Posted on 04/12/2003 7:49:12 AM PDT by vannrox
Edited on 04/22/2004 12:36:05 AM PDT by Jim Robinson. [history]
Last fall, the Wall Street Journal ran an editorial entitled "The Non-Taxpaying Class." The editorial, which dubbed those too poor to pay taxes "lucky duckies," won the Journal widespread ridicule from big-hearted egalitarians throughout the world of media and punditry.
(Excerpt) Read more at foxnews.com ...
Nothing, but cash transactions exist now, under the current system, and would seem to increase under your NRST.
In fact state sales taxes would tend towards conformity with the federal sales tax system, which is encouraged in the NRST legislation by paying states to conform their tax system to the NRST way of doing things.
Seems that you want to *harmonize* things by installing sales taxes in the (8?) states that don't have it yet. No thanks.
There is no more incentive to purchase used under the NRST than there is right now.
Aren't only final users taxed (i.e. New)?
Again read the bill:
I have a hard time with the current tax laws (which I admit are awful), but I am trying to wade through H.R. 25. Surely you will admit, that Congress will meddle with your *pure* NRST to christmas-tree the bill with all of the goodies that Congress is known to add.
True, but Congress has always meddled with the tax code, and will in the future. There is no reason for 95% of tax regulations, but Congress added them, and we need to cut those excess regulations out.
Income taxes are expressed in tax inclusive measure (tax)/(gross income). The NRST is measured in tax inclusive measure (tax)/(gross payment) for comparability.
I am sorry, but this is funny math. All (current) sales taxes are calculated as (tax rate)/(price). Calculating this *inclusively* is twisting the current understanding of how sales taxes operate. You may not like it, but, I repeat, buying $77 in groceries, then having $23 in sales tax still equals a 29.87% tax rate in my book.
The income tax began as a simple flat tax. How is this an argument against the NRST, which at the very least provides financial privacy to the individual. No individual income is reported to government by the individual under a Sales Tax, where do these income limits, progressivity, exemption come from? Those are inherent features of income taxes, not Sales Taxes.
Read Charles Addam's books on the history of taxation. Proponents of income taxes said tax rates will NEVER go above, I believe, 1%, and we will NEVER tax more than the richest, I believe, 1%. If you listen to one thing that I say, know that your pure NRST will NEVER stay the same as proposed, or even stay the same if it is ever passed.
Under an NRST, won't Social Security still be funded as currently, meaning through taxation of income? If so, then some gov't agency will still collect income information.
Guaranteed that Congress has already demonstrated its historical ability to dink with (originally) flat income taxes.
Agree.
Changing from a broadbased tax on all goods and services to exemptions of certain items merely raises the rate on everything else, or government institutes a novel tax reduction. So where is the problem?
The problem, as currently, is that exemptions will eventually happen. I get the feeling that you think that passing an NRST will solve our tax mess. No, it merely will substitute (or add) another one.
In the end Congress is must respond to the demand of its constitutencies. Raising tax on goods and services does not make voters happy. Increasing complexity of taxes on businesses does not make business(read contributors) happy. You figure it.
Despite all of this unhappiness, Congress does it anyway. Do you think passing H.R. 25 (even in its originally pure form, which won't happen) will change Congressional meddling?
Guaranteed a flat income tax neither starts out flat nor does it remain simple nor flat over time, furthermore there is no true Flat Income Tax proposal before Congress nor will there ever be one.
Guaranteed a flat *sales* tax might start out flat but it doesn't remain simple nor flat over time, furthermore while there is a Flat Sales Tax proposal before Congress, it probably won't pass, and if it somehow does, we will be stuck with TWO tax systems.
By the way, earlier you were quoting some Harvard professor on how some certain NRST level would be revenue neutral. Since I think that we both agree that since taxation provides various different disincentives, how can ANY analyst compare two RADICALLY different tax systems?
I believe a NRST will encourage cash transactions.
