National sales tax gains momentum

WorldNetDaily.com ^ | Wednesday, November 13, 2002 | By Jon Dougherty

[ancient_geezer]

(i.e., we would still be raising $2+ Billion for the gov't budget) and the 25% savings would come in the form of lower prices for commodities?

Yes, that corporate portion of tax revenue is currently embedded into the price of goods and services as well as the overhead costs tax planning, accounting, litigation, etc. The NRST will remove more than 90% of those overhead costs along with the actual corporate tax omponents (income & payroll) from the shelf price of goods. Essential we would see a drop in shelf prices, then NRST applied to bring the total payment (Tax + shelfprice) to approximately the same as we pay today. Dr. Jorgensen estimates that the total tax plus shelfprice for goods and services would actually fall 3% in the first year and more than 10% across a 25 year period.

The overall condition of the individual will be to receive his full gross paycheck, (no witholding), plus monthly FCA and a fall of 3% of the combination of NRST and shelfprices within the first year of implementation.

That leaves a lot of room for economic expansion driven by the consumer, and opening the citizen's potential for investment and savings from his released witholding dollars as well as assuring tax revenues for covering current programs and functions of the federal government.

[Bigun]

I still like Steve Forbes' idea. A flat tax with the first, say, $30,000 of income exempted for everyone...set at around 15 percent with no deductions to tempt Congress to legislate through tax policy.

Hmmmm! Perhaps it's time for you to take some time and read Confessions of a Flat Taxer by one of it's principal architects.

[Bigun]

The more I think about it, the more I like the National Sales Tax. They need to start seriously cutting government spending though.

I agree! It's one of the MAIN reasons for getting rid of the current system where so much of what you pay is HIDDEN!

Don't you think the result of having the cost of government detailed on the reciept for every purchase of a new good or service made in America will be to put downward preasure on those costs? I sure do!

[ancient_geezer]

are there actually socailist who want smaller goverment???? I have my doubts.

So do I, however, the NRST answers the socialist's arguments about treatment of the poor by assuring everyone is rebated the tax payment for the poverty level of consumption. Even a socialist has a hard time turning their backs on the economic advantages of the NRST to every one including their own constituencies.

All legal residents will receive a FCA equivalent to the FairTax paid on essential goods and services. The FCA will be paid in advance, in equal installments each month. The size of the monthly FCA will be determined by the government's Poverty Level for a particular family size, multiplied by the tax rate.

Every year, the Department of Health and Human Services [HHS] determine the "poverty level" for each family size.

The 2001 "FairTax" Family Consumption Allowance Figures
Family Size	HHS Poverty Level	Annual FCA	Monthly FCA
One	$8,590	$1,976	$165
Two	$17,180	$3,951	$329
Three	$20,200	$4,646	$387
Four	$23,220	$5,341	$445
Five	$26,240	$6,035	$503
Six	$29,260	$6,730	$561
Seven	$32,280	$7,424	$619
Eight	$35,300	$8,119	$677

1) Federal Register: February 16, 2001, Pages 10695-10697).

[ The monthly FCA for each adult is .23 * (HSS poverty level for a single person)/12 to assure no marriage penalty due to the manner in which the poverty level is dependant on family size. The monthly FCA for each child is .23 * (the incremental increase of HSS poverty level for a family with one child over no child) ] A. Geezer

A family of four, for example, could spend $23,220 per year free of tax because they will have received over the course of the year rebates totaling $5,341. $5,341 is the amount of sales tax paid on $23,220 in expenditures. A family spending double the "poverty level" or $46,440 per year will effectively pay tax on only half of their spending and, therefore, have an effective tax rate of 11 ½ percent or half the FairTax rate.

The beauty of the FairTax is that you can control how much you pay in taxes. If you happen to save, invest or spend a portion on used [previously taxed] items, you can get your effective tax rate below 9%.

H.R.2525 "The FairTax Act

Not only does every family receive a FCA based on family size, not income, but they will also receive 100% of their paycheck:

Fedup Smith makes $39K per year...once the FairTax is the law of the land he will receive an instant increase in pay of $200.00 per week. Since he has a family of four, he will receive a FCA of $445 per month, for a total of $1,305.00 additional income per month that he can do with as he sees fit .

---

Protecting the Poor from the Tax

A common assumption about the NRST is that it is naturally regressive, since lower income individuals spend a greater percentage of their income in any given year on consumption of necessities. Because a sales tax is an altogether different paradigm of taxation, any judgment on the equity of the tax must be accompanied by a different analysis of regressivity.

To examine how a national retail sales tax could address such concerns, a number of issues should be broached. First and foremost, taxing income at a graduated rate is not the only means of making a tax system progressive. Moreover, a tax on income, no matter how steeply graduated, does not necessarily make an income tax progressive. Even if progressivity is measured by the common standard of "ability to pay," the income tax is imposed only on productive labor and the return to capital and not on wealth. An income tax does not tax consumption of older accumulated capital, whereas a sales tax does.

