Posted on 02/08/2006 5:07:55 PM PST by voletti
The President aims to end estate taxes for the wealthiest Americans. He also wants to scrap a $255 death benefit for the poorest The contrast in President Bush's new budget could not be more stark. On one hand, he wants to eliminate what he likes to call the "death tax" -- a levy imposed on a handful of the nation's biggest estates. On the other, he wants to end Social Security's lump sum death benefit -- a $255 check that the families of many of the nation's poorest use to help pay for their funerals.
There is a lot more in Bush's $2.77 trillion budget than that, of course. He'd boost spending for homeland security and the Pentagon, trim many popular domestic programs, and control the growth of Medicare by boosting premiums for high-income seniors and freezing or cutting payments for health providers, such as doctors, hospitals, and hospices. At the same time, the President asked Congress to make most of his first-term tax cuts permanent.
ESTATE PLANNING. That includes permanently eliminating the estate tax, or what conservatives like to call the death tax. Like most of what happens these days in the tax world, the story is complicated, but it goes like this: Starting in 2001, Congress began to gradually increase the size of an estate that would be exempt from tax. By 2009, estates of $3.5 million or less ($7 million for a couple that does the smallest bit of planning), would be tax-free. By 2010 all estates would be exempt from the tax, but only for one year.
So President Bush wants to permanently free all estates from the tax starting in 2011. The estimated annual cost: in excess of $50 billion in 2012, rising to more than $70 billion by 2016.
(Excerpt) Read more at businessweek.com ...
I meant to say "after the FairTax" (you couldn't figure that out?). After the FairTax, I start a "business" to buy my computer and it's is no longer in the PCE. Your denominator is reduced.
I see, in your world self-employed types and small businesses persons don't already declare personal use PCs as business deductions under the income/payroll tax, in their effort to limit or evade income taxes and thus reduce PCE because those computers and other equipment and commodities and services are improperly declared as business expenses.
Sorry the scenario already is in place and in use, reducing PCE due to many such evasions across the board.
AFT assumes (for rate calculation purposes) the same folks doing it now will continue to attempt to do so under a retail sales tax system. In fact the same self-employed business folks not declaring cash income now, are also purchasing personal use computers declaring them as a business expense to increase capacity for evasion into their above board transactions.
In fact this form of tax evasion is pervasive and stretches to the individual employee who receives a PC from his employer for business use which he then engages in his private personal affairs, to the small business owner willing to stretch his tax return deductions to the limits of IRS in capacity to audit them on top of the under-the-table cash transactions he engages in to evade the income tax outright.
You may come up with all the theoreticals you wish, the reality is the evasion and essential MO is already in operation discounting PCE and by the same folks who would be inclined to try continue there evasions using the equivalent MOs they are used to and currently using under the income tax system.
Your theoreticals do not in any way detract from the concept that PCE and revenue yields are already derated for the evasion that exists today continuing at the same levels will not change the calculated "revenue neutral" rate in any appreciable degree.
I see, in your world self-employed types and small businesses persons don't already declare personal use PCs as business deductions under the income/payroll tax, in their effort to limit or evade income taxes and thus reduce PCE because those computers and other equipment and commodities and services are improperly declared as business expenses.The information in the PCE is based on surveys of either manufacturer's shipments or retail sales. If I bought the computer at BestBuy, how exactly do you think that isn't in the PCE?
If I bought the computer at BestBuy, how exactly do you think that isn't in the PCE?
If you used it as a deductible expense in a business, one of the most common ways of reducing and evading income taxes by those who also engage in under-the-counter cash payments,(e.g. self-employed & small businesses as well as employees of companies receiving a PC from a company) ,
It was removed from PCE. All such declared business expenses are removed from the NIPA accounting for PCE to assure that product is only counted once in PCE (i.e. retail sales only)
If the purchase by a non-profit its for their own final consumption, yes they pay the tax the same as any other consumer.
Same is true for a small business with mixed use and converted assets.
The contribution to the non-profit is not taxable, same as contributions to non-profits are not taxed in the current system.
Likewise, the charitable services or goods of the non-profit are untaxed. However if the goods or services are consumed by those in the non-profit organization as final consumers, yes their purchase of such goods is taxable same as for everyone else.
Obviously conversion of assets to personal consumption is a taxable event in the retail sales tax implemented under the FairTax.