The option with income taxes, to not earn money, is hardly an option to promote.)
I can say the same about sales taxes. The option with sales taxes, to not buy, is hardly an option to promote.
Furthermore, with those who want to resist paying the tax, it is hard to fault a person for wanting to keep the product of their own labor.
This is true of all taxation.
Finally, it is far better to have enforcement targeting non-corporeal businesses than real individuals.
That is a great insight! Let's get rid of the personal income tax, and increase the corporate income tax to make it revenue neutral.
And income tax hasn't created similar incentives for non-reportable income? Cash tips to waitresses (and exotic dancers for that matter), the cash transaction that my tow truck driver requested last year (expressly lowering my price in exchange, and stating why), the extra benefit of tax-free income encouraging drug-dealing (or any other illegal product)... and then we get to the fact the sales taxes are inherently fair. They are equal for all, and avoid the Communist ideal of a "progressive" tax system.
I can say the same about sales taxes. The option with sales taxes, to not buy, is hardly an option to promote.
Given the choice between the two - encouraging not working or not buying - the far better choice is the latter. Laziness should not be encouraged, because it fosters dependence and is difficult to "unlearn". However, if you're not buying anything, that means you have to make, grow, invent, create, barter, or build it yourself. This fosters independence, increases the number of skills you have, increases the competition in those fields, and rewards the hard-working.
Furthermore, with those who want to resist paying the tax, it is hard to fault a person for wanting to keep the product of their own labor.
This is true of all taxation.
No, it isn't. Not all taxes are income-based (a notion that is explcitily prohibited by the Constitution... that is, it was, until the 16th Amendment came along in 1913). If a seller, after including taxes, charges me $20 for a $15 widget, then he tries to keep the extra $5, he is fraudulently overcharging me, and he is stealing the government proceeds that he collected by invoking their name. He is clearly in the wrong for trying to keep this money. On the other hand, I cannot fault a working American who has been hired to do a job for $100 and who wants to keep all $100 that he has worked so hard to earn. The difference is clear. The justifiable, honest, moral, and fair position is to tax purchases, not labor.
(I see that my phrasing in my previous post was probably poor. Yes, the seller did get this money by the product of his labor... the "labor" of lying to me and to the government. I should have probably said "honest labor".)
They (sales taxes) are equal for all, and avoid the Communist ideal of a "progressive" tax system.
WHY do sales tax advocates believe that sales taxes will remain flat?
There is nothing in the concept of a sales tax that makes it necessarily "un-progressive". Sales taxes can be eliminated on favored items, and increased on unfavored ones, and pretty soon you have a "progressive" tax system. I can easily imagine a NRST of 20% on coats under $50, and a NRST of 30% on coats above $50 for example. Scanning technology would make it simple. My local WalMart, depending on the item, RIGHT NOW collects sales taxes at THREE different rates, 0, 5.6 and 5.85%, and those taxes are different in the next county too. How about a 20% tax on small cars, and a 30% tax on SUVs, and No tax on hybrids. A 10% real estate sales tax inside designated metropolitan areas, a 20% sales tax outside. Congress will ALWAYS meddle.
Given the choice between the two - encouraging not working or not buying - the far better choice is the latter.
That is a tough choce, and your later comments "make, grow, invent, " while admirable, if widely followed, would definitely put a downward slant on the economy as it stands today.
On the other hand, I cannot fault a working American who has been hired to do a job for $100 and who wants to keep all $100 that he has worked so hard to earn. The difference is clear.
The same idea applies to what the worker does with his money. I could just as soon say "I cannot fault a working American who wants to buy something with his $100 that he has worked so hard to earn, to spend it economically without excessive taxation."
Thanks for replying.
And what prevents his agrieved customer from turning him in, or his ex-wife, competition, ...
Nothing, but cash transactions exist now, under the current system, and would seem to increase under your NRST.
