Posted on 08/18/2005 6:34:27 AM PDT by GPBurdell
NUMBER ONE ---- AGAIN!
The word came in yesterday afternoon. The FairTax Book will remain No. 1 on the New York Times Bestseller's List for the second week in a row. Our editor at Regan Books told us yesterday afternoon that it is much harder to make this list the second week than it is the first. Needless to say, we're excited and gratified. Interview requests for Congressman Linder and myself are pouring in, and the crowds at the book signings remain strong.
Our greatest hope is that the book generates a buzz and momentum of its own. Across the country people who have never heard of The FairTax before are learning that it is possible to get rid of all income and payroll taxes and replace those taxes with a one-time tax on consumption at the retail level. These people are learning that:
* They can say goodbye to the death tax, the gift tax, Social Security taxes, Medicare taxes, the Alternative Minimum Tax, capital gains taxes and the trouble of filling out tax forms; * That they can just go enjoy themselves on April 15th, just as they do on every other spring day; * That American corporations who have fled overseas to escape our crushing tax system can be brought home again; * That they can invest and save with no federal tax consequences whatsoever; * That the trillions of dollars that are working in offshore financial centers, again to escape our crushing taxes, can be brought back to work in the American economy again; * That we don't need to spend $500 billion a year to comply with an obscene tax code; * And that all of this can be accomplished while eliminating the federal tax burden on the poor, and without increasing the cost of living for everyone else.
I was discussing the book with some friends last night. I told them that over the past ten or so days I think that I have signed about 8,000 copies of the book at various book signings. Since many people buy multiple copies of the book, I would guess that I've seen about 6,500 people during that time. So .. how many people had something negative to say? Two. That's it. Just two. One man at Ft. Bragg came through the line twice to have two books signed (he went and bought an extra copy) all the while grumbling that we didn't include enough of the research in the book. Well, there's a reason for that. You can find the research at the FairTax website. Knock yourself out, pal. One other man stood in front of the table and demanded an opportunity to point out all of the typos he had found. We politely declined his incredible offer. But that's it. Two complaints. On the other hand, we've received hundreds of comments from people who doubted whether or not this idea could work ... until they read the book. Well, that's what we were after.
Again ... thanks so much for another week at No. 1! The FairTax is becoming an idea that can't be ignored.
I see what you are saying. The business owner has to lower his prices for this to work and, if he does, he is getting no advantage over the wage earner. In fact he is worse off. Let me and my com-padres work on it.
Absolutely that is what I am saying. But the point I get from your argument is that the business owner must lose that advantage by lowering his prices. I see that as a valid argument. There is also a macro-economic situation here because the business owner now has a slew of wealthier customers and the possibility that business will be good. Rising tide, boats, you know the drill. But you raise a bona-fide point which will be addressed.
LOL, indeed, s-test. (And hey, werent' you the other guy who was refusing to post to me just recently??).
Let me point out some flies in YOUR ointment.
As to your assumptions about adding no value, etc., marking up, incurring no costs, etc, those do not apply since this is an example of the mechanism involved where those things are assumed to occur and not a P&L statement. Those concepts contribute nothing to the understanding of cascading taxes and can clearly be ignored or assumed-in to the example as given.
It is not MY model and in fact not a "model" at all in the usual sense but it certainly illustrates tax cascading very clearly. As to the types of businesses to which it might apply, even a single man firm needs to cover the taxes he will eventually pay (if any) so he must raise the prices of items that he processes to obtain this necessary money. The fact that he pays it as an individual rather that a corporation (or partnership for that matter) does not matter at all. The mechanism still applies to his business and what passes through it.
I certainly assumed you knew enough to realize that - but obviously you do not. The example applies to the general case of a business manipulating inputs in some fashion and adding value so that it (he, if a single man) will benefit in the long run after taxes. The boost in prices comes not only from any added value and price boost to cover taxes and profit but from the cascaded taxes that are ALSO embedded into the prices. That's what the example shows. It does not matter what the type of business entity might be (excluding the so-called non-profits here).
