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.
I'm not, nor is anyone else. But everyone else sees that the $23,000 does not get reported in either system. That doesn't change.
What does change is that the drug dealer begins paying his full share of taxes under the nrst. Under the income tax, he only pays a portion of his share- the part embedded in prices.
You're the only one who is so blind not to see this.
The $23,000 goes unreported in either system, duh. That's one of the reasons it's called an illegal transaction.
Beyond that, you have a fundmental misunderstanding about who pays the nrst. It is not business, it is the consumer. You're so stuck in the mindset of income taxes that a myopia blinds you to things others see as obvious (big surpirse).
Open your eyes.
But under the nrst, drug dealers will pay their full share - so us legal folks don't have to pay for them anymore.
An old adage is raise taxes on what you wish to discourage, lower taxes on what you wish to encourage. Therefore, I propose government employees pay all taxes.
In fact, you have no basis for the statement at all since it is just as likely as not that the John & drug buyer paid little or no in the way of income taxes.You have no basis for that statement. Unless these people are using counterfeit money, all money in the underground market can be traced to legitimate sources.
But your analysis assumes ALL taxes are embedded in the final costs of goods and services, so the drug dealer is in fact paying the same under either system. You guys talk in circles and deny the basic truth.
The consumer pays in the income tax system too, it is just the retailer, distribution people, manufacturer and their employees who actually remit the tax under the income tax. It is no different except in the sales tax, it is only the retailer who remits the lump sum of all the taxes.
But the tables are turned with the NRST. The states will be remitting grossly more than they will ever receive.What's more likely to happen is some states will be more lax in collecting the NRST than others and will start a whisper campaign. "Move your business to our state. We don't do NRST audits very frequently." What does the state care if the NRST is collected? 0.25%?
The tax base for both systems is the entire legal economy. A $1000 purchase under the sales tax will yeild a similar amount of tax as a $1000 purchase under the income tax. If your system is tax neutral, you really can't argue with that. The only way to capture the illegal economy is to somehow make it part of the legal economy, which a sales tax does not do. I understand this point completely. It is not me who needs to open his eyes.
So now you agree that prices will remain stable under the nrst - that's a start.
Here's the difference you don't get: under the income tax, other people must pay a portion of the drug dealer's taxes because he only pays a portion of his taxes under the income tax... he pays no income tax, he pays no FICA... so we have to cover it for him.
But under the nrst, the drug dealer pays his FULL share of tax.
Under the income tax, he pays only a portion of his taxes.
Under the nrst, he pays all his taxes.
Can you not see that we all no longer have to pay for the drug dealer's taxes???
This is not relevant. It may be the same total collection, but I no longer have to subsidize he drug dealer under the nrst - he will begin paying 100% of his taxes! sheesh!
You've been into the kool-aid too heavy. There is no argument, no matter how stupid, that you'll not try in order to keep the marxist income tax in place.
Open your eyes, stop selling income tax snake oil. You income tax fanatics are not logical.
I would if employees took a pay cut, but since employees pocket the money it is impossible for prices to remian stable. There will be an immediate 15-20% inflation under the NRST.
This is not relevant.
It is the only thing that is relevant. It is the whole point that you miss and fail to acknowledge that it is a complete wash.
Whether it's a wash is not relevant. What IS important is that of the total collected, the drug dealer now pays his share. Currently, he doesn't. Currently, his only pays a portion of his taxes.
You are missing the point. It is not that the total collected stays the same or not. It is that under the income tax, drug dealer doesn't pay all his taxes, we have to pay some of his taxes for him. But under the nrst, the drug dealer pays ALL his taxes, so we no longer have to pay any of his taxes... becuase he pays ALL HIS TAXES under the nrst.
Under the income tax, the drug dealer only pays a portion of his taxes.
Under the nrst, the drug dealer pays all his taxes - so we will no longer need to have a higher rate on the rest of us in order to make up for the drug dealer's taxes that aren't paid under the income tax.
As usual, your focus is so tight on th eincome tax, that you miss the point and look dumb.
I'll match my level of experience running a business with yours, any day, since it's clear that yours is extremely limited. What is your level of business experience that allows you to pontificate on the way business works?
So the IT is going to kill us, huh? I don't like it either, but that claim is a sign that your medication isn't working.
I don't think so, but it is already killing our economy. It's killing our export industry.
Analogy is not too tough. In no way is the income tax a simple tooth ache - it is a terminal illness. Are you going to spend bandwidth minimizing the deadly effects of the income tax on our economy?
That's not true, it is mostly the NRST worshipers who don't see the point. Besides, I really don't care who agrees with me, because I am absolutely correct on this.
Whether it's a wash is not relevant.
That's the whole point, so how can it not be relevant.
What IS important is that of the total collected, the drug dealer now pays his share.
He illegally does not remit the 23% of his gross sales, so I can't see how any rationale person can claim he pays his share. Who share is he pocketing then? No matter how you view it, he is liable to remit that tax and he does not.
Currently, he doesn't. Currently, his only pays a portion of his taxes.
He pays zero income tax on the money he receives from drug sales, just like he will pay zero sales tax on the drug sales. The amount is roughly the same.
But under the nrst, the drug dealer pays ALL his taxes, so we no longer have to pay any of his taxes... becuase he pays ALL HIS TAXES under the nrst.
Except the 23% of his gross which you seem in denial about. When the drug dealer finally makes legal purchases, he will pay the embedded taxes which will roughly be the same as the 23% sales tax. Or do you change your assumptions for different scenarios? That is very convenient of you, but very typical.
That's not the point everyone else is talking about. It should be clear that the total collected will be the same - it's revenue neutral, remember?
The point is that the share of taxes paid by drug dealers is small under the income tax compared to the share that would be collected under the nrst.
This is because under our income tax, drug dealers only pay a portion of their tax burden - the part embedded in taxes.
But under the nrst, the drug dealer pays 100% of his taxes.
Under the income tax, the dealer only pays a portion of his taxes, so the rest of us have to pay more in order to collect required revenue.
Under the nrst, the dealer pays ALL of his taxes, so the rest of us don't have to pay his share anymore to collect required revenues.
You are the only one focused on total collected - the rest of us know the nrst is revenue neutral and will collect the same amount of revenue. But unde our income tax, drug dealers escape paying much of their taxes. Under the nrst, they pay all their taxes.
Geez.
Are you trying to tell us that drug dealers will increase their price in order to pay the tax?!!! LOL!!!!
Besides, in a competitive industry, unnecessary costs are eliminated. If that were true, they'd increase their prices by x% today. But they don't.
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