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The Fair Tax: Stop the Tax Cheats
chronwatch.com ^ | Feb. 19, 2006 | Jan Larson

Posted on 02/20/2006 3:30:35 PM PST by Bigun

The Fair Tax: Stop the Tax Cheats

Written by Jan Larson
Sunday, February 19, 2006

 

 

The Internal Revenue Service reported [1] last week that $345 billion (not a misprint) in taxes owed for 2001 has not been collected.  Not to worry, the report also indicates that IRS enforcement efforts will recover approximately $55 billion of this “tax gap.”  Bully for the IRS.

 

Even if the IRS is successful in recovering the amounts they seek, there is simply no way that a $290 billion shortfall can be justified regardless of how it is spun.  There are several reasons why taxes rightfully owed are not collected.  Many taxpayers underreport income and/or claim undeserved deductions.  In other words, a lot of people cheat on their taxes.  Is anyone surprised?

 

Another factor that significantly affects tax compliance is the complexity of the tax code.  According to a report [2] from the Americans For Fair Taxation [3], the federal tax code, rules and IRS rulings comprise more than 60,000 pages.  While complexity undoubtedly leads to some paying more than they rightfully owe, that complexity also results in billions in unpaid taxes.

 

The report also indicates that individuals and businesses spent over six billion hours at an estimated cost of $265 billion dollars attempting to comply with the maze of tax rules and regulations.  This is equivalent to a workforce of over 2.8 million people spending the entire year doing nothing but tax compliance.

 

To cover the uncollected taxes, the 130 million U. S. taxpayers are effectively subsidizing the tax cheats to the tune of over $2600 each.  In other words, if the cheaters were prevented from cheating, the average taxpayer would see reduction in his or her tax bite by over 30%.

 

If the tax gap and compliance costs were in and of themselves not sufficient reason to scrap the tax code, the tax code also hurts the U. S. in other ways.  The income and payroll taxes ostensibly paid by businesses (but are in fact simply passed along to consumers) make U. S. products less competitive on world markets.  This leads to job losses in the U. S. and, as we also saw last week, record trade deficits.  The complexity of the tax code also enables politicians to reward and punish via the tax code.  This is probably the single worst aspect of the U. S. tax system.

 

The sheer lunacy of a tax system that fails to collect billions owed, enables political manipulation, hurts the economy and in general works against the taxpaying public is astounding.

 

There is a solution however.  It is a solution that would eliminate individual compliance requirements and make April 15 just another day.  This solution would greatly reduce business compliance costs and similarly reduce the size and scope of the IRS.  This solution would lead to job growth and economic expansion.  This solution would eliminate most of the opportunities for tax cheats and political manipulation.  The solution?  The Fair Tax.

 

The Fair Tax would eliminate all income and payroll taxes and would replace them with a national sales tax paid on the retail purchases of new goods and services.  The Fair Tax protects low-income individuals and families by rebating taxes paid up to the poverty level.

 

The first reaction by many people to the idea of a national sales tax is that prices of goods and service would go through the roof.  Under the Fair Tax, this is not the case.  Consumers are already paying for the corporate income and payroll taxes embedded in the price of virtually all goods and services.  It is estimated that these embedded taxes average approximately 22% of the retail price of goods and services.  Make no mistake; you are paying these hidden taxes.

 

Under the Fair Tax individuals would incur no compliance costs and businesses would remit Fair Tax receipts similarly to the way state sales taxes are remitted today.  No more armies of lawyers and accountants to figure out IRS regulations.  The IRS (or some similar agency) would need to ensure compliance from just the approximately 25 million businesses instead of 155 million businesses and individuals, as is the case today.

 

Maybe most importantly, the Fair Tax would eliminate the patently unfair manipulations of the tax code that Congress uses to hand out favors to wealthy constituents and lobbyists.  The elimination of the incentive and ability to tinker with the tax code would go much farther toward making members of Congress more “ethical” than any other type of reform.

 

The Fair Tax has been introduced in both the House (H. R. 25) and Senate (S. 25).  The House version already has 48 cosponsors.  The Americans for Fair Taxation estimate that it would require just 3000 active supporters in each congressional district to make the Fair Tax a reality.  Each of the 435 districts represents approximately 300,000 taxpayers.  That means that if just one percent of taxpayers became vocal supporters of the Fair Tax and took the time to write and/or call their representatives in Washington, the Fair Tax could become law.

 

The Fair Tax would be the most significant tax reform since the Boston Tea Party.  Don’t leave this reform to others.  Take a few minutes to let those in Washington know that the time for the Fair Tax is now.  Think about that as you pore over your 1040 this year.

 

[1] http://www.irs.gov/newsroom/article/0,,id=154496,00.html

[2] http://www.fairtax.org/pdfs/Tax_compliance_facts.pdf

[3] http://www.fairtax.org

About the Writer: Jan A. Larson is currently employed in private industry in Texas. He holds a bachelor of science degree from the University of Nebraska, a master of science degree from the University of Kansas, and an MBA from Colorado State University. jan@pieofknowledge.com.