As for "giving back" the income/payroll taxes to wage earners, yes, that has been established for normal wage-earners but the mechanism operates a bit differently for a person who is not a normal wage-earning employee. The giving back of the wage withholdings applies to the wage earners so that their earnings are stable. In the case of a non C-corp entity you must still file and pay taxes though in a bit different fashion that the normal wage earning employee. That also isn't germane to the cascading mechanism which goes right on functioning as shown in the chart. And it doesn't matter that these taxes are (or are not) corporate taxes, but just that they are business taxes even if levied on and/or paid by individuals. It is the effect of cascading taxes on the things passing through the business to others that is at issue.
As a big, bad S-corp owner (which apparently you are), spare me the trivia about how you do or do not spend the money. That is immaterial also and the real point is that as a business owner you will (supposedly) benefit from your great busines acumen and do better than your wage earners (if any). As such you have the opportunity - but not the guarantee - to do better financially. If your S-corp does poorly or loses money does the government refund all your losses quickly (or at all)? The idea of "giving back" does not apply since you have a unique opportunity to do much better.
With the FairTax removal of the embedded tax costs the input to your business will be quite a bit less expensive that it was before. It is then up to you as a shrewd businessman to adjust your pricing structure to balance the lowering of prices to customers with the appropriate boosting of internal margins where necessary and to increase your volume of business as well with the additional opportunities the improved economy will offer. That is YOUR responsibility, not that of the government - and not that of your competitors (who will be actively trying to eat your lunch). Businesses - particularly smaller ones - paint on a constantly changing canvas and if you are unable to adapt to the new environment then you will perish as a business but it will not be the government OR the tax system that has caused this ... it will be YOU. That's why you're paid the big bux now.
You are far too locked in to thinking that tax cascading applies only to C-corps or that I never took Business 101 in high school. Spare me your condescension. I include the many business types and not just C-corps which you seem so fixated on. The mechanism applies across the board. Flail on; your 1-2% cascading is ludicrous and most, I think, would realize it. As a business owner you are not at all the same as a normal wage earner. If that's what you wish to be so you can have a guaranteed return of your withheld akmounts, then go to work for someone - or get busy and put that noodle to work in thinking about how you can greatly improve your business under the FairTax rather than posting such stuff.
BTW, most of the compliance cost estimates I've seen that seem likely range from $500 billion to $1,000 billiomn per year. Even the lowest I've seen (which is hardly credible) spins out at $250 billion of unproductive costs to the economy. Your own p[ersonal compliance cost may be as low as you say - and it may not - but there are certainly many, many businesses (and individuals) who have far mor significant compliance costs, apparently, than you.
Great points...very true!
Okay, you are obviously daft...I'm comparing his disposable income under the CURRENT SYSTEM and using apples to apples to show what the Fair Tax would cost AT THE SAME LEVEL OF SPENDING.
I clearly explained this, very simply, in my post. And you are totally incorrect to assume "prices" go up. Prices do NOT go up, they will acutally come down as, again, I posted. You are confusing "prices" with the Fair Tax.
I'm not fully behind this idea but you are clearly ignorant of simple economic definitions and basic principles.
Let me and my com-padres work on it.LOL! This subject is only new to you it seems.
How much longer will we have to wait before you and your "com-padres" are capable of grasping simple logic?...We've been disussing this without answers from the Fairtax crowd for a few years already.
Wrong again...I did NOT reduce his consumption...I compared APPLES TO APPLES and left it at the disposable income of the current system.
Do any of you read? Under the current system the example shows, clearly, a disposable income of $25,163 a year. Again, I CLEARLY STATED based on the fact he completely spends that amount he'd be ahead given there are NO DEDUCTIONS under Fair Tax which increases his disposable back to his $30K a year.
And based on spending the $25K the Fair Tax at 23% (this wipes our the arguement thing will cost more since he's spending the same amount)is $5,900 which in only about $1,000 more than he's paying now.
Then regardless of your lame point about the FCA (which I lowered to $300 a month while the Fair Tax AVERAGE is using $400 BUT clearly states it's a local caculation and not the average you quoted) he's ahead around $2,500 as my math pointed out.
Nice try. But unless you're a Democrat, numbers don't lie. You can argue the variables but you still come up short.
