Free Republic
Browse · Search
News/Activism
Topics · Post Article

To: Dimples
With regard to deriving tax revenue related to the illegal economy under the income tax vs. the FairTax, you've said:

"You clearly have no grasp of what you are talking about."

Not so. Under the schema proffered by you and a (very) few others on these threads you take the position that money moved into the illegal economy (illegal aliens, drug dealers, etc.) has already been taxed and so is equivalent (somehow) to money coming from the illegal economy under the FairTax when spent for taxable things.

Let's examine that. Any after tax income put into the illegal economy would have yielded at best a fairly low tax rate since the "typical" individual tax rate is about 14% presently. Over and above that, though, such an example also pre-supposes that the person with the legal income actually PAYS income tax (not everyone does) so it would be necessary to offer some convincing data about the taxes paid (IF ANY) by those hiring day laborers.

In addition I take it you have not spent much time at work sites using numbers of illegal aliens when they were being paid. If so, you'd notice that the typical payment is NOT a check with neatly-printed deductions, etc, but greenbacks ands lost of them. Of course, one could suppose that the businesses doing this are actually reporting and paying income/withholding taxes to Uncle later as a good businessman would do. But then again, it is perhaps more likely that the business may fall within the 20-25% of tax revenue collected that is non-compliant (the IRS has no figures for the illegal economy or avoidance or criminal activity).

The point is that making the pretense that ALL of the money supposedly "after tax" is in fact after tax when some noticeable bit of it is never taxed at all is (at best) a strech. Even if taxed, the likelihood is that it would be taxed in the 14% or below rate which most individual taxpayers pay. There's no real way to quantify this, of course, but the corrolary of that is that you may not reasonably make the claim that all money going into the illegal economy is already taxed since that is certainly not completely realistic.

Moreover in the case of the drug dealers, etc., this is even more clear since a great amount of the money spent for drugs presently is stolen money - completely untaxed with no income tax paid at all (and the same comments as with the above example apply to any legal income involved). The FairTax will also yield considerable larger tax contributions fom this part of the illegal economy when spent for consumption. Trying to pretend otherwise is not something most would wish to defend.

Certainly it is true that only money transferring into the underground is taxed by the income tax (to some degree) and only money transferring out of the underground is taxed under the FairTax when spent for taxable consumption. Money that stays IN the underground is not taxed under either scheme. Those seem to be the only points of agreement but they leave a wide gap in tax revenues gained under the two circumstances.

The claim that has been made, though (I forget who made it), to which you seem to subscribe is that:

"... the money flowing into or out of the illegal economy gets taxed exactly once in either the current scheme or the FairTax scheme. No illegal transaction get taxed, therefore, given a revenue neutral system, the same dollar flow yields the same tax (just at different points in the flow.) ..."

... is simply not true and cannot be shown to be so. It is quite clear from what I have outlined above that the FairTax will draw greatly more tax "contributions" from the illegal economy than any present contributions made indirectly by income-tax payers. Your original observation about "... no grasp ..." then is VERY wide of the mark. It's good, also, that you don't INTEND to be "nasty" (accidentally, maybe???) since heavens to Betsy, it might make me faint!!

551 posted on 08/30/2005 4:55:08 PM PDT by pigdog
[ Post Reply | Private Reply | To 464 | View Replies ]


To: pigdog; Always Right; ancient_geezer; Your Nightmare; All
I am simply asking a question here not seeking an argument.

Are any of you familiar with any other work, by any other author, seeking to quantify ALL costs imposed on the economy by the income tax system other than the one previously cited on this thread by Ancient_Geezer @ #534?

A comprehensive review of all the studies that attempt to measure the costs associated with the federal income tax appears in James L. Payne, Costly Returns: The Burdens of the U.S. Tax System (San Francisco: Institute for Contemporary Studies Press, 1993).

I am NOT familiar with any others but would LOVE to see them if they exsist.

556 posted on 08/30/2005 5:37:15 PM PDT by Bigun (IRS sucks @getridof it.com)
[ Post Reply | Private Reply | To 551 | View Replies ]

To: pigdog
It's apparent you are quite enamored with your anecdotal world and quite convinced that your personal experiences comprise an accurate surrogate for the real world.

Yep, all the 15% bracket folks hire nannies, housecleaners and gardners.

Yep, all contractors paying an illegal workforce are only paying 14% in income tax.

Yep, nobody will steal goods or attempt to black market goods under the FairTax ... it wouldn't be "fair."

Yep. Drug dealers are very careful about the money they steal ... they only steal money that was completely untaxed.

Like I said, you really have no grasp of what you are talking about.

558 posted on 08/30/2005 5:46:57 PM PDT by Dimples
[ Post Reply | Private Reply | To 551 | View Replies ]

Free Republic
Browse · Search
News/Activism
Topics · Post Article


FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson