Posted on 12/11/2005 6:50:49 PM PST by Your Nightmare
Taxes suppress activity. Tax income and you suppress the reporting of and creating of income. Tax consumption and you will get less consumption. I don't see how this is going to stimulate the economy. This idea is at least 50 years old in the US but there are virtually as many problems trying to implement this as there are implementing the existing system. Rich people will learn to game the new system just like they do now. And there is no way you get Democrats to go along with NOT taxing the rich so its a moo point (you know, what a cow thinks...)
lots of gobledygook. Seems like you only need to mark up the 'new' good 30% above the leased good or so. when the 23% tax is added back, then all goods would leased.
I am for excise and sales tax and hate the income tax, but leased good problem and thy neighbor as tax collectors are real issues.
Maybe you should wait to comment on this book until it comes out in an audio version because you obviously had a difficult time understanding it as it is written. Many of your comments about the book and plan are wrong. I will just give a couple of examples which will include your own contradictory comments.
Your "Lie # 1" section is completely absurd. Your claim that the fair tax would not be voluntary is way off the mark. You ask "what happens if someone decides that they don't want to pay any taxes to the federal government?" Then you reply with: "The same thing that happens now: fines and imprisonment." Fines and imprisonment could occur if someone buy or sells goods without charging or paying the tax. As is pointed out in the book, that requires two parties (the buyer and seller) to consciously avoid the system.
This is so simple! Even an under-worked, over-educated idiot should be able to understand it. If I don't make any purchases on new goods or services I won't have to pay any tax. That would not be illegal. I would earn my wage, keep ALL of my earnings, then save (if I choose to) in an interest bearing account without paying taxes. That would be completely legal.
If on the other hand I wanted to buy a bunch of goods that I don't need, I would be VOLUNTARILY paying more in taxes.
Your "Problem #1" section is also flawed. "Go stand in front of a store and ask the typical American how much federal sales tax he paid on the item he just bought for $139? Give him a calculator and ask him again. Unless he is familiar with figuring percentages, the average American will not be able to tell you how much sales tax he just paid."
Do you think that same individual has any idea how much is deducted from his paycheck? I pay attention and have good math skills but I still don't know in advance how much is going to be confiscated by the government; sometimes it's 22%, other times it's 23%, when I work several hours overtime it's 31%. At least the fair tax is a consistent percentage.
As far as the typical American being unable to do simple math.......well, that's a different debate for a different day.
Now it is time to point out some contradiction. "The FairTax is not a voluntary tax at all. The whole idea is a contradiction in terms." You made that assertion in "Lie # 1" but in "Problem #2", you state, "Millions of Americans will pay no taxes at all." By whom is the contradiction being made?
I will now admit that I didn't read your entire posting. I will, however, if you will actually read all of the book and the proposed legislation.
You're missing huge portions of the big picture.
The fact that foreign made goods enter our market pretty much free of charge under the current system.
The fact that our goods enter the world market loaded down with the stupid costs of our current stupid system.
The fact that we're burdening capital, the fuel for productivity and prosperity.
Those are a couple of the biggies.
And the fact that that would completely change under the FairTax.
Our goods and services would swiftly become the most competive in the world.
America would become THE magnet for capital.
The FairTax is the only way to go, friend.
There is no other plan out there that even approaches it for its elegance, simplicity, efficiency and the return to freedom and privacy of our business affairs that it provides.
lots of gobledygook.
It's called legalese. It's the lexicon of lawmakers. It does account for leased property when it is sold.
but leased good problem
It's not a problem. Leased property that is sold is taxed at fair market value of the property and tax is prorated according to how much tax was paid on the principle of the leased property.
thy neighbor as tax collectors are real issues.
Not sure what you mean by that. Eighty percent of retail sales are made by the large national stores, Eg., Wal-Mart, Target, Microsoft, McDonalds... They will collect 80% of the tax and remit it to the states.
Under the income tax the IRS has to keep track of 160 million tax payers. Under the FairTax there's about 25 million businesses to keep track of/ And most of those businesses already remit sales tax to their respective states.
I am not sure the law says that. Leasing is currently used by corps to get and double tax deduction. One for the expense of the lease by the renit corp and twice by the corp that takes the depreciaation.
I think we would see all sorts of used gray markets. for instance, I make computer and rent it for one week. One week of 'value' is taxed at 23%. Since the computer has then depreciated it is used and I pay no tax. I think this would be hard to keep track of.
Also, I am sure that the level of *visible* goods and services at the retail level would go down and we would have to charge a higher rate. This has already happened with the income tax as more folks have opted out the workforce.
Do you think that same individual has any idea how much is deducted from his paycheck?
