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 federal government is still exercising undue authority on the state's, by telling them, you will have this law, you will collect for us, there's no way around it.
That is firmly against the principles of state's rights.
Sorry, it is at the State's option to do so, not their obligation, for which they receive a consideration acting as agent for the national government.
Once again, read the bill before spouting off:
H.R.25Fair Tax Act of 2005 (Introduced in House) `SEC. 1. PRINCIPLES OF INTERPRETATION.`(a) In General- Any court, the Secretary, and any sales tax administering authority shall consider the purposes of this subtitle (as set forth in subsection (b)) as the primary aid in statutory construction. `(b) Purposes- The purposes of this subtitle are as follows:
`(c) Secondary Aids to Statutory Construction- As a secondary aid in statutory construction, any court, the Secretary, and any sales tax administering authority shall consider--
`CHAPTER 4--FEDERAL AND STATE COOPERATIVE TAX ADMINISTRATION `SEC. 401 AUTHORITY FOR STATES TO COLLECT TAX.
`SEC. 404. FEDERAL ADMINISTRATION IN CERTAIN STATES.
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You still have a federal government bureaucracy, my solution (which is somewhere on this thread, but I'll repeat)
The only federal functions should be the military and some base law enforcement
And forgotten a couple of others like regulate the money supply, administer the nation's debt, etc. and primary of all to accomplish the rest is to pay the nation's bills through taxation in a uniform manner wherever you are in the United States:
Constitution for the United States of America:
- Article VI: "This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding."
- Article I Section 8: "The Congress shall have power to lay and collect taxes, duties, imposts and excises,
to pay the debts and provide for the common defense and general welfare of the United States;
but all duties, imposts and excises shall be uniform throughout the United States; "
- Article I Section 8: "To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof."
Everything else goes to the states, they want a welfare state in their state boundary, lovely, they want to create a Libertarians paradise, so be it.
Including a power to collect taxes, even for the federal government if they so choose to do so.
Part II: What do you do if a governor decides, we're not complying with the sales tax.
You really should try reading the bill:
H.R.25Fair Tax Act of 2005 (Introduced in House) `SEC. 401 AUTHORITY FOR STATES TO COLLECT TAX.
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Are you really willing to send in federal troops to protect a national sales tax.
Are you really willing to not enforce the Supreme Law of the Land and not enfoce the Laws of the Union, and suppress insurrections in any such situation?
Constitution of the United States
Section 8 The Congress shall have Power
"To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;"
I would certainly hope that any law a governor or anyother official of state, national would be enforced. With the state's own law enforcement sworn to that duty, as would normally be the most that is needed, With militia if that is what is required.
Bottomline, State's governors are just as subject to the laws of the nation and the constitutions of their states as anyone else is.
Exactly and if the market will bear a 30% increase then why is not the price 30% Higher right now?
Do you think the stores competing against the Evil Wal-Mart Empire™ would not jump at a chance to undercut them by using any price advantage they could?
If you and Shadow's assertion are true why then do the price of electronics and computers continue to drop? 6 years ago a state of the art computer loaded with extras from Gateway cost me nearly 3 grand I can buy one with twice the memory and speed and features for half the price now.
Further your example of the Euro has no bearing in this situation. We are not changing currencies we are changing the tax structure. Nice of you to try the old Apples and Oranges trick.
"Are you really willing to not enforce the Supreme Law of the Land and not enfoce the Laws of the Union, and suppress insurrections in any such situation?"
Every ancestor of mine that fought in the unpleasantness of 1861-65 fought for the South, so no, I am going to say it is not the job of a state government to enforce an unpopular national law in that state. If Washington wants it enforced, they can send in their troops, and endure all the abuse, demagogery and everything else that goes along with it.
Nullification is a valid constitutional principle, and it's a shame Jackson and Lincoln made us get away from that.
It is not right that the federal government can go in and micromanage the affairs of a state.
There's also no guarantee that the state militia will comply. The state's have allowed the government to get away with abuses like these for more than 150 years but eventually, a breaking point is going to come.
And how popular do you think it would be for the federal government to come into say, the Southern or Western states and say, you're not doing what we want, so were in charge now. You could send in federal troops, but if they start pelting the troops with fruit, what do you do then. What if the Governor tells you, if I protect you with my law enforcement, I lose election so you're on your own sparky. What do you do then, put the state under martial law. You do that, then the governor is on national T.V playing the role of the victim, and soon you get sympathizers in other states.
Granted, this is all a hypothetical, but people are really getting sick and tired of federal courts saying, you've got to do this, do that, etc etc. And telling state governments that they are going to have to do the bidding of the national Treasury Department (presumably so people deflect their anger away from the DOT), you really think they are going to be thrilled to go along with something like that.