That's what you would have us believe on your bare assertion. However the overall burden on shelf price of goods and services fall with the NRST, thus there is less pressure/incentive to cheat than there is with the marginal rates present with the income/payroll tax system.
The current systems virtually beg to be cheated by the fact that it just take a single individual to not report income to evade the tax thus risks are substantially lower than under the NRST which takes the collusion of both buyer and seller to cheat. Under the NRST, where overall effective tax rates are lower and dollars available for the market are greater, higher risk, lower tax burden, smaller reporting base(large retail outlets(80% of dollar volume) vs self-employed citizen) assures a better compliance with the NRST. The most likely to evade a sales tax is the small business or self-employed citizen, not the large corporations where more than 80% of the tax dollars get collected. That is true under the income/payroll tax system and is hardly likely to change substantially under the NRST.
In one of the most comprehensive studies of the subject, the IRS found that noncompliance with individual and corporate income taxes cost $84.9 billion in 1987, or about 15 percent of total tax liability in that year.
|
Table 3. Compliance Estimates for Selected Types of Personal Income, 1987
Source: Department of the Treasury, Internal Revenue Service, Income Tax Compliance Research: Gross Tax Gap Estimates and Projections for 1973–1992, quoted in Slemrod and Bakija, Taxing Ourselves: A Citizen’s Guide to the Great Debate Over Tax Reform, Table 5.1, p. 150. |
You may not like it,
Irrelavant to me, as I can do the comparative calculations either way. Apples to Apples comparison is what is necessary. So lets take a look at the percentage tax burden add on $77 worth of groceries under the income/payroll tax system.
The dollar amount as regards taxes received by government is the same regardless of your preferred way of measurment. Just make sure you recalulate the income/payroll tax sysytem's effective rate in similar measure for accurate comparison.
but, I repeat, buying $77 in groceries, then having $23 in sales tax still equals a 29.87% tax rate in my book.
And that compares with what percentage income/payroll taxes paid to purchase to the same $77 in groceries now?
| Effective Total Federal Tax Rate (Percent of reported income) | |||||||||||
| Income Category | 1977 | 1979 | 1981 | 1983 | 1985 | 1987 | 1989 | 1991 | 1993 | 1995 | Projected 1999 |
| All Families | 22.8 | 23.4 | 23.5 | 21.4 | 21.8 | 22.6 | 22.5 | 22.6 | 23.5 | 24.7 | 24.2 |
Data from IRS collections statistics and The Bureau of Economic Analysis as compiled in tabular form by the Congressional Budget Office.
http://www.cbo.gov/showdoc.cfm?index=1545&from=4&sequence=0
In 1999, in order to purchase $77.00 in groceries the average person paid an additional $24.58 (i.e. 24.2% of gross income) in income/payroll taxes (not counting the costs of tax code compliance embedded in the current market prices) meaning you got less groceries in 1999 for $77 than you would under the NRST.
If the NRST rate is 29.87% burden in your book, then for the same amount of groceries received under the current system the tax burden must be near an effective 31.92*1.60 = 51.07% tax rate under a revenue neutral rate between the tax systems for which the NRST tax rate is defined.
Flatten the Tax Code before it Flattens Us, Lawrence W. Reed; Makinac Center April 1, '97
The work of economist James L. Payne is perhaps the most authoritative and exhaustive available on the cost of today’s federal income tax code. He has demonstrated that most of the expense of compliance does not show up on the government’s books because businesses and individuals in the private sector are paying it—in time and bills from tax preparers. In his 1993 book, Costly Returns: The Burdens of the U.S. Tax System, Payne assembled data from the IRS and other sources—public and private—and arrived at a startling conclusion: For every tax dollar collected and spent, Americans pay an additional 65 cents in collection and compliance costs!
29.87%(NRST) vs 51.07%(Income/payroll tax), comparing apples with apples. NRST looks pretty good by my book using your preferred measure. *Truth in Taxation* indeed.
