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 can laugh all you want, but that does nothing to explain how Jorgenson calculates embedded taxes and compliance costs.
Jorgenson calculates the effect of change tax rate on prices based on historical record of tax policy changes.
The cost factors are intrinsic to the parametric functions derived from the historic econometric data series.
That is how it is done, Jorgenson doesn't need to explicitly calculate your compliance costs they are implicit to the parametric function coefficients derived from historic relationship intrinsic to the economic data series.
You seem to have no clue what Jorgenson considers embedded taxes and compliance costs.
LOL, it is irralavent as to what Jorgenson considers embedded taxes and compliance costs in the first place they are intrinsic to the econometric parameterization of the J&W IGEM.
Tax revenues collected from business are a matter of federal historical tax data records. The correlated economic data set provides the basis on which to derive the parametric relationships that are manifested by the economy in responce.
In point of fact to solve an econometric series for the effect of tax policy change merely requires the capacity to relate tax policy changes in the historical record to their effects in the markets for each economic sector of interest. Accumulate the results of the econometric functions and solve for prices in relation to original baseline as you change the tax system parameters expressing the policy change one wishes to study.
The costs associated with tax systems are intrinsically included in the empirically derived coefficients of the parametric relationships manifested through the market economy, as price.
I enjoy your use of big words though. It makes you sound smarter than you are. It should not be that tough.
When all else fails resort to personal attack, mockery or ridicule that way you can slide over the issues rather than acknowledge that you have no argument to stand on, and your just spinning your wheels to see if anything can stick.
I have seen some caculations for compliance costs, and most have nothing to do with actual costs to businesses.
I, have seen come calculations for how a ball bounces that have nothing to do with the force of gravity. The ball still bounces when it hits the wall.
THat amount of tax costs are already in premiums. The nrst just makes it visible. You fear that.
Come on. You're constantly arguing over the rate, which is nonsensical, as I've explained simply and repeatedly....the argument over the rate is moot, since the FairTax bill is revenue neutral. This moot point's inclusion as the basis of this silly posting was one of the first signs of its logical and intellectual dishonesty.
It reminds me of a joke:
A woman married for the fourth time told her new husband to be gentle, she was still a virgin. He asked how that could be. She said her first husband died in an accident on the way from the church; her second was an older man, and had a heart attack before they got to it; the third was a FairTax fanatic who did nothing but sit by the side of her bed telling her how wonderful it was going to be.
Such as...
No. I'm just laughing and seeing how far they will go on their demented path. You should have addressed it to piggy and a_g -- before they made fools of themselves!
LOL! I wasn't pinned down, you idiot. I tried to be nice and give EV a bone and you claim he pinned me down! Come on....your unprincipled dishonesty is getting tiresome.
This may be the first honest and correct (assuming that you aren't trying to fool us) statement that you've made in this whole debate
EXCEPT
the income tax hasn't made you succesful unless you are profitting from the horrible mess that it is and THAT is nothing to be that proud of when you consider the power it gives to the Feds.
If you aren't profitting from the system, you will be freer to be even more successful when the constraints of the F.I.T. are removed.
I assume that's rhetorical since I have expounded on this, here and two other earlier threads, as you know.
This would be a good place to point out that the federal government today spends far outside and above the enumerated powers delegated to them by the Constitution. I believe they could easily meet all of their real constitutional obligations with a 10% retail tax, max.
However, in a practical sense, you can't even begin to address that problem politically, since most of the tax burden is hidden. The people are fooled. Out of sight, out of mind, and all of that.
So, the first step to putting government back in its rightful constitutional box is to get the tax burden completely out in the open. The NRST is the only tax reform plan that does that. The only one. And the only way you can start is by making it revenue neutral.
Once we implement it, all Americans will then be united in one self-interest: Lowering the rate.
Under the FairTax, we will have the tools we need to restore constitutionally limited government.
Without it, it ain't gonna happen.
Nothing rhetorical about it. I assume, since you are implying we are all liars, that you would be able to enumerate the lies easily. The only thing I have heard is that we are snake oil salesmen. Prey bless us with an example.
Without it, it ain't gonna happen.
It (the FT) ain't going to happen, either, because the government won't pass it, in part because it's smart enough to see the threat to itself. I thnk the FT fanatics know this, which may explain their stridency and BS in trying to sell it.
You have convinced me. The total mess with the 50,000 pages of taxes and the system that punishes you for success and allows some to escape paying but not others and gives the government the power to jaol you and take everything you worked for is better than a single tax on the end user of an item. No, we wouldn't want to change THAT wonderful, fair, simple system!</disgusted sarcasm>
Then you have surrendered. If you are correct, it is impossible to restore constitutionally limited government in the United States.