But, to reiterate, I do believe in nullification.
Part Duex
`(2) which enters into a cooperative agreement with the Secretary containing reasonable provisions governing the administration by such State of the taxes imposed by the subtitle and the remittance to the United States in a timely manner of taxes collected under this chapter.
There is one simple problem with that though, suppose the state legislature decides, we're going to put the issue to the vote of the people, in a referedum. And we're going to give them a choice between tax schedules to choose from (fed/state split)
And further, suppose that suddenly ads started popping up in said state, and they end up voting for the version that gives the Treasury Department 5%
What will Washington do then, if they try to bring the state in line, they'd be going against the will of the people.
Politics is all a matter of propaganda, whoever wins the propaganda war, and when it comes to issues of federal supremacy, the feds have never won a propaganda war in my state.
If you did it right now, you would stick out like a sore thumb, and get a lot of customer resistance. If you do it when there's a good excuse ("it's the evil NRST that did it") and when others around you are also doing it, it's much easier.
That's why the Euro example is NOT Apples and Oranges. "It's the evil EU Euro that did it", and most others jacked the price, too.
Every ancestor of mine that fought in the unpleasantness of 1861-65 fought for the South, so no, I am going to say it is not the job of a state government to enforce an unpopular national law in that state.
Get over it, that one was fought and lost.
What you have to say about it is of little import on such issues, what the Constitution has to say about it however is of great matter.
Nullification is a valid constitutional principle, and it's a shame Jackson and Lincoln made us get away from that.
Nullification is for jurys of one's peers in court proceedings, not government officials sworn to uphold the Constitution, and Laws of the Land.
It is not right that the federal government can go in and micromanage the affairs of a state.
Strange I don't see collecting a national tax as micromanaging anything. It is however a very definite authority of Congress to lay and collect taxes and make the laws necessary and proper to the execution of that authority.
There's also no guarantee that the state militia will comply. The state's have allowed the government to get away with abuses like these for more than 150 years but eventually, a breaking point is going to come.
Give you a clue, federal government doesn't use the militias of the state in default to correct such controversies.
And how popular do you think it would be for the federal government to come into say, the Southern or Western states and say, you're not doing what we want, so were in charge now.
Where there is an agreement by the state to act as an agent, with a full option to not do so? LOL. Get real.
Granted, this is all a hypothetical,
Indeed it is, and has little to do with the specific legislation of discussion. As the NRST agreement is bilateral with the state able to pull out anytime it wishes turning administration over to either a third party, or to the U.S. Treasury.
but people are really getting sick and tired of federal courts saying, you've got to do this, do that, etc etc.
I suppose that people violating laws would be sick and tired of the courts telling them they must abide by the law. So? We are talking here about clear authority under the Constitution not some pre-numbra or inferred magic right that never existed.
And telling state governments that they are going to have to do the bidding of the national Treasury Department
Nice hyperbole, but not on point as the states enter into voluntary agreements with the Treasury to administer a clearly constitutional national tax law. Sorry, just doesn't fly for the situation.
(presumably so people deflect their anger away from the DOT),
I would suggest you get rid of what ever it is you are smoking, fantasy is creeping in.
you really think they are going to be thrilled to go along with something like that.
State's option as to whether they, another state, or the U.S. Treasury administers the NRST in that state. Sorry thrilled or not people pay taxes, the choice is only in who administers the national tax system in the specific instance.
But, to reiterate, I do believe in nullification
So do I, in a court room by jury of peers.
There is one simple problem with that though, suppose the state legislature decides, we're going to put the issue to the vote of the people, in a referedum. And we're going to give them a choice between tax schedules to choose from (fed/state split)
Politics is all a matter of propaganda, whoever wins the propaganda war, and when it comes to issues of federal supremacy, the feds have never won a propaganda war in my state.
So just tell your state to cancel the federal income/paryoll tax system. Problem solved.
Nice fantasy, but empty.
What issue destroyed the Democratic Party in the South. State's Rights.
All a solution like this does is keep a bloated federal government, it keeps the judges that rule to increase federal power, it increases pork projects, etc.
I hate sales taxes right now, but I am willing to deal with it because I know my money goes to help my own people, my state, my city.
I am not crazy about having to pay a 25 percent surcharge on an item just so a majority of that money can go to people in a state that I will never live in, people in a state I may never visit.
Now granted, it is amazing irony that income taxes from New York and all those Northeastern states are used to subsidize social services here in the South, but I don't believe that is right either.
