Posted on 03/31/2002 1:15:58 PM PST by DennisR
A 23% sales tax would kill our economy.
You pay more than that now by a long sight.
DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation
The article considers only those factors actually paid to government out of impositions on the business in complying with the income, payroll, excise & tariff tax laws and does not account for the additional burdens pressed on the economy as a consequence to complying with the current tax code.
The total contribution of the federal tax system(including taxes in gross wage/salaries) to the price of retail consumption goods and services is 36% for federal taxes alone.
Why? Because wages and the taxes on them are paid for out of sales receipt to business,(i.e. consumption expenditure). If we add in a cost of compliance of more than $600billion/year as a very conservative estimate, the percentage that represents the burden on the family due to the Federal income payroll tax system increases to about a 47% of family consumption expenditures.
Tax as % of current family retail expenditure = fed/(1-state-fed-savings) =
23.5/(1-.235-0.102-0.012) = 36.09%
Current total Federal tax revenues are about $1900billion, more than $600billion(Paine '97, Pilla '95, AGCCA 2000, Williams 2000) additional dollars are passed on in consumption prices due to the business costs of complying with the federal income/payroll tax laws.
Percent total current federal burden (taxes + compliance costs) of consumption dollars = 36*(1900+600)/1900 = 47.36% as passed through consumption prices.
Reduce the taxes on business and simplify them in any way possible ultimately means a lower price and higher standard of living for the citizen.
I am not a fan of the NST, NRST, or whatever they choose to call themselves now. It is already riddled with exceptions and loopholes and exemptions and it isn't even a law yet.
I oppose the current system because it is too high and is full of exemptions and complications. It allows the feds to delve into the personal lives of Americans.
The flat income tax would be more of the same, although at a lower tax rate.
What would I like then? How about a 10% federal retail sales tax on all goods? No loopholes. No exceptions. No exemptions. If you have a business license and you sell tangible goods, you will be taxed. Period. Write it into a Constitutional Amendment that way.
Yes, that means to some extent there will be natural VAT. You can't have simple and no VAT. Close all the loopholes and let people live with it. Once there are no income taxes, corporate taxes, or payroll taxes people will grow to like it.
Why not have a tax on services? Services are intangible. They can't be physically touched. Taxing them would only create a huge black market. You can easily see if someone has sold a thousand radios. It's easy to hide a thousand haircuts.
It is better to have people pay 10%
How do you plan on getting there from here?
Remember what Walter Williams is telling us?
Walter Williams, World Net Daily, 10-25-2000
According to the most recent U.S. Treasury Department figures, in 1997 the top 1 percent of income-earners (those with income of $250,000 and higher) paid 33 percent of all federal income taxes. The top 5 percent of income-earners ($108,000 and over) paid 52 percent, and the top 50 percent ($36,000 and over) paid 96 percent of income taxes. Guess what the bottom 50 percent of income earners paid?
If you're among those who pay little or no federal income taxes, what do you care about tax cuts? Moreover, if you think tax cuts pose a threat to government handout programs, you might be openly hostile and support Al Gore's silly "risky scheme" talk. So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?
And the "Flat Tax" proposals that have been submitted before congress even add to that constituency of 70% of the voting public clamoring for more from government looking for the top 40% of taxpayers to foot the bill.
This is something taught to me by freepers when I first joined. Corporations do not pay taxes. Consumers pay them. Stop. Read that again. Let it sink in.
Example. I sell widgets at 10 dollars each. My profit is 2 dollar on each. The government taxes me at one dollar per widget. Do I continue selling at 10 dollars and give my dollar to the government? No. I raise prices. The widgets will cost 11 dollars. I still profit 2 dollars. The government gets one dollar. The consumer has now become an indirect taxpayer and he will never know.
Any good tax reform will start by eliminating all the little hidden taxes:
*corporate income tax
*capital gains tax
*social security tax (employer and employee)
*medicare tax (employer and employee)
*and all the little taxes like the ones on your phone bill
than to punish the economy with an NST.
NST?, that is what we already have and the Flat Tax would just institutionalise it by increasing the constituency exmempted from filing to pay the tax.
An NST is a VAT clear and simple taxing all levels of production and passing the total burden down to the ultitmate consumer in price inflation.
And the Forbes/Armey Flat tax is an income tax with VAT(an NST), requiring, the IRS for administration and enforcement, and still taxes business passing on such taxes in higher prices to consumers, lower wages to employees, and lower returns to investors/retirees.
Issue: What Is the Best Way to Collect a Value Added Tax?
A value-added tax (VAT) generally is a tax imposed and collected on the value added at every stage in the production and distribution process of a good or service. Although a VAT may be computed in any of several ways, the amount of value added generally can be thought of as the difference between the value of sales and purchases of a business. (e.g. Revenues - Costs = Taxable Business Income)
***
Subtraction-Method VAT. Under the subtraction method, value added is measured as the difference between a business's taxable sales and its purchases of taxable goods and services from other businesses. At the end of the reporting period, a rate of tax is applied to this difference in order to determine the tax liability. The subtraction method is similar to the credit-invoice method in that both methods measure value added by comparing sales to purchases that have borne the tax.
