Posted on 11/15/2004 7:00:17 AM PST by Rakkasan1
MINNEAPOLIS - Rep. Gil Gutknecht is pushing legislation that would replace the federal income tax with a national sales tax.
"Think of a world where there is no income tax, where you get to keep everything you earn and you pay the tax man when you buy stuff," Gutknecht, R-Minn., told the Star Tribune of Minneapolis.
(Excerpt) Read more at twincities.com ...
First you just wanted one source - now it's two. Next it'll be three - you willnever be satisfied. You just continue to call these experts wrong.
You're claiming if wages go down, price goes down. But when taxes go down, prices don't?The majority of taxes are coming out of wages (including the employer's portion of the payroll tax). If you remove the taxes, prices don't drop much unless wages do.
First you just wanted one source - now it's two. Next it'll be three - you willnever be satisfied.You're a really strange man.
A VAT is no different than a NRST from the customer's standpoint.
Once again you mislead by claiming only the tax itself and not accounting for the business costs in dealing with it.
Prices are higher in VATs and all general business taxes as a consequence not only of taxes imposed per-se but the higher overhead costs associated with them, as compared to a single rate single stage RETAIL sale tax.
The issues of a VAT and and business taxes generally are the overhead costs attendant with dealing with them throughout the full chain of production as well as their lack of visibility to the electorate.
With a VAT or any corporate tax both tax and overhead burdens associated are embedded into the price of the product.
With an NRST, and specifically HR25(which compensates the business for the collecting and remitting the tax) The tax is levied separately and totally visible to the customer. with compliance costs (less than a tenth that of VATs and income taxes) on just the retail level of business not accumulating throughout the production chain as with VATs and other general corporate taxes.
Added
Credit
Price
VAT
Payment
(Tax - Credit)Raw Materials Manufacturer Wholesaler Distributor Retailer
Income tax withholding and half of the FICA would be paid to the employee. The employer half of FICA, 7.65% of wages, would be:
a. paid to the employee (wage increase) at no additional cost of sales to business.
b. retained in the profit margin, allowing 2% - 7% margin for competitive price cuts.
If you remove the taxes, prices don't drop much unless wages do.
If you remove the 15 - 39% corporate tax, unless you have a monopoly, your prices will have to drop as soon as your competitor's does.
Yeah, and? That wasn't the issue, the issue was whether a flat tax is an income tax. It is not, it's a consumption tax.
The economic term "consumption tax" covers all taxes(including income taxes) that exempt taxation of investment returns.
Your use of the economic term "consumption" is a transparent attempt to obscure the real factors of this debate. The use of that general term encompassing many different tax systems, does not mean that all consumption taxes are equally transparent to the elecorate or lay the same total burden politically or economically on the electorate, the consumer or the economy for that matter. Quite the contrary.
The issue is the advantage of Retail sales taxes to the citizen as opposed to your VAT and other forms of general corporate taxes such as the Flat Tax which is nothing more that the subtraction method variant of VATs coupled with a progressive wage tax.
Retail sales taxes impose less ovhead burden on the economy and business and the tax is fully visible to the customer at the final stage of deliving a product to its consumer. Neither its costs not the tax itself accumulates through multiple levels production as the VAT and other general corporate taxes due. As a consequence the total burden on the consumer and business as well are much lower with an NRST.
It is for good reason that the people of this country has viewed with distrust and opposed the VAT in any of its forms.
I find it more than enlightening that the VAT appears to be your favorite, especially seeing your admission that enforcement of taxation on the citizen is you dominant reason for establishing it as the better form of taxation.
Once again you mislead by claiming only the tax itself and not accounting for the business costs in dealing with it.There would be business costs with the FairTax, too. But I guess you'll ignore those. Everything is beautiful with the FairTax.
The majority of taxes are coming out of wages (including the employer's portion of the payroll tax). If you remove the taxes, prices don't drop much unless wages do.
Wrong, as the business overhead costs related to those taxes burdening the economy are removed, with the spur to productivity and lower prices that comes from significantly increased investment. With the incentives of tax free investement vs taxed consumption the rate of investment increase by 80% over income tax system levels.
That incentive to invest instead of spend, coupled with tax related cost reductions for business assures commensurately lower prices on all goods and services throught the entire economy.
The spur of investment assures new business growth through providing startup capital as well as the capital necessary for financing the productivity improvement and refurbishiment of the nations industrial infrastructure. All together these factors result in a low inflation, expanding economy with lower total prices paid for persons consumption, that is called an increase in real standard of living as a consequence of moving to an NRST.
The economic term "consumption tax" covers all taxes(including income taxes) that exempt taxation of investment returns.If an income tax exempts investment returns it's not an income tax, it's a consumption tax.
"The flat tax, by expensing investment, is precisely a consumption tax. "
There would be business costs with the FairTax, too. But I guess you'll ignore those.
Not at all, as I stated before those costs are less than a tenth of those associated with any general business tax whatever its flavor. In fact the business is compensated to collect and remit HR25's retail tax by the legislation.
Remember a retail sales tax is based on the total of retail sales revenue to a company, a quantity tracked in nomal accounting practice as a consequence of good practice. The only cost imposed as a consquence of the NRST is that necessary to collect a retail tax from a customer and remitting it in parallel with state retail taxes. It does not impact anything other than retail level and minimally at that as the NRST compensates the business for collecting and remitting the tax to the states. All together the retail sales tax imposes the least burden on the economy of all taxes.
Wrong, as the business overhead costs related to those taxes burdening the economy are removed, with the spur to productivity and lower prices that comes from significantly increased investment.Not based on empirical data. But I'm sure you can find plenty of computer models that predict 80% savings increases.
With the incentives of tax free investement vs taxed consumption the rate of investment increase by 80% over income tax system levels.How well do you think those investments will do with no one consuming? Consumers are the engine of the economy. No consumers, no profits on investments.
That incentive to invest instead of spend, coupled with tax related cost reductions for business assures commensurately lower prices on all goods and services throught the entire economy.No spending assures a recession (if not worse).
All together these factors result in a low inflation, expanding economy with lower total prices paid for persons consumption, that is called an increase in real standard of living as a consequence of moving to an NRST.Will my hair have more bounce, too? I guess we'll all be skipping to work whistling a tune.
Not at all, as I stated before those costs are less than a tenth of those associated with any general business tax whatever its flavor.Any data to support this claim?
Maybe you would believe Hall & Rabushka. I quote from their book The Flat Tax:
"The flat tax, by expensing investment, is precisely a consumption tax. "
That is because it is a VAT with a progressive wage tax. As I have mentioned many times, and is stated clearly in the same book, by them as well as every other economist familiar with the Flat Tax.
Any tax, based on income or otherwise, that does not tax investment, is a consumption tax.
The term "consumption tax" as a broad definition encompassing several different taxes each levied in distinctly different ways and having different impacts on the economy and upon the consumer.
That does not make a VAT or the Flat Tax (VAT) equal to a Retail sales tax in its effects on the economy nor the equal of a retail sales tax in implementation. It is only equal in the sense it is levied on a taxbase that expressly excludes taxation investment.
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
| 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. |
FLAT TAX, VAT TAX, ANYTHING BUT THAT TAX; Duke Law Magazine, