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're not paying attention, then.
Income taxes are a fundamental principle of Communism, not Freedom.
Which is why an income tax is one of the primary planks of the Communist Manifesto.
That fact alone should give you all the impetus you need to oppose income taxes fundamentally whereever they are found, in any form.
The Founders would find it hard to fathom how Americans could have submitted themselves to a system that allows government agents, in defiance of every principle of liberty, to know every jot and tittle of our personal and business finances.
Bottom line? The income tax, flat or graduated, is fundamentally flawed from its inception, and is anathema to Freedom.
Eternal vigilance is the price of liberty.
Actually, consumption (sales taxes if you will) are more stable a tax base than income tax so that there will be fewer revenue fluctuations, not more.
Also, think about what most states are likely to do once the FairTax becomes law. They have no piggybacking mechanism to define income, deductions, etc. and would have to duplicate the entire statutory and enforcement structure along with the expenses thereof on a state basis (rather than have it paid by taxpayers as an unfunded mandate as at present).
The most reasonable thing for most states is probably to subscribe to a FairTax-conforming sales tax themselves. The upshot of that would be that in most states the sales tax rate would decline a good bit rather than increase since not only is the consumption tax base much greater than the income tax base, but the FairTax has no exemptions, deductions, etc. as are presently within all state sales taxes. In other words, even a lower state sales tax would raise more money.
In a state like California, for example, which has a 7.75% (or so depending upon various things) sales tax rate now, the rate would drop to something like 2 or 3% (perhaps less due to all the millions of illegal aliens in the state).
Stop and think - use your common sense. At present, the IRS's own figures for non-compliance and evasion (and that does NOT include illegal income) are about 20-25% of tax revenues each year. That's a huge "couple of bucks" that those defending the Status Quo hope you do not think about. They'd rather you assume the present tax system has no warts (non-compliance, evasion, illegal income) but in fact it is rife with those things and most people would be well-advised to stop and realize it.
Raising the spectre of the boogeyman as they do is disengenuous as well as inaccurate.
And if the Sales Tax is such a great idea, then tell me why it is that across the country, retailers try and get sales taxes reduced.
That is one of primary things that's good about them.
Business want lower tax rates on their products, everone purchasing products wants lower tax rates.
When the entire electorate and business want precisely the same thing because government is too big and spending too much. Guess where the pressure builds.
The whole point is, if you want government to be smaller, then everyone must participate in the burden that government imposes. Not just some small plurality of the nation that cannot muster the political votes to make enforce a change.
There is a consequence of over half the nation not substantially and visibily engaged in participation in the federal tax system. Ever bigger government.
The Honorable James DeMint (R-SC)
United States House of Representatives
APRIL 5, 2001
- "There has been a shift in the relationship between individuals and government, he argues, such that fewer and fewer are paying taxes at the same time that more and more are receiving increasingly generous benefits. If it becomes the case that most voters do not bear a financial burden for this largess, then there will be little to restrain--and significant political incentives to encourage--the continued growth of government.
Consider:
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, figuring someone else foots the bill.
Great post!
Home run...
If you'll spend a few minutes actually reading the FairTax bill (several links given on this thread but if you need one, just ask) you will see that there is none of the "earmarking" you describe outside of the S/S & M/C programs (which funding is required by existing laws).
For a state to adopt a FairTax-conforming sales tax, that state system would also have to have no "earmarking". If your state has a real problem with that at present, you should begin hammering on your state folks to adopt a FairTax-conforming law when the FairTax is passed. If you'd start talking that up now, you'd have a headstart on most states and would help get your state ahead of the game.
Eternal vigilance is the price of liberty.
I like this one better ;O)
"The condition upon which God hath given liberty to man is eternal vigilance; which condition if he break, servitude is at once the consequence of his crime and the punishment of his guilt."
-John Philpot Curran: Speech upon the Right of Election, 1790.
