Posted on 11/03/2004 10:42:24 AM PST by tgusa
I have lived in Britain where they have a VAT,
The NRST is not a VAT, it does not tax business purchases, the tax is leveled only on sale for final consumption, i.e. retail.
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.
and I'm telling you there are lots of businesses that sell goods "off the books" to avoid the VAT.
If they are not paying the tax, since business purchases are not taxed, selling goods "off the books" only makes the liable to enforcement provisions, and the purchaser getting a good deal. Think about it. More than 80% of retail dollar volume passes through the 20% of businesses (the largest) that are not about to put there business in jeopardy for not collecting a tax from a customer.
Today, the underground cash economy thrives by evading the 40%+ marginal tax rate of the the income/payroll tax system, mainly by indivduals and single proprietors not reporting their income. Under an income/payroll tax system it only takes one to cheat, with a retail sales tax, you have let every customer in on the secret or at least a potential witness to the fact of cheating/embezzelment via a fraudulent sales slip.
Your friendly folks at the Fair Tax Enforcement Division, who formally worked enforcing the IRS code, -- who else?
So then what have we gained? You are replacing one hated bureaucracy for another.
For example, $130,000 income. You pay $30,000 income tax. You spend the remaining $100,000 on five cars that cost $20,000 each. The $20,000 includes roughly $4,500 in hidden taxes passed on to you from the chain of suppliers to manufacturers to delivery/transport to car dealer.
Spending that same $100,000 under a NRST you'd pay about $15,500 for each of five cars -- $4,500 of hidden taxes have been eliminated --totaling $77,500 and fork over $22,5000 for the NRST. Your $100,000 savings goes just as far with a NRST as it does with the NRST.
Are fed auditors going to come around and demand 27% of my garage sale and e-bay receipts?
No state auditors will be checking on that where appropriate.
However, if you are selling used in your garage sale or e-bay, no NRST.
If you are involved in new sales, yes you can expect that states will be interested in enforcing both their own tax, as well as the fed tax in parallel with them.
You don't understand. The feds took a 25% cut off the top of my income a portion of which I then saved and now when I spend it I will only pay a 8% state sales tax (no state income tax). Now you want me to pay a 27% national sales tax in addition to the state sales tax. It's taxing money that has already been taxed. Of course future earnings will be exempt from the 25% income tax I currently pay, but that doesn't help me when I spend my already accumulated savings. You're taxing that when it came in and now you will be taxing it going back out again.
Why would you expect no cheating with a NST? I can see more cheating under a NST than the current income/payroll tax.
Listen Americans
the libertarian notion I believe to have a very low income tax as flat tax, no loopholes, you can fire half the IRS there
complemented by a national sales tax, I take it you all have state sales tax, we in Canada have been paying national sales tax since 1990
now others advocate no income taxes at all and a national sales tax
but because you get cycles of economic downturn I would argue the combination would work better so the government has more stable source of revenue......
now the good news in Canada our income tax rates have come down slowly (perhaps at the expense of the quality of our health care and military, what military) but we still pay too much income tax IMO and the reality is the reduction in federal and provincial taxes, over the last decade or so have been offset by higher property taxes and user fees as each level of government downloaded onto the next lower level
I cannot remember but I think there is one country in Europe that has a low flat tax on income combined with what they called Value Added Tax
now after a while you get used to and don't pay attention to the sale tax......
if you are paying half as much income tax then a reasonable national sales tax wouldn't be onerous at all and again the more people spend, the more expensive the item, yeah it's a consumption tax
the key is get the right balance, the right percentage, here so you don't slow down the market
in Canada they introduced the Good and Services Tax, effectively adding a 7 per cent tax on a number of items not previously tax in the same year as hard hitting recession (keep in mind though it also replaced an old tax on certain goods that was 13.5%)
we sell residential houses, we got double whammied in 1990
they brought in the Goods and Services Tax on new housing at the same time the municipality brought in development charges (to fund the cost of new infrastructure necessitated by new subdivisions) - with mortgage rates around 14 per cent we couldn't pass on the extra money to the consumer or we wouldn't sell anything and those two taxes almost eroded our net profit per unit......
but times improved, house prices have gone up tremendously, though costs have too, but the profit margins are nice again.....
the paperwork for the GST is a bitch, at least the provincial sales tax, they give you 5 per cent of what you collect as commission, so you can at least offset your increased bookkeeping costs.......
the other thing is for lower income people, they get a quarterly cheque from the Government called the GST Tax Credit to give them relief from the GST they have to pay on their purchases etc.......