The revenue neutral calculation did not take some of that into account but I believed you were asking how all these wonderful things would occur. Perhaps I misssed the fact that you expect all benefits to come from revenue neutrality?
Interesting idea all right, and many good things will come about from revenue neutrality but I was trying to illustrate to you SOME of the ways the FairTax - which starts our of the chute as revenue neutral - will go on very quickly to greatly benefit the country and most of the people in it. That's what my post was about. One point, here, though ... the 100% paycheck promise applies to normal wage-earners to get their withholdings back. I don't know that anyone eve has said the you non-wage-slaves have a guaranteed free ride. If that's what you want go to work for wages and have withholding. As a businessman you presumably have the opportunity (assuming you have the smarts) to do much better under the FairTax (or even the present system) without that sort of "guarantee".
All of the things I mentioned in my prior post - and even more - operate under the FairTax to allow that opportunity. If you choose to stick your head in the sand, that's fine with me (and with most of your competitors who will certainly appreciate your short-sightedness). As for embedded tax costs, they will be allocated as dictated by the market forces - some will go to the customers undoubtedly and some will stay within the busines. That's part of the tippie-toe game you get to play as a business mogul. Figure it out and respond. Who ever told you it would be easy - or simple - or that you have a guaranteed income? It's called capitalism - and you're in it so get with the program.
Oh, and hey, under the FairTax with the prebate, the poor are VERY MUCH on the tax rolls and they pay the same tax rates as you, I, or even Bill Gates on every taxaabkle thing they buy.
I've answered some of the places where what you mistakenly call the "huge pay raise" is coming from in the post you just responded to and you don't even realize what it said or its import to our country's economy. That's what's sad.
In case you haven't noticed, there are a number os posters who appear repeatedly on these threads whose only mission is to attack the FairTax and its supporters.
Since thet's "what they do" they will never admit to anything negative about the FairTax that they've presented as being wrong. You will at times seem some truly convoluted "reasoning" to try to back up this sort of thing. I wouldn't get too upset about it - they can't "hep" it.
Of course we have people on this thread like you Louie who seem to find GREAT pleasure is pointing out typos. So let me get this straight. You spend your time on these threads pointing out typos and presenting long and convoluted arguments against the fair tax when you could be out there doing deals, each one of which nets you 200,000. The fair tax would eliminate your tax liability on those deals which would be about 50,000 if you're honest about it, and you are against it. Well, as seeker of the truth, I think I smell a rat.
Whatever economic model is right, whatever way we extract tax money from the economy, there has to be revenue neutrality. If we let the PEOPLE create wealth without penalty there has to be a way to tax that wealth that is not punitive. So if the fair tax isn't the way, what is?
You Squirrels have never offered any kind of alternative. Well as far as I'm concerned, the only alternative is the fair tax. The only one of you guys that has stated a legitimate reason for standing against it is Always Right. He is worried that the price of his new homes will be prohibitive and his business will suffer. He is the only honest one among you. He has a legitimate argument which is debatable.
Dear pigdog,
"As to your assumptions about adding no value, etc., marking up, incurring no costs, etc, those do not apply since this is an example of the mechanism involved where those things are assumed to occur and not a P&L statement. Those concepts contribute nothing to the understanding of cascading taxes and can clearly be ignored or assumed-in to the example as given."
Well, the problem with it is that since the model comprises 70% profit, 17% tax, and 13% initial input, why would we think we'd see anything else in it?
When you create a similar cascading model using realistic numbers about realistic businesses, you don't come up with 17% cascaded taxes. You come up with 1% or 2% or 3% cascaded taxes.
And, overall, the average amount of corporate income tax in a given dollar of GDP is about a penny and a half. Give or take.
"As to the types of businesses to which it might apply, even a single man firm needs to cover the taxes he will eventually pay (if any) so he must raise the prices of items that he processes to obtain this necessary money. The fact that he pays it as an individual rather that a corporation (or partnership for that matter) does not matter at all. The mechanism still applies to his business and what passes through it."
No, I refer you to the discussion between groanup and RobFromGa, where groanup has grasped the nature of the problem.
