Posted on 08/27/2005 3:10:16 PM PDT by Shamino
I have a few questions for the FairTax experts to answer! Beyond section 1 of HR25, where it repeals the existing Income Tax legislation, after reading further into the bill...
Why does HR 25 under the definitions category of the bill maintain the concept of withholding by employers on the wages and salaries of Federal Employees? If they were going to be consistent with the concepts layed out by FairTax.org why would they not eliminate direct taxes on the wages and salaries of all employees federal or otherwise?
Furthermore, why does the bill shift the regulatory duties of the IRS to the social security administration for withholding? Was the intent not to eliminate an expensive, bloated and intrusive bureaucracy?
Why does it maintain a definition for wages and salaries but change the definition it once had under the Income Tax and change it to read that wages and salaries are now defined as "services?" Under this definition, would a 23% tax rate not be applied to all sources considered a service?
FairTax.org's marketing would suggest that under this bill all employees will earn 100% of their wage or salary. If the HR25 bill was intended to eliminate all payroll taxes, would that not include medicare and social security? Where in the bill does it remove social security withholding from wages and salaries?
Under Fairtax.org marketing, they claim this bill not only eliminates April 15 (which it does), but they also imply that this new bill lifts the burden of keeping records and receipts from individuals! Under the section on liabilities and penalties, why is it written that a "purchaser" is liable for remittance of the new sales tax?
Any guidence on these issues would be appreciated
Excerpts from HR25
>SEC. 2. DEFINITIONS AND SPECIAL RULES
(17) WAGES AND SALARY- The terms `wage' and `salary' mean all compensation paid for employment service including cash compensation,employee benefits, disability insurance, or wage replacement insurance payments, unemployment compensation insurance, workers' compensation insurance, and the fair market value of any other consideration paid by an employer to an employee in consideration for employment services rendered.
(14) Taxable property or service (A) GENERAL RULE- The term `taxable property or service' means-- (i) any property (including leaseholds of any term or rents with respect to such property) but excluding-- (I) intangible property, and (II) used property, and (ii) any service (including any financial intermediation services as determined by section 801). (B) SERVICE- For purposes of subparagraph (A), the term `service'
(i) shall include any service performed by an employee for which the employee is paid wages or a salary by a taxable employer, and
(ii) shall not include any service performed by an employee for which the employee is paid wages or a salary (I) by an employer in the regular course of the employer's trade or business,
SEC. 103. RULES RELATING TO COLLECTION AND REMITTANCE OF TAX. (a) LIABILITY FOR COLLECTION AND REMITTANCE OF THE TAX- Except as provided otherwise by this section, any tax imposed by this subtitle shall be collected and remitted by the seller of taxable property or services (including financial intermediation services).
(b) Tax To Be Remitted by Purchaser in Certain Circumstances-(1) IN GENERAL- In the case of taxable property or services purchased outside of the United States and imported into the United States for use >or consumption in the United States, the purchaser shall remit the tax imposed by section 101.
(2) CERTAIN WAGES OR SALARY- In the case of wages or salary paid by a taxable employer which are taxable services, the employer shall remit the tax imposed by section 101.
SEC. 903. WAGES TO BE REPORTED TO SOCIAL SECURITY ADMINISTRATION.
Keep in mind, the definition for the United States of America (aka USA,inc.) is the territories of the federal government which only include Federal Government properties, District of Columbia, Virgin Islands, Puerto Rico, Guam, etc...This does not include the soverign 50 states! Also, any US citizen by definition includes anyone who holds a contractual relationship with USA,inc. by means of a Social Security number, or those born within the legal US territories.
Curious
Excerpts from HR25
`SEC. 903. WAGES TO BE REPORTED TO SOCIAL SECURITY ADMINISTRATION.
(a) IN GENERAL- Employers shall submit such information to the Social Security Administration as is required by the Social Security Administration to calculate Social Security benefits under title II of the Social Security Act, including wages paid, in a form prescribed by the Secretary. A copy of the employer submission to the Social Security Administration relating to each employee shall be provided to each employee by the employer.
`(b) WAGES- For purposes of this section, the term `wages' means all cash remuneration for employment (including tips to an employee by third parties provided that the employer or employee maintains records documenting such tips) including self-employment income; except that such term shall not include--
`(1) any insurance benefits received (including death benefits);
`(2) pension or annuity benefits received;
`(3) tips received by an employee over $5,000 per year; and
`(4) benefits received under a government entitlement program (including Social Security benefits and unemployment compensation benefits).
`(c) SELF-EMPLOYMENT INCOME- For purposes of subsection (b), the term `self-employment income' means gross payments received for taxable property or services minus the sum of--
`(1) gross payments made for taxable property or services (without regard to whether tax was paid pursuant to section 101 on such taxable property or services), and
`(2) wages paid by the self-employed person to employees of the self-employed person.
If Federal employees are still subject to an income tax, would they somehow be exempt from the sales taxes?
