Posted on 08/26/2007 4:27:23 AM PDT by Aristotelian
That means the tax rate is ridiculously higher now. The nrst has both lower marginal rates and lower effective rates on spending than the income tax rates on income. Your argument is self defeating. If the revenue neutral rate would have to be high, then today's rates are even higher - yet you do not oppose today's even higher rates?
... and apply to all manner of goods and services.
Today's even higher rates already apply to all manner of goods and services. You have fallen into the trap of comparing PRE income tax prices to POST nrst prices.
Of course if you want to compare the effect of tax systems on prices, you have to include the effect of tax on prices... in both systems.
Example; I buy a service from a dentist. Today, I write the check for payment of $100. That sir is the PRE income tax price. To determine the after tax price, apply the exclusive income tax rate to the price. I'm have a 25% total effective income tax rate - so my after income tax prices is $133.
Compare now the after nrst price....
The dentist's price drops first due to elimination of tax costs to $91 [a 9% drop stipulated by themost vehement anti nrst people]. THen, add the full, marginal nrst to arrive at $118. Note here that I'm using the higher marginal rate, not the lower effective rate.
Under the income tax, pre tax price is $100.
Under the nrst, pre tax price is $91.
Under the income tax, after tax price is $133.
Under the nrst, the after tax price for me is $118... using the full marginal rate. My actual after tax price will be less because the full rate is the rate paid by individuals who save zero dollars, spend 100% on taxable items, and who choose not to accept their rebate.
RE: # 9 Dead on target.
In order for the "corporate tax" on a million dollar tank to be $250,000, they would have to be making over $800,000 profit on each tank. Not likely.
What he also leaves out is right now it costs the IRS $25,000 to process the tax today and it also costs the supplier Accountants, Tax lawywers, auditors, clerks, filing systems, computer systems, more to track all of it.
The vast majority of accounting type work done for business is done for other reasons besides taxes:
Business planning and analysis;
Cost accounting and pricing;
Collecting receivables;
Paying bills;
Expense reports for employee reimbursement;
Payroll processing;
SEC filings;
Cash flow management;
I think that the FairTax system where I have to file a monthly report to get all my business related FairTax payments rebated to me is likley to be more intrusive and more complex than anything I have to do now regarding taxes so my compliance costs would likely increase substantially.
And make no mistake: to collect the amount of money they consume, there will be an enforcement arm with teeth and the full power of the government behind them.
HOW?????
Buy used.no tax.It will make it harder for the guvmint to come in a take all that you have worked for.If you are a conservative that in its self should be enough reason to get behind the FT
Final Report
Chapter 9 excerpt:
Box 9.2. Comparing the Treasury Department’s Revenue-Neutral Rate Estimate with Estimates Made by Retail Sales Tax Proponents
In their submission to the Panel, proponents of the FairTax claimed that a 30 percent tax exclusive sales tax rate would be sufficient not only to replace the federal income tax, but also to replace all payroll taxes and estate and gift taxes and fund a universal cash grant. In contrast, the Treasury Department concluded that using the retail sales tax to replace only the income tax and provide a cash grant would require at least a 34 percent tax-exclusive rate.
Some may wonder why the tax rate estimated by FairTax advocates for replacing almost all federal taxes (representing 93 percent of projected federal receipts for fiscal year 2006, or $2.0 trillion) is so much lower than the retail sales tax rate estimated by the Treasury Department for replacing the income tax alone (representing 54 percent of projected federal receipts for fiscal year 2006, or $1.2 trillion).
First, it appears that FairTax proponents include federal government spending in the tax base when computing revenues, and assume that the price consumers pay would rise by the full amount of the tax when calculating the amount of revenue the government would obtain from a retail sales tax. However, they neglect to take this assumption into account in computing the amount of revenue required to maintain the government’s current level of spending. For example, if a retail sales tax imposed a 30 percent tax on a good required for national defense (for example, transport vehicles) either (1) the government would be required to pay that tax, thereby increasing the cost of maintaining current levels of national defense under the retail sales tax, or (2) if the government was exempt from retail sales tax, the estimate for the amount of revenue raised by the retail sales tax could not include tax on the government’s purchases. Failure to properly account for this effect is the most significant factor contributing to the FairTax proponents’ relatively low revenue-neutral tax rate.
Second, FairTax proponents’ rate estimates also appear to assume that there would be absolutely no tax evasion in a retail sales tax. The Panel found the assumption that all taxpayers would be fully compliant with a full replacement retail sales tax to be unreasonable. The Panel instead made assumptions about evasion that it believes to be conservative and analyzed the tax rate using these evasion assumptions.
snip...
the Panel concluded that a number of features of the retail sales tax would make it difficult to administer and enforce at the high tax rate necessary to be revenue-neutral. A federal retail sales tax assessed at a rate of at least 34 percent, added on to state retail sales taxes, would provide a substantial inducement for evasion at the retail level. Retailers and shoppers could use a number of techniques to evade a retail sales tax. For example, unregistered cash sales to a consumer would allow a transaction to escape taxation. Retailers facing a high retail sales tax might also misapply exemption criteria, whether intentionally or unintentionally, and fail to tax goods that should be taxed. Or, the retailer might collect the tax from customers, but keep the money rather than remit it to the government. At high tax rates, the gain to retailers from evasion is high.