Under an NRST, won't Social Security still be funded as currently, meaning through taxation of income? If so, then some gov't agency will still collect income information.
It will be funded from the NRST, FICA(a payroll tax) will be abolished. Without funding SS & Medicare the NRST rate would be 14.91%.
The only information going to government will be wage info to Social Security benefits. If you don't want the benefit, don't report your wage to them.
By the way, earlier you were quoting some Harvard professor on how some certain NRST level would be revenue neutral. Since I think that we both agree that since taxation provides various different disincentives, how can ANY analyst compare two RADICALLY different tax systems?
By designing dynamic simulations and determining the relative impact.
See pdf document containing Jorgenson's anlysis and methods:
Lifting the Burden: Fundamental Tax Reform and U.S. Economic Growth
But you can figure it for your self.
Take into account the relief to the economy by merely looking at how much the economy can benefit from the reduction of Cost of Tax Compliance where most of the capacity for economic growth come from by instituting a retail sales tax as opposed to an income/payroll tax system. Same dollars get to government, but more thean 60 cents for every tax dollar to the government becomes available to the economy for a combination of price reduction, investment, wage increases, (i.e. increased purchasing power to the consumer.)
That my friend is good for substantive economic growth and increase in standard of living by anyone's calculus.
That is a great insight! Let's get rid of the personal income tax, and increase the corporate income tax to make it revenue neutral.
In otherwords, a VAT, so the voter doesn't have any measure of how much he pays in taxes, and saddle the corporations with even heavier burdens of tax compliance costs. Sounds like a great idea NOT.
You are being anticpated by the way, that is the ultimate direction the movement to WTO and European Union compatability is going, along with the encouragement of the so called Flat Tax with large personal exemptions(Under the Armey "flat" tax, HR1040 introduced 3/15/2001). Just a slight change at the corporate level in how capital equipement is expensed and we have you full fledged VAT with all the complexities of the current corporate tax law to play with already built in.
http://www.taxfoundation.org/foundationmessage03-00.html
"Under the WTO definition of the term, a sales tax is an indirect tax, as is an European-style VAT. The economic equivalence of an European-style VAT and a subtraction-method VAT is well-established. A subtraction-method VAT is essentially identical to a business income tax except that all purchases of plant and equipment may be expensed, rather than depreciated as under current U.S. law."
And every man woman and child in the nation, ends up paying federal taxes through that VAT with no idea whatever of the burden placed on them by ever growing government. Just take a look at what is happening with the EU & it's VATs. Just think we to can have an economy just like France.
Isn't a VAT close to a NRST? Do you think people are that stupid? So what if a VAT is buried in the price. People can still count, No?
2. Apples to Apples comparisons? How do YOU calculate sales taxes? 3. For every tax dollar collected and spent, Americans pay an additional 65 cents in collection and compliance costs!
In a $2 trillion federal budget, that would be $1.35 trillion in collection and compliance costs! In a $10 Trillion (?) economy, that would be 13.5% !?!? That seems to be a HIGH estimate of collection costs.
2. Apples to Apples comparisons? How do YOU calculate sales taxes? 3. For every tax dollar collected and spent, Americans pay an additional 65 cents in collection and compliance costs!
In a $2 trillion federal budget, that would be $1.35 trillion in collection and compliance costs! In a $10 Trillion (?) economy, that would be 13.5% !?!? That seems to be a HIGH estimate of collection costs.
Isn't a VAT close to a NRST?
No, a VAT is a tax paid by business on their purchase of business products. It is a complex cummulative tax that is not detailed in the final retail sale of a final retail products to consumers hidden within and inseperable from consumer price.
Definition [ http://www.encyclopedia.com/articles/13330.html ]:
value-added tax
levy imposed on businesses at all levels of production of a good or service, and based on the increase in price, or value, added to the good or service by each level. Because all stages of a value-added tax are ultimately passed on to the consumer in the form of higher prices, it has been described as a hidden sales tax. Originally introduced in France (1954), it is now used by most W European countries.
