obvious?
Well, nightie, you can do that right now under the Status Quo that you so love ... and many do as the IRS's data hints at in their non-compliance numbers. Nothing to prevent that right now so the situation is really no different now that with the FairTax. There are so many methods of non-compliance and evasion right now that it isn't even funny (maybe that why you're a SQL, eh?).
Just because YOU think you'll be more crooked doesn't mean a thing since most who've been on a few threads with you realize you'll lie through your teeth just to stretch a point and try to make the FairTax look bad in any respect you can.
The base doesn't shrink and the rate doesn't go up (except in your Nightmare dreams). This is merely another of your (and Gale's) attempts to shrink the consumption base by any sort of prevarication or fraud possible.
Won't work.
Another case of nightie trying to divert/digress off of the subject - it's called the "SQL factory red herring" method.
The NIPA personal expenditures numbers (the base for the FairTax) factor in current sales tax evasion/avoidance. The income numbers (the base for the current system) have the current income/payroll tax evasion/avoidance.
Show us where income from sales from illegal trade, evasion activities, underground cash economy are accounted for in the NIPA data. No such activity is reported to be included or even estimated in the NIPA data.
Here's a link to a paper describing what is measured as the value of final goods and services sold in the NIPA GDP and GNP data sets and what is expessly not included (e.g. illegal trade, cash underground, any non-reporting activities, non-production activites.)
| http://spruce.flint.umich.edu/~mjperry/Unit10.html
WHAT COUNTS IN GDP?: 1. Only FINAL goods and services purchased by final users. Only retail sales count, not intermediate (wholesale) goods or transactions. When GM buys steel, tires or transmissions, those transactions don't count because it would be double counting since those expenditures will be accounted for in the final retail price of the car. For example, suppose GM spends $15,000 for a car and sells it to a dealer for $16,000 and the dealer sells it for $17,000. We only count the $17,000 for the final retail sale. We can't count $15,000 + 16,000 + 17,000 = $48,000. Only the value of the final output is counted, and the value of the inputs are not directly counted since their value is reflected in the final purchase price. See Example, page 158. Bread example. 2. Only goods and services produced during the time period are counted. Only new production is counted, not secondhand sales. Example: sales of used cars and used houses don't count. They were already counted as new production in the year built. Resale doesn't get counted in current GDP. Commissions on used cars or houses would get counted, because they are current services. 3. Financial transactions and income transfers are excluded. Example: stock or bond purchase is just a transfer of money from one individual to another, it does not involve current production of a good or service. Commissions would count, as a current service (income) provided by the broker. Gifts and income transfers (Social Security, welfare, veterans' pmts, etc.) also don't count, since no current production of goods or services is involved. 4. ONLY Domestic Production is Counted, regardless of who provided the labor. Foreign citizens working in the U.S. count toward U.S. GDP, since their labor contributed to "domestic production." U.S. citizens working temporarily overseas does NOT count in U.S. GDP, since their labor does not contribute to "domestic production." GDP vs. GNP - GDP measures domestic production within the 50 states, regardless of who provided the labor or capital, US citizens or foreigners. GNP measures the production of US "nationals," U.S. citizens regardless of where they are working. *** SNIP *** PROBLEMS WITH GDP - 1. Nonmarket production - Nonmarket production is excluded from GDP because there is no way to accurately measure it. Only actual "market transactions" get counted in GDP. Nonmarket production includes household production like fixing your own car, repairing, fixing, painting your house, working on your garden, growing your own food, cooking, the work of a housewife/househusband, etc. Estimated to be 10-15% of GDP, or about $1T/year. *** SNIP ***
2. Underground economy - could also easily be another $1T, or 10-15% of GDP from prostitution, drug trafficking, gambling, smuggling, illegal gun sales, tax evasion, etc. Also unreported cash income from cash business - taxi drivers, waiters/waitresses, bars, craftspeople, carnivals, fleas markets, illegal immigrants, etc. |
Here's a hyper link to the NIPA user guide describing the tables and how data is collected and entered.
PDF: NIPA User Guide
Show us where any illegal income, evasion activity or cash economy activites or income are estimated and incorporated into the NIPA data series.
Here is a hyperlink to the NIPA keyword index of what is included and where in the tables each item can be found:
Show us any data entry what ever providing an estimate of underground cash economy, illegal trade or any trade or income associated with tax evasion which by its very nature is unreported and no accurate way to measure it thus included or in anyway estimated in the NIPA series.
Another case of nightie trying to divert/digress off of the subject - it's called the "SQL factory red herring" method.That might be true except for the fact that I didn't bring up the topic.
They don't. Maybe you misunderstood my post. When I said "The NIPA personal expenditures numbers (the base for the FairTax) factor in current sales tax evasion/avoidance. The income numbers (the base for the current system) have the current income/payroll tax evasion/avoidance." I meant the current NIPA income numbers don't account for income/payroll tax evasion/avoidance.The NIPA personal expenditures numbers (the base for the FairTax) factor in current sales tax evasion/avoidance. The income numbers (the base for the current system) have the current income/payroll tax evasion/avoidance.Show us where income from sales from illegal trade, evasion activities, underground cash economy are accounted for in the NIPA data. No such activity is reported to be included or even estimated in the NIPA data.
Beats me -- we'll have to wait and see.
And HE talks about "ignorance". Nightie is a guy that loves the Nightmare VAT/Nightmare Flat tax. Trouble is, neither is defined at all and both are just ivory-tower theories (which break down in practice) with no detail -- none at all -- behind them.
He even switches from one to the other as the preferred method whevever it suits the particular argument he attempts to present. These also are straight from "The SQL Diversionary Handbook for Looney Liberals".
As an example, on page 112 of that handbook (under the DIVERSIONS chapter), it suggests a technique for this situation which runs soimething like this:
(Nightie) - "Where did I EVER switch from one to the other??? Just show me, moron. Just show me one time. I dare you!!"
A bit further in that chapter, we see suggested: (Nightie) - "Prove to me that the Nightmare Tax breaks down in practice. Give me some hard figures and not just your B/S. Proove it, idiot." (And all this despite a non-existent tax scheme which is detailed nowhere but the REAL ones DO fall apart when used, but you can't give figures on something that doesn't exist such as the Nightmare VAT/Flat).
Those two tactics even work with some people, but not most.
Of course, the NIPA personal income numbers are irrelevant to the FairTax rate.
OTOH of course, the NIPA sales/expenditure side is totally relevant to the FairTax rate which do not include any of the non-reporting income or sales such as are used to evade income and payroll taxes.
You are aware of course that GDP = GDI except for a small statisical discrepency of below 1% of GDP measures.
For only legitimate, reporting sales and income (not under the table deals to evade taxes or avoid law enforcement) are reported to government to even be included in the Product side or the Income side of the GDP/GDI data series.
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