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.
Could you understand "requisite" better???
Well, we certainly hope you enjoy the Income Tax while it lasts - shouldn't be much longer.
Be sure and pull the top of the hole in after yourself.
Sorry, nightie, I get to post as often (and as much) as I wish. It nowhere says that nightie gets to determine that.
The fact that you can't keep your mental faculties together sufficiently long to read a post that tears your presentation apart does not surprise. That shouldn't stop you since it never has before - keep right on lying, my man.
It sounds like NIPA does not try to make adjustments for unreported services. So I don't think those numbers are in the NIPA tables.The NIPA Personal Consumption Expenditure numbers appear to be taken from a range of surveys and censuses.
Data for the PCE is collected from numerous surveys and censuses. Most items of the PCE use a residual approach. In general, the BEA uses the Census of Manufactures (CM) and Annual Survey of Manufactures (ASM) to obtain the basic value of shipments, the Census of Wholesale Trade (CWT) and Annual Wholesale Trade Survey (AWTS) to derive wholesale trade margins and taxes, the Census of Retail Trade (CRT) and Annual Retail Trade Survey (ARTS) to obtain retail trade margins and taxes, and the Census of Service Industries (CSI) and Service Annual Surveys. The BEA also adds transportation costs using data from the Interstate Commerce Commission, the Department of Transportation, and the Census Bureau's Census of Transportation, Communications, and Utilities, to arrive at the final purchasers’ value. The data sources and methodologies differ slightly between benchmark years (years ending in "2" or "7") and non-benchmark years (years between the benchmark years). The economic censuses are used in the benchmark estimates, while the annual survey data are used in extrapolations to estimate PCE for the non-benchmark years.
[source]
Fascinating - nice diversion!!!
Next, why not try the "Manufacturing Difficulties Involved in Spooling Toilet Paper Onto Household-sized Rolls". It is equally informative and probably on the BEA website. If not, check the Census Bureas website, or the NAM webbsite or ...
an evader would have to be an utter fool to think the FairTax is "better" for him
That is obvious in looking over past replies through many tax related theads including those of tax protestors.
Have yet to see ardent TP'rs claim anything other than an NRST will be Amegeddon and the end of the world.
GEE - wonder why that might be??? Cause it puts them out of business??
Sounds like nobody gives a rat about the fair tax, huh YN? tick,tick,tick...
they sound a bit like democrats when they due this
They ought to, most of the tactics and material they use are right out of liberal hitpieces and talking points against NRST, and NRST supporting candidates and Congressional representatives going back into the Clinton adminstration.
Always found the overwhelming absense of Democrats as co-sponsors on the FairTax legislation to be an interesting side note on how hung up they really are in keeping the income/payroll tax system inplace.
I suspect that factor alone will ultimately be one of the prime factors leading to loss of socialist representation Congress.
Fascinating - nice diversion!!!LOL! The fact that the FairTax base doesn't include evasion or avoidance is a diversion!
No one except you ever claimed that the FairTax ever included or "dealt" with evasion (avoidance is a different thing) except, perhaps, you, making up your straw man that it didn't so was somehow faulty. The IT "deals" with evasion the same way as the FairTax - by not including it.
Posting all that trash about where it's data came from is a HUGE waste of bandwidth. It would really be funny if it did contain data about evasion hidden away in some nook and cranny. Hoewever no one cares enough to even research that - and it's not the point in any event.
Point is, moron, that the greatly higher rate structure of the IT encourages evasion far more than the lower FairTax rate ... and that's precisely what I illustrated in #1114 just above. You may not be capable of reading it but others certainly will be.
The last thing those on the left want is a level playing field. If they didn't have the "Bush" tax cuts to rail about they would be left with "Bush lied, people died". The left is addicted to the power to tax as much as a crack head is addicted to his drug. The fair tax takes away too much from them. All of you anti's hear me. The left is on your side.
pd, you are right. The evasion issue should be a non-starter for these guys but they hang on to it like a twig on a cliff. For pete's sake, in most instances it takes two people to evade the fair tax. If we tweak the law a bit, making a business license something more important than it is now and putting an onus on sellers that they have to check those licenses, the evasion issue will be almost moot compared to what we have now.
I think most of them know that as a lot of them are FROM the left. A few are even involved with liberal think tanks in one way or another. It's especially fun to hear from them.
We're just equal-opportunity taker-oners here.
With less to gain under the FairTax and with the ability to concentrate more collection resources on a smaller number of taxpayers, an evader would have to be an utter fool to think the FairTax is "better" for himI have a service business and the fairtax would be a huge gain for me should I choose to evade the tax. First of all initially I would have to RAISE my rate the amount of the tax just to break even, that would be a 30% (not 23%) increase in my gross. Me, the business owner being required by law to give a receipt to everyone who is NOT required to keep them or even allowed to write off my expense would be a HUGE incentive for services to evade the fairtax...I have to give a receipt to everyone who has no use for one..BFD!
What were you thinking Lapdog?
Ever notice how quiet they are about the illegal alien portion of the underground economy???
That's many billions of $$$ evaded right there in one fell swoop. Throw in the foreigh tourists (about 50 million in CA last year according to one article I saw), and pretty soon you have some big bux - all being evaded and/or not paid right now. It would be tax revenue under the FairTax.
Everyone reading the thread gets that.
THe maximum marginal rate is 23%. That's much lower than the income tax...flat or graduated.
The fair tax is simple and easy to comply with. The income tax - either flat or graduated - is arbitrary and nonsensical, confusing and very difficult to understand.
The fair tax is fair, treats all legal residents the same. As for illegals, they always pay the maximum rate. THe income tax is obviously not viewed as fair by anyone.
Lower marginal rates, easy to understand, and fair.... the 3 components most affecting tax cheating.
It's also harder to get away with cheating under the fair tax.
But it's been amusing watching someone try to put forth the idea that the rate is too low b/c the calculation of rate did not take evasion into account. We all know it does - it expects the same amount of evasion as we're experiencing now.
Odd though at times the income tax fanatic marxist kool aid drinking income taxers swear up and down that the rate is too high... and later on the thread they swear up and down the rate is too low.
It's pretty funny to watch them melt.
They must be really worried about the end of their socialist tool. ANd some are worried that they'll actually have to start paying their fair share of our nation's tax burden.
The thing that scares them most is that the millions of people backing the nrst will not stop until the income tax is gone. It doesn't matter if it takes another 11 years - or 11 more. The number of people signing on is ever increasing.
Pass the kleenex to the socialists.
You will go out of business then. It would be pretty stupid to raise your prices when none of your competitors do so. I own a service business too - you aren't the only one.
BTW the tax would be 23% (not 30%) of your gross.
Great Looey - go ahead. You're probably doing it right now since we know of your Tax Protester alliances. You'll find out under the FairTax you'll make a lot less in evasion than you do now (and have a greater chance of bein nailed).
Be sure to post your name and address so we can turn you in and help lower the FairTax rate. Always thot you sounded a bit criminal ... nobody ever said you had to be smart to be crooked and you're the living proof.
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