Posted on 08/16/2007 6:10:39 PM PDT by RobFromGa
Fair Tax, Foul Politics
By The Editors
Advocates of a national sales tax to replace the income tax have built an impressive grassroots army. They have given their idea an appealing, if somewhat gimmicky, name: the Fair Tax. And they have managed to get five Republican presidential candidates to suggest that they would sign a sales-tax bill if it reached their desk. Some observers credit the enthusiasm of the Fair Taxers for Gov. Mike Huckabee’s surprisingly strong showing in the Iowa straw poll. Huckabee is the candidate most committed to the Fair Tax.
Former senator Fred Thompson is, however, backing away from the idea. Fair Tax advocates have released a video in which Thompson, asked about the proposal, appears to say he would “absolutely” sign it if elected. On August 10, however, Thompson wrote those advocates a letter that said merely that the Fair Tax was a good starting point in thinking about tax reform. Mitt Romney’s campaign says that the Fair Tax has some attractive elements, but that the candidate would need to see details before making any pledges. Rudolph Giuliani has said that he does not think he would sign any such legislation.
The leading candidates are right to be wary. The tax code needs major reform to become fairer, simpler, and more efficient. The Fair Tax is one instantiation of those goals, but its political impracticality makes it fatally flawed. If conservatives force a choice between a Fair Tax and no tax reform at all, the latter is what they are likely to get.
There is widespread confusion about what the Fair Tax would entail. If you bought $100 of clothing and paid a $30 tax on it, you would probably think you had paid a 30 percent tax. The Fair Taxers say that you paid a 23 percent tax: $30 is 23 percent of the $130 you paid in total. When they say they want a 23 percent tax, that’s what they mean.
Since there would be no more income tax in this system, there would also be no more standard exemption to make sure that the basic necessities of life went untaxed. The Fair Taxers would solve this problem by sending out monthly “prebate” checks to all Americans.
The great, undeniably attractive selling point of the Fair Tax is that it would allow the country to dispense with the IRS. But the sad truth is that if the federal government is going to collect as much money as it currently does—which the Fair Taxers say their system would—its methods of tax collection will inevitably be intrusive. The real difference between the current system and this proposal is that the primary brunt of tax collection will be borne by a smaller group of people: business owners.
Over time, then, enforcement measures could become more draconian than they are today: especially since a massive retail sales tax would create a massive incentive to evade it. That’s why every country that has ever tried to impose retail sales taxes this high has quickly moved to a Value Added Tax levied at every stage of production. Consumers rarely see or keep track of these taxes, and they seem to be fairly easy for governments to raise.
These pitfalls are beside the point, however, since a national sales tax is not going to become law. No presidential candidate could be elected on a sales-tax platform, and no Congress would enact one if he were.
A candidate who ran on the national sales tax would be able to run on nothing else. He would have to spend all of his time defending the idea. Off the top of our heads, we can think of three devastating lines of attack an opponent could use in television ads. One ad could argue that getting rid of the mortgage deduction would send home prices into free fall (something that voters are going to find especially worrisome now). Another could ask why senior citizens, having paid taxes all their lives as they made income, should have to spend their retirements paying taxes on everything they use that money to buy. A third could simply ask voters if they look forward to paying a brand new tax.
There are answers to each attack. But no Republican candidate, especially in the daunting environment of 2008, is going to want to have to make them. Republicans cannot win a national election without the tax issue. If they ran on the national sales tax, Republicans would be taking one of their natural strengths and making it into a liability. Which is why we expect them to say nice things about the Fair Taxers’ passion, and move on.
Where does it exist?
...good question...
Hint: nowhere on this planet, anyway...
TAXES IN MEXICO
This article is electronically reproduced
with permission from the
Mexico 2000 Business Directory.
Your Passport to Mexican Business.The Mexican tax system has been subjected to comprehensive tax reform legislation, enacted principally in 1986 and 1988. The dramatic changes are an attempt to make it compatible with the tax systems of Mexico's most important trading and investment partners and with those of countries competing with Mexico for foreign investment.