If you're saying the wage earner gets to keep his taxes, then you can't include the personal income and payroll (self-employment) taxes of the small business owner, as his "profit" is his wage, and he needs to recover his personal income and payroll taxes as well.
"certainly assumed you knew enough to realize that - but obviously you do not. The example applies to the general case of a business manipulating inputs in some fashion and adding value so that it (he, if a single man) will benefit in the long run after taxes. The boost in prices comes not only from any added value and price boost to cover taxes and profit but from the cascaded taxes that are ALSO embedded into the prices. That's what the example shows. It does not matter what the type of business entity might be (excluding the so-called non-profits here)."
The problem is that because your model is all profit and tax, it hysterically exaggerates the modest effects of cascading. Throw in a TechData with .1% tax liability as a percentage of revenues, or 0% for a small retailer that's a proprietor, or even a Wal-Mart, with 1.6% federal corporate income tax liability, and your cascaded taxes won't begin to approach 17%. Or even 7%. Or likely even 4%.
"The giving back of the wage withholdings applies to the wage earners so that their earnings are stable. In the case of a non C-corp entity you must still file and pay taxes though in a bit different fashion that the normal wage earning employee."
First, pigdog, then what you're saying is that my personal income taxes are really corporate income taxes. Then, do I pay personal income taxes? Are we counting them twice?
Second, I've shown that for C corporations, typical federal corporate income tax liability is typically 1% or 2% (or often even less) of revenues.
"And it doesn't matter that these taxes are (or are not) corporate taxes, but just that they are business taxes even if levied on and/or paid by individuals."
If it's paid personally, it isn't a corporate tax. It's the same as an individual's personal income tax and payroll taxes on his W-2 earnings. In fact, I file a Form 1040 and pay tax on it. The tax form I file for my business, I don't pay any tax with it. The GOVERNMENT is under the impression that I pay personal income tax, but not corporate income tax.
"As a big, bad S-corp owner (which apparently you are),..."
Well, if I were big and bad, perhaps I'd own a C corporation. ;-)
"...spare me the trivia about how you do or do not spend the money. That is immaterial..."
No, it isn't, actually. It shows that my personal income (the profit from my Subchapter S corporation, which is not subject to any corporate income tax) is used for personal consumption items, which will be subject to the NSRT, and thus, it is unreasonable for me not to get to keep my personal income and payroll taxes paid.
Groanup, do you disagree?
"...also and the real point is that as a business owner you will (supposedly) benefit from your great busines acumen and do better than your wage earners (if any)."
I may. But I may lose my shirt, too (although after 14 years of the current business, I haven't yet).
"As such you have the opportunity - but not the guarantee - to do better financially. If your S-corp does poorly or loses money does the government refund all your losses quickly (or at all)?"
No, what's that got to do with it? My profits = my income. Why do wage earners get to keep their personal income and payroll taxes, but you don't think I should?
"The idea of 'giving back' does not apply since you have a unique opportunity to do much better."
LOL! That ol' class warfare bit is seepin' in.
Groanup, what do you think? Because I might do better, that means I don't "deserve" my taxes back??
I think the NSRT theory is falling apart as you post, pigdog. LOL.
"With the FairTax removal of the embedded tax costs the input to your business will be quite a bit less expensive that it was before."
No, the inputs to my business, which are mostly all labor, will stay the same. Remember? We're giving workers back all their taxes, including their payroll taxes. My costs likely won't go down at all.
"It is then up to you as a shrewd businessman to adjust your pricing structure to balance the lowering of prices to customers with the appropriate boosting of internal margins where necessary and to increase your volume of business as well with the additional opportunities the improved economy will offer."
I won't need to adjust my pricing. The C corporations against which I compete won't be getting much out of the tax savings, as they're typically only paying 1% or 2% of revenues in corporate income taxes, and all the little guys like me are in the same boat as me. If we have to pay that 30% sales tax on the stuff we buy personally, none of us are going to reduce our prices by the amount of our own taxes, since we're going to need those taxes back to pay the blasted tax.