Do you think people are that stupid? So what if a VAT is buried in the price. People can still count, No?
Count what? What is the total tax burden you are paying buried in the price of a hamburger?
The corportate income tax is a VAT can you tell me how much you are paying in the products or services you purchase at the retail register?
http://www.taxfoundation.org/foundationmessage03-00.html
"Under the WTO definition of the term, a sales tax is an indirect tax, as is an European-style VAT. The economic equivalence of an European-style VAT and a subtraction-method VAT is well-established. A subtraction-method VAT is essentially identical to a business income tax except that all purchases of plant and equipment may be expensed, rather than depreciated as under current U.S. law."
And every man woman and child in the nation, pays federal taxes through that VAT.
With the NRST tax is levied only at the retail cash register and is explicitly detailed in the customer's receipt. If you don't see it, how do you expect to hold Congress accountable.
1. Trying to evade a 23% NRST is a GREAT incentive to cheat.
Trying to evade a 24.2% income tax is not? Only takes one person to not report income. It take two in collusion to assure that a sales tax is evaded. And only one of the two, the seller, is held at legal risk for not remitting the tax, (i.e. the seller).
2. Apples to Apples comparisons? How do YOU calculate sales taxes?
As a retailer, I add up total retail sales receipts(gross), and multiply by a fixed rate. For the NRST with a state sales tax, that would be (.23 + statetax factor) * total receipts. Send the calculated amount to the state tax authority.
How do you calculate income taxes you remit to the government?
3. For every tax dollar collected and spent, Americans pay an additional 65 cents in collection and compliance costs!
In a $2 trillion federal budget, that would be $1.35 trillion in collection and compliance costs! In a $10 Trillion (?) economy, that would be 13.5% !?!? That seems to be a HIGH estimate of collection costs.
You have better data?
It isn't just collection costs, it is tax planning, litigation, law enforcement, accounting costs etc as a sum total impact on the economy:
Read Paynes book if you are actually interested:
Flatten the Tax Code before it Flattens Us, Lawrence W. Reed; Makinac Center April 1, '97
The work of economist James L. Payne is perhaps the most authoritative and exhaustive available on the cost of today’s federal income tax code. He has demonstrated that most of the expense of compliance does not show up on the government’s books because businesses and individuals in the private sector are paying it—in time and bills from tax preparers. In his 1993 book, Costly Returns: The Burdens of the U.S. Tax System, Payne assembled data from the IRS and other sources—public and private—and arrived at a startling conclusion: For every tax dollar collected and spent, Americans pay an additional 65 cents in collection and compliance costs!
Dr. Walter E. Williams, March 2000:
http://www.freerepublic.com/forum/a39b6487a1fb0.htm
The average taxpayer now pays more than $8,000 a year, working from January 1 to May 8 to pay federal, state, and local taxes. In addation to the out-of-pocket cost, Americans spend 5.4 billion hours each year complying with the federal tax code-roughly the equivalent of 3 million people working full time. If it were employed in productive activity, the labor now devoted to tax compliance would be worth $232 billion annually. The federal cost of hiring 93,000 IRS employees is $6 billion. If these Americans weren't fooling around with the tax code, they could produce the entire annual output of the aircraft, trucking, auto, and food processing industries combined..." Emphasis added
American General Contractor's Association
http://www.agc.org/Legislative_Info/Members_Testify/testimony_04-10-00.asp
To this we must add the shear wastefulness of the colossal compliance costs of the current tax system. To administer the tax laws, the IRS directly employs about 112 thousand employees. The IRS budget is about $8 billion. However, direct expenses of the IRS are not the central compliance problem; rather, it is the expenses that are pushed forward on the taxpayer to be tax collector, tax accountant, and record-keeper.
