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.
You are 100% right. 100%. Thank You
Why don't you take it up with the poster who said it?
>>The best argument for a sales tax is because it means the government would need to keep NO records on the individual taxpayer.
If it were changed to "minimal record" then I would not argue with it. But as it is written it is a lie.
The only tax collected is the NRST for which no tracking of an individual as a taxpayer is required. SS/Medicare taxes are repealed by the legislation thus even that link has been broken.
The choice is totally yours to make as to whether or not you supply sufficient infomation for sales tax rebate to be processed and sent to you.
The social security number exists for social security benefit calculation as the NRST does nothing to change the Social Security Act itself.
You are free to not provide any information if you chose not to receive the sales tax rebate. There is an explicit provision making the annual application for such totally voluntary and up to the citizen.
There is no record of you for even the sales tax rebate if you do choose not to receive it, same as there would be no record if the sales tax rebate did not exist.
The choice of receiving the rebate is solely up to you.
The NRST however is collected anonomously, regardless of any decisions you make about social security numbers or participation in the sales tax rebate program.
It's quite obvious that it has been awhile since I bought a DVD player but, had competition not entered the market, you'd be paying a much higher price.
Lets say you own a small video rental store and are competing with several Blockbusters, Hollywood Video and other mega chains in your town. Your scratching by but surviving. Will you in an attempt to earn more customers that are currently go to Blockbuster et al...
1) Raise your prices
2) Keep your prices the same
3) Lower your prices
In my town and ALL the surrounding towns around me there is a Home Depot and Lowes right next to eachother. They are constantly battling for market share. And invariably there is always an Ace Hardware just down the street.
Is Ace Hardware going to not lower prices and hope that Home Depot and Lowes don't either? Or are all 3 of them going to lower prices in an attempt to gain market share over the others.
The Invisible Hand is not a myth. It is as real as your hand.
As an every day example look at McDonalds and Burger King. When one comes out with some special offer such as 2 for $2, the other quickly follows suit. McDonalds introduce the Dollar menu a few years back. BK followed and Wendys came out with the 99 cent menu.
It would happen again.
What is YOUR the alternative to income tax, numbnutz..
You deride with out an alternative.. sounds like a democrat..
Give it up.. are you FOR the federal income tax.?. or not..
IF not spit it out.. libertariians (years ago) were for the basic dismanteling of the federal government for all practical purposes completely.. I'm down with that to a certain extent.. WHAT say ye?.. smartass.. carping just for carping sake is better left to democrats.. they are better at it.. due to 100+ years of failed systems, wars, and solutions..
OUT YOURSELF.. (shineing fingernails) I'm listening..
If your goal is a revolution, a sales tax is the way to go. I still think we have a great thing going in America, and I think we just need to work on what we have. Simply the code, reduce the size of government, and protect individual liberties. The havok I see a large sales tax creating is not the way to go. I am successful under the current system, so it makes no sense to me to scrap it completely.
First, the doctor doesn't pay the tax, he collects it from the buyer and remits it - and is paid for doing so (unlike today).
Prices will indeed be stable under the nrst. The reason is that business in competitive industries will remove unnecessary costs from prices befor the nrst is added. If the business is not competitive, they already charge whatever they want.
"The 23% sales tax rate turns 37%"
What 23%? I only pay, I believe, 7.25%.
If I were paying 23% or 37% -- depending on the basis on which the rate is being applied -- I would have known by now.
It will ratchet downward because the competitor wants to maximize his revenue. This is because the competitor knows that if he lowers his price incrementally (say 1%), he will sell more products (2% more products, for example). The end result is more revenue for the competitor. This is exactly the invisible hand that regulates prices. Of course, this whole scheme breaks down if there is a "trust" or agreement between the two companys...but that would be illegal. I am not a economist, mind you.
It may well be wasted effort. But that doesn't change the fact that, if you lay them all off, you risk a depression and re-assigning them to truly productive work takes at least a year, while prices have already gone up by say 30% and stayed there.
Again, this is contradicted by reality. Gas prices really do go down sometimes.
If you want a revolution, the quickest way is to end withholding and have every tax payer file quarterly and write a check for what they owe.
I am successful under the current system, so it makes no sense to me to scrap it completely
As has been pointed out in previous threads, the bulk of your desire to fight the fair tax is personal greed and fear.
Why not replace the income tax with the municipal property tax? If you own expensive property (real estate, cars, boats, etc.), you pay more in taxes. Owners, including landlords, would pay their taxes directly to the municipality. Landlords would pass-through their property taxes in rents they charge--just like today. The municipalities would collect the taxes and send the feds their share.
Only in an arcane way. Like the one is not related to the other. To the doctor they are the same.
And low-income people can decline to file their 1040EZ tax return and forfeit their EITC.
100 reduced by 30% is 70.
70 increased by 30% is 91.
100 reduced by 23% is 77.
77 increase by 30% is 100.
Be honest please.
No they are not. These are objections which spring to mind with minimal thought by anyone examining this issue. Anyone not a True Believer or not blinded by hatred of the IRS that is.
The TBs argument is torpedoed once one understands microeconomic theory and price formation but they don't have to worry much about that since few people other than economics majors grasp these subjects.
I did. Why don't you not defend it if you don't agree with it either?
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