***
The subtraction method differs from the credit-invoice method principally in that the tax rate is applied to a net amount of value added (sales less purchases) rather than to gross sales with credits for tax on gross purchases. A business's tax liability under the credit-invoice method relies on the business's sales records and purchase invoices, while the tax liability under the subtraction method may rely on records that the taxpayer maintains for income tax or financial accounting purposes
None other than the father of the flat tax, Robert Hall of Stanford University (along with Alvin Rabushka), in his 1995 Ways and Means Committee testimony said, "The Hall-Rabushka flat tax is a value-added tax."
Which was pointed out again in additional hearings in April of 2000:
http://waysandmeans.house.gov/fullcomm/106cong/4-11-00/4-11kotl.htm
"Robert Hall, one of the originators of the proposal(Flat Tax), who describes his Flat Tax as, effectively, a Value Added Tax. A value added tax taxes output less investment (because firms get to deduct their investment.)"
"The Flat Tax differs from a VAT in only two respects. First, it asks workers, rather than firm managers, to mail in the check for the tax payment on that portion of output paid to them as wages. Second, it provides a subsidy to workers with low wages."
The Flat Tax; Chapter 3, by Robert Hall and Alvin Rabushka
| In our system, all income is classified as either business income or wages (including salaries and retirement benefits). The system is airtight. Taxes on both types of income are equal. The wage tax has features to make the overall system progressive. Both taxes have postcard forms. The low tax rate of 19 percent is enough to match the revenue of the federal tax system as it existed in 1993, the last full year of data available as we write. Here is the logic of our system, stripped to basics: We want to tax consumption. The public does one of two things with its income—spends it or invests it. We can measure consumption as income minus investment. A really simple tax would just have each firm pay tax on the total amount of income generated by the firm less that firm’s investment in plant and equipment. The value-added tax works just that way. But a value-added tax is unfair because it is not progressive. That’s why we break the tax in two. The firm pays tax on all the income generated at the firm except the income paid to its workers. The workers pay tax on what they earn, and the tax they pay is progressive. To measure the total amount of income generated at a business, the best approach is to take the total receipts of the firm over the year and subtract the payments the firm has made to its workers and suppliers. This approach guarantees a comprehensive tax base. The successful value-added taxes in Europe work this way. The base for the business tax is the following: Total revenue from sales of goods and services less purchases of inputs from other firms less wages, salaries, and pensions paid to workers less purchases of plant and equipment The other piece is the wage tax. Each family pays 19 percent of its wage, salary, and pension income over a family allowance (the allowance makes the system progressive). The base for the compensation tax is total wages, salaries, and retirement benefits less the total amount of family allowances. |
CONSUMPTION TAX PROPOSALS; 1996 Deloitte & Touche LLP
The Flat Tax is a VAT even as the current income/payroll tax structure now in place is a subtraction method VAT, in that it is a levy imposed on businesses at all levels of production, it is passed on to the consumer hidden in the price of goods and services.
As long as government is able to play a shell game with hiding taxes from the Voter(i.e. individual) it can rely on the old maxim:
A government which robs Peter to pay Paul can always depend on the support of Paul.
-George Bernard Shaw
and keep right on growing without bound.
Florida, Nevada, South Dakota, Texas, Washington, Wyoming and Alaska have no income tax. They seem to be doing as well as income tax states.
...propose that it be 10%...
I like that number too. It works well with slogans about tithes for church.
But I would probably be happy being unhappy with an NST instead of what we have today.
I wish you would trash the "NST" terminology, a NST is a VAT, like Australian & Eupopean style taxes on on all levels of production purchases passed on as increased price to consumers.
The NRST(National Retail Sales Tax) is a single stage tax levied on the sale of products for consumption, and fully visible to the customer, as opposed to being levied on value added in regard to production of an NST and passed hidden in price.
The NST & NRST are quite different animals. The current income/payroll tax system operates as a subtration method VAT, an NST and the Flat Tax proposals changes none of that.
see:
Flat Tax as Seen By a Tax Preparer
by Vern Hoven
The compliance costs imposed business simply do not go away under a Flat Tax. The 65 cents for every dollar of tax revenue collected is fully active and adding to the price of goods and service under a Flat Tax just as much as it is today under the income/payroll tax. Under the Flat Tax Congress is still calling the shots on what is deductible for a business, the IRS still is sitting on both individuals and businesses to assure accurate tax reporting, the litigation does not go away.
An nrst, oddly, would not increase prices. Takes a little thinking, but it's true.
Prices will not go up.
I agree...as would nearly everyone on this forum. But you wouldn't have to wait long at all for the rate to go down...
Once withholding ends, and every single individual in these United States pays a federal tax everytime he buys something, pressure will be extreme to reduce taxes.
I look forward to the day every Joe has to pull cash from his pocket to pay the beast...then we'd see some action.
Actually, it would be a boon to our economy. I believe you are of the mind that prices will increase, and that the increase will inhibit spending...
Well, prices won't change much, if at all. And did you know that right now, you pay far more than 23% in fed tax costs in every single purchase you make?
Consumption is more stable than income - meaning taxes based on consumption would be more stable than taxes based on income.
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