As well, even if I DID reduce my prices by the amount of my taxes, it would only be a few percent of my overall revenues. My profit margins are modestly higher than most big businesses, but not wildly so. And my effective tax rate, when all is said and done, is probably lower. So, I'm going to lower my rates by, maybe, 4% so I can bankrupt myself? LOL! Talk about lack of business experience...
And this isn't different from most small business folks.
"That is YOUR responsibility, not that of the government - and not that of your competitors (who will be actively trying to eat your lunch)."
My competitors try to eat my lunch now, LOL. And I, theirs.
But we gain nothing from the NSRT in terms of decreased costs, and we need those personal taxes back as much as any wage earner.
To cut our prices by the amount that we get back in taxes would be to take paycuts relative to the price level in general. Why would us competitive, shrewd businessfolks want to take pay CUTS?? LOL.
"You are far too locked in to thinking that tax cascading applies only to C-corps or that I never took Business 101 in high school."
Well, I don't know if you took Business 101 in high school or not. Did you? As for me, my advanced degree is in business management. I've owned several businesses, beginning in 1985. So, if I have to choose between your conception of how business works and mine, guess whose I will choose.
"Spare me your condescension."
If I wanted to condescend toward you, you would know it. You're an easy target.
"I include the many business types and not just C-corps which you seem so fixated on. The mechanism applies across the board."
You assert but offer no evidence. Get back to me when you have an argument rather than assertion.
"BTW, most of the compliance cost estimates I've seen that seem likely range from $500 billion to $1,000 billiomn per year."
Well, you're a guy who seems to believe that prices are going to fall large amounts by squeezing out the 1.3% of GDP paid in corporate income taxes, or that small business folks whose non-C corporation businesses don't pay corporate taxes are going to want to be the only folks in the US to forego keeping their tax savings.
So, my guess is that you'll believe anything that assures you of the righteousness of your cause. Even that there are a trillion dollars worth of compliance costs in the economy, LOL.
"Even the lowest I've seen (which is hardly credible) spins out at $250 billion of unproductive costs to the economy."
That would be all of 2% of GDP. Not much savings there.
I certainly could believe that all the corporate accounting costs in the US might add up that high.
However, nearly all those accounting costs would be incurred, anyway.
Because there is one government agency to which the very largest companies in America are accountable that is tougher than the IRS, and that's the SEC.
All the public companies in the US must comply with SEC standards (including the dreaded Sarbanes Oxley Act, which is driving up overall compliance costs an average of 40% overall for all public companies).
Thus, we're not going to get all those accounting costs out.
Anyway, even small companies that aren't public need accounting.
I gotta count the wages of each one of my workers whether there's an income tax or not (and I have to report it to the government whether there is an income tax or not). I gotta have documentation for every purchase I make (to prove it's for business and not personal) and for every collection of revenue I make (to demonstrate that it was either a taxable or a non-taxable sale, and since nearly all mine will be non-taxable, I will also have to do something new, which is keep the sales and use tax license copies of each one of my clients).
For the sake of proper accounting, I will still have to keep a General Ledger (otherwise, it's tough to figure out what exactly is happening in my business), and will still have to do cash flow reports, etc.
None of this goes away with the end of the income tax.
"Your own p[ersonal compliance cost may be as low as you say - and it may not - but there are certainly many, many businesses (and individuals) who have far mor significant compliance costs, apparently, than you."
Yes, but on average, most don't have wildly high compliance costs. Not as a percentage of revenues.
Remember, take a company like Boeing, with over $50 billion in annual revenue, and sure, I'm sure they spend a few million dollars figuring out how to minimize their tax bill.
But that amounts to some tiny fraction of one percent of their overall revenues.
sitetest
Oh puh_leeez. You guys and your insults. Can you make a friggin argument without insults. The problem as I clearly explained is prices go up an average of 15% or so depending on the item. So your comparison is an apples to orange comparion. For instance, if my rent is $1000 under the income tax, the very day the fair tax goes into effect, my rent for the very same apartment is $1300. So how is it an apples to apples comparison to compare spending $1000 under the current system, when the very same apartment is going to be $1300 because of your tax? That is the effect of the fair tax bill and there is nothing the consumer can do about it. Unless you are going to make the obscene arguement that by some miraculous act of God your rent that you are contractly obligated to pay will go down 23%. I am not the one being 'daft' here. You are the one who is ignorant in what the argument is, and why your point makes zero sense.