PRINCIPAL TAXES
The principal taxes payable by individuals and by corporations operating in Mexico and, in certain cases, by foreign companies, are those levied by the federal government. State and municipal governments have more limited tax powers and are not authorized to levy general corporate income taxes; some states tax employers on salaries and professional fees paid by them. The principal taxes are as follows:
Federal Taxes
1. Taxes on income, including a minimum tax based on assets held;
2. Value-added tax;
3. Import and export taxes; and
4. Payroll taxes, principally the 1% percent tax on salaries, social security and contributions to the National Workers Housing Fund.
There are a number of special federal taxes, such as excise taxes on the mining industry and on a few specific products and services, such as alcoholic beverages, cigarettes, gasoline, telephone service, automobiles, etc.
Local Taxes
1. On real property;
2. On salaries (payable by the employer); and
3. On acquisition of real property.
CLASSES OF TAXPAYERS
Tax payers are divided into four main groups, for which, in addition to the rules of general application, separate sets of rules are provided as follows:
Resident Corporations and Other Associations Taxable as Corporations
Resident corporations, permanent establishments and "fixed bases" of operations of non-commercial activities of foreign corporations and all entities other than those associations specifically designated as non-profit organizations, will be taxed in the same manner and under the same rules applicable to resident corporations discussed below in greater detail.
Resident Individuals
Residents of Mexico, irrespective of nationality, are subject to Mexican taxation on their worldwide income of all types which must be included in an annual personal income tax return. Special treatment is given to capital gains, domestic interest and dividend income, at a graduated scale of rates reaching 35%.
Non-Resident Corporations and Individuals
Non-residents are taxed only on their Mexican source income, usually at flat rates applied separately to different types of gross income without deductions. However, under special rules they may elect to be taxed at higher rates on net taxable profits from sales of real property or shares or on short-term construction, installation, erection and similar work. No overall annual return is required of non-residents.
Non-residents may be considered to have a permanent establishment or a fixed base of operations for income tax purposes in Mexico under certain circumstances. In these cases, the permanent establishments, or fixed bases, are taxed in the same way as duly registered branches of foreign corporations, basically following the rules for resident corporations.
Sorry! but none of that sounds even remotely like the Fairtax to me and proves what I said earlier. Thay you guys don't want to talk about the Fairtax but something else entirely!
“DUH”:
2. Value-added tax
The tax code will not be fundamentally changed in our lifetime. The Government will not allow it.
If so you have just proven that you know absolutely NOTHING about that which you have been talking! Nothing!
says you, everyone else with a brain knows better.
The following quote was shared on another thread:
The consumption tax, on the other hand, can only be regarded as a payment for permission-to-live. It implies that a man will not be allowed to advance or even sustain his own life, unless he pays, off the top, a fee to the State for permission to do so. The consumption tax does not strike me, in its philosophical implications, as one whit more noble, or less presumptuous, than the income tax. Murray Rothbard
What difference does it make to me if taxes are extracted at the "point of a gun" or if they are extracted as payment for permission to aquire what is necessary for life itself?
At least the income tax taxes what ones has, rather than taxing what one needs.
You know what they say about wrestling with pigs, right?
"Thank God he's not still around here" is what I say.
I thought the prebate made sure some people didn't feel the pain?
The FairTax strives to be all things to all people. When politicians do that we say they are pandering and call them liars.
..but the old piggydoggy did a heck of a job training his minions...
And they haven't ever had to start the negotiating yet to bring on board the other 200+ people of both parties that they would need to get such a boondoggle through Congress. I can only imagine the results of that arm-twisting match...
But to make that possible, government must first give the qualified money so it can then tax them. The government giveth and the government taketh away, Blessed be the name of the government.
Doesn't that strike you as grossly inefficient.
He who?? You’re the second person on this thread to post this kind of non sequitur to me.
Mexico has a 15% sales tax on all goods and services. Mexicans living in border towns regularly do their shopping in the US because the Mexican sales tax actually makes goods sold in Mexico more expensive than in the US.
Perhaps with a 30% US sales tax (plus state and local), the flow of shoppers will reverse - a boon to Mexico.
Nice tactic, typical. Why don't you threaten to kick my dog?
Not as long as the cost of government is hidden in borrowing.
Cry me a river?
I have heard about teaching pigs to sing (”Never attempt to teach a pig to sing...It simply annoys the pig and wastes you time.”) but I don’t think I’ve heard about wrestling with them.
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