Posted on 08/15/2005 5:55:06 AM PDT by OESY
A major domestic battle looms this fall, when tax reform-- a centerpiece of the president's bold domestic agenda-- will finally be on the table. The President's Advisory Panel on Federal Tax Reform is expected to release its findings by the end of September. After the political shellacking the White House took on Social Security, the administration will be strongly tempted to take a conciliatory path that supports only superficial reforms, essentially preserving the status quo of our hideous income tax code.
Such a course would have perilous consequences, economically and politically. In fact, the administration has an opportunity here to boldly retake the initiative, to recover lost political support and thrust an already decent economy into high gear and, at the same time, make America better able to meet intensifying competition from China, India and others. How? By junking the entire federal income tax code and starting over with a flat tax. A growing number of countries are doing this -- and so should we.
The current system is beyond redemption, a beast whose complexity, confusion and outright unfairness have corrupted our economy and society. Americans waste more than $200 billion and over six billion hours each year filling out tax forms. They engage in all kinds of useless economic activity intended to take advantage of the code's complicated maze of deductions and to reduce taxes -- from deducting donations of old socks to making unwanted investments. The waste of brainpower -- at a time of increasing global competition -- is incalculable.
The code corrupts our system of government by encouraging the crassest political conduct and by creating a massive, intrusive federal bureaucracy. One-sixth of the private-sector employees in Washington are employed by the lobbying industry. One-half of their efforts are directed at wrangling changes in the tax code....
(Excerpt) Read more at online.wsj.com ...
Sorry Nightie, you're the one with the silly ideas. The report is clearly called out in the bill and I'll certainly let readers figure out what the requirement might be.
It will certainly be dramatically less that most state sales tax reports at present and insignificantly so in comparison to finling under the present income/payroll tax system.
Also your spin on Linder's testimony leaves out the fact that he ALSO said:
"So they would not be taxed and we would not ask the Home Depot to make the decision whether or not to raise the tax from them. Any business-to-business transfer will not be taxed at all."
This last part of the statement indicates that there will be no tax charged and not that tax will be charged and then rebated by tax credit. That conforms to the registration certificate method and the earlier part applies to the business conversion credit. And since that is how many stores operate now, I would expect that to be the normal method. It makes little sense to do the VAT-like invoice credit operation and also makes auditing more difficult.
The registration certificate does not require the seller to make any decisions relating to taxable or not - he is covered by the bill - and clearly so.
You can think however you like ... and we all know how that will be; as deleterious as possible to the FairTax.
Well, Looey, you certainly pose no threat, then.
It's not administered by the same folks. There are innumerable service sector businesses that will be required to report income and report and sales taxes that do not do so now--probably the majority of businesses in the US. And thanks for jumping into the middle.
IT's OK by me that individuals are not tied to tax receipts, but if they aren't how is the quality of income reporting monitored?
Our current system couldn't be improved upon by the devil himself. But I don't know which is worse. The government knowing how much money I make, or where I spend it?
$20. Why?Because that is the largest bill that is used anyway.
But I have no desire to see the rules overturned in a way that badly hurts large numbers of folks, and this proposal would do that. Lots of folks have ordered their lives according to the rules, and have prospered accordingly. Yanking the rug out from under these folks now isn't fair or right.
Many people ordered their lives according to the rules prior to the existence of the IRS and the 16th amendment but somehow they survived. Eliminating the approximately 60,000 pages of the IRS code will simplify their lives and consequently make their lives more orderly.
I've gone over the transition accommodations in previous threads. For this particular example, I haven't heard any. It isn't like the govt is going to give me back part of the cost I expended on the property, and in fixing it, to compensate me for getting screwed by the fact that I won't derive any additional income through tax savings, while the rest of my personal expenditure costs rise by the average sales tax I will have to pay.
The worse case scenario is no one will be able to recover expenses prior to the enactment of the Fair Tax anymore than can be recovered by the passage of any other type legislation. The short term situation of products that have already been taxed in the pipeline prior to the Fair Tax becoming law will eventually be offset by the long term benefits of the new tax system. Most personal expenditures for many people are for necessities. Taxes on necessities will be off set by the monthly rebate check.
However, don't worry, very little of this compliance stuff will go away under an NSRT. In thinking about this, I can find very few pieces of information that I will no longer have to report to the government, and very few pieces of information for which I will no longer have to maintain documentation.
Much of the federal compliance will be eliminated. As far as businesses complying, they will need to answer only one question to determine the tax due: How much was sold to consumers?
Stupendous Man!!
1) if there are no exemptions, then what happens to wholesalers or manufacturers ?
They pay no federal income or payroll tax no income to apply exemptions too. Furthermore they are exempt from paying the FairTax on business purchases. Appears to me costs for said businesses will go down considerably in those areas impacting tax accounting/reporting, litigation and planning/avoidance.
Are they going to have to pay sales tax on vendor to vendor sales or on raw materiel purchases ?
No, because the FairTax is a National "Retail" Sales tax. Business to business purchases are not taxed.
