Posted on 08/03/2005 4:51:43 PM PDT by RobFromGa
A simple question...
So, under the FairTaxI get to keep my whole paycheck, prices for everything I will buy will stay the same even with the taxes included, and I get a prebate check from the govt every month. And businesses pay no taxes.
Where is the extra money coming from...
What is wrong with this reasoning below?
1. Right now the government collects $X in the form of all taxes.
2. All taxes are really paid for by consumers in the end result, either directly, or in the cost of their purchases which allow businesses to collect money in order to pay taxes. Companies do not really pay taxes they jsut collect them and pass them on.
3. The FairTax will collect the same $X per year in the form of taxes but using a different method.
4. Under the FairTax, the price paid for goods will not rise because getting rid of all the taxes built into goods will cause the prices to drop, then the FairTax will add onto the new lower price, resulting in the same price paid by consumers.
5. So, for a given taxpayer, shopping (consumption) will be revenue neutral. Ie. Prices are the same as before.
6. And each given taxpayer will get a "prebate" check every month that they are not getting now.
7. And each taxpayer will pay no taxes on capital gains, or on savings.
8. And, each taxpayer will no longer pay any taxes on income, or payroll taxes.
9. And, there will be no Fair Taxes on any purchases made for a business.
Are these all true so far?
Again, I get to keep my whole paycheck, prices for everything I will buy will stay the same even with the taxes included, and I get a prebate check from the govt every month.
Where is the extra money coming from???
I don't have a good idea on what either the single level compliance costs or the typical company's costs from purchasing from other companies. The second could probably be estimated by getting tax returns from every company and comparing income to non-labor expenses.
Compliance costs would be hard to calculate because I expect that direct compliance costs (hours spent by accountants) would be smaller than the indirect cost of doing economically stupid things to jump through tax hoops. Recently some investors wanted to put money into where I work. Probably 80% of their discussions were about tax consequences of their actions instead of whether their investment would make money.
I'm still wondering how retail purchases (hotel, car rental, plane tickets, airplane tickets, auto fuel, meals, office supplies, printing, trade show supplies, capital goods like TVs and laptops, etc used for business) are going to be sheltered from the FairTax without requiring compliance costs to prove the business usage, and at the same time keeping many people from abusing the system since there will be no paper trail?
I agree and thought that I had said exactly that. Perhaps i did not say it clearly enough so thanks for the correction!
I'm multitasking here BIG TIME this morning so I'll admit to not spending a lot of time on what I have written here.
No idea off the top of my head.
There have been rumors of an employee at my company [not mentioning who :-)] who found out a local computer store had the company's tax ID for sales tax exempt sales entered into their cash register. That employee just said he was from my company and the purchase came up tax free.
The other problem I see is that there is an incentive to hire people rather than pay their employer. For example, I could pay for a lawn care company and pay 23% tax on it. Or, I could hire the same guy as a part time groundskeeper as an employee for a couple hours a week and not pay taxes because he's an employee.
This is the opposite of the current tax incentives where an employer benefits by saying a person doing work for them is a private contractor who gets a 1099 instead of an employee who gets a W-2. There are all sorts of complicated IRS rules defining who is a W-2 employee and who is a contractor.
I'm sorry I took this out of context:
To: RobFromGa
A trillion annual on IRS operating and enforcement expenses alone.
8 posted on 08/03/2005 6:58:21 PM CDT by Dead Corpse (Never underestimate the will of the downtrodden to lie flatter.)
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Doubt it. AFAIK, there is no death tax with the Fair Tax plan.
Of course it will. And, as I wrote in my previous post, I am 100% in favor of the Fair Tax and it can't be implemented fast enough for me.
My point was that the caller to Boortz had, IMHO, found a hole in the Fair Tax plan and rather than acknowledge this Boortz cut off the caller, changed the subject or 30 seconds or so and then went to a break.
Very unfair to the caller. And very unfair to the Fair Tax plan. No plan is 100%. I'm just disappointed that Boortz didn't acknowledge this and tried to spin his way out of the situation.
Thank you for the link. But the link doesn't explain it either.
Compliance costs would be hard to calculate because I expect that direct compliance costs (hours spent by accountants) would be smaller than the indirect cost of doing economically stupid things to jump through tax hoopsYou aren't getting it. 20 to 30% of the (gross) price of every product/service (no matter what country it's from) is imbedded tax costs. If a company is paying 3% of it's gross in actual tax then 17 to 27% of the price is compliance cost...Oh yea and if five companies in the supply chain pay 5% of their gross then it's 25% "cascading" tax...
Just ask them for an example. phil_will1 has one to show you I'm sure.
Ask him about the "asymptotic curve"...That ought to prove it for you.
phil_will1: "The answer in both cases is the same: they are both asymptotic curves, meaning that they approach a constant but never reach it, even if you extend the curve into infinity. If you were to go thousands of levels deep into the supply chain, you would reach a point where accumulated taxes account for well over 99% of the price you would be paying.
In other words you get to 30% really fast but to get to "well over 99%" takes quite a bit longer.
Look, if you aren't going to be honest about it, just stop. Ok? Childish...
In some cases - those in which only few hands have been involved in the production - it won't. In others where many hands are involved it will be much more.
When fairtaxers talk about that they are, at least all the ones I know, talking about an AVERAGE.
we have surely hit rock-bottom if we are using Jimmy Carter as a positive reinforcement for a point being made at FreeRepublic. </sarcasm off>
I do get it. I just don't accept that the number is that high. I could be convinced with actual numbers. I figured about 9% was the cost for directly embedded taxes (SS+medicare for labor at every step and corporate income tax for corporate profits at every level). That means that the rest of the embedded tax(14% by taking the middle of your 20-30% total - my 9% direct figure) would have to come from compliance costs at every level. That would be about leave about a trillion dollars agregate compliance costs for the entire economy. I don't believe that $1 trillion of the economy is spent doing tax accounting or inefficient investments to avoid taxes.
Oh yea and if five companies in the supply chain pay 5% of their gross then it's 25% "cascading" tax...
But that's only true if each company's full expenses are for supplies from the next company in line without adding any of it's own value. If each company's output is made up of 40% bought from the last step in line and 60% from its own labor and profits, then your 5%/level compliance cost adds up to 5 + 5*0.4 + 5*0.4*0.4 + 5*0.4*0.4*0.4 + 5*0.4*0.4*0.4*0.4 = 8.25%. Carried out to an infinite number of levels you reach a limit of 5% / (1-0.4) = 8.33%. Pick different values for single level compliance costs and pass through from one level to the next and you get a different final value.
If you really want to know and aren't just yanking our chain, go to http://www.fairtaxvolunteer.org/smart/tax_system.html and look at the very bottom Table 2.
Sorry, DC, the 2005 budget for the IRS is $10 Billion. It only FEELS like a trillion.
I'm not so sure about that. If THK buys a diamond-studded collar for her lapdog today she would pay $X. $X includes the 20-25% imbedded tax. She also does not pay much in income tax (because of the tax-free investments).
With the fairtax, if she buys the same diamond-studded collar for poodleboy, she would still pay $X because prices would not rise according to boortz/linder. But this time there is a 23% sales tax imbedded into the cost. She still pays no income tax.
She is no better or worse off than before.
The annual budget for the IRS is $10 Billion, for 2005. Per the IRS website.
Don't be complacent. Write your elected officials. They need to know the grassroots supports this. I wrote mine yesterday.
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