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.
Hey, post that to pigdog and ancient_geezer, they're the ones beating it to death -- while we stand around and watch. LOL!
More probably they figure (as does pittipat) that the number doesn't mean that much to most people. It does, however, to me. I prefer the correct figure but I klnow you guys can't even spell 29.87%.LOL! So when expatpat says 30% he's trying to fool people, but when the AFT says 30% "they just got tired"!
Yes, health care premiums are taxes as is health care itself unless it is covered by a plan that has been taxed.
But again, the cost of those premiums as well as those of the health care providers will be reduced because the hidden cost of government will have been removed.
You also get a prebate.
You also get your full paycheck.
You will have more money and prices will be lower.
You've been told that repeatedly. Why do you always act as that will not be true?
If I can improve my margins by 20%, why give that up to get a 10% increase in volume? I'm beginning to wonder about you.....
Maybe we should argue for a 10% rate. Most of the SQLs would scream like stuck pigs at the lost revenue to their beloved status quo.
Sticks in your craw, don't it???
The formula you presented as being meaningful in relation to the sales tax was one that determined the employee cost as INCOME taxes were changed and showed nothing at all in relation to the FairTax.
You merely were presenting a lie disguised as fact and were caught. Tell us nightie, how the income tax and the FairTax are the same thing and how, since the FairTax base is consumption and not income that a formula dealing with income tax rates is meaningful at all. Hint - It ain't; it's merely a lie.
Thass funnee, nightie. I nailed uyou with 11 lies on the last thread.
Your creditility is zip to most people who have been on a few threads with you.
Ahh I see, so your contention is that business operates without calculating competiton.
So all those businesses will just agree not to change the status quo and just operate at current levels and not try to change their market share and seek an advantage. Correct?
Agreed!
Now you're getting it. It sure beats racing with your competitors to get to the lowest price to see who goes bankrupt first.
If you claim to be sure that the revenue-neutral number is 23.0% and not 23.1%, then you are either BS'ing me or delusional
I don't, I figure the revenue neutral number to be closer to 18-20% tax inclusive not 23%. Based on current federal revenues collected through income, payroll and gift estate taxes as a percent of reported annual national retail sales in the U.S.
Have your class envy always been this rabid?
The more you spend, the more tax you will pay under the FairTax, so that should make you very happy.
Right now, most of those hated 'billionaires and their useless heirs' aren't paying income taxes because they can afford to shelter their income from the tax man. When they spend their money on caviar and Rolls Royces, you will be getting back at them.
You should be on board with this plan just because of your hatred/envy/jealousy or what ever it is that drives you.
expatpat:"Now you're getting it. It sure beats racing with your competitors to get to the lowest price to see who goes bankrupt first.
OK so with your assertion that business operates without regard to competition in mind why not just raise your prices 20% now and forget the NRST? Wouldn't you make more money?
Maybe we should argue for a 10% rate. Most of the SQLs would scream like stuck pigs at the lost revenue to their beloved status quo.
Heck they complain it's not enough at 23% in the opening article, and nearly every other thread I have been on.
You don't figure they would buy into a lower tax rate do you? Far as I can see the tax rate has nothing to do with there opposition, unless they figure government is not taking enough from us already.
You'd prefer a lie like you give, perhaps, nightie???
That one on the right looks a lot like nightie ... hope we're not related!
Sticks in your craw, don't it???You being a complete and total dumba$$? No, I find it kinda funny (and useful - thanks).
The TAX system, not our form (at least as intended) of government. The tax system is immoral. Of course, the perversion of our system (as it now operates) of government is getting pretty immoral also.
Oh, I see - you think it really funny that you lied. You only THINK you got away with it my friend.
People on FR are onto your litle shtick.
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