Equally important, using taxable income as the basis to determine progressivity is necessarily based on a year-to-year analysis where the ability to pay is measured as a function of income per unit of time. Consumption over the life of a taxpayer is in many respects a better measurement of the ability to pay taxes. Because people's incomes fluctuate throughout their lives, the lifetime application of a sales tax is much less regressive than it would appear to be when examining a cross-section of taxpayers in any given year. Since all income is earned for the purpose of eventual consumption, under a national retail sales tax, the taxpayer can defer taxation by saving his income. But he cannot forever avoid the tax.

In any case, an NRST plan can be made progressive through a rebate mechanism that would shelter low-income people from paying the tax. One manner in which the NRST could be made less regressive would be to exempt certain necessities--such as food and clothing--from the tax. That approach would exempt, however, the most expensive food (lobster and caviar) and the most expensive clothing ($1,000 designer suits). It is a very inefficient means of providing tax relief to lower and middle income Americans and would necessitate a much higher overall rate. A more neutral and less distortive approach is to simply provide each family a level of consumption free of tax by providing a rebate of the tax on expenditures up to the poverty level.

The rebate could work as follows: A family consumption refund would be established for each household at an amount equal to the sales tax rate times the poverty level. The poverty level is defined by the Department of Health and Human Services guidelines and should be raised by the sales tax rate.

The family consumption allowance approach has several effects. First, it makes the sales tax applicable only to consumption beyond the necessities of life. Second, it makes the tax in effect progressive, not only because it is based on consumption, a better index of true ability to pay, but because--if one wants to continue to view progressivity through an income tax lens--it entirely exempts lower income workers. Third, unlike most state taxes, it does not undertake the complex and politicized task of determining what to tax and what to exempt, thereby minimizing administrative and compliance questions and economic distortions.

The 23 percent NRST plan would have a highly beneficial impact on the U.S. economy and raise the standard of living of the American public. The tax compliance costs borne by our economy would fall sharply. And the degree of intrusiveness of the tax system in our lives would decline greatly. Once set free from the burdens of compliance with the current system and the punitive tax rates imposed on work, savings, and investment, the United States will become a more productive and more prosperous republic. A national retail sales tax is more compatible with the principles of a free society than any other alternative tax system.

81 Posted on 03/21/2000 12:48:00 PST by CHIEF negotiator

[antaresequity]

Defund the beast, defang it, and drive a stake through its heart

ditto

[Bigun]

I never could figure out why WORK AND PRODUCTION was taxed!

Because it suited the purpose of those who proposed it!

The progressive income tax is directly endorsed in the Manifesto of the Communist Party by Karl Marx and Frederick Engels! (scroll to the end of the section in the link and find item #2 on the list!)

[ancient_geezer]

in EVERY country that has instituted a NRST the Income tax came back. As a conservative I look at reality and what History teaches us.

Since you are a student of History, you will provide us with the example of even one nation that has instituted an NRST such of the like of HR2525, which kills all predecding national income & payroll taxes and replaces them with a single rate single stage tax at the retail point of sale.

Good luck, there is no such example. You statement is non-sequiter and meaningless.

[WileyC]

I thought such a tax would be very inflationary, since the consumption tax would be incurred at every step of production, and of course, that cost would have to be passed along to the consumer.

Am I confusing this with anoter type of consumption based tax?

Yup. The various national sale tax plans all apply the tax only at the time the final consumer buys the item. So there is no 'cumulative tax' along the way that has to be accounted for.

What you are thinking of, probably, is a Value Added Tax which is one of the most insane ideas in taxation ever created.

[WileyC]

To make sure the income tax isn't resurrected in the future, the 16th Amendment would have to be repealed.

While true, can you imagine what would happen if people started pushing for the return of an income tax? The scenes we've seen in TN would be nothing compared to what would happen in that case!

[Bigun]

That has happened in EVERY country that has a NRST.

PLEASE be kind enough to supply me with the name of ANY country which has EVER had a NRST similar to that proposed by H.R. 2525!

Frankly, I don't think there IS one but I will wait for your response!

[antaresequity]

in EVERY country that has instituted a NRST the Income tax came back.

This fact if true does not imply a causal relatsion between consumption tax models and failure of those models.

Please tell us:

1) Which countries have implemented failed consumption taxes

2) What era or year they did so

And give any links you may have that go into detail the model implemented...

[WileyC]

Add property taxes to the mix. With NO Fed income taxes, there'd be NO mortgage deductions. There'd be NO charitable deductions.

With no burdensome income tax, you don't need interest mortgage deductions. And did you know that more than half of all charitable deductions are never claimed? So, right there, we have fifty percent that are unaffected. Ever study has shown that when Americans have more money, they give more. Bump that fifty up to sixty or so to take than into account. Plus you have to figure at least half of the rest would give even without the incentive of a deduction.

