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.
That's one of my biggest beefs with the 'fair tax' proponents. They make extreme claims that aren't true. They say they eliminate the IRS, technically true I suppose, but there is still a federal revenue collection agency, just not called the IRS. Is that really an improvement?
The difference between 'no' record' and name, SSN, and address so that you can get a check that you are applying for is so small as to be ridiculous. If you are hanging your hat on that argument, then just come on board.
The IRS is defunded and torn apart. What the IRS REPRESENTS will also be destroyed. There will no longer be tedious reporting of the most intimate financial details to the Feds. Yeah, some one will always have to count the money. But the tyranny in getting it from the free people of this country will end. Do you have think that's not good?
Are you done picking nits?
Good. Pigdog apparently does, though.
I already covered that earlier in the thread.
Really? Which Part?
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'm still waiting for your answer.
The reply to you in 903, was a question about what you figure the revenue-neutral number to be.
It was not about the tax rate stated in the legislation, which is indeed "23 percent" of gross payment as defined for 2007 implementation of HR25.
Perhaps you would like to answer the questions instead of digressing, or wandering off on some debate over a hypothetical rate of 23.0 or 23.1%. Rates which I don't view as even close to the actual much lower "revenue-neutral" value that would be established with a full economic study based on current economy, government revenue under current tax cuts that have been implemented since the 1999 introduction of the FairTax legislation.
1) What common measure should be used to specify tax rates so they can be compared between the different proposals out there, whether they be NRST, Flat Tax, VAT, or some lesser modification of the graduated income tax?
2) What is your estimate of that realizable revenue neutral rate for this discussion, framing the debate around the actual criteria the president has laid down recognizing the legislation replaces all federal income, payroll and gift/estate taxes?
Nope, you've got it wrong, pittipat. I'd love to see those lower tax rates and I think we probably will either with the passage of the bill or very shortly thereafter.
I believe the economic expansion alone will cause the rates to drop. No matter what the rate, though, I still expect to see it calculated correctly from whatever rate is in the final bill. It that is 23% t-i, then the correct t-e rate would be 29.87% since it would be derived from the bill's figure. Sales tax rates are frequently carried to two decimal places but I have never seen them calculated beyond that.
LOL! Yes you were, you idiot.
Wasn't impressed...
Oh, I was. Since reading #150, I've had bumper stickers made up reading "Read #150", it's part of my answering machine message, and I've been chanting it as my new mantra.
mmmmmm Read #150. . . Read #150. . . Read #150. (sitting in lotus position) mmmmmmm
For discussion purposes, the rate is 30%. Get over it. If you wish to use the 29.87% number, knock yourself out. I am getting a kick over how annal you are being about this.
Wal mart won't like the nrst as much as business that sell domestic goods.
Imports will not experience the cost savings associated with reducing the costs of our tax system.
Of course, China is at a huge advatage already due to relatively little labor cost.
Walmart is gonna have to start selling domestic goods.
I bet there's some reason you don't like that.
You say this 20 times per thread. You must be selling snake oil trying to get people to avoid any tax reform in favor of your marxist progressive income tax.
What ugly thoughts you have.
Me first. I'm still waiting for an explanation of what is :
"the BS that is sprayedd around by the acolytes of the Fair Tax proposal."
#857
Good. Pigdog apparently does, though.
Are you agreeing that 19-20% is the more proper revenue-neutral rate as should be implemented for the FairTax legislation? or do you have a better estimate of current conditions, not those existing back in the Clinton era.
Remember, I asked you for your estimate of revenue neutral rate for the FairTax, not mine, and the best common measure to use to represent it for comparison with other tax plans competing with the NRST like "Flat Tax", Business Transaction Tax, VAT or some lesser modification of the current income tax system.
Still looking for your answers. Seems to me discussion depends on laying out where everyone stands on the NRST rate and whether or not the proposed value in the legislation means anything other than a provisional place holder and going from there.
That, to me, is the best way to get the board cleared, and discuss merits rather than continual digressions on the trivial.
Weak-minded ones are always easily amused. Children and puppies are the same way.
Keep it in mind ... 29.87% as calculated from a stated 23% because, you see, some sales tax rates are quoted to two decimal places - your idiocy not withstanding.
He thinks you're serious.
A-blessed-men!!
Yep, my idiocy. As if I am the one bent out of shape that 29.87 gets rounded to 30. After all this, that is the point you wish to make. Gee, you are really scoring big points.
Why ask me? -- I don't have the slightest idea, or care. If you and Schweinhund say it's around 23%, I'll not argue with you. However, if you tell me its 23.0% and not 23.1%, as Schweinhund tried to do by quarreling with 30 vs 29.9, then you are wrong.
I'm certainly not "bent out of shape" about it but merely stating that whatever the FairTax rate figure ends up being in the bill, it should be - when calculated as t-e - calculated correctly and carried out to two decimal places if it does not come out to an integer.
No point in being sloppy like the SQL crowd.
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