It was removed from PCE. All such declared business expenses are removed from the NIPA accounting for PCE to assure that product is only counted once in PCE (i.e. retail sales only)Do you have some evidence the BEA is adjusting the PCE using IRS data or are you just making the assumption?
If the purchase by a non-profit its for their own final consumption, yes they pay the tax the same as any other consumer.Just to clairify, if a church bought a new roof or Bibles (not for resale), would they pay FairTax on them?
If the Bibles are given away and no charge is demanded for use of the church by the beneficiaries of its charitable services embodied in that property, there would be no tax.
OTOH, if someone associated with the church were to use that church as his own home, yes the materials going into that roof would be taxable in the same sense that a computer purchased by a business were to be used for purely personal consumption by the owners or employees of that business it would be taxable.
Do you have some evidence the BEA is adjusting the PCE using IRS data or are you just making the assumption?
http://spruce.flint.umich.edu/~mjperry/Unit10.html
"NIPA arbitrarily assumes: All household spending is PCE except spending on housing. All business spending on final goods is considered Investment. "
If a business reports spending it does not count towards PCE, ever.
If that reporting business spends on a computer used for personal use of an employee, it is still assumed to be a business expenditure not personal consumption expenditure and thus is not include aggregated into PCE. It goes into the investment side of the data series.
Doesn't matter - both are due to having the FairTax.
All business spending on final goods is considered Investment.I understand that's the way it's suppose to work, but that doesn't tell me how they know the computer I bought at BestBuy was for business use. Once again you don't answer the question that was asked.
If the Bibles are given away and no charge is demanded for use of the church by the beneficiaries of its charitable services embodied in that property, there would be no tax.What do you mean? No tax when they bought them or no tax when they gave them away?
Doesn't matter - both are due to having the FairTax.Both of what?
No tax when they bought them or no tax when they gave them away?
None in either case. a charitable gift is not a sale to be taxed whether from a non-profit or an individual.
Well Marx would probably call it a "cost" but here in America we call it "savings". A billion that doesn't go to the government certainly cannot be classified as a cost. Definitely a savings.
None in either case. a charitable gift is not a sale to be taxed whether from a non-profit or an individual.Hmm. The NIPA PCE table for 2004, Line 108, has $219 billion dollars listed for "Religious and welfare activities." The footnote states
"For nonprofit institutions, equals current expenditures (including consumption of fixed capital) of religious organizations, child day care services (excluding educational programs), social advocacy organizations, human rights organizations, civic and social organizations, residential mental health and substance abuse facilities, homes for the elderly, other residential care facilities, social assistance services, political organizations, museums, libraries, and grantmaking and giving services. The expenditures are net of receipts--such as those from meals, rooms, and entertainments--accounted for separately in consumer expenditures, and exclude relief payments within the United States and expenditures by grantmaking foundations for education and research. For proprietary and government institutions, equals receipts from users."
You persist in arguing against points NOT made!
No one has suggested the PCE counts business-use purchases. Quite, the contrary. It is precisely because the PCE excludes Business-Use purchases that the example works.
The individual portrayed in the example is not acquiring a PC for business use; he's acquiring a PERSONAL USE ITEM. Since there is no tax penalty for purchasing a PC at retail under the Income Tax system, the individual just buys the PC at a retail outlet today. The PCE, the one the FairTax bases its rate calculates its tax rate from includes that PC purchase as a Personal Consumption Item.
In contrast, that SAME individual, interested in acquiring that SAME Personal Use PC is incented to masquerade the purchase as a Business Expense PRECISELY BECAUSE BY DOING SO HE CAN EVADE THE FairTax!!!!! I only suggested the individual used untaxed income to demonstrate that individual's comfort level with tax evasion. Since the FairTax takes away all incentive to evade tax on income, the evader shifts his focus, and CHANGES HIS BEHAVOIR to evade tax on consumption.
He ALTERS his purchase behavior IN RESPONSE TO THE FairTax!!!
His ALTERED behavior, ALTERS the PCE.
For a guy how often berates others for being stuck on static analysis, YOU'RE STUCK on STATIC! (to steal a phrase perhaps more applicable here in its original form!)
His ALTERED behavior, ALTERS the PCE.Yet another example. A retail that is losing a little money or about break even. He pays no income tax because he has no profits. After the FairTax, he charges the full FairTax amount but only submits 80% of his sales.
How is buying a Bible not a "current expenditure of [a] religious organization"?
Simple when it is purchased from contributions then passed on as charitable gift without a sale occuring.
