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.
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?
Sorry, doesn't fly. IRS is charged with the administration of the current tax income/payroll tax system and a number of other specific excises and the name on your check is irrelavent to the functions of that organization.
Under HR25, that administrative agency is defunded, and dismanteled Nothing left of it.
In its place doing the function of administrating the NRST, are the state sale tax administrators.
Merely the office of Treasury remains to receive the remittences of NRST collections made by state tax administrators is what is left for them to pay their collections to.
That's all there is for states that administer the NRST as part of the state sales tax administration to send checks to.
But you may continue to beat a dead horse to death if you wish.
You're obsessed with this, and have chosen to remain blind to what is going on elsewhere, and how all revenue legislation is 'implemented' now. Agencies will enact implementing proceedures and regulations, just as the IRS does now. Stop dreaming, and get informed. This 'consumption tax' is more than a consumption tax.
Get Tom Sowell's book on basic economics.
Try to get a revenue neutral taxbase replacing all income and payroll taxes out of import tariffs alone.
I guarantee you end up with zero revenues.
I have to wonder if you've even read the bill, or understand at all what it is that the vast bulk of tax reformers support.
This 'consumption tax' is more than a consumption tax.
What, pray tell, do you mean by that?
I'm starting to wonder if you're not more than a bit paranoid.
I'm not going to let tin-foil fears about what might happen down the road, things that aren't even in the proposed legislation, to stop me from trying to end this communist-inspired system we have now.
Dude, the stated goal of the NRST is to weaken the federal government. To "starve the beast" as they say.
If you want to tame the beast of tyranny – starve it into submission.
... the one way to reign in the federal government is to starve it.
It may not be too weak now. But that is what the NRST folks want for the future.
Dude, the stated goal of the NRST is to weaken the federal government. To "starve the beast" as they say
If you want to tame the beast of tyranny – starve it into submission. .
Hmm, lookin at that link I find the stated goal of JPFO doing a hit piece on the FairTax legislation. They state that there position on taxes:
"Here's our alternative: Nothing.
Ban the income tax, definitely. Banish it. Disband the Internal Revenue Service and auction their buildings to the highest bidder. Let all the IRS auditors, clerks, and armed enforcers get honest jobs. But don't replace the income tax with any tax, of any variety. "
*** snip ***
If you want to tame the beast of tyranny – starve it into submission. Ban the income tax. Trash the unFairTax. And put the government back on a leash.
... the one way to reign in the federal government is to starve it.
And an irrelavant post of some crankcase on a blog?
It may not be too weak now. But that is what the NRST folks want for the future.
That is really pitiful. You could have at least tried to find a posting that was from a fairtax supporter could you not?
Man you have gone beyond the pale, a total fruitcake, what are you smoking in that pipe?
Scraping the bottom of the barrel, eh...
It is not hyperbole to compare the income tax with a terminal illness. However, to compare the income tax to a pesky toothache is indeed hyperbole.
Are you really going to defend the current system? I didn't think anyone would really try to do that.
AW: Which is total crap, unless he remits sales tax on his gross receipts which he will not.
No, one pays his tax burden at purchase for retail consumption, not when he sells something. If your incorrect statement were true, only business would pay tax- none do so - they collect tax from the buyer - it is the buyer who pays the tax, just like today.
This is really simple. The nrst will collect an drug dealer's full tax burden, our income tax doesn't. The nrst will collect the maximum marginal rate form illegals, our income tax doesn't.
Although this is only a tiny issue - that the nrst does a better job collecting taxes from the drug dealer. The big ideas are eliminating withholding, making everyone pay the same rate - increasing resistance to taxes, and making the taxes visible so that every single voter and consumer feels the pain of the gov't daily by pulling $10s and $20s out of his pocket every day to pay tax.
good pt - he may not have much (if any) legal income for SS benefits, yet he'll pay his full share of taxes.
Lets not forget that we get to keep ALL of our pay check.
For me that means that I get an additional 500 to 700 dollars every two weeks. I know I can use the extra money to cover whatever extra tax I might have to spend for an item if i deciede to purchase it. Or I can not buy the item and pay no tax. The CHOICE is Mine.
But the best part is the Government is out of my personal finances and rightly does not need to know how much I earn.
wages (not income) will be reported to ssn to determine benefits - of course, if you don't report - and i dunno if it's req'd, you'd obviously wouldn't get as much ss at retirement as if you'd reported...
Lets not forget that we get to keep ALL of our pay check.
For me that means that I get an additional 500 to 700 dollars every two weeks. I know I can use the extra money to cover whatever extra tax I might have to spend for an item if i deciede to purchase it. Or I can not buy the item and pay no tax. The CHOICE is Mine.
But the best part is the Government is out of my personal finances and rightly does not need to know how much I earn.
Lets not forget that we get to keep ALL of our pay check.
For me that means that I get an additional 500 to 700 dollars every two weeks. I know I can use the extra money to cover whatever extra tax I might have to spend for an item if i deciede to purchase it. Or I can not buy the item and pay no tax. The CHOICE is Mine.
But the best part is the Government is out of my personal finances and rightly does not need to know how much I earn.
they pretend not to see this. silly eh?
That's fine, I just don't like the dishonesty. If workers get to pocket the tax savings, that money will not be there to reduce the cost of goods. Fair Taxes always claim that your take home pay will go up AND prices will not go up. If they want to sell their tax plan on the freedom, then say that. But they sell it as some magical wonder drug that increases growth, increases take home pay, lowers inflation, lowers interest rates, increase savings, increase revenues. According to them, every aspect of our economy will take off just because we place a 30% sales tax on all goods and services. It is just dishonest and many people are buying into the dishonesty.
Earnings must still be reported to the Social Security Administration, and many states may decide to keep the income tax in lieu of adding 7-10% to the federal sales tax.
What, pray tell, do you mean by that?
A tax on services is a tax on labor.
Except for the $23,000 he illegally does not remit in sales tax from his $100,000 in drug sales. How can you keep ignoring that? And besides, he doesn't report SS income today, so again you tout a benefit that is non-existant.
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