According to the non-partisan Tax Foundation in 1997 Americans spent no less than $225 billion complying with the income tax. The most recent projections made by the IRS of tax returns to be filed in Calendar Year (CY) 1999 indicate that the grand total, or sum of all major tax return filings, will be 228.2 million. This number is then expected to grow at 1.24 percent annually until CY 2005, when the grand total return count is expected to reach 245.2 million. This does not include the 1 billion information returns that will be filed. In addition, more than 8 billion forms and instructions are sent to taxpayers each year, enough to encircle the globe several times.
Paperwork is the most visible compliance cost, but it is clearly not the only, and perhaps not the largest compliance costs. Return processing, determining liability, recordkeeping and other burdens are an estimated 19 to 33 % of the total revenue raised by the income tax system and 2.0 to 3.5% of the Gross Domestic Product (GDP)[an additional 3% of GDP1999 = $279Billion]. We waste money each year on seeking to avoid taxes, avoid trouble with the IRS, interpret the laws or determining the best course of actions with the laws.
Who pays these compliance costs? You do. The hardest hit segments of our economy are middle income wage earners and business owner. Small corporations in particular endure compliance costs estimated to be several multiples of the tax actually collected. Although duly included in the National Income Product Accounts (NIPA), payments made to tax lawyers, accountants, IRS agents and other tax professionals do not really improve our collective standard of living. These compliance costs are wasteful expenditures, which absorb so much time and energy of American people that they roughly approximate in costs the assets of the entire building industry. None of this is necessary.
Adding to the costs and to unfairness, our tax laws are so complicated not even the common tax lawyer can understand them. There are a number of ways of measuring complexity; one of which is the number of penalties issued and then abated for reasonable cause. There are more than 34 million civil penalties issued each year; more than a third of all small firms receive payroll tax-related penalties alone. More than 50 percent are abated.
The tax system is now so monstrously complex that it is beyond the ability of any one person to understand it. Understanding the system is certainly beyond the reach of most mere tax lawyers, accountants and tax administrators. A system that is so complex must be administered in an arbitrary and unfair way. If no one really understands what the law is, it is impossible to administer fairly and uniformly - and of course, it is not so administered.
Our government embroiled its citizens in more than 35,000 litigation actions. Taxpayers sustained more than 3 million levies. As long as we insist upon an income tax system, the system needs to be complex. The system needs to be enforced with a heavy hand. The system needs to have all of the 34 million in civil penalties. The system needs to be intrusive. It is the price we have to pay for an income tax system.
Perhaps most troublesome, we have gotten little in return for this payment because our current tax system has inspired an increasingly lower level of compliance. Despite the costs of enforcing and maintaining our system, tax evasion is at an all time high. Today's income tax system has invited massive noncompliance. According to the IRS own statistics, only about 80 percent of taxes owed are voluntarily paid -- $200 billion are not. In 1992, the tax gap was estimated to be $127 billion. Taxes evaded continue to be in the range of 22 to 23% of income taxes collected. These IRS figures did not include taxes lost on illegal sources of income. Evaded taxes increased by 67% in the decade between 1982 and 1992. As a percentage of Gross Domestic Product (GDP), tax evasion has reached 2.0% compared to 1.6 % in 1991.
Our current system is also problematic because much of the burden of the current system is hidden from the American taxpayers. Most taxpayers have been taught that an amorphous entity - business -- must pay its fair share. However, they do not understand that businesses are merely a collection of individuals engaged in a productive enterprise. When businesses are taxed, the taxes result in fewer businesses, lower wages or higher priced goods and services if the taxes can be pushed forward. In some businesses, taxes cannot be pushed forward and the owner must endure these taxes. Businesses don't pay taxes, people do; however, the corporate income tax and the employer share of payroll taxes perpetuate this myth.
It is not a harmless myth. The hidden cost of our tax system ensures that Americans remain ever ignorant of the increasing proportion of federal taxes they pay. Taxes are now more than 20 percent of Gross Domestic Product, and despite the claims of tax cuts, Americans pay more now than we have in the history of our nation, including the height of World War II. Upstream taxes only ensure that taxpayers cannot see the true cost of our government, raise the costs of goods and services and ensure more taxes in the future.
