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 ...
Then how are the revenues accounted for?
So, in effect, if I'm a blue collar worker with a family of six to feed and groceries cost $400 a week, then under the Fair Tax plan, I could end up spending half my take home pay on food. Conversely, if I'm a rich guy feeding my family of six, groceries will cost about 1/10 of my weekly income?
...also, it seems like the perfect opportunity for the gubmint to play nanny, like they do with cigarette taxes. Ice cream, chips, and pork rinds could be taxed at a higher rate than fruits and veggies.
Then how are the revenues accounted for?
The same retail sales tax audit and general administration efforts the states use in collection accounting for their sales tax today will continue to be used by them for the national retail sales tax implemented under the FairTax legislation.
The NRST is administered by the states in parallel with their own operations.
The turnover of administration to the states retail sales tax bureaus is covered in Chapter 4 of the bill:
H.R.25Fair Tax Act of 2005 (Introduced in House)
`CHAPTER 4--FEDERAL AND STATE COOPERATIVE TAX ADMINISTRATION
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How much do pre-tax prices for goods and services go down under the FairTax? All goods and services already contain the embedded costs of the current tax system in their prices. When these embedded taxes are removed, prices come down. Dale Jorgenson, Ph.D., former chairman of the Economics Department at Harvard University, has projected an average producer price reduction of 22 percent for goods and services in just the first year after the adoption of the FairTax. In addition, the FairTax lowers compliance costs by an estimated 95 percent and the removal of these costs will force prices down even lower.
"All goods and services already contain the embedded costs of the current tax system in their prices" sure sounds like they are talking about income taxes and payroll taxes. And this makes clear that they aren't counting compliance cost savings in their 22% expected reduction, any idea where the 22% is going to come from?
The FairTax.org site doesn't tell us.
So, in effect, if I'm a blue collar worker with a family of six to feed and groceries cost $400 a week, then under the Fair Tax plan, I could end up spending half my take home pay on food. Conversely, if I'm a rich guy feeding my family of six, groceries will cost about 1/10 of my weekly income?
Yep, and both receive the FCA sales tax rebate, covering the NRST up to the HHS povertylevel of consumption.
Married six kids, the sales tax rebate for that family of 6 kids would be $723 per month covering taxes on $3,143 expenditures per month.
Instead of opening the political and administrative rats nest of excepting specific items or persons from paying the NRST at the cashregister, the Fair Tax Act(H.R.25) provides what amounts to a personal exemption in the form of a demogrant that all legal residents and dependants will receive; a monthly amount called the Family Consumption Allowence(FCA) equivalent to the FairTax paid at the HHS defined poverty level of expenditure. The FCA is paid in advance, in equal installments each month by check or electronic tranfer to bank account from the Social Security Administration.
The size of the monthly FCA will be determined by the government's Poverty Level for a particular family size, multiplied by the tax rate, and paid to all households regardless of income or actual expenditure. The HHS poverty llevel is a well-accepted, long-used poverty-level calculation based on the cost of a healthy diet comprising 1/3 of total family budget value Essentially, the poverty level is defined to be 3 times the retail cost of food.. The HHS povertylevel statistic is fixed in 1969 dollars updated annually for CPI including sales and excise taxes and published annually in the Federal Register.
Essentially, the poverty level is defined to be 3 times the retail cost of food..What does my food cost me?
marking
. And this makes clear that they aren't counting compliance cost savings in their 22% expected reduction, any idea where the 22% is going to come from?
Yes from Jorgenson's analysis of the effect of repealing the income and payroll tax system replacing it with a retail sales tax only system on the economy.
The 22% is the average fall in price of goods and services received by producers sans the retail tax and includes the effect on business and consumer response to change in the tax system, effects of increased investment saving promoted under a retail sales tax system, effects of an expanding economy with release of manufacturing, wholesale and all upstream businesses from the effects of the federal income payroll tax system on both domestic and international trade arising from subsequent efficiencies and increase in productivity causing lower general costs of manufacture, delivery/production of all goods and services throughout the economy.
I refer you to the section of the Tax Analyst's article about the Income/Payroll tax system and its impact on our economy ": A. Hidden Upstream Taxes. " paragraph 39.
"[39] Dr. Dale Jorgenson, Chairman of Harvard University's Economics Department, believes that the price of goods and services are inflated by about 20 percent or more by upstream taxes consumers ultimately bear. In a recent paper Dr. Jorgenson estimated the built-in taxes contained in the price of goods and services. /22/ In the chart above, he quantified the hidden component of tax, estimating that producer prices would fall on repeal of upstream taxes an average of about 22 percent."
Looking at the accompanying chart, the range of values from industry to industry appears to be about 12-25%.
It is well to note that producer price in context of an supply demand equilbrium solution on which the study is based is price received by producer after remittence of tax to government. Price paid by consumer (consumer price) is producer price including tax.
It is a good start on one. It would be the area where the social engineering would start. They would means test it, then probably increase the prebates gradually for those who still qualify based on their SOCSEC reported wages. Then they will start eliminating certain items from taxes and raising the taxes on the remaining luxury items. At some point they add the income tax surcharge back on the rich people, and on and on...
Politicians crave the power to buy votes, they will find a way.
What does my food cost me?
What ever you want to spend for it.
The FCA sales tax rebate you receive under the FairTax act is fixed at 3 times the price of a healthy diet as it has been defined by HHS since 1969 updated for CPI including sales and excise taxes and published annually.
Essentially, the poverty level is defined to be 3 times the retail cost of food.. .... What ever you want to spend for it.My poverty level is three times whatever I want to spend for food?
HHS povertylevel is time expenditure the HHS as determined the price of a healthy diet is for a family of specified size.
You can eat what every you want, you will be compensated for sale tax at the fixed rate set by size of family and the HHS povertylevel statistic time tax rate.
Eat too much, not only will you get an unhealth belly, you will pay the tax on any expenditure above the HHS povertylevel.
Gluttons are welcome, they can help pay down the federal deficit.
I don't see how tracking individual transactions can be avoided as there must be some accounting control to verify sales and the amount of tax owed.
Businesses already record each transaction at the time of sale. The business has one copy and the consumer gets a receipt. Businesses need answer only one question to determine the tax due: How much was sold to consumers?
the HHS povertylevel statistic time tax rate.You made the claim that the poverty level is three times the retail cost of food.
One more time. What is three times my retail cost of food?
I read the link you provided. It seems to be saying that the tax on business is repsonsible for most of the embedded tax, and that these will be removed. But for a small biz like an S-corp, the profits (K1 distributions) are passed to the business owners as personal income and taxed at personal levels.
So the only way that a small bizness would have a lower cost of production would be if the profit to the owners was reduced by the amount that they are now paying in income taxes on the profits (K1 distributions). The owners would receive the same amount of profits as they now have after income taxes.
The small business owner (or shareholders) would not receive the same income tax removal that employees get. Is this what they are saying the embedded taxes are going yo be saved from? If so, every employee gets his full paycheck plus what has been taken in taxes, while business owners get the same as they get now.
That would explain where the extra money is coming fromm it is coming from the business owner. Of course they would reduce wages to employees to compensate for the unequal treatment.
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