Posted on 10/26/2005 3:54:15 PM PDT by Jo Nuvark
Could we stop some of the abuse from illegal aliens by converting from an income tax that illegals avoid, to a federal sales tax that illegals cannot avoid?
Many illegals from Mexico pay no taxes and send much of their income home. A federal sales tax could discourage the abuses and possibly stem the human flood.
I really don't think that we want to end short-term immigration from Mexico; I believe that it's become too big a part of the economy. (I live in Dallas, and I suspect that about 25% of manual labor jobs here are done by illegals - I have this vision of little Mexican elves appearing every night to take away my trash and mow my lawn. I don't employ them directly, but I'll bet the companies who have those contracts do
However, I DO want to control it and tax these workers so that they pay their own costs in society.
My personal thoughts are that Bush's "Guest Worker" program with screening and cards are the best answer, along with VERY stiff penalties for those who employ anyone who isn't a registers "Guest" who pays taxes on public services.
But the contributions to the economy from illegal aliens will not be taxed under either system.
I agree that nannies and yard crews (and other cash-pay work done by illegals) don't currently pay income tax today. But they won't collect and remit sales taxes under a sales tax. The big difference between you and me is that you think a sales tax will capture the economic contributions of illegals. As I have said, there is no activity that a sales tax can capture that an income tax can't.
We both agree that the consumption of illegals is taxed today through so-called "embedded taxes". Consumption of illegals in the legal economy will continue to be taxed under a sales tax regime.
"Consumption of illegals in the legal economy will continue to be taxed under a sales tax regime."
Agreed. It is simply a matter of whether they are given a tax preference or a tax disadvantage, not that they are tax-free under one system and taxed under the other.
Enforcing the laws we already have would stop the illegals. Much more in money and resources need to be dedicated to this job and it could be done without any new laws.
You are incoherent. If transactions are made in the legitimate economy (legal consumption transactions that happen to be made by law abiding citizens, illegals, or drug dealers) they will be taxed under a sales tax or income tax (including payroll tax) system. Neither is tax preferred. Your argument makes no sense.
Now economic activity by illegals is unlikely to be taxed by either system. You've got to understand that both an income tax and a sales tax depend on the honesty of the producer. (The consumer does not materially enter the picture, and where he does, the income tax is superior tax system.) The bottom line is that if producers won't pay the income tax, it is disingenuous to claim they will pay a sales tax. Do you really believe that illegal aliens working as nannies and yard workers will collect and remit a sales tax? If not, then you are in the same position you are in today. You simply can't capture the contributions of illegal aliens.
Economic consumption by illegals. Will be taxed by an income tax (including payroll tax) based on a percentage of GDP paid to the government by producers. Will be taxed by a sales tax which is based on a percentage of GDP that producers remit to the government.
Economic contribution by illegals. Not taxed by income tax as illegals simply don't file income taxes. Not taxed by sales tax as illegals simply don't remit sales taxes.
Fraud now??? Oh, yeah - like illegal alien getting cash wages and never paying income taxes (times 20 million of each); drug dealers; those in the sex business; cash betting of all sorts; tip cash income; and let's not forget (though it's not illegal) foreign tourists from Europe, Mexico, Canada, etc.
Right now, none of them help defray our tax burden but only increase it. With the FairTax, that changes big time.
A VAT is not a "national sales tax of sorts" and especially is it not at all like the FairTax.
A VAT is, good, however at causing some tax costs to be embedded in the price of goods and of promoting a huge increase in governmental regulation - which we've had plenty of already, thank you.
The FairTax is definitely not a VAT.
Not at all - there's a huge difference and in favor of the argument for the FairTax.
The discussion is not, and never was, about taxing the illegal activity. By definition that will not happen and it has never been so suggested.
Under the income tax the only amount of tax "contribution" from someone spending his ill-gotten gains is that small portion of the sale that becomes profit and is therefore taxable.
An example would be to look at a $100 transaction. With the income tax, if the seller has a margin of, say, 25% he'll have a profit of $25.00 and at a tax rate of 15% he would be paying $3.75 in tax. With the FairTax, the same purchase would generate tax revenue of $23.00.
That's a huge difference. Also, the illegal economy workers you mention WILL spend the money in retail purchasing and when they do they'll pay the FairTax.
First:
The discussion is not, and never was, about taxing the illegal activity. By definition that will not happen and it has never been so suggested.
I agree. But I have been responding to a poster who claims that economic contributions by illegal aliens will be taxed. It has been suggested on this very thread.
Then:
Also, the illegal economy workers you mention WILL spend the money in retail purchasing and when they do they'll pay the FairTax.
But earlier in the very same comment you said that noone has ever suggested that illegal activity could be taxed. You can not be more incoherent. Perhaps I should be more charitable. When illegals purchase something, they are participating in the legal economy. When illegals work, they are participating in the illegal economy. As you say, the Fair Tax cannot capture the illegal economy and that includes the economic contributions of illegal aliens.
Nonsense. And "charitable" has nothing to do with it.
Any money-generating activity on which income taxes are or should be due (but are not now) is by definition part of the illegal economy. When money from those sources is spent by the individual receiving the money to purchase things at retail, that purchase is not an illegal activity (no matter the tax system).
If under the income tax, such spending generates very little tax revenue as has been shown by examples on these threads, while under the FairTax a full sales tax rate (presumed at 23% as specified now in the bill) is generated. Those earning in the illegal economy are not taxed on the illegal activity but on the legal activity of spending that money and the tax revenue generated is much greater under the FairTax than under the income tax from the individual who has participated in the illegal economy.