Why do we need a bloated government, why do we need a Department of Education, or a Department of Agriculture, or the million departments we have right now.
Today, as we speak, the federal government will pay farmers not to grow crops, but they pay them what they would have gotten had they grown crops, to me, that is absolutely ridiculous.
I will admit, it was ridiculous for the federal government to pay 3 mil to restore a historic train station.
Now, had it been state money spent on an in-state project, a different situation.
What is so wrong with the concept of reducing the federal government to just the military (and law enforcement), and letting each state kick in revenue, however it wants to get it, to pay for national defense.
Why is it that we should substitute one system of financing a bloated government with another system of financing a bloated government.
Why should I have to pay a surcharge on every item I buy, see that surcharge and seethe at it, just so we can fund a school lunch program in a blue state.
Instead of finding new ways to fund big government, we should be trying to eliminate big government all together.
My reply was to a small businessman. The question was about documentation for IRS compliance of a business. You are the one off the deep end on this seizing on every possible slight to put forward your snake oil. Why don't you just admit that business will need to submit documentation for the NRST? Why try to change the subject? It makes people think you are trying to pull a fast one.
I don't see it. Please cite the section in HR25 or quote it.
We tried that from 1776 to 1787. It was called "The Articles of Confederation." It was a spectacular failure. Congress had no way to force the states to pay (just like the NRST) and so some didn't.
To compare the situation under the Articles of Confederation to what would occur under the NRST is absurd.
The Federal Government of today has more than enough power to collect the sales tax from the several states.
Isn't one of the arguments on the NRST side that there is a "hidden income tax" that is included in the price of the Mercedes now? The retail price has to be higher to pay the income tax on all the people who produced the car. So the drug dealer is already paying the same hidden income tax on the Mercedes now as is the doctor. Right?
I believe it is misleading to claim that in spite of the fact that the same people will be working in the same offices doing almost the same jobs, but with a different name hanging on the building's entrance, that the old agency is not still in existence.
The Articles of Confederation didn't work at the time because of the frameset of the population at the time.
For starters, we didn't have much of a standing army.
Today, I don't think there really is a militia, in the Revolutionary sense, and the fact is, alot of places rely on the military for their economy.
Any state that refused to contribute, you close all public installations, it's that simple, because states will do anything to keep their respective military bases.
You could also make it requirement that, in order for someone to become President, their state has to be in compliance, set the same level for Congress. Because there will still be something for the feds to do, and no state will want to lose their influence.
In the end though, any solution for government finance is going to be a dressed up form of extortion.
How? But sending in the Marines, occupying the state houses, and arresting the Governor?
It certainly won't take a hundred thousand plus employees, with their thousands of volumes of rules and regulations.
And the new agency will not be collecting data daily on individual American citizens.
If you can't see the difference, and what a tonic to this nation cleaning out the IRS would be, you're either blind or are purposely closing your eyes to reality.
'Freedom calls', man, and she's on the NRST road...
Nope.
By threatening to withhold funds, the way they do right now.
How many States in recent decades have eschewed funds that were tied to legislation that required them to implement certain policies?
Snapped your seat belt shut lately?
Pretty good description of your posts I've been reading these last few minutes...
My proposal wouldn't collect data on American citizens daily either.
Of course, my proposal would restore the federal government to it's intended size, and that puts all the big government folks into a frenzy
And you would be surprised how many people it would take to collect revenue.
Collecting it in say, Kenedy County, Texas, that's one thing. But when you start to get into areas of concentrated population, and multitudes of commercial establishments, it becomes that much more difficult.
And in this whole grand scheme, you forgot one thing. There are going to be enterprises who if they figure out a way to get away with it, will start under-reporting to the tax people. If you don't officially record a sale, don't give a receipt or anything, then how will the government know this sale has occured.
And all this would do would be to allow the federal government to collect even more data on people, maybe not individuals, but certainly groups. They could know who buys what, etc.
And I don't even want to go into the economics of this, cause others have done this for me, but all I will say is this.
The United States runs on a consumer economy, when you raise prices, people will adjust their consumption habits, even if they do pay more. And because no one in this lifetime has ever dealt with a 25% sales tax, seeing one on a bill is going to make them livid, and immediately you will see thrift.
You would see more people planting vegetable gardens, and you would actually see an exodus out into rural areas, just so you can grow some food without having to pay an exorbitant tax on it.
As it stands now, this country is already in a bad financial way, almost everyone buys on credit (and I ain't talking mortgages, I'm talking credit cards)
At any given time, your average American has got several grand in credit card debt. The last thing we ought to be doing is increasing the amount that they will be charging to those damn things, because it was the credit industry that got us into the Great Depression.
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