By my rough count we are cruising on at least 80% of charitable giving to continue as before... at least!

[paul51]

"I don't think any more will happen [on tax reform and reduction] now than happened during the Reagan administration or since Republicans took over the House in 1994," he said.

"The one thing no one should expect, despite the rhetoric, is that their taxes are going to go down, because government needs money now more than ever," Paul added. "I hope there's serious debate, but I don't see much happening."

The problem is too many people in Wash that think like this

[Cicero5]

I'd like to to see a flat tax with the percentage changeable only by a direct vote of the people. Lets put the government on a budget just like each of us. And I don't want to hear anything about flexibility in a time of war, etc., etc. The time to fix the roof is not when it has started raining.

Reality is, of course, that the real reason the tax code is structured as it is, is so that Congress can control the behavior of American citizens. That power will never be given up.

[On the Road to Serfdom]

Housing sales ? P-O-O-F !

I disagree. Even without the mortgage deduction advantage a sales tax puts in a better advantage to buying a house:

Income: 40,000

Income tax: none

20% sales tax one time on 100,000 house: 20,000

sales tax on 700/mo. rent over 20 years:33,600

A family taking home 40,000 can afford a 120,000 house as easily as a family taking home 32,000 can afford a 100,000 house. Plus, they save in taxes (discounting for time would reduce the advantage ,but increasing to 30 or 50 years would add to the advantage).

[WileyC]

1) it is biased against consumption. This will lead to overinvestment which can lead to a crash. Both consumption and investment should be taxed but with lower rates
2) the burden on collecting the tax will go to retailers who tend to be small businesses, mom and pop stores.
3) the underground economy will go up as more people will use cash to avoid paying the taxes. just like they already do with state sales taxes
4) it is hidden. It will be hard for most consumers to know if the tax goes up and it will be the death of a million cuts. Furthermore it will be very easy (and common with many state sales taxes) for politicians to tinker around with it so you end up having different rates for favored and disfavored products. Taxpayers won't have a single rate and a single number of the dollars they spent in taxes
5) it's harder to make the supply side argument for cutting this tax

Okay, one at a time... =)

1. You assume that investment opportunities (i.e. growth) would not occur. With capital being freed up there's likely to be a huge wave of new business. Yes, some will fail. Them's the breaks in investing. But it'd be a person's choice and that's what freedom is about, yes?
2. Most, if not all, 'mom and pop stores' already collect local sales tax. Add another line of code to the cash register. Voila, no problem.
3. The only way to make money at tax fraud is if you do it wholesale (i.e. in large quantities) rather than nickle and diming it to death. The big boys will keep their noses scrupulously clean (because, instead of tens of millions of taxpayers, you have many less retailers) and mid-level operators will be the big target for law enforcement. What about Sam and his turnip truck? Well, I think we can all agree that's not a huge portion of the GDP. =)
4. It is not hidden. Most of the NRST plans have a single rate for everything that's printed right on the receipt. In fact, it is integral to having it be fair and balanced. No loopholes, no exemptions.
5. This is nearly the easiest point of all. It removes the tax calculations from the entire production stream and instead puts it where it belongs: at the end points. Investing would have the hideous warping effect of a confiscatory and biased tax system removed. Just removing the tax compliance burden alone would have dramatic (positive) effects on the way business is done in this country. Instead of spennding money to avoid taxes, it would be used (supply side) on higher revenue items such as more R&D, capital investment or even dividends (remember those?)

[Richard Kimball]

Until I hear the word "repeal" and "IRS" or "tax code" in the same sentence, I think it'll just be another make work project for laywers and accountants.

AMEN!!! If the KILL the income tax, a national retail sales tax is fine. But if they only lower it, then they can raise taxes just by jacking up the income tax one year and the sales tax the next. Some of the Lib Rats in Texas tried to sell a state income tax by saying they'd lower the sales and property tax. No way.

[ancient_geezer]

Which countries have implemented failed consumption taxes.

Should be restated as a NRST that was instituted and the income tax came back; and the question should be addressed to Leto to whom I posed your same challenge to find an example of where a NRST was fully implemented replacing all income/payroll taxes.

The answer is none. Therefore Leto's earlier remark, to which I was replying, has no referent and is not germane to the issue.

[FITZ]

Don't you think the result of having the cost of government detailed on the reciept for every purchase of a new good or service made in America will be to put downward preasure on those costs?

Yes it would, also it seems the only way to even things out as far as foreign made items vs domestic made items, domestic items cost more because income taxes for Americans are extremely high while Chinese products can be much cheaper because those workers don't need as much money.

[Action-America]

If Dubya manages to push the NRST through or (more likely) just stays out of the way and signs the legislation after it passes, I'll take back all of the derogatory remarks that I have made about his spinelessness...  well, that may be going a little overboard.  But, I will take back half of it.