"Cures all your tax woes!" Buy it even if it doesn't work. LOL! You finally admitted it.
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 path that the founders of this country put in place, that worked well until the socialist takeover during WW I. They taxed imported manufactured goods. It would work even better today.
The states don't collect income/withholding taxes on individuals in the respective states. If I work for IBM in New York, New York doesn't collect the money from IBM and then pass it on to the IRS. But under the NRST, New York would collect the NRST from all the retailers in NY prior to passing it on to the newly-renamed "IRS".
"Cures all your tax woes!" Buy it even if it doesn't work. LOL! You finally admitted it.
The path that the founders of this country put in place, that worked well until the socialist takeover during WW I. They taxed imported manufactured goods. It would work even better today.
If you want fact, it was the exploitation the dissatisfaction of the average American citizen with high tariffs on consumer goods at the end of the 19th century that lead directly to the ratification of the 16th amendment and the modern income tax:
I refer you to:
http://www.cato.org/pubs/journal/cj1n1/cj1n1-10.pdf
THE RATIFICATION OF THE FEDERAL
INCOME TAX AMENDMENT
John Bruenker; Professor of History at the University of wisconsin— ParksideCatoJournal, Vol. 1, No. 1 (Spring 1981), Copyright ©Cato Institute.
Prepared for the Cato Institute’s symposium “Taxation and Society,”
held at the University of Chicago in April 1980.
But you are welcome to go on believing in fantasy, and repeat history if you choose to.
Read up on the history of the Articles of Confederation.
And if they saw what would be coming, they never would have gone for it. It was exactly the same 'foot in the door' technique that is the subject of this thread.
People love false panaceas, especially "something for nothing," and it takes little to stir up ignorant, blind distrust.
The fantasy is your own.
Uh huh and when Walmart doesn't drop their prices all those other companies will just ignore that opportunity to trumpet how they can beat Wal-Mart on price (and still maintain their profit margin.) Heheheh you are frickin hilarious.
Sorry but that ain't the way American businesses work.
One thing about the sales tax is used goods are exempt, so you'd be more likely to buy off ebay for some things.
But under the NRST, New York would collect the NRST from all the retailers in NY prior to passing it on to the newly-renamed "IRS".
Do you always just spout oortentious non-sense about things you don't take the time to study?
Your 'newly-named "IRS"' state tax administrators pass NRST collections on to is called the U.S. Treasury.
The State's tax administrators perform the roll of tax administration in NRST collections from businesses under HR25.
H.R.25Fair Tax Act of 2005 (Introduced in House) `SEC. 401 AUTHORITY FOR STATES TO COLLECT TAX.`(a) In General- The tax imposed by section 101 on gross payments for the use or consumption of taxable property or services within a State shall be administered, collected, and remitted to the United States Treasury by such State if the State is an administering State. `(b) Administering State- For purposes of this section, the term `administering State' means any State--
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After seeing your posts here for the last five years, I'm rather surprised to see you make such insupportable claims.
Just the opposite is true in both cases.
Our economy is shackled by the current monster we call the income tax code, and can only thrive when relieved of those chains.
And it is shocking that you can't see what an increase in personal freedom and privacy would result from this necessary change.
And if they saw what would be coming, they never would have gone for it. It was exactly the same 'foot in the door' technique that is the subject of this thread.
They were told what was coming, the chose to ignore it, because 40% tariff rates on consumer goods were considered attrocious, while goods from domestic manufacturers were untaxed at the same prices as imports leaving the distinct impression that the wealthy corporations were ripping tremendous profit. Guess what, we now have is the income tax as a result.
And you want to do it again. LOL.
Consumption-based taxes, in fact. Served the country well for over a century...a time of unparalled economic growth for any nation in history.
The Founders were dead-set against direct taxes, for good reasons. They knew their history, and they would have never stood for the kind of loss of liberty any income tax entails.
Oh, really??? Who collects/forwards the withholding taxes for the state employees??? Or perhaps you are claiming the state doesn't need to pay its employees enough to have w/h taxes?
No need ... not applicable.
Denying history doesn't make it go away or make people change their behavior.
Are you claiming that the state collects the income taxes paid on all the people who work in the state for private companies? Don't be absurd! The number of state employees in a state is so miniscule that that amount doesn't matter -- but to have to remit all the taxes collected in a state -- that's something altogether different.
When I write my quarterly tax check, I make it out to the "United States Treasury". Does that also mean that the IRS doesn't exist?
True to a point. The shackles come from the 'progressive' nature of the tax; it punishes productivity.
"And it is shocking that you can't see what an increase in personal freedom and privacy would result from this necessary change."
You've made an assumption that is not in evidence. If the tax includes services, it's effects will be grievous on independant providers of many services. I'm talking about doctors, lawyers, engineers, accountants, building contractors, music teachers, tutors, and likely pastors of churches. You have failed to apply what you already know about the nature of government, to the implementation of the tax.
Privacy will be non-existant for everyone, because government will be allowed to presume that all are possible providers of services. Your bank accounts will be scrutinized as never before. This is already going on in other countries, so you don't need to rely on guess work. The U.S. govt. will work on the same model as all the VAT tax countries are following.
You still beating the 'Articles of Confederation' horse? That's one of the weakest tactics I've seen the SQLs use yet.
To believe it, you'd have to believe that the federal government is too weak to carry out its wishes, as was the American government under the Articles.
Absurd.
Productivity is the result of capital formation; aka as savings and investment. The income tax in all its various manifestations punishes capital formation.
If the tax includes services, it's effects will be grievous on independant providers of many services. I'm talking about doctors, lawyers, engineers, accountants, building contractors, music teachers, tutors, and likely pastors of churches.
Nothing grievous about it. Simply remit a percentage of your gross to the state. Sales taxes are the least burdensome form of taxation there is. A ten-year old could figure it out. The 'pastors of churches' comment is blatant fear-mongering. Want to talk about the negative effects of the income tax code on our churches and their freedom of action?
Privacy will be non-existant for everyone, because government will be allowed to presume that all are possible providers of services. Your bank accounts will be scrutinized as never before. This is already going on in other countries, so you don't need to rely on guess work.
Pure paranoia. And privacy is non-existent for everyone now. Sheesh.
The U.S. govt. will work on the same model as all the VAT tax countries are following.
Not if we don't want it to, and certainly not under the FairTax bill that is in front of Congress.
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