TOPICS: Business/Economy; Crime/Corruption; Culture/Society; Editorial; Government; Politics/Elections
KEYWORDS: cheats; fairtax; subsidizing; taxreform
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To: pigdog; Dimples
I've never pretended that the cascading embedded tax example I've given many times represented anything other than the mechanism of how such taxes become hidden.
Yes you have. In this very sentence you say it is an example of "cascading." It isn't.
501 posted on 03/01/2006 4:06:20 PM PST by Your Nightmare
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To: Dimples
You have no idea what your talking about.
He's getting laughable.
502 posted on 03/01/2006 4:53:09 PM PST by Your Nightmare
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To: Awestruck

"Explain to me why gambling losses are deductible in any amount, but medical out-of-pocket expenses have to be 20 percent of your income to be deductible?"

Because you are taxed on gambling earnings. If you win a 100 dollar bet, but lose a 75 dollar bet should you pay taxes on 100 or 25 dollars. Its the same with stock market income.


503 posted on 03/01/2006 5:01:04 PM PST by RHINO369
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To: Your Nightmare; Dimples

Sure it does. Goe back and read the posts that poiint it out ... and thank you for proving the point that you two (and most of the other Squirrels) have been claiming "t'weren't so".

Demned nice of U!! Hope your cohorts treat you gently since you obviously disagree with them.


504 posted on 03/01/2006 5:02:44 PM PST by pigdog
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To: Your Nightmare

Sorry, Nightie, but if you could read, you'd understand how cascading works and my example clearly explains that to anyone with half a brain or more.


505 posted on 03/01/2006 5:04:17 PM PST by pigdog
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To: pigdog

Its not fair that people who don't work now because they have enough money to stop, don't pay taxes? Is it fair that I pay 8% of my income to SS when SS under the best situation will go bankrupt before I retire? So rape me at 39% plus 8% in SS, and I'm supposed to feel sorry for those who would get 2000 less from the government.

I'd support any plan that 1) Cuts taxes, and 2) makes people feel their tax burden. Be that a sales tax, or ending withholding. Once people realize how much they pay there will be a much better chance of cutting spending and lowering taxes further


506 posted on 03/01/2006 5:57:47 PM PST by RHINO369
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To: pigdog
Sorry, Nightie, but if you could read, you'd understand how cascading works and my example clearly explains that to anyone with half a brain or more.
You're embarrassing yourself and aren't bright enough to realize it.
507 posted on 03/02/2006 7:31:37 AM PST by Your Nightmare
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To: RHINO369

with a bit of research you'll find that the FairTax will cover the things you wished in your post.

The bill itself (HR25) is here:
http://thomas.loc.gov/cgi-bin/query/z?c109:H.R.25:

And the FairTax website is here (check FAQs, Research, & Rebuttals for starters):
http://www.fairtax.org/research.html

Yopu might also be able to get a copy of The FairTax Book which does a good explanatory job as well.


508 posted on 03/02/2006 7:53:14 AM PST by pigdog
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To: Your Nightmare

Backattcha Nightie. You and your sidekick Dimp-Dimp have consistently shown by your misshapen attacks on the FairTax that you don't understand it OR the mechanism of cascading embedded taxes. Not at all!!! So take your own insult to me and reverse it as it more porperly applies to you SQLers.

It's even hilarious since the misnamed "real world" example you gave in #393 shows both embedding of taxes and cascading and you're too ignorant to realize the point. As I have pointed out your example is anything but "real" and despite being intentionally biased against the FairTax results it still shows that something in the range of 15% or, while including your supposedly "real" chart in #451, perhaps even 20% or more. Your own limited mental ability prevents you from understanding your own - purposely biased - examples.

Go back and study my #323 to see how cascading and embedding work. Notice that - unlike you - I've never erroneously claimed the example was some sort of magical representation of 6 businesses in the "real world" - but that it was strictly to show how the mechanism of cascading and embedding of taxes into prices works and that there is a good bit of leeway for prices to drop when income taxes are removed. Your own example (even though clearly artificial and intentionally biased) shows this same effect - and you're too ignorant to realize it.


509 posted on 03/02/2006 8:12:51 AM PST by pigdog
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To: pigdog; Your Nightmare
Sorry, Nightie, but if you could read, you'd understand how cascading works and my example clearly explains that to anyone with half a brain or more.
Uh huh, and if the cascading, hidden taxes is as true as you claim, then anyone with a half a brain or more knows exposing them at the retail level doesn't can't also equate to lower prices.
510 posted on 03/02/2006 8:24:22 AM PST by lewislynn (Fairtax = lies, hope, wishful thinking, conjecture and lies. (no it's not a mistake)
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To: lewislynn
BRAAACHHH!! Wrong answer, Looey.

It's not "exposing" tham that affects prices, but removing them by eliminating the income tax which causes them to cascade and embed. You're about as knowledgeable on the subject as your bedfellow Squirrels.