Fits so nicely with:
| I discussed the importance of abolishing the income tax because of its tendency to form a habit of servility in the souls of a people that accepts it. Servility of soul is bad not only in itself, it is also an open door through which will soon walk the abuses of ambitious government power. Leaders who find themselves with governmental power over a servile people will be quick to conclude that such a people exist to serve them. |
In one particular state, I have had discussions with a prominent state Senator about doing exactly that.
Great point.
You'd think most people would already know that but judging from the lead-in to this thread, I guess not.
Perhaps they'll learn and maybe this thread will help as we go along.
:-)
Any fairminded, thinking person who studies this thread is bound to gain knowledge and understanding about what needs to be done.
The SQLs do us a all a favor in their fervor, in fact. :-)
As long as there are folks like you and the others here to refute them in detail, at least.
Not once have I defended the IRS on here.
But when I see the words "National Sales Tax" then right along side it "27%" and then right alongside that "state and federal contract, but the feds will get the lions share"
It doesn't matter how you rip people off if in the end you're still ripping them off.
It's clear that no one who ever devised any tax scheme has ever thought it true, that's why it all becomes so convuluted eventually.
"Actually, consumption (sales taxes if you will) are more stable a tax base than income tax so that there will be fewer revenue fluctuations, not more"
Here's a little primer on recession, when there is recession, people will consume less, no more than what they have to spend.
Most of our sales tax windfall items are not necessities, so if people are nervous about the economy, they stop spending, and revenue stops entering
Now, the income tax sucks as does the capital gains nonsense (that's the one I wanted burned in a vat of acid), but the thing about the income tax is. You can use withholding, accountants, etc, so while you are paying money, you don't have to come face to face with it on a daily basis that you're getting squeezed
With a sales tax, you are reminded on a daily basis about taxes, you are reminded every day that it's the government's fault that no price advertised is an actual price, etc. You still have the exact same hatred for the tax man we have today, except you get to be reminded about it every 6 hours.
And another thing, no one has yet addressed my point about sales taxes and credit. Credit purchases are generally taxed just like anything else.
Every one of your eleven points lies in smoking ruins, destroyed by a multitude of clear statements of reality.
Are you still happy you posted them?
Your logic is right on ... great point to the SQL who started this thread.
As you've seen on the thread, he has a vested interest in the Status Quo which is why he defends it so much. Same is true for most of the SQL fellows.
But when I see the words "National Sales Tax" then right along side it "27%" and then right alongside that "state and federal contract, but the feds will get the lions share"
Hmm, where do you see 27%, I see a provisional 23% and that was determined back in 1999 under a somewhat higher rate of federal taxation.
The same legislation, once updated for revenue neutrality before enactment is possible as is required by the President's criteria for all tax reform measures (not tax cut measures), is headed somewhat lower provided there is any fair expectation of achieving permanent tax cuts out of this, or the next, Congress:
refer Tax Freedom Day 2005 report PDF: Special Report No.134, April 2005
|
Total Effective Tax Rates by Level of Government |
|||
| Year | Federal | State | Total |
| 1996 | 21.3% | 10.4% | 31.6% |
| 1997 | 21.8% | 10.3% | 32.1% |
| 1998 | 22.4% | 10.4% | 32.8% |
| 19990 | 22.5% | 10.4% | 32.9% |
| 2000 | 23.1% | 10.4% | 33.5% |
| 2001 | 22.2% | 10.5% | 32.7% |
| 2002 1 | 19.6% | 10.2% | 29.8% |
| 2003 2 | 18.8% | 10.1% | 28.9% |
| 2004 3 | 18.4% | 10.2% | 28.6% |
| 2005 | 19.0% | 10.1% | 29.1% |
| Notes: Leap day is omitted to make dates comparable over time. Since depreciation is not available to pay taxes, GDP is an overstatement of spendable income for the purpose of measuring tax burdens. Depreciation is netted out of NNP. "Overall, NNP provides the best statistical representation of the common notion of “spendable” resources. In 2004 NNP was $10,371.6 billion. Like GDP and PI, NNP is a component of the National Income Product Accounts (NIPA). These accounts are computed and compiled annually by the Commerce Depart-ment’s Bureau of Economic Analysis (BEA)." 0 First year introduction of HR2525(Fair Tax legislation). 1 Economic Growth and Tax Reform Reconciliation Act of 2001 Sources: Office of Management and Budget; Internal Revenue Service; Congressional Research Service; National Bureau of Economic Research; Treasury Department; and Tax Foundation calculations. |
|||
Look it up - economics contaxt.
