Posted on 09/17/2006 8:03:05 AM PDT by Principled
Can you get some html thangs happening and put up a graph of income vs effective rates that will overlay income tax rates by income AND nrst rate by spending?
Is the 23% FairTax revenue-neutral rate higher or lower when compared to income and Social Security taxes people pay today? Most people are paying that much or more today much of it is just hidden from view. The income tax bracket most people fall into is 15 percent, and all wage earners pay 7.65 percent in payroll taxes. Thats 23 percent right there, without taking into account the 7.65 percent employer matching! On top of that, you have to add in the business taxes and associated compliance costs passed on to consumers in higher prices.
Effective tax rates vs. stated tax rates
Because the 23-percent FairTax rate of $0.23 on every dollar spent is not imposed on necessities, an individual spending $30,000 pays an effective tax rate of only 15.5 percent, not 23 percent. That same individual will pay 17.3 percent of his or her income to federal taxes under current law. See effective tax rates for a family of four at various spending levels in Figure 2.
And AFFT's discussion of comparative rates regarding a situation of married with no childern FAQ#14:
http://www.fairtaxvolunteer.org/smart/faq-main.html#14
Is it fair for rich people to get the exact same FairTax rebate from the federal government as the poorest person in America? Lets look at a billionaire under the FairTax if he spends $10,000,000 dollars he pays a tax of $2,300,000 and gets a rebate of $4,508 (assuming he is married and has no children). His effective tax rate as a percent of spending is 22.95 percent.
Now, lets look at a middle-income married couple with no children under the FairTax if they spend $40,000, they pay $4,692 net of their rebate for an effective tax rate of 11.7 percent. The effective tax rate increases as spending increases, but never exceeds 23 percent!
Figure 4: Comparison of effective tax rates
FairTax Income tax
FairTax
Current Tax
Expenditures = income $40,000
$40,000
Net tax $4,692
$5,870
Effective tax rate 11.7%
14.7%
In contrast, if this same couple earns $40,000 in wages today under the current tax system, they pay $2,810 in income taxes and $3,060 in payroll taxes for a total of $5,870 in taxes (14.7 percent). In addition, their employer pays another $3,060 in payroll taxes. Most economists agree that the employer payroll tax is actually borne by employees in the form of lower wages. Looked at this way, this couple is paying $8,930 (22.3 percent) in taxes today, which doesnt even include the hidden taxes they pay every time they make a purchase.
Finally, lets look at a low-income couple under the FairTax they pay no net FairTax at all. Today, under the income tax system, they not only pay 15 percent in payroll taxes, but they also pay hidden taxes arising from corporate taxes, private sector compliance costs, and payroll taxes passed on to consumers and embedded in the price of everything they buy.
Ping
The BLS acknowledges the rather large difference between reported income and expenditures. It relies on self reporting when gathering information and admits a significant margin of error.
Why would someone mis-report to BLS?
Do you think there is a similar mis-reporting to the IRS?
How would you reconcile the fact that the IRS shows 20% less in earnings than we spend in the aggregate?
Oh yeah- and when the tax is on spending instead of earnings, how will capturing that previously mysterious (untaxed) 20% affect collections?
Could some of it be the illegal economy?
Which is one reason the rate will be lowered in future years.
That ALL individuals (obviously to include all voters) benefit from a rate reduction puts all individuals (and obviously all voters) united in favor of a tax cut. That's not the situation we have now under the income tax.
Also, under the nrst when ALL individuals pay the same marginal rate, all individuals will be united in opposition to any increase. That's not the situation we have now under the income tax. Now, it's "tax him" or "tax the other guys"...
From the tax panel report For the portion of income from which taxes are not withheld and there is no third-party reporting, income tax evasion rates are estimated to be around 50 percent.
The FairTax makes ALL tax collection points self reporting.
It relies on self reporting when gathering information and admits a significant margin of error.
Hmmm, ever wonder why large groups of people would not tell the government how much they make in income?
Table 2. Income before taxes: Average annual expenditures and characteristics, Consumer Expenditure Survey, 2001 |
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Complete reporting of income a/ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Never mind, that's just a rhetorical question in a thread about reforming the income/payroll tax system ;O)
But there is 3rd party reporting under the nrst. Did you forget that?
Retailers will have a registration that allows them to purchase tax free and allows them to be paid for remitting the tax.
They aren't simply asking retailers to please be honest! They'll be checking.
Au contraire, mon frère - there is a fourth option and it's the one the politicians will choose.
4) Keep the graduated income tax and ADD a national sales tax.
What you are suggesting is an audit, not third party reporting.
Third party reporting would mean requiring the consumer to retain his receipts and report his purchases, the sellers and tax paid to the government.
HTML king - nice job.
People DO spend up to the poverty level - even if they don't report near as much in earnings.
What does that say about the number of people who have negative tax rates under the income tax compared to the number that will have negative tax rates under the nrst?
Seems that the nrst will greatly reduce redistribution.
Audits of business will take place, but that is not what I was suggesting.
That registration numbers are used to purchase tax free for business purposes allows a third party - the tax authority - to trace taxes they're expecting.
Surely you don't think that the bill simply asks retailers to be honest with nothing but audits to catch them, do you?!
The FairTax makes ALL tax collection points self reporting.
Actually since the taxpayer in a retail sales tax system is the purchaser of goods and services a retail sales tax system assures that the one paying the tax is not the one held liable for accurate reporting of the taxes due. For every transaction taxed, there are more than two persons aware of the tax collectors existence, the purchaser, the seller, the suppliers to the business selling and the government issuing business certification providing tax exemption for purchasing in production or aquisiton of products for ultimate retail sale.
Lots of potential witnesses, and lots of oppertunity for government to monitor 90% fewer tax collection points than exist today, less than 20% of which carry more than 80% of the total retail dollar volume. A max risk for little gain for the tax collecting point.
OTOH, under the income tax system the payer of the tax and the reporter thereof is one and the same person. Making an income tax/payroll system totally dependant upon self reporting, begging to be violated and cheated.
You don't understand what self reporting or third party reporting means.
Nobody wants both taxes (except socialists).
Provided we can prevent both until the passage of HR 25, we will be MUCH safer.
HR 25 defunds the IRS, destroys existing income tax records (save those delinquent at changeover), eliminates withholding, and erases the entire income tax code.
Those things make it much, much harder to put an income tax back on.
Sure some politician could introduce a bill to RE fund the IRS. Sure, some politician could introduce a bill to force all businesses and individuals to create and save documentation wrt income and payroll taxes, and of course some politician could introduce legislation to RE implement withholding.
These things are unlikely to be sure. And if they happened, they'd have to be passed by folks expecting our votes!
In addition to the obtacles stated above, how long would it take to write and negotiate an entire income tax code?... (and WHO would propose it?)
It would be a nightmare to have both. IMO passing HR 25 makes it much less likely.
IMHO passing a national sales tax makes it much MORE likely we will end up with both. Obviously passing a national sales tax is one of the steps to ending up with both, we already have the income tax half. So your can claim that passing a national sales tax, which does not eliminate the 16th Amendment as a prior requirement for passage, will somehow make it less likely that we end up with both, is just backwards.
What is the purpose of 3rd party reporting?
Isn't that accomplished under the nrst (even if you choose to call it something else?)
Yes it is.
Dingdingdingding... We have a winner!
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