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.
I doubt that Looey's "own petard" has a big enough explosive charge to hoist him & his untruths!!
It'd be fun to watch, though!!
Hmmm - I wonder if they make a super-sized charge for nightie???
Oh, we SEE, nightie ... your posting of:
"I provided an illustration that showed that that's not the case (it happened again last year - GM had more market share, Ford had more profits). Often the market share leader has no profits."
doesn't count as a diversion since you were the first/only one to mention it??? In fact, this was an off-topic pursuit you were attempting to expand upon.
I see your SQL Factory is in full operation.
Oh, SURE, nightie ... and "the monkeys have no tails in Zamboanga".
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.Exactly, and it's this amount that will decrease due to higher sales tax evasion/avoidance that would come with the dramatically higher rate. This higher sales tax evasion/avoidance is what isn't accounted for in the FairTax rate.
Money ... who needs money. Just having you provide such a target-rich environment, nightie, is payment enough.
I haven't had so much entertainment since grandpa burned the outhouse.
Classical nightie - switching the meaning (or attempting to) of what he said.
"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."
Well, nightie, which is it?? And can we expect that that holds for more than just this instant in time???
And why should anyone believe anything you post with your track record???
Classical nightie - switching the meaning (or attempting to) of what he said.Classic Squeally. Too stupid to understand so he accuses people of "switching the meaning."
And why should anyone believe anything you post with your track record???Why would anyone even read anything you post. You never offer anything substantive.
You seems to be the only one confused, their math is correct. Everyone agrees, but you. I know it is a bit confusing, but the 23% inclusive sales tax is really a traditional 30% sales tax rate, or as pigdog likes to more precisely call it a 29.87% sales tax.
Did you know that conservative estimates of revenue that is being held off shore because of our current tax code is at least 10 Trillion dollars? Can you imagine if we bring that money home what it would do for our economy. Imagine all the new jobs it would add.
That would be amazing. Our entire economy is currently about $10 Trillion, so doubling it to $20 Trillion would be incredible. I just wonder who are we going to use to fill those 150 million new jobs considering unemployment is only about 5%.
Now, let us get this straight, nightie ...
The FairTax rate is determined with evasion/avoidance being whatever it might be presently (and not factored into the rate) and so YOU try to convince us that since the rate so determined will cause more evasion in view of the fact that the current marginal income tax rates are typically higher when including withholding than the FairTax rate and that somehow the lower FairTax rate will engender dramatically more evasion?
Interesting theory (which no doubt Gale at Brookings Institute helped you with)!!
Since no one knows what evasion currently is, I'd say you're full of beans and your notions are like passing gas in church.
Aside from evasion, the IRS knows that current non-compliance (not including illegal income) is about 20% of total tax revenues. Are you arguing that non-compliance under the FairTax is that huge a chunk of money??? Really???
Why the hell should anyone believe your "stuff"??
Great response, nightie. More passing of gas in church.
Shame you can't originate an intelligent response.
Also a shame that you never prove any of your idiotic claims. Could that be, perhaps, because they're not true?
Maybe we'll just have to raise what people are paid ... oh, no ... economic improvement caused by the FairTax.]
Lion, and tigers, and bears, OH MY!!
You just pay people double and they produce double! That ought to work. Did Jorgenson model that?
The FairTax rate is determined with evasion/avoidance being whatever it might be presently (and not factored into the rate)That's right. The current level of sales tax evasion/avoidance is what is assumed in the FairTax rate.
and so YOU try to convince us that since the rate so determined will cause more evasion in view of the fact that the current marginal income tax rates are typically higher when including withholding than the FairTax rate and that somehow the lower FairTax rate will engender dramatically more evasion?It has nothing to do with marginal income tax rates. It has everything to do with the sales tax rate people are paying. The FairTax rate was determined with a personal expenditures base that had evasion/avoidance levels due to a ~7% sales tax rate. Without a doubt, there will be more sales tax evasion at ~37% than at ~7%. It's this increase in sales tax evasion/avoidance that the FairTax rate doesn't account for.
Interesting theory (which no doubt Gale at Brookings Institute helped you with)!!Actually, my dad had more to do with it. He's the one who taught me common sense.
Shame you can't originate an intelligent response.This is coming from you...
No need for a separate model. Economic improvement is part of the FairTax in the boost it gives us in economic activity.