I don't believe that in the least, but even if you are right, some of us will continue to fight with all our might to the very end.
but since the employees are pocketing 2/3rds of the savings by eliminating the income tax
Pocketing the savings? Looks more like they are spending and paying NRST when they spend.
H.R.25Fair Tax Act of 2005 (Introduced in House)
`SEC. 101. IMPOSITION OF SALES TAX.`(a) In General- There is hereby imposed a tax on the use or consumption in the United States of taxable property or services. `(b) Rate-
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You do realize the NRST replaces the income payroll tax system, and collects no more than the current system does in tax revenues to government.
The biggest advantage may be from the sales tax causing inflation and devaluing the dollar even further, making our goods more competitive.
You do realise, don't you, the currency exchange markets cause the dollar to appreciate in response to move the initial offset in trade balances induced by addition exports towards balance, Not cause it to inflate as you maintain.
Looking over the content of the following report regarding changing the current income tax system that is a source basis tax, to a sales tax which is a destination basis tax, we find some interesting effects of a retail sales tax applied to imports and domestic products equally but applied to domestic manufacture for export.
| ftp://ftp.usitc.gov/pub/reports/studies/PUB3110.PDF PDF page 33 Finally, Hines (1996b) argues that exchange rates move to reflect international differences in goods prices. Thus any increase in export competitiveness caused by a move to destination basis would ultimately be offset by appreciation of the U.S. dollar. Another line of reasoning is that countries use receipts from exports either to import immediately, or to make investments abroad which ultimately provide income to pay for a larger volume of imports in the future. Both of these arguments are based upon the observation that strong economic forces keep a country’s trade in approximate balance regardless of what other policy changes it may undergo. The likelihood that the change from an origin-based system to a destination-based system would in fact generate incentives to export and disincentives to import ultimately depends on the strength with which the long-run tendency toward balanced trade in fact operates. Grubert and Newlon (1995 and 1997) point out that a destination-based consumption tax does create an incentive for cross-border shopping, if goods can be reentered tax free, and for consumption abroad through travel or emigration. Finally, the ultimate effect of a flat consumption tax on the price of particular goods will depend on demand elasticities. Those goods for which demand is relatively inelastic may be able to pass through a larger price increase (tax inclusive) to purchasers than those with elastic demands.29 Whether this would happen in specific cases would depend, among other things, on the price behavior of production inputs and competing products. |
From what the paper has to say about the effect of a flat sales tax hitting both domestic manufacture and imports equally we would see
- an appreciation of the dollar (expanded purchasing power, e.g. lower prices) and
- an influx of investment from abroad in US industry,
to return trade balances back towards equilibrium over the long term after an intial surge in exports in relation to imports to the US.
Thus substantial benefit to the US economy and American standard of living arising from the implementation of retail taxes in place of the current income/payroll tax can be expected.
Strange, just what Jorgenson's results indicate should happen.
"3.Holding net foreign investment constant,the fourth chart shows that exports would jump by 26.4 percent under the NRST, while imports would rise only modestly. This is the consequence of excluding exports from the tax base while including imports. The initial export boom would gradually subside, but exports would ultimately remain more than 13.3 percent above the level under the current tax system, while imports would fall a modest 0.9 percent below this level."
The FairTax authors make no such agreement - that's merely your "spin" ... and it's incorrect.I guess you can't read.
Is that ever a relief!!!
LOL, you call me ignorant and you make a statement like that! Learn about the Fair Tax and get back to me. For an item that costs $100, the retailer has to add $30 to it for a total of $130. The so-called '23% tax' is 23% of the after tax price of $130. The retailer keeps $100 and sends in $30 to the tax collector. If you had a clue about the bill you would know that.Another victim of the AFT's "honesty." Of course, the inclusive rate is just for comparison! .:wink:. .:wink:.
I have not used the term "lies", because I am willing to give the benefit of the doubt that many of the devotees are deluded and may believe what they say. Just because they may believe what they say does not however, make it true, or make it gold instead of BS.
I've posted a number of these previously. Here, I'll give you one example: pigdog is under the delusion that the FT is going to be passed into law just as its devotees have cast it in their proposal, without the amendments or compromises that are part of the legislative process. He argues this point with unshakeable Faith, and cannot give it up -- but it is BS.
The rest of the world knows that, in the unlikely event that FT were ever passed as a law, it would look very different from its initial form in HR25.
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