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.
They want you to compile and file monthly tax returns! You think the IRS takes a lot of your time -- you ain't seen nothing until you look at what the NRST people want you to do.
Right, just like a state retail sale tax, requires every citizen in the country file sales tax returns LOL.
Sorry to disappoint you, only retailer vendors are required to file and remit the NRST to their state tax administrators right along with their state sales tax collections.
Nice try at demagoguery though.
And, you might want to use something other than a temporary hyperlink to the text of the legislation on the Thomas website though.
H.R.25Fair Tax Act of 2005 (Introduced in House) TITLE I--REPEAL OF THE INCOME TAX, PAYROLL TAXES, AND ESTATE AND GIFT TAXES
TITLE II--SALES TAX ENACTED
TITLE III--OTHER MATTERS
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Campaign finance laws are there to protect the imcumbents. It doesn't matter if it's harder or not, as long as it's harder for the challenger than the incumbent, the politicians will always be for it. If you think they are for repeal, then they've succeeded in fooling you.
"Change the Congressional Budget Process - it's broke."
Change Congress - Congress is what is broke...
Change the Congressional Budget Process - it's broke.
They have, its still broke.
Ersatz Congressional Budgeting
Paygo rule leads to government growth.
Jack Kemp; CSE, June 14, 2004
http://www.cse.org/informed/issues_template.php?issue_id=1899
Seems there is a lack of interest on the part of voters who don't pay income taxes for cutting spending.
So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?
--- Walter Williams
Too many folks getting taken off the tax rolls.
Bush touts relief as tax day looms
Another 3.9 million Americans will have their income tax liability completely eliminated, officials said.
That's 3.9 million Americans more added to the spending constituency of 70% of the public clamoring for more from government, expecting someone else to foot the bill.
If there are two similar products and one is priced lower, the lower priced model will outsell the more expensive model. Further, if two similar items are priced similarly and then one of them lowers price, the lower priced item will increase its market share. Duh.
That fact is irrelevent to the issue of my post to expatpat, which was that he is holding me to a higher standard than he is holding you to.
If there are two similar products and one is priced lower, the lower priced model will outsell the more expensive model. Further, if two similar items are priced similarly and then one of them lowers price, the lower priced item will increase its market share.They could race each other to the bottom and both go broke or they could put similar prices (the market price) on their similar products and both make a decent profit.
The bill is easily searchable.
The monthly report is done only by retail businesses. The report consists of total gross sales and a check for 23% of it. ANd the business is compensated for doing the report and remitting the tax...1/4%.
There is no reporting by individuals - only retail business. That cuts the number of filers by 85% or so, aiding in compliance. Further aiding compliance is that 80% of all retail transactions go through just 20% of retailer.
Tax cheating will be no worse under the nrst than now - and there is reason to believe compliance will improve; the tax is simple, fair, difficult to avoid, and carries stiff penalties.
1. We are talking of yachts, not homes. 2. If a tax suddenly appears, it is a different case than if a tax is replaced by another. Not an apples to apples comparison. The premise of this thread is why the NRST is bad, but discussions of the NRST presume that it replaces the income tax. Instead, an example was cited in which a new sales tax was imposed, without any other tax relief.
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?
One has nothing to do with the other. If the sales tax is in place, presumably you won't have to pay any income tax. Not because you sold a house, but because Congress, in enacting the NRST, revoked the income tax.
If the equation did not allow for increases or decreases in wages, you'd complain about the formula. As is, you assert that the formula permitting the wage to change must mean that wages fall.
Talk about misleading.
I wasn't, actually. My post was aimed at Principled, who is unprincipled about name-calling, and lewislynn, and others who do it, more than you. I used your post to finally express my frustration and dislike. You were not one of the worst offenders.
Do you seriously expect a teenager mowing lawns in the summer for spending money to file all the proper paperwork and remit the NRST? Who's going to enforce that? Talk about an intrusive taxman!
LOL, once again you fail to read the bill and just to bloviate instead.
There is a deminimus dollar amount of sales that one must meet to be a certified business required to collect and remit taxes under the HR25. Sorry, that teenager mowing laws in the summer for mere spending money has no requirement to collect report or remit the NRST to government. Mp>Guess what, because that teenager is not a certified business required to do all that, he pays the NRST on his lawn mower when he purchases it retail instead. Just like every one else.
Exactly. But Principled is too busy uttering "Duh" to understand, even after it has been pointed out multiple times.
I see - you were shooting for someone else and hit me. If there's a higher standard that one should strive to attain in a reasoned debate, avoiding the aforementioned might be a good start.
If the equation did not allow for increases or decreases in wages, you'd complain about the formula. As is, you assert that the formula permitting the wage to change must mean that wages fall.In the Jorgenson/Wilcoxen model, the price of labor goes down as the marginal tax rate on labor income goes down. So eliminating the income tax (reducing the marginal tax rate on labor income to zero) in favor of a NRST causes the price of labor to go down in the model.
Talk about misleading.
The drive is to maximize profits, not keep them from growing.
The drive is to maximize profits, not keep them from growing.
The drive is to maximize profits, not keep them from growing.Exactly. That's why both businesses do better by avoiding a price war then they would by continually undercutting the competitors. You really should read up on game theory. Pricing is not as simplistic as you pretend.
I can hear it in the board room, "Let's keep profits from growing... after all, an income tax fanatic kool aid drinker named your nightmare says it's better that way".
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