Won't this drive the price of goods way up overnight ?
If no business pays income or payroll taxes (repealed under the FairTax legislation), no business pays the National "Retail" Sales Tax on their purchases for business use. Just what is going to drive the price of goods way up overnight?
If the National Sales tax is as easy as you all say it is (which I still have my doubts) then that would be great but I also believe that non-compliance would be incredible since sales tax is one of the easiest taxes to avoid paying for people who choose not to (in certain fields).
Non-compliance evasion is incredible now under income/payroll tax system that the Fair Tax would replace. Under that system cash income merely needs not be reported with none the wiser which is why the current system has non-compliance and evasion rates under the underground cash economy estimated to be as high as 25% GDP.
Under a retail sales tax system there are 90% fewer filers (making it easier to monitor), each transaction involve two persons involved creating more potential witnesses to the activities involved in retail sales and taxes. The marginal rate of a federal retail sales tax at 23% is substantially lower than the marginal rate on next dollar of income under the income/payroll tax system weighing in at 40%+. The higher marginal rate assures that the income tax encourages more evasion at the margin (where it counts the most) than a retail sales tax at 23%.
For non-compliance and evasion to be an issue, you must show the FairTax evasion rates would be higher than the current income/payroll tax system it replaces. Merely looking at the fact that more 80% of dollar volume in retail sales is done by less the 20% of retail businesses (represented by the largest who are not about to risk loss of license to operate over not collecting a tax from their customers). That fact alone argues that there will be lower evasion and non-comliance than with the current federal tax system the FairTax NRST would replace.
3) is every person who has a garage sale, or sells a car or boat, etc. or who gets a table at the local flea market, going to have to collect national sales tax ? I just don't see that happening.
Your right it won't be happening because most of those folks deal in used items not taxed under the FairTax legislation. Only new products are taxed at retail sale, and only taxed once under the FairTax NRST.
Point by point your issues are simply not there in reality, it would behoove you to actually study what the FairTax act actually does rather than speculate and get it wrong.
It's not administered by the same folks.
State tax administrators will be responsible for administrating the NRST in parallel with their own sales tax regardless. So yes the same state tax folks will be administering both the FairTax and any current state retail tax existing.
There are innumerable service sector businesses that will be required to report income and report and sales taxes that do not do so now--probably the majority of businesses in the US.
Hmm, don't know many that would not be required to report income under the current system of federal income/payroll taxes.
Service sector in most states do not remit retail sales tax today, but they certainly remit the SS/Medicare taxes on wages and they certainly file federal income tax both of which go away under the FairTax to be replaced by a national retail sales tax administered by the states.
And thanks for jumping into the middle.
This is an open forum if you have not noticed that yet. The purpose is for commentary on any aspect of the thread. So you are very welcome.
I don't know which is worse. The government knowing how much money I make, or where I spend it?
Don't see any provision in the FairTax act that provides any information to government on where an individual spends their retail dollar any more than current state retail sales taxes provide such information.
There certainly is no place on the mandatory receipt tracking who is purchasing anything and that is the only record required sellers who remit the tax collected regarding retail purchases.
H.R.25Fair Tax Act of 2005 (Introduced in House)
`SEC. 510. TAX TO BE SEPARATELY STATED AND CHARGED.`(a) In General- For each purchase of taxable property or services for which a tax is imposed by section 101, the seller shall charge the tax imposed by section 101 separately from the purchase. For purchase of taxable property or services for which a tax is imposed by section 101, the seller shall provide to the purchaser a receipt for each transaction that includes--
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Humor me.
Let's say we convert to a national sales tax. Rather than reporting income taxes paid by classes of individuals or corporations, we'll have the capability to monitor taxes paid by market sectors. Let's take a loaded example (pun intended) like gun shops.
If we're engaging in social engineering based on income now, what kind of politics can we expect with statistics like: Americans spend more on guns than they do on antacids! Horrors! They must be taxed more!
I don't trust Congress any farther than I can throw the capital.
We already have "luxury taxes" and "vice taxes". What would make anyone think such things wouldn't come about over and above a national sales tax? And we pay, and pay, and pay. And do you ever hear anyone seriously suggesting that it's just a crime for the government to impose such sector a taxes and be effective in getting rid of them?
The answer is NO. The money is too easily had.
As I understand it, the sales tax will only apply to final sale of new finished goods. One of you "Fair Tax" experts might chime in with more detail.
"2) I am in a business where everybody who can, tries to pay in cash (to avoid sales taxes and to get a better deal. Adding yet another sales tax is going to encourage more people to try to use cash to avoid paying tax. (please don't tell me that people are going to change their ways just because we hope they do) Any contractor knows that folks who can, love to pay cash if they get a break on the price and just about everybody will take cash over a check, any time if only because "a bird in the hand is worth two in the bush"."
I'm sure there will be "some" level of noncompliance, but I doubt that it will be a significant percentage of the tax. States obviously already have to live with it.
"If the National Sales tax is as easy as you all say it is (which I still have my doubts) then that would be great but I also believe that non-compliance would be incredible since sales tax is one of the easiest taxes to avoid paying for people who choose not to (in certain fields)."