Don't know where your "double" information comes from - I don't think even YOU said that (but maybe i missed it).
Oh, but it has everything to do with marginal income tax rates. At present these are so high that many people are tempted to evade (but most, being basically honest, do not ... don't know about you, though).
The "sales tax rate" of 7% you proffer probably isn't accurate but forget that for now. You're adding percentages that are derived from different bases perhaps because you know no better (or, more likely, because you're just being dishonest and trying to fool people).
Present sales taxes in states are all over the map in what they do/don't tax and most are replete with many exclusions/exemptions and things not taxed. Almost none of them tax services as does the FairTax.
In fact, many (if not most) states will probably elect to conform their sales taxes with the FairTax once it becomes law. They would be both reasonable and wise to do so. Doing so will about triple the tax base when one considers that services are typically half or more of the revenue and having no exemptions/deductions will easily boost it to a factor of three times the present base. This would mean that a state with a 7% rate presently would have it drop to 2% or 3% or possibly even less while raising the same tax revenue.
This drops your "37%" t-e (which was bogus to begin with)
by easily 3 or 4 percentage points. Even so, at, say 33% that rate is still much lower than the present marginalincome tax rate so what I said still applies even more:
The lower rate of the FairTax (and of course, you unfairly include state sales taxes with a different base to artificially and dishonestly boost the rate). If you include your "7%"and add it on to the existing marginal income tax rate, the IT rate is much, much higher thereby offering much more of an incentive to evade than there will be under the FairTax.
You might go back and check that with your dad (if not Gale and your Brookings Buds) since it seems he needs to give you another dose of common sense. You have lost a good bit of yours. Been around the libs too long, I'd say.
Classical nightie evasion... I didn't "accuse" you of switching the meaning.
I posted the exact example you gave - from two contiguous sentences where in the second you reversed what you said in the first. Most people can remain consistent from one sentence to the next, but you seem unable to do so.
I repeat - why should anyone buy into ANYTHING you say?
Oh, but it has everything to do with marginal income tax rates. At present these are so high that many people are tempted to evade (but most, being basically honest, do not ... don't know about you, though).
The FairTax rate has absolutely nothing to do with marginal income tax rates or income tax evasion/avoidance. It is simply a factor of the expenditures base and the revenue required. It's the evasion/avoidance in the expenditures base that will increase dramatically with the increase of the overall sales tax rate.
Present sales taxes in states are all over the map in what they do/don't tax and most are replete with many exclusions/exemptions and things not taxed. Almost none of them tax services as does the FairTax.
And one of the reasons the states don't tax services is that they are very easy to evade. Not taxing these services tends to reduce the amount of evasion/avoidance in the NIPA expenditure numbers as compared to the FairTax base.
In fact, many (if not most) states will probably elect to conform their sales taxes with the FairTax once it becomes law. They would be both reasonable and wise to do so. Doing so will about triple the tax base when one considers that services are typically half or more of the revenue and having no exemptions/deductions will easily boost it to a factor of three times the present base. This would mean that a state with a 7% rate presently would have it drop to 2% or 3% or possibly even less while raising the same tax revenue.
That might be true except for the fact that the states will be paying the FairTax on their purchases and their employee's wages thus increasing their expenditures. They would have generate more revenue than they do currently to pay for this increase in expenditures.
This drops your "37%" t-e (which was bogus to begin with)
by easily 3 or 4 percentage points. Even so, at, say 33% that rate is still much lower than the present marginalincome tax rate so what I said still applies even more:
The 37% is bogus. And, again, the marginal income tax rate is not a factor in calculating the FairTax rate.
The lower rate of the FairTax (and of course, you unfairly include state sales taxes with a different base to artificially and dishonestly boost the rate).
And you unfairly don't include the increase in state expenditures due to the FairTax to artificially and dishonestly decrease the rate.
If you include your "7%"and add it on to the existing marginal income tax rate, the IT rate is much, much higher thereby offering much more of an incentive to evade than there will be under the FairTax.
Why would you do that? Talk about dishonest (actually, it's just stupid).
You might go back and check that with your dad (if not Gale and your Brookings Buds) since it seems he needs to give you another dose of common sense. You have lost a good bit of yours. Been around the libs too long, I'd say.
You might try making at least one post that makes sense before you accuse people of losing their's.
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