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.
BWHAHAHHAHA...
Has anyone tried to sell you tax a evasion kit via FReepmail?
"Pass" it to them .... hell ... I'll sell it to them and charge the 23% tax inclusive rate to boot.
You may just have identified a whole new industry.
To me the best reason that everybody pays. Right now close to half of Americans pay nothing for the privilege living in this country. With a NRST everybody pays. The more you consume the more you pay, how does that effect lower and middle income more than higher income people? It has always been my belief that richer people buy bigger houses, more expensive cars, higher priced clothes etc.
Not if you're required by law. Try NOT giving a receipt to the wrong person.
Right. But how would the politicians control things with the IT? They wouldn't. That's why the left hates it.
Has anyone tried to sell you tax a evasion kit via FReepmail?
More than once, LOL, more than once.
Are you really serious?
How about the redistribution of income and wealth for starters? Taking from one to give to another at point of a gun, if necessary, if the threat of imprisonment isn't enough to get you to comply, sounds pretty immoral to me.
Government can only do what has been delegated to it. We cannot delegate powers that aren't lawfully ours. If it's illegal for me or you to do it, it's out of the proper bounds of government to do.
Is that immoral enough?
Now see. There you go injecting facts and reason into a thread that started with a series of lies.
I misread what you wrote. Sorry.
That said, he still isn't necessarily wrong. Could be, but not necessarily.
Finally, we find an area of agreement.
Two years ago when they were concerned about an attack on DC that would decimate congress that were trying to figure ways to work around such an event. Your proposal is exactly what we proposed at discussion group.
Thank you for the laugh.
You made a statement. I asked for clarification and you chose only to sidestep the issue and make up a resume on yourself, guess about me, and try to slip out the back door.
Now this is really simple. What did you mean about useless billionaires and their heirs? It sounded like class envy. Was I wrong?
Okay, it's your turn to answer.
Point is, moron, that the greatly higher rate structure of the IT encourages evasion far more than the lower FairTax ratePoint is, moron, that one of the reasons the IT rate structure is greatly higher is that it factors in evasion and avoidance. If the FairTax rate factored in the level of evasion and avoidance that could be expected, it's rate would be greatly higher. Get it?
I think most of them know that as a lot of them are FROM the left.If anybody speaks hillbilly, could you please translate.
Always thot you sounded a bit criminal ...Doesn't anybody have a hillbilly dictionary? What does "thot" mean?
I know newgeezer well enough to know he was just looking for a debate on a Friday. The bible says the government will tax you and once they have their tax money, it's theirs. Jesus even implied that it was theirs before they taxed you. The bible also says that God establishes governments as His ministers for your good. There is nothing in the world immoral about their taxing you and redistributing the wealth.
Government can only do what has been delegated to it. We cannot delegate powers that aren't lawfully ours. If it's illegal for me or you to do it, it's out of the proper bounds of government to do.
This is a myth propegated by armchair constitutionwonks. God gives governments their authority. The constitution is a nice set of guidelines subject to the interpretation of lawyers.
Is that immoral enough?
Not remotely.
Suprised he cut something out of context? That's his #1 tactic.
THe context was that eliminating tax costs would allow business to cut costs and KEEP THE SAME PROFIT MARGIN... and that if a competitive business fails to eliminate the costs from prices, their competitor will - because the competitor can cut its prices to increase market share WHILE KEEPING THE SAME PROFIT MARGIN.
The fair tax rate presumes the same level of evasion as the income tax...even though there is a strong argument that evasion will reduce.
BTW, you oppose the fair tax today because the rate is too low????!!!
Wouldn't it be good if gov't was forced to spend less?
And before, you said the same rate being visibly applied to everyone would not prevent the rate from being increased easily...
So which is it today? Rate too high or too low? Rate can't change easily or it can?
The fair tax rate presumes the same level of evasion as the income taxYou say that, but it's flat out not true.
The whole thing was ...It's increased market share WHILE KEEPING THE SAME PROFIT MARGIN that leads to growing profits...unPrincipled from #485:
"It's increased market share that leads to growing profits."Don't see anything there that says "keeping the same profit margin."
This is why you're discounted - you purposefully take things out of context in order to mislead.
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