You are on the pinger ;O)
If the item or service is sold at retail -- retail is for consumption, not an item such as clay you need to create your retail products from -- and has not previously had the NRST applied then it is taxable. Buy a thousand parts and tools required to build a car, build it and then turn around and sell it and the only tax collected is on the sale of the car. None of the tools or parts are taxed. Conversely, if you buy a water pump for your car you'll pay tax on that.
I appreciate your point of view, but the income left after tax now IS TAXED WHEN YOU SPEND IT beyond the 8% sales tax you see. You just didn't know it because it's hidden in prices. Estimates are that retail prices include 22% federal tax costs.
So you ARE already paying 22% of your after tax money in federal tax when you buy something. The nrst makes the federal tax component visible - it does't raise prices.
It's a replacement tax, not an additional tax.
Collection would be onerous as businesses deal with local, state and then federal sales taxes. The tax would be especially regressive so consideration would have to be given to exempt lower income folks. Now we start to get complicated again. Etc, Etc, Etc.
Better yet would be a Flat Tax. You fill out a postcard that says I earned this much and owe this much. If my earnings are less than, let's say, $36,000 I just enter 0. Above that a calculator, ball point pen and stamp are all that is needed. Oh, someone has to collect it. Sure. We can scale the IRS down from tens of thousands of employees to a few to collect and post the tax. That's it
Not clear why no one on this thread has got my point. I do write simple declarative english sentences. 1) I already paid taxes on what I have saved. 2) Now you propose a sales tax to tax AGAIN what I have worked so hard to put away? 3) I am not a fan of the IRS/income taxes, but is it fair to tax people like me AGAIN?
You missed the point made that you already pay the taxed costs of anything you buy.
These taxation costs are built into everything we purchase ~now~..
-- Thus, you won't be taxed any more under the 'fair tax' scheme then you are now.
If the scheme works, overall taxation would be less than now. ---- And we would regain a private financial life, free of the IRS.
OK, you get the last word. What is your answer to improving the current tax code? All I've heard so far is what is wrong with everybody else's ideas, the 'everybody else' being the 98% contributing positive ideas to this thread. Go ahead, the floor is yours.
It's a different animal. Check it out.
Current system: $30,000 income tax + $4,500 "hidden taxes" = $34,500 federal revenue.
Spending that same $100,000 under a NRST you'd pay about $15,500 for each of five cars -- $4,500 of hidden taxes have been eliminated --totaling $77,500 and fork over $22,5000 for the NRST. Your $100,000 savings goes just as far with a NRST as it does with the NRST.
NST system: $22,500 federal revenue.
Unless you plan on trimming the fed government back you are not supporting the current level of taxation. You are trying to fake the numbers. Do them again revenue neutral.
You are also leaving out the fact that my $100,000 has already been taxed as income. So when I go to spend it I will have paid a lot more. Using your numbers:
$130,000 income. Paid $30,000 income tax. I saved it all. It is in the bank. I go to spend it after you implement your NST and I end up paying $22,500 for the NST. That already is $52,500 in federal taxes before factoring in any "hidded taxes.". Way more than what you calculated.
And don't forget to factor in my state sales taxes. You will bankrupt my senior years.
I make pottery in my garage that I sell at craft fairs (I don't but for sake of argument). Will I be taxed? It's new goods right?
You will be required to collect and remit the tax from your customers, and provide a receipt for doing so to them keeping a copy for your business.
Will the clay I buy be taxed?
No, you are a certified business purchasing for business purpose.
Who will determine that?
You do, by selling to the public in general rather than another business.
Who will audit my sales?
The state tax authority of the state you live in.
I agree.
folks this has been on the planning books since BEFORE Bush was elected in 2000. It is the priority after terrorism.
Show me an example of that.
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