There is another problem with hidden taxes. Apart from ensuring the system lacks integrity, hidden taxes buried in goods and services reduce exports, and result in lower profits, lost productivity and a competitive advantage to foreign commodities.
Taken altogether, the true tax burden impressed upon us all through higher prices and loss of productivity exceeds the mere revenue collected by the govenment by substantially more than the $593 billion estimate of James Payne in 1995:
Town Crier Staff Writer
Clyde Noel : http://www.losaltosonline.com/latc/arch/9528/
"In a book titled "Costly Returns," economist James Payne estimates the nation's bill for tax record-keeping, audits, filing tax attorneys and accountants totals an astonishing $593 billion. To put it another way, that's more than twice as much as last year's entire defense budget and $240 billion more than all 1996 Social Security outlays."
Killing the IRS, By Daniel J. Pilla, Reason Magazine July 1995
"There is little about a flat-tax system that will trim the staggering cost of tax law compliance. At present, this burden is estimated at $700 billion annually. Much of the cost is associated with recordkeeping and tax law enforcement, neither of which is reduced by a flat tax. A flat tax certainly involves a simpler tax return, but return preparation is the smallest component of tax law compliance.
The solution to our tax problem is to adopt a national retail sales tax in place of the personal and corporate income tax. Only a sales tax can eliminate the invasiveness of the IRS, since one's income and lifestyle are irrelevant."
And that was 8 years ago, I hesitate to guess what it is today, all due to the current income/payroll tax system.
Adding those Government mandated Compliance costs onto the Federal revenues collected shows the real Federal Tax burden to be at least 33% more than the raw government statistics of revenue lead one to believe.
Depressing, ain't it?
Unless you are double-counting some of the estimates, nothing in your long post comes close to $1.35 trillion in collection and compliance costs.
Furthermore, the differing estimates of compliance costs show what a quagmire this is.
Also, by definition, calculating tax evasion and the underground economy is difficult at best, or else the IRS would have figured out a way to tax it!
I am sorry but I believe that human nature shows that people will try to evade taxation, and avoiding a 23% NRST is a great incentive. I am NOT saying that income taxes are not evaded, just that a NRST would be evaded also.
Now you are being argumentative. I am NOT saying that the income tax is NOT being evaded. I am just saying that a 23% NRST would ALSO be evaded.
As a retailer, I add up total retail sales receipts(gross), and multiply by a fixed rate. For the NRST with a state sales tax, that would be (.23 + statetax factor) * total receipts. Send the calculated amount to the state tax authority.
Exactly! So what is the debate about?? The original post was about $77 in groceries. Now a 23% federal NRST on $77 is $17.71, totaling $94.71, not the $100 total that you originally claimed. State sales taxes would be in addition to the $94.71, and would be calculated based on the $77 purchase. For example, a 10% state sales tax on $77 would be $7.70, for a combined total of $102.41 ($77 + $17.71 + $7.70). Please re-read what you have written.
You have better data? (about compliance costs)
Your previous reply gave multiple answers. I myself don't know what the number is. This number is subject to wide estimates, and I believe that NO ONE knows the amount. As I stated in a reply to your other post, the size of the underground economy, by definition, is hard to calculate. But compliance costs of $1.35 trillion is WAY too high.
Unless you are double-counting some of the estimates, nothing in your long post comes close to $1.35 trillion in collection and compliance costs.
The particular sources you are looking at at partial listing of the total costs.
The most comprehensive study done by Dr. James L. Payne indicate the 65% level.