It just takes one business trying to maximize profits by gaining market share to begin the process. If it were possible to have 100% of business collude in price fixing, it would be happening. It's not happening. The desire to maximize profits leads to the attempt to gain market share.
Wrong. I stopped reading here. It was values...God and country.
Now, the income tax sucks as does the capital gains nonsense (that's the one I wanted burned in a vat of acid), but the thing about the income tax is. You can use withholding, accountants, etc, so while you are paying money, you don't have to come face to face with it on a daily basis that you're getting squeezed
Oh, its alright if the squeeze you, just don't bother you with the knowledge so you might have to do something about it. I see.
Your desire to hide taxation from the eyes of the individual citizen it deplorable. Playing the ostrich will not make it go away, trying to pass it on to the other guy will not make it go away, in fact experience has shown that such manner of taxation inevitably rises until it so burdens an economy that a nation is driven to stagnation.
Ostriches may be a somewhat successful species by making themselves look like a bush or tree hiding their head in the sand. Unfortunately low flying buzzards roost in trees and sh't all overthem.
With a sales tax, you are reminded on a daily basis about taxes, you are reminded every day that it's the government's fault that no price advertised is an actual price, etc. You still have the exact same hatred for the tax man we have today, except you get to be reminded about it every 6 hours.
Now you catch on, you are not supposed to like or tolerate high taxes, you are supposed to be mad enought to do something about it.
If you want smaller govenment there is only one way to achieve it, remind voters daily just how expensive big government really is personally and up front and in their face.
And another thing, no one has yet addressed my point about sales taxes and credit. Credit purchases are generally taxed just like anything else.
What's your question, I haven't notice it.
Yes you pay the NRST on credit purchases, Yes finance companies will carry the risk of default on that tax as any tax not paid in the service of the debt will be credited back to the lender.
So what precisely was your issue, if that does not answer the question?
Please ... I made no such claim. I'm trying to help you with information to counter some of the misinformation (such as the 27% you quote - nor is it 37%; it is 23% tax inclusive which corresponds to an income tax bracket of 23%) on the lead-in post to the thread.
Yes, absolutely in a recession people can spend less although they do not stop consuming. In a recession, people - many of them - lose their income completely ... yet thay still consume (while the government loses income tax revenue). A family with no income will borrow or, if necessary, steal to be able to consume and feed their family.
Let's see - is it that you are in favor of MORE government spending by having such an easily-manipulated tax system as the present one? I would think you'd appreciate lowered tax revenues to force spending cuts.
I'm afraid I don't think the "not getting squeezed" idea is too good a one. I WANT people to see how much they're being squeezed on each and every receipt on everything they buy. That will help us get to lowered government spending quicker than anything when it's combined by a bill such as the FairTax. Please, please - read the bill.
No question that credit card debt is bad and that the interest rates are too high, but that's more a function of the present tax system (and personal profligacy) than anything else. In fact, the FairTax will help there also since one of the things it clearly does do is lower interest rates by a couple of percentage points - and on home mortgages, too. That may not wean the current plastic generation completely from their plastic, but it will help to lower their expenses and, with the fact that saving and investing is no longer penalized (or even taxed at all) under the FairTax, it will certainly allow a good percentage of those who have the will and insight to get up a rung or two on the economic ladder.
Staying on the present tax path is merely a recipe for disaster. Credit card purchases are just purchases and SHOULD be taxed, but the costs to people of mis-using their credit as at present will be lower and make no mistake, that helps them (and the country) financially.
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