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.
That just means people have no way to avoid being jipped.
Hey, sorry but taxes is how government is supposed to pay the bills under the Constitution.
If you don't want to be taxed on what you buy in another country, just don't bring across the border and use it in this country.
You don't want to be jipped, the way to do that is assure numbskulls don't get into Congress that keep growing government and raising taxes.
Once again, the sane answer, is a flat tax,
Ahmmm, you figure a flat tax is any better way to not be taxed? LOL. That just guarantees more tax related overhead costs on business and more costs to the individual citizen in accounting for and determining how much tax they don't owe, along with big brother looking over your shoulder auditing your records & accounting to make sure you didn't leave some out when filling out the postcard you swear is accurate and truthfull.
Far as I can see the Flat Tax promises to hit you with at least 17% on your wages, let SocialSecurity/Medicare taxes hit you again, and business a third time in prices and lower wages.
You are aware that all taxes are collected and go to the same pot are you not,(the one Congress spends out of) and ultimately comes from the same pocket (i.e. yours).
No thanks, if they're going to take a tax from me, it want to see it, and be when I choose to let them by spending some.
Rest of the time I'll let my dollars work for me, and my productivity earn the maximum it can with out being hit with the IRS ready to pounce on my home.
with an addendum that the law cannot be touched for 200 years, just to avoid the risk of reinvigorating the old system
Hmmm, don't see any Congress Critters ready to sign onto that one, do you?
ROFL....It is not often I've seen this level of dillusional thinking on this forum.
So if what you're saying is true and it's a wash revenue wise to government, why would you be against the simpler method of collection?
And if it turns out to be more of a gain to government, why would you be against that too?
Something stinks here and I don't think it's your cologne. You must have some vested interested in keeping the status quo. You will lose something if the current Rube Goldberg system goes away?
Bravo!
Your post proves my point.
And 'dillusional' is actually spelled 'delusional'.
Guess you're not actually 'Always Right', eh?
There was a similar provision (not for as long a duration) in the Constitution regarding the slave trade, one of the many compromises they had to make to pass thing.
Boy, you finally niled me. A spelling error! I guess I will leave now with my tail between my legs. Or is it spelled tial.
Well, actually your understanding of tax reform is about equal to your spelling abilities.
It was included in his estimate for the compliance costs on individuals, as opposed to business costs.
That estimate as you call it is the effective marginal tax rate on the next dollar earned by labor. If earning that next dollar is not worth the taxes, and leisure is worth more, guess what people don't work the extra time they golf or watch TV instead.
See reply Gaffer's reply #236, for a very clear real world example, if you don't understand how the value of leisure over working increases as marginal tax rates on personal income rises.
Such taxation lowers productivity, lowers annual wages as people work less(what you tax you destroy.), and raises the cost of living for us all as a consequence of lower productivity and increased dependancy on unemployment insurance and SocialSecurity/Medicare programs encouraging early spending/consumption over savings/investment patterns.
For crying out loud!
National Retail Sales Tax (NRST) is functionally no different that a state sales tax!
If I buy $100.00 of goods from you, YOU have to COLLECT FROM ME, an additional $6.00 (6% here in Indiana) on that purchase to send to the state at the end of the quarter. How are YOU paying that!?
NRST would be no different, other than the fact that the money you COLLECT FROM ME for the NRST, will be sent to Washington. Your costs and profit margin on said goods will be untouched.
I don't support that type of attack on either side of the argument.
Well, AlwaysRight's list is full of that sort of argument.
The problem is, whether it is an income tax or whatever, the tax makes it so my service has to be worth $106. It doesn't matter what you call the tax. I have to collect $106 and pay $6. Whether it is a 6% income tax or a 6% sales tax. Now 6% is no big deal to most, but 30% is. Under the NRST, I as a register retailer have become liable to pay the tax. I pay a 23% tax on my gross income.
I understand what it is. I just don't believe that counting it as a compliance cost is honest or realistic. There is no money which is recoverable if the IT were to disappear. You might just as well claim that TV watching costs the nation $10,000B a year.
You know how many thousands of times I have been called names by fair taxers? I can probably show you 100 this week alone and this has been going on for over 5 years.
That was on top of income and business taxes, not instead of them which is the proposal at issue here.How does imposing a sales tax on a new home become "instead of" the income tax?
If I finance a new home for $200,000 + 30% tax = $260,000 then sell it 2 yrs later without collecting my tax paid how is that "instead of" my income tax exactly?
How exactly is that dishonest. If a government now pays $50K for a worker under the income tax, and under the sales tax it now costs the government $65K, what is dishonest about that point? Do you dispute that or do you not see that it costs more under the sales tax. $65 is more than $50K the last time I checked. What exactly is dishonest?
What part of - YOU COLLECT FROM ME - are you having trouble understanding?
Do you drink, go to bars? You belly up to the bar and order a beer, the bartender gives you your order and tells you that you owe him $3.00, and you pay it. I assume that your state collects sales tax on alcohol sales. So the bartender didn't say that it was $3.00 plus tax, he just said $3.00. That price included the sales tax, he just didn't tell you it did. The bar has based its price on its costs, plus profit, plus the tax.
If your goods or services (including your profit) are worth $100.00 then you will list the walk out the store with it price as $123.00 (or $129.00 for the included 6% state sales tax).
As the consumer, I will base my buying decision on a number of factors. But I know, in one way or another, I will be paying a tax.
As for being liable; you became liable when you made the sale and collected the tax. And at the end of the night, when you're totalling up your receipts, you take the money you collected for taxes and deposit it in your tax account the next day, and the money you collected for your goods or services in your general account. You're only liable for sending in the money to the government at the end of the quarter, just like you are now for the state sales taxes.
Unless of course you're planning to skip town with that tax money, and then you'd be a crook.
I really don't see the problem here. Why are you having trouble wrapping your brain around it; or as I suspected earlier; do you have a vested interest in keeping the current Rube Goldberg system we have now?
Can you explain how you arrived at 4.3%?
Well, I'm not a "sales tax worshipper." But Reason #2, that 37% isn't enough, is ludicrous. Brookings 44% wouldn't be enough. Hellfire and damnation, 100% wouldn't be enough for these pigs at the trough, under static analysis.
The point, I think, is that proponents want taxes in the open, not hidden in withholding that people don't see. If people see taxes in the open, maybe the outcry would make 25% or 10% enough, by cutting the government crap.
I am skeptical of that view--after all, we put up with TSA and all the other encroachments, so the 'Merkin people are too comfortable and too far down the road to serfdom to revolt (even metaphorically). But let's at least give the argument its due.
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