A line item on the receipt shows how much the tax was -- 23% of the total. It's no different than a person walks out of the computer store with a new computer -- he or she knows how much tax they paid. Except under the FairTax the shopper knows not just the exclusive tax rate, but also the inclusive tax rate. A different situation applies before purchase and the product price doesn't include the tax. The shopper will add the 30% exclusive tax figure to get a total price for the product.
I think we would see a lot of software, clothes, wood and furniture sold on craigs list. I think the country would look like items for sale in the college post office.
We would just reuse a lot stuff. computers would have reusable cases and power supplies and only the cpu board would change. goods that are elastic would be consumed less as if the price had increased 30%.
I am not sure the law says that.
I realize you don't understand, as you wrote, "lots of gobledygook". Nonetheless, SEC. 804 deals in part with not allowing a leased item being sold to circumvent paying the tax on the value of a new product. A $10,000 new car that has a $3,000 tax compared to a leased car sold six months into the lease. A portion of the lease payment is principle. Say for example $1,000. When the leased car is sold the fair market value would be about $9,000 and the tax applied to that. Also, the lease company remits a tax for it's lease services.
Also, I am sure that the level of *visible* goods and services at the retail level would go down and we would have to charge a higher rate.
Raising the tax rate will be very difficult. People back East in Western New York, Eire county, are hammering the county legislature for trying to raise the sales tax by 1/4 of one percent. I heard a similar scenario happened in Wisconsin dealing with the state sales tax. I think the visible goods and services would remain about the same with only minimal swing up or down.
You have just raised the price of everything 30%. The amount retail sales would certainly fall. taxes collected would fall short fot this reason.
Lots jewelry being bought overseas. lots of stuff be sold as used, but highly refurshed. difficult to police. Are going to bust open computers with used cases to what is inside?
A drastic 30% increase would see retail sales as we know fall dramatically. I think it would similiar to the EU with their 19% or so sales tax.
your sec 804 example did not address the 50% rule and an easy way around it. just make stuff more expensive new, rent it out for a short time and then book a large amount of depreciation suitable for sale in the used market. cars loose most of thier value the first year.
just make stuff more expensive new, rent it out for a short time and then book a large amount of depreciation suitable for sale in the used market.
Won't work.
`(c) Determination of Principal and Interest Components of Financing Lease- The Secretary shall promulgate rules for disaggregating the principal and interest components of a financing lease. The principal amount shall be determined to the extent possible by examination of the contemporaneous sales price or prices of property the same or similar as the leased property. `SEC. 804. FINANCING LEASES.
To learn more about the FairTax see: www.fairtax.org. or read the Bill at HR25
I have read that line. Sure there is some embedding, but the 'exlucive' rate MUST be used, because you have raised the cost of stuff 30% in real terms. Sales taxes are currently quoted and thought of in 'exclusive' terms.
France consumes aroung 66% of what we do if I remember correctly. This is no small part to their vat, which looks very similiar to a retail customer.
Folks would just find ways to use used stuff. Haircuts at home and people would buy eat out less. Revenues would fall short due to price elasticity, then gov would have to bring back the income tax.
I would be for this, except, I dont think you can get past 12, 13% where people's behaviour would change drastically.
You could have a broader based tax than say in 1880, but gov would also have to shrunk to size closer to what it was in 1880.
`(a) Definition- For purposes of this section, the term `financing lease' means any lease under which the lessee has the right to acquire the property for 50 percent or less of its fair market value at the end of the lease term.
Think about this. Company sets up a datacenter in canada to save the 30% price of blade oards. Then ships the boards to be sold as used computers in the us.
Same could be done for furniture jewelry. We just use the world's hand me downs.
Look what happened with the lux boat biz. All that stuff would be made overseas.
Incidentally, I have the same elasticity issues with the way europe taxes INCOME. They used static analysis and fall short because of all the underground jobs that go on whilst folks collect welfare. (car repair, haircuts plumbers) That is why they work fewer hours than in the us. this has been noted by the edward prescott paper.
Under the FairTax, these prices will "go down by roughly the same amount as the proposed FairTax rate of 23 percent."
I knew it was a MONSTROUS load of hokum (the fair tax proposal, that is.
I have a fairly decent memory, and up here in Canuckistan, when the GST (government sanctioned theft) was introduced, the manufacturer's tax of 13% was eliminated.
Imagine the shock and dismay of economists here when the month after the 7% GST was imposed, there was a 7% "inflationary episode".
I do agree that a consumption tax is the "fairest" tax, but ALL other taxes MUST be reduced, and the federal government should go back to funding itself through IMPORT taxes ONLY, after eliminating all the "transitory" and "temporary" taxes that have been imposed on the productive over the last 100 years. Food, clothing, and shelter (the necessities) should all be exempt from all taxation. Sure, there are the Imeldas out there, but duds are duds, and food is food.
The outrageous homes will be taxed by their communities.
Or profiting from the current system. Other than that, you are right.
Mea culpa.
Of course, you are correct.
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