Empirical evidence suggests third-party reporting substantially improves tax compliance, particularly when tax rates are high. 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. There is no third-party reporting in a retail sales tax. Retailers would add their retail sales tax to the pre-tax price for their goods and would remit that amount to the government, but shoppers would not separately report what they bought, and at what price, to the government. The government would rely on retailers alone to report their own taxable and exempt sales.
To obtain exemption from tax, retail purchasers might try to fabricate exemption certificates or otherwise masquerade as tax-free buyers of retail products. For example, individuals might create “paper” businesses solely to obtain business exemption certificates and avoid taxes on purchases for personal use. A related problem involves individuals with legitimate businesses using their business exemptions for personal purchases or for goods or services to give to employees in lieu of cash compensation. Using their business purchase exemption would provide a discount equal to the retail sales tax rate.
With a retail sales tax, retailers would have the responsibility to determine whether the ultimate use of a good or service would be for a business purpose, and therefore would be deserving of the business purchase exemption. Retailers are often ill-equipped to carry out this role. State experience suggests that abuse of exemptions is common, in part because distinguishing between business and individual consumer purchases of so-called “dual use” goods and services – goods and services that are commonly purchased by both businesses and final consumers, such as a plane ticket – can be difficult and costly.
Not really, O/J is posting an editorial by Mr. Bartlett who was deputy assistant secretary of the Treasury for economic policy from 1988 to 1993.
again, attacking the messenger, not the message.
The IRS may be abolished, but in name only.
If the 'prebate' is determined by your income some agency has to track how much you make.
How is income defined? By actual paychecks? What about an equivalent valued item, say a refrigerator in lieu of actual money?
Is that 'income' and who makes that call? a government agency.
As far as the inclusive exclusive controversy, a State's sales tax is usually expressed as exclusive, ie, 7%,8.5%, etc. Why not express the Fair Tax burden the same?
And then we come to my pet peeve with the Fair Tax.
What happens to all the people that have Roth IRAs or after tax mutual funds and such.
They have been taxed on their income once, now when they spend that money they get taxed again.
I don't like the present system but IMHO the Fair Tax will plunge us into stagnation.
Thinking of big ticket purchases, houses, cars mainly.
If I had one adjustment to the Fair Tax, it would be eliminate the prebate and reduce the tax percentage.
It's there to make the idea palatable to low income folks but IMHO it adds a layer of bureaucracy that doesn't need to be there. It exempts a large segment of the population from paying their share.
Read the book.
better yet, skip the book - observe reality.
I love how the Fair Tax folks talk about the income tax as being progressive, and it is trust me, and that the Fair Tax does away with the progressive system.
It doesn’t, it just moves it. If I choose to live better, have nicer things, I pay more.
If I, like I see several on here say, keep it simple I won’t have to pay as much. Thanks for sharing the load. It is just moving around the burden, not balancing it.
Oh and don't get me started on the whole "decrease in purchases if the tax rate gets to high" bit. How do you think that will help the economy if we stop buying because of wanting to reduce tax. I bet the newly unemployed will not really like that.
There is much more to taxation and economics in 21st Century America than is alluded to in the Fair Tax solution.
Get me a flat tax or something that balances the load, and reduced Federal spending, and we'll talk.
Sure you are right about bottom line taxes.
My model is oversimplified. But if you dig into it all taxes collectively are baked in. From payroll taxes of direct labor to things like IFT and all other hidden taxes.
Bottom line is your average $1bn company in fact has a small army of Tax Lawyers who do nothing but look for ways to reduce tax liability.
A huge waste of human capital, in my opinion. The extra accounting work to manage all the various complex corporate structures and IT folks who manage those systems can not be discounted. I know I’m in the profession. Fair tax scares me right now for the political expediency, but longer term if we put it in or something more simplified over time we might be more productive.
I’m sure the ABA lobby will not let Fair tax happen. Nor will the Tax code ever be under 10000 pages again.
The article did, however, point out a serious flaw for me. This rebate based on income means... people will STILL have to prove their income!!
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What happened to everybody getting the same rebate? Wasn’t that the original plan?
Its a tax on what you spend, not what you make! Be a cheap bastard like me and watch what you buy. Buy used
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Amen, that is what attracts me to the plan and at the same time makes me wonder if it would actually work. I could find so many ways to avoid buying new stuff that I probably would not pay enough tax to cover my own rebate. I can’t believe that all sales of used items would really be exempted.
In this piece Mr. Bartlett, once again, refuses to discuss the Fairtax bill as it is written but rather some construct of his own making. That is not a new tactic as most all Fairtax opponents try to employ it but one must wonder WHY they think it necessary to do so.
At the end of the year those that purchase more will pay a greater amount of taxes than others. This is not fair. Everyone should pay the same amount of taxes, that is, if you believe everyone should be treated equally under the law.
Say two guys work side by side getting the same pay. One works all the overtime offered, while the other does not. At the end of the year the hard worker is hit with a higher tax bill, this is not fair. A fair tax should tax them both the same amount.
Wrong!! Neither of them gets a tax bill at the end of the uear. Neither of them pays a tax until he purchases something.
Suggestion: Check out:
http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#47
The ultimate irony is that the Russians and a bunch of ex-Soviet satellite states have flat income taxes, yet we don’t and have no prospect of getting there any time soon.
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The real ultimate irony is that Russia and China may one day wind up being models of capitalism even as the United States sinks ever deeper into the muck and mire of socialism. One slogan seems to describe the future of this country, “the idiots are in charge of the asylum”.
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