See above comment.
"3) is every person who has a garage sale, or sells a car or boat, etc. or who gets a table at the local flea market, going to have to collect national sales tax ? I just don't see that happening."
Again, as I understand it, the "Fair Tax" only applies to sale of new merchandise--no tax on resale of used goods. There are lots of threads on FR, where the ramifications of the "Fair Tax" are thrashed out in detail.
No, it's quite clear that the registration certificate would be the requirement for most retailers. Many of them operate in this fashion right now. Present your certificate and claim the non-taxed status.It's not "quite clear." Linder's statement added some clairity to the situation.
The credit that may be cleimed by the procedure mentioned is for conversion of a business purchase to a personal purchase and for other excep[tions. It is not the normal method of claiming "no tax". That would make it into something like a credit invoice VAT which it is not. Most stores such as Home Depot accept such certificates right now.But Linder says they won't be asked "to make the decision whether or not to raise the tax from them [businesses]." So, according to Linder, they won't accept such certificates.
And YOU are the one always whining about us "putting words in someone else's mouth" when you're trying to insert you own interpretation into his statement.No, you are trying to twist his words. I will post the entire quote again with the question he was responding to so everyone can see how clear Linder was and how you are trying to change the meaning of his words:
MR. CAMP: "All right. Thank you very much. Mr. Linder, your proposal obviously is a retail sales proposal, and property that's purchased for business purposes or services would not be subject to tax. And if the taxability of an item depends on the nature of the transaction, would that be a simpler tax to administer because there still will have to be this evaluation, was the item purchased for business purposes or was it purchased for consumption? And if you could just talk about that a little bit I'd like to hear your thoughts on that."
MR. LINDER: "If a business went to Home Depot and bought some goods from Home Depot they would pay the tax at Home Depot which sells to both consumers and businesses. And they would keep their receipts and they'd use the value of those receipts as a credit against paying the tax in the future. So they would not be taxed and we would not ask the Home Depot to make the decision whether or not to raise the tax from them. Any business-to-business transfer will not be taxed at all."Rep. John Linder
Testimony before the Ways & Means Committee
July 28, 2005
Sorry Nightie, you're the one with the silly ideas. The report is clearly called out in the bill and I'll certainly let readers figure out what the requirement might be.The bill specifies three lines and then says the form shall include "other information reasonably required by the Secretary or the sales tax administering authority for the administration, collection, and remittance of the tax imposed by this subtitle." So the form could get very complicated. The fact that you think it could possibly be two lines shows you live in a different world than the rest of us.
Also your spin on Linder's testimony leaves out the fact that he ALSO said:You've wrongly accused me of doing it several time, but now we have an example of an out-of-context quote. If you take the last sentence out of context of his whole statement, it seems like it says what you claim. If you put it in the context of the complete statement, it says something different. This is the definition of an out-of-context quote. Here, again, is the entire statement which gives a completely different meaning to the last sentence."So they would not be taxed and we would not ask the Home Depot to make the decision whether or not to raise the tax from them. Any business-to-business transfer will not be taxed at all."This last part of the statement indicates that there will be no tax charged and not that tax will be charged and then rebated by tax credit. That conforms to the registration certificate method and the earlier part applies to the business conversion credit. And since that is how many stores operate now, I would expect that to be the normal method. It makes little sense to do the VAT-like invoice credit operation and also makes auditing more difficult.
"If a business went to Home Depot and bought some goods from Home Depot they would pay the tax at Home Depot which sells to both consumers and businesses. And they would keep their receipts and they'd use the value of those receipts as a credit against paying the tax in the future. So they would not be taxed and we would not ask the Home Depot to make the decision whether or not to raise the tax from them. Any business-to-business transfer will not be taxed at all."Rep. John Linder
Testimony before the Ways & Means Committee
July 28, 2005
You boiled down my objection in a nutshell. I don't believe that the FairTax plan can possibly raise the same amount of revenue, and everyone pay less taxes at the same time.
except for the mega rich
According to the FairTax crowd, the mega rich win too. There are no losers in FairTax land, where everyone is above average.
thanks for the ping, you are right about the way that most of the Fair Tax crowd acts towards anyone who asks questions. My sticking point remains that I don't see how the costs of goods are going to come down.
Looking at this as a businessman, say I have employees that make a total of $1 million per year right now. At the present time, I am writing checks totalling about $150,000 to the FedGov for FICA, about $200,000 for federal withholding, and about $60,000 for state tax withholding. The remainder I write checks to my employees. My out of pocket cost is the $1 million.
Under FairTax I will write out the same check for $1 million but it will all be to my employees directly. My payroll costs haven't changed. How am I able to reduce my prices by 20%+ allowing prices to stay the same when the 30% FairTax is added?
The problem will come in when it is 30% on top of prices which won't go down much. This will likely wreck the economy in terms of consumption of new goods, which will be bad for tax revenue and devastating for businesses that manufacture goods and provide services.
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