LOL, no the only one that has any support is the $250 billion and that has nothing to do with actual costs to business. That number mostly comes from the time it takes for individuals takes to prepare their returns. It may be unproductive time, but it is impossible to logically make the arguement that businesses will see a penny of savings because employees only have to spend an hour filling out forms instead of eight hours. The business share of that $250 billion is way less than $100 billion. It would be a fairly simple thing to calculate although maybe time consuming. You would just need to see the number of forms businesses fill out and the IRS estimated time to fill out those forms compared to the number of forms individuals fill out and the IRS estimated time to fill out those forms. From that you could calculate how much of that $250 Billion of so-called 'compliance costs' is actually a costs to businesses. Judging simply by the number of forms turned in, it is only a small percentage. I know this arguement will be ignored because you really don't understand where the numbers you quote come from and mean.
The example is certainly simple enough and clearly indicates cascading of income tax. Wish I'd have done it myself (sorry, but no I didn't). Since you can't seem to find things like that (that don't fit the SQL Playbook) I see no reason to help you out since you'll merely deny it or attempt to belittle ANY source.So you won't tell me the source? Why?
Wrong again...I did NOT reduce his consumption...I compared APPLES TO APPLES and left it at the disposable income of the current system.Disposable income is not the same as consumption. Under the current system, disposable income is after tax. Under a NRST, it is pre tax. "Disposable income" is not an accurate gauge. You need to look at how much "stuff" (consumption) the guy can buy under each system.
Do any of you read? Under the current system the example shows, clearly, a disposable income of $25,163 a year. Again, I CLEARLY STATED based on the fact he completely spends that amount he'd be ahead given there are NO DEDUCTIONS under Fair Tax which increases his disposable back to his $30K a year.
Then regardless of your lame point about the FCA (which I lowered to $300 a month while the Fair Tax AVERAGE is using $400 BUT clearly states it's a local caculation and not the average you quoted) he's ahead around $2,500 as my math pointed out.The FairTax bill does not state that the FCA is a local calculation. This is just wrong. Everyone in the continental US will get the same amount. (Alaska and Hawaii will get more because their poverty levels are calculated separately.)
Under the Fair Tax plan he will have his $30,000 income plus a monthly check to cover basic living expenses (they use $400 a month but it's based on where you live); for this example let's say $3,600 a year. This leaves $33,600 a year in disposable income.LOL...See the FCA IS a welfare check. Everyone will have more money to spend than they actually earn. < /sarcasm >
Pigdog reply:
Great analysis - & thanks much.LOL!!!IOW, you lie about the plan and I'll swear to it.
Nice try. But unless you're a Democrat, numbers don't lie. You can argue the variables but you still come up short.Since Fledermaus and pigdog are in agreement and so well informed about the "unless you're a Democrat, numbers don't lie", maybe one of them could tell us where the extra $3600 "disposable income" for every family in his/her example comes from....Or maybe this one family in the example is somehow special.
I found the Jorgenson testimony from the Ways and Means committee back in June 1995 (104-28) and March 27. 1996 (104-46) at http://www.gpoaccess.gov/wmhearings/104.html
Here is what Jorgensen said in March, 1996 testifying before the cmte:
"Since producers would no longer pay taxes on profits or other forms of income from capital and workers would no longer pay income taxes on wages, prices received by producers, shown in the fifth chart, would fall by an average of twenty percent." (the fifth chart is the same basic chart that Boortz used in his book, Fig 5.1)
Sounds pretty clear that he expected the workers to give the money they saved by not having to pay taxes on wages back to the "producer" (their employer) to enable them to lower taxes. Jorgenson was under no delusion that the wage earners would get to keep 100% of their current paychecks. He knew they would get to keep 100% of their new smaller paychecks (reduced by about the amount they now pay in income and FICA taxes).
Oops, correction
Sounds pretty clear that he expected the workers to give the money they saved by not having to pay taxes on wages back to the "producer" (their employer) to enable them to lower prices.
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