Flatten the Tax Code before it Flattens Us, Lawrence W. Reed; Makinac Center April 1, '97
The work of economist James L. Payne is perhaps the most authoritative and exhaustive available on the cost of today’s federal income tax code. He has demonstrated that most of the expense of compliance does not show up on the government’s books because businesses and individuals in the private sector are paying it—in time and bills from tax preparers. In his 1993 book, Costly Returns: The Burdens of the U.S. Tax System, Payne assembled data from the IRS and other sources—public and private—and arrived at a startling conclusion: For every tax dollar collected and spent, Americans pay an additional 65 cents in collection and compliance costs!
Even at that, I do not use $1.3 trillion in my own estimates.
My statement: "Adding those Government mandated Compliance costs onto the Federal revenues collected shows the real Federal Tax burden to be at least 33% more than the raw government statistics of revenue lead one to believe."
What I actually use in calculations is $1 Trillion relative two $2 Trillion tax revenues. 50% of ( Federal taxes collected, less than that indicated by Dr. Payne '97 and in between the sum ($700) of the compliance costs mentioned in the 95' articles
Killing the IRS, By Daniel J. Pilla, Reason Magazine July 1995
"There is little about a flat-tax system that will trim the staggering cost of tax law compliance. At present, this burden is estimated at $700 billion annually. Much of the cost is associated with recordkeeping and tax law enforcement, neither of which is reduced by a flat tax. A flat tax certainly involves a simpler tax return, but return preparation is the smallest component of tax law compliance.
The burden today with a $2 Trillion budget is substantially higher than the $700 figure and I prefer to discount the $1.35 Trillion indicated by Payne's 65% of taxes paid. So I use $1 Trillion.
If you have a problem with the number I use, take it up with the sources. Dr. Payne. & Daniel Pilla.
The full impact of the federal tax system(taxes in gross wage/salaries & other compensation + business income/payroll taxes) added onto the base price(without taxes) of retail consumption goods and services is 36% for federal taxes alone. Why? Because all wages and the taxes on them are paid for out of sales receipts to business,(i.e. consumption expenditure).
Federal tax revenues collected as % of current family expenditure = fed/(1-state-fed-savings) =
23.5/(1-.235-0.102-0.012) = 36.09%
If we add in the cost of federal tax compliance & enforcement, the percentage that truely represents the burden on the family due to the Federal income payroll tax system increases by nearly 55% of tax free prices.
Where Have All the Dollars Gone?
How the government robs Peter to pay him back.
By James L. Payne, Reason Magazine February '94When the overhead costs are added together, (24 percent compliance costs, 33 percent disincentive costs, and 8 percent other costs), they total 65 percent of tax revenue.
Current total Federal tax revenues are about $1900billion, more than $1,000 billion additional dollars are added on onto 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+1000)/1900 = 54.95% economic burden added on to base retail prices.
I am sorry but I believe that human nature shows that people will try to evade taxation, and avoiding a 23% NRST is a great incentive. I am NOT saying that income taxes are not evaded, just that a NRST would be evaded also.
I have never said otherwise, my statement is evasion under the NRST will be no worse than that of the Income Payroll tax in current use and will probably be around 10% as opposed to the 15% non-compliance rate measured in dollar volume, quoted for the current system.
Exactly! So what is the debate about?? The original post was about $77 in groceries. Now a 23% federal NRST on $77 is $17.71, totaling $94.71, not the $100 total that you originally claimed.
The Federal NRST on $77 of shelf price goods = 23 dollars.
The NRST tax rate is the rate used by the seller to calculatw taxes to be remitted to the Federal Government out of gross(tax included) sales reciepts.
The NRST law is written from the perspective of the retail seller required to remit taxes to the government.
23% of gross(tax included) sales receipts is a tax inclusive measure comparable to income tax measurement which is about 22.4% of gross(tax included) family income.
Apples are compared with apples when comparing the rates of the income/payroll tax system, with the rates of the NRST which replaces it.
The amounts remitted to government in both cases are the comparable.
The seller collects a gross payment from the consumer(state + federal + shelfprice), the seller then remits (23% + statetax%) of gross payment to the state tax authority as called for in the legislation.
Got it?
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