The question becomes is it a consumption expenditure subject to the NRST, not whether it is merely an expenditure in connection with a charitable gift.
Consumption expenditures are taxed i.e. that which is consumed by the non-profit not connected with its charity product, charitable contributions are not taxed purchases under the FairTax national retail sales tax.
Contributions to not-for-profit organizations are explicitly not taxzble under 706(a)
706(a) "Not-For-Profit Organizations- Dues, contributions, and similar payments to qualified not-for-profit organizations shall not be considered gross payments for taxable property or services for purposes of this subtitle."
Only transactions in the form of sales by the not-for-profit organization are taxes collected from contributors thus taxable per
706(d) Taxable Transactions- If a qualified not-for-profit organization provides taxable property or services in connection with contributions, dues, or similar payments to the organization, then it shall be required to treat the provision of said taxable property or services as a purchase taxable pursuant to this subtitle at the fair market value of said taxable property or services."
Furthermore, the not-for-profit is expressly exempt from paying taxes in connection with the purchase of goods purchased for furtherence of its charitable activities:
706(e) Exemptions- Taxable property and services purchased by a qualified not-for-profit organization shall be eligible for the exemptions provided in section 102.
The bona fide business purpose of a not-for-profit is its charitable activities as no part of the net earnings of a not-for-profit organization can inure to the benefit of any private shareholder or individual it can only go to further the business purpose of the not-for-profit organization (charitable works).
`SEC. 102. INTERMEDIATE AND EXPORT SALES.
`(a) In General- For purposes of this subtitle--
`(1) BUSINESS AND EXPORT PURPOSES- No tax shall be imposed under section 101 on any taxable property or service purchased for--
`(A) a business purpose in a trade or business, or
`(B) export from the United States for use or consumption outside the United States, if, the purchaser provided the seller with a registration certificate, and the seller was a wholesale seller.
*** SNIP ***.
`(b) Business Purposes- For purposes of this section, the term `purchased for a business purpose in a trade or business' means purchased by a person engaged in a trade or business and used in that trade or business--
- `(1) for resale,
- `(2) to produce, provide, render, or sell taxable property or services, or
- `(3) in furtherance of other bona fide business purposes.
No one has suggested the PCE counts business-use purchases. Quite, the contrary. It is precisely because the PCE excludes Business-Use purchases that the example works.
PCE expressly excludes Business use purchases by methodolgy. Any purchase by a business is considered to be business use and an investment not personal consumption by NIPA/
That PC purchased by a business but used for personal consumption is not in PCE it is considered investment not personal consumption of PCE.
http://spruce.flint.umich.edu/~mjperry/Unit10.html
"NIPA arbitrarily assumes: All household spending is PCE except spending on housing. All business spending on final goods is considered Investment. "
That computer bought by a business for its employee to take home is assumed to be an investment by NIPA and is not included in PCE at all.
One of 7our examples is that of a business purchasing for an employee that he might avoid/evade taxes, such a purchase is not entered as PCE in the income/payroll tax case, (when such compensation effects avoidance of income taxes on the value of the PC), and it is not entered as PCE for the situation of the NRST.
Your other cash under the table scenario then purchasing the PC in open market, leaves the numerator (i.e. government revenues lower than they would otherwise be, thus the rate calculated against PCE remains revenue neutral with respect to revenues that are actually collectible.
You overlook that the one receiving the under-the-table cash payment is indeed a business, if an under-the-table cash transaction is in the works by such a business to evade the income tax, it is by no means a stretch that his purchase of a personal use PC would be as a business expense achieving even greater worth and scope as a means to evade under the current system. That PC would not be counted under PCE as it is most likely declared as a deductible business expense item used to minimize taxible income arising from tracible business sales of that rather nefarious tax evading business person.
You hypothetical is marginal at the very best light, and easily offset by other transaction that obviously must go the otherway in folks erroneously declaring less business expense than they otherwise qualify for in tax deductibility of the income/payroll tax system.
Sorry, just don't by your marginal hypotheticals at all when the obvious cases abound all around us in the current system that act to reduce PCE below its real value rather than increase it. It is far more probable for PCE to be lower than real taxable consumption, than it is for it to be higher by a very wide margin simply due to the lacks in methodology for measurement of PCE to begin with. The static revenue neutral tax rate computed from the PCE base represents a clear upper boundry to the tax rate for the NRST with much greater certainty than it represents a lower boundry.
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