Under the inappropriately-named "fair tax," the old phrase of "Your papers, please" will soon become "Your receipt, please." And don't think the government won't start keeping tabs on what you purchase. Governments practically live to accumulate information on the citizenry.
Not that I can tell. The way I'm reading it right now is that a wage or salary is a "service" and is subject to the same tax as goods sold by a retailer.
From what I also understand is that anyone who has a social security number is considered a federal employee by the government, so the income tax is replaced with a 23% tax on wages and salaries.
Is this a misreading of the bill?
There are tens of millions of people not paying any income tax NOW. The way I see it, there will always be corruption and the same amount of money will flow into the government pockets, it will just be collected differently.
Have you gone to Http://www.fairtax.org? I don't know where you are getting your info.
I don't know where you are getting your info.S/he's reading the actual bill not the rhetoric...
I'm getting my info from HR25....and my understanding of the existing FICA, and Income Tax legislation...also from other sources I've read.
Also note the tax is "23% of the gross payment" and YES service income is subject to the 30% tax.
A $100.00 item would have a $30.00 tax making the total ("gross payment") $130.00 ...
"23% of the $130 gross payment" is $30.00...And that's only the beginning.
Isn't it also true that the original $100 item value would now be closer to $70 as the taxes built into production costs are eliminated? Hence, the cost of the item would be close to the same and a whole slew of production taxes would be eliminated.
My main point is that I'm reading in the bill itself, and comparing it to the FairTax rhetoric, the FairTax rhetoric implies that all workers receive 100% of their pay, or their gross pay, but the HR25 bill appears to define wage and salaries as "services" under which appear to be taxed 23% just as any good or service.
Furthermore, under the existing FICA (Social Security) regulations, wages are withheld at a defined rate on the basis that each employee is legally a federal employee (i.e. anyone with a social security number is accepting a government benefit and is subject to an excise on pay). The HR25 bill maintains social security, and says nothing about repealing it, but it does mention handing over regulatory power of observation and audit to the SSA in place of IRS.
How can the Fairtax theories work if workers only maintain their net pay instead of receiving gross pay to offset the burden of a 23% tax on all goods purchased? The prebate will help, of course, but I don't see it being honest marketing if workers don't receive a true 100% gross pay?
Isn't it also true that the original $100 item value would now be closer to $70 as the taxes built into production costs are eliminated?No! Only if you and other employees are willing to allow your employers to retain your withholding in hopes of them using it to lower prices rather than increased profits.
You can have no withholding and add the tax to existing prices or you can relinquish your withholding and hope for lower prices.
Those reduction rules only apply to products produced in this country...most aren't.
It still doesn't change the 30% tax...
How can the Fairtax theories work if workers only maintain their net pay instead of receiving gross pay to offset the burden of a 23% tax on all goods purchased? The prebate will help, of course, but I don't see it being honest marketing if workers don't receive a true 100% gross pay?You're questions are legitimate and deserve honest answers that I and others have learned you probab;y aren't going to get from the Fairtax marketing center. One FR member, robfromga, recently contacted the original economist that made the 20% price reduction claim. He confirms that you cannot have 100% paychecks AND 20% lower prices. The Fairtax has been misrepresenting his study for years. You can see his response to robfromga by clicking on the link in post #13
BTW as to Social Security. You've read the bill so you know where it says that the rate for the year after the first year would be a combined rate...look at the section under "Trust Fund Revenue" and you'll see where HR25 authorizes Social Security Bureaucrats to "determine the rate" every year without a vote from congress...
I'm getting my info from HR25....and my understanding of the existing FICA, and Income Tax legislation...also from other sources I've read.
The legislation repeals FICA and funds SS/Medicare via the implemented retail sales tax.
The Social Security Act requires wage reporting for benefits accounting, thus HR25 provides for employers to report of employee wages to the SSA for that qualifying for Social Security Benefits.
And no, an SSN does not imply you are a government emplyee under the legislation. It means you may qualify as a legal resident to receive the FCA sales tax rebate mailed to you from the Social Security Administration.
but the HR25 bill appears to define wage and salaries as "services" under which appear to be taxed 23% just as any good or serviceYou included the portion of the bill that answers this question; "the term service shall not include any service performed by an employee for which the employee is paid wages or a salary by an employer in the regular course of the employer's trade or business"
Quite to the contrary, the bill contains requirements that individual persons must produce documentation if they suspect you owe tax.
That is an absolute falsity. The only way to get those embedded costs out of the items is if employees take a pay cut in the amount of taxes paid. And that is according to the lead researcher who did the study for the fair tax organization.
Quite to the contrary, the bill contains requirements that individual persons must produce documentation if they suspect you owe tax.Like everyone has to do now if they are suspected of owing taxes that they haven't paid.
That is true, but the way the fair tax is presented, they would have you believe that individuals are free from the scrutiny of the tax collectors. That is just not true.
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