511 posted on 03/02/2006 9:50:21 AM PST by pigdog
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To: pigdog
It's not "exposing" tham that affects prices, but removing them by eliminating the income tax which causes them to cascade and embed
Has simple logic always been a problem for you? Do the words "revenue neutral" mean anything to you.

The income tax you claim is embedded in cascading and any other tax idiocy you conjure up wouldn't just vaporize in a "revenue neutral" tax plan....unless of course (other than in only your mind) those "embedded, cascading taxes" never existed in the first place.

512 posted on 03/02/2006 1:01:02 PM PST by lewislynn (Fairtax = lies, hope, wishful thinking, conjecture and lies. (no it's not a mistake)
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To: lewislynn

You're merely exposing your own ignorance once again, Looey.

The taxes embedded (hidden) in the prices of things by the cascading mechanism I've continually illustrated are not part of the revenue neutral concept at all, but are part of the inflated prices paid by consumers IN ADDITION TO THE "NORMAL" INCOME TAXES THEY PAY.

That's why many call them hidden taxes, Looey. They cannot be easily seen and are not normally recognized as tax revenue - since they are not part of the normal tax revenue from the consumer. The revenue neutral terminology comes from revenue raised by the normal income taxes (not the hidden taxes which just boost prices). Inflation (generally purposely implemented and boosted by the Fed) is also a hidden tax as well - but I suppose you don't believe that either.

The embedded tax costs discussed WILL be eliminated by removing the income tax and prices will drop because of that. You're welcome to keep on paying the same old prices though if it makes you happy.


513 posted on 03/02/2006 2:26:28 PM PST by pigdog
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To: pigdog
The revenue neutral terminology comes from revenue raised by the normal income taxes (not the hidden taxes which just boost prices).
Huh?
514 posted on 03/02/2006 4:18:51 PM PST by Your Nightmare
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To: Your Nightmare

I figured you'd not understand that either since you don't understand the mechanism that causes embedded, cascading tax costs. No reason to expect you to suddenly have an epiphany at this late stage of your education.

You might, though, go study hard on some of the examples where I've explained this at a fourth-grade level. Your "pretend ignorance" is charming.


515 posted on 03/02/2006 4:32:21 PM PST by pigdog
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To: Your Nightmare
So are business profit taxes "normal taxes" in your eyes?

Are business profit taxes part of the $927.7 Billion the AFT calls "income tax" in its 2003 "revenue neutral" tax rate calculations (Line 23 of Table 2)?

516 posted on 03/02/2006 6:26:26 PM PST by Dimples
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To: pigdog
They cannot be easily seen and are not normally recognized as tax revenue - since they are not part of the normal tax revenue from the consumer. The revenue neutral terminology comes from revenue raised by the normal income taxes (not the hidden taxes which just boost prices).
OHHH, you said "hidden tax", you didn't say it was - a secret tax- not counted as tax revenue... BWAHAHAHAHAHAHA! TOO FUNNY!... WHAT A FRIGG'N IDIOT YOU ARE!
Inflation (generally purposely implemented and boosted by the Fed) is also a hidden tax as well - but I suppose you don't believe that either.
And guess what, unlike your -secret tax-, it's also accounted for. So now you're going to claim the Fairtax eliminates the FED?...Otherwise what's your point?

You're either really stupid or you're banking on anyone reading your tripe is.

517 posted on 03/02/2006 6:34:46 PM PST by lewislynn (Fairtax = lies, hope, wishful thinking, conjecture and lies. (no it's not a mistake)
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To: lewislynn

Well, Looey, ONE of us is stupid.

You don't seem to understand that the hidden taxes are not taxes paid into the Treasury Dept. as income tax (business or otherwise) but are prices increased by the cascading of business income tax costs into prices that are passed on to further levels in the production/distribution chain. They cause artificially increased prices due to downstream income taxes that have cascaded into increased costs for things eventually bought by consumers.

You SQL Studs don't grasp the concept but most who think about it will certainly understand that prices are artificially boosted due solely to taxes that businesses pay and these inflated prices are merely a hidden tax on the consumer that is in addition to any income taxes paid.

Your and the other Squirrels' efforts of trying to claim that the discussion relates to taxes paid to the government are meaningless. The discussion is about prices (not taxes) being needlessly inflated by such hidden taxes. That's why they are called "hidden". DUH!!!


518 posted on 03/02/2006 7:15:48 PM PST by pigdog
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To: Your Nightmare; pigdog
Sorry, this was meant for pigdog, not Your Nightmare.

So, pigdog, are business profit taxes "normal taxes" in your eyes?

Are business profit taxes part of the $927.7 Billion the AFT calls "income tax" in its 2003 "revenue neutral" tax rate calculations (Line 23 of Table 2)?

519 posted on 03/02/2006 7:42:00 PM PST by Dimples
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To: pigdog
Besides excise taxes (which we aren't discussing), what "hidden taxes" don't generate revenue that would have to be replaced by the FairTax?

You are getting sillier and sillier with every post.
520 posted on 03/02/2006 8:24:00 PM PST by Your Nightmare
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