The illegal activity itself is not taxed but the resulting funds are when spent at retail. There is certainly nothing incoherent in that statement. You merely misunderstand it for whatever reason.
My point is that the illegal nanny who doesn't pay income taxes today will not collect and remit sales taxes under the so-called Fair Tax. The economic contributions of illegal aliens cannot be captured by a sales tax. No illegal activity can be taxed under either system.
When an illegal purchases something (say a loaf of bread), that is a legal transaction. The income tax captures the sale of the loaf of bread and the sales tax will capture the sale of bread. Legal activities will be captured under either system.
It doesn't matter which system you choose, a sales tax and an income tax capture the same exact transactions.
You're the one who is mistaken (not incoherent) since the discussion was never about the nanny not paying income tax suddenly turning around and collecting and forwarding sales tax to the state. By definition - as I originally said - THAT WILL NOT HAPPEN.
When that nanny spends the money for retail items, though, the FairTax DOES collect a substantial tax revenue rather than none at all under the income tax (since, remember, she doesn't report the income). Not reporting the income under the present system is the equivalent of not collecting/forwarding the sales tax ... they are both examples of illegal activity which by definition is not taxed.
It is when the money from illegal activity is spent that it is "exposed" to taxes but under the income tax system as I have said there is almost no tax revenue generated compared to that generalted under the FairTax.
Your "capturing" the sale is nonsense since on a $100 sale the income tax will only capture the tax on the profit from the sale. If the retailer has a 15% margin his profit would be $15.00 and at a tax rate of 25% the tax revenue generated would be $3.75. Under the FairTax, the tax revenue would be $23.00. There's a massive difference in the amount that is "captured" - and that's the heart of the discussion. The fact that both may pay some amount of tax is meaningless; it is the amount that is the main consideration.
You are, simply, misinformed.
You make no sense whatsoever. As I understand it, supporters of the so-called "Fair Tax" claim that it is revenue neutral. That means the "Fair Tax" generates the same revenue as the income tax. Because the "Fair Tax" and the income tax have the same base (legal transactions) and are intended to be revenue neutral, then the "Fair Tax" and income tax extract the same amount from each legal transaction.
A plain reading of your argument says that you think the "Fair Tax" will extract more from legal transactions than the income tax. You are, in effect, saying that the "Fair Tax" is a tax increase over the income tax. That does not reconcile with the idea that the so-called "Fair Tax" will be revenue neutral.
Are you really saying that the cost of embedded taxes in today's goods are less than the 23% rate of the proposed sales tax? If not, how do you reconcile your statement that there is almost no revenue generated by the income tax?
FWIW, I prefer lower tax rates. If, as you argue, the income tax generates less revenue on the same base, it must necessarily have a lower tax rate. That, in and of itself, is a reason to oppose the so-called "Fair Tax".
Illegal immigrants -- my pet peeve.
The illegal immigrants who take advantage of us and our great country will continue on as per usual. They are aided and abetted by the companies that hire them and even help them obtain false social security cards in some cases.
Think of another factor in the equation: There is talk today of restricting travel should we face a pandemic like the deadly strain of bird flu. Hmmmnnn...
Does that mean the airports and train terminals and bus terminals where legal citizens must pass through will be fedarally guarded to prevent the outbreak?
You don't seem to understand how the current income tax works. The retailer is not the only one subject to the income tax. If a good costs $100, the retailer, shipper, manufacturer, raw materials supplier, etc. all share in that $100. If the retailer (Kroger) has a 15% mark-up, he is responsible for income tax on $15. But all other producers (Kroger's employees, Kellogg Co., Kellogg's employees, shippers, wheat farmers, etc.) are responsible for paying income tax on the other $85. The total tax base on producers is $100 whether there is a sales tax or an income tax.
You need to understand that a sales tax and an income tax have the same base: GDP.
[...There is talk today of restricting travel... all ports federally guarded to prevent the outbreak?]
Though this looks like a type of Fascism or Marshall Law, I don't know how it could prevent the transmission of this flu. However, it could be a back door way to effectively discourage terrorists and illegals. Just don't let anyone put a mark on your hand or your forehead.
http://www.cato.org/pub_display.php?pub_id=1131&full=1
I suggest you become more informed before you launch into such a set of embarrassing misstatements as you have done.
In short, this statement of yours is true:
"That means the "Fair Tax" generates the same revenue as the income tax."
while this one is not:
"Because the "Fair Tax" and the income tax have the same base (legal transactions) and are intended to be revenue neutral, then the "Fair Tax" and income tax extract the same amount from each legal transaction."
The FairTax will certainly collect more tax revenue from illegal income when spent than does the income tax - and clearly so as my example in #135 showed. Embedded tax costs merely function to raise the prices of goods at the retail transaction level (they are not then taxes but increased prices of the things being sold); the PROFIT from that transaction is what is taxed as #135 shows.
The FairTax is certainly a tax increase for those in the illegal economy (among others) since they now pay no income tax and the FairTax amount will be greatly more that the small portion of tax they pay under the present system. That's a very good feature as it will help lower the tax burden on the rest of us (unless you're part of the illegal economy now).
You seem to genuinely not understand what a tax base might be and how it differs between the income tax and the FairTax. Please study the link I gave above.
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