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.
The difference is, some carriage companies (example: Studebaker) were able to convert over.
Besides, at the time the automobile was introduced, we had an entirely different economy, and also, during this time, not many people went to college. Even old money families had often never sent a single person to college. My ancestors were part of the planter class and they didn't begin sending people to college until after WWI.
We have a different economy today, and one thing component is, if you want to be a success in life, it's a good idea for you to get a college degree.
The reason people with degrees are paid more is because they worked to get that degree, and they worked so they could have that higher salary.
It's not fair to arbitrarily put people who worked hard on a tight rope like that, you have to give them time to adjust.
Ding, ding, ding! We have a winnah!
Good grief man, how many times can he explain it to you?
I'll type real slow so you can keep up.
1. As of now, under the current system: Drug dealer pays zero, zip, nada ($0.00) in federal income taxes. And collects zero, zip, nada in state sales taxes. He gets to keep the full $150K and pay a paltry (depending on state) 6% or so on purchases in state sales taxes.
2. Under the proposed tax plan: Drug dealer still doesn't collect state sales tax on the $150K in drugs he sold, and won't collect the federal NRST either; BUT, he will pay the NRST on that shiny new Caddy with the $1000.00 set of gold spinner rims and the $1000.00 sound system with the giant sub woofer in the trunk, and all those gold chains, and all the chemicals he uses to make his crack or meth or whatever. NOt to mention all the other stuff he'll buy. That IS a net gain to government that government is NOT getting now.
The drug users; the buyer of said drugs; He'll still be paying NRST too, as will you and I, on other legal products and services (just like the dealer). The way I see it, the NRST would level the playing field with regard to the tax burden, and will open up the eyes of the public to government spending. Power will/should shift from the fedgov back to the people where it belongs.
How much money does it cost the economy to comply with the current Rube Goldberg tax system we have now? That alone is worth the price of admission in my mind.
*yawn*
What, maybe 80% spend maybe an hour or two or maybe a Saturday afternoon filling out a 1040-EZ or telefile return?
I think you are grossly exagerating the typical "burden" of filling out a tax form.
No, you are still just a liar. Only a fool of a landlord would pay themselves wages and subject themselves to a self-employment tax of 15.3% of their gross income. Of course, if that describes you, then, as one Freeper to another, I suggest you urgently consult a competent accountant as soon as possible before you flush anymore of your earnings down the toilet.
It would be helpful if everyone refrained from lying and using fraudulent numbers and assumptions.
Your #321 amounts to an argument that we have very sophisticated buggy whips these days, with highly trained buggy whip makers...and that we should therefore eschew future freedom and prosperity for our children in order to retain their out-dated and totally unnecessary services.
I just can't agree with that. It's a bad deal.
Of course, as a landlord, you can give away any freebies or profits you want. No one is forcing you to charge the maximum you get either. You can eat the utilities if you want. You don't even have to demand a security deposit. You don't even have to make a profit. ;)
But most businesses are not run that way.
The invasion of privacy and loss of liberty that the income tax entails is too high a price; even if you only have to spend five minutes a year filing your taxes.
What is the basis for this false assumption? There was no income tax in the 1890s, yet the second worst depression ever to hit the United States occurred from 1893-1897 with 25% unenployment and a quarter of the railroads bankrupt.
Good greif, how many times do I have to explain it to you. I'll put it in simple terms. Even under the current system, when the drug dealer buys a Caddy and all the gold chains, income is created and taxes are paid in an amount that is compariable to the proposed sales tax. The drug dealer does not pay these taxes directly, but taxes get paid.
http://www.pbs.org/newshour/bb/election/july-dec00/browne_7-05.html
RAY SUAREZ: So that smaller federal government would also allow you to, what, eliminate the income tax?
HARRY BROWNE: Eliminate the income tax.
RAY SUAREZ: How would you do that?
HARRY BROWNE: Well, if you limit the government to its constitutional functions the way it was for the first 120 years or so, you don't need an income tax. The government was financed completely by tariffs and excise taxes, and it paid for national defense, the judiciary, the mint, the post office, all of these things until 1913. When the income tax was passed, that provided a virtually unlimited source of income for the federal government, and they could get into anything they wanted because the money was always there, just raise taxes, raise taxes more. Today, tariffs and excise taxes are more than enough for a strong national defense, the judiciary, the mint and all those other constitutional functions. So we should repeal the income tax completely and not replace it with a flat tax or sales tax or any other kind of tax.
You make it sound like the retailer is paying this out of his own pocket!
He isn't.
The vast majority of retailers these days have computerized POS systems. Every quarter, they press (or click) a button that says you've collected $x.xx in state sales taxes. The retailer presses another button and prints a check; signs it and mails it to the state. With a NRST, the POS software gets an upgrade and the retailer has to press a total of four buttons, sign two checks, and put postage on two envelopes.
Hmm just had a thought. Retailer collects this money from customers, the people paying the tax, but the check is only paid quarterly to the government (state & federal), he puts that money into an interest bearing account that he will no longer have to pay tax on the interest.
That ought to compensate him for the trouble of having to push four buttons on his POS system.
We live in a global economy these days, my friend. This ain't the 1890s.
Under the current system, foreign producers are at a marked advantage over our producers, even in our own market.
The NRST would instantly reverse that foolish situation.
There is absolutely no way that that can be anything but tremendously helpful to our businesses, our people and our prosperity.
No my argument is, if you're going to phase it out, do it gradually so that all the people involved have time to get in a field that is equally profitable.
We are to this day still subsidizing and storing in the National Helium Reserve a strategic stockpile of emergency helium to fill the U.S. Navy's fleet of attack dirigibles.
You called me to task about "throwing around accusations of lying and fraud." Have you levied this same criticism to the author of this thread, who incidentally was the first to use the term "fraudulent?"
(Furthermore, there are ways other than using terms like "smoke and mirrors" and "so-called" in representing opponent's positions, to paraphrase you.)
The author is quite hostile to supporters of the NRST, plus, he's dishonest in ways I've pointed out. I don't think this earns him an especially respectful response. Am I mistaken?
LOL...
He certainly is. If I provide a service to you worth $100, I have to pay the government $30 for the previledge of providing that service to you. If there was not a sales tax, that service would still be worth $100 to the customer. I am not simply collecting money the customer owes the government, that money is money only owed because I provided a service.
Your hostile assertions about the FairTax and it's supporters are lying in shreds after 300 and some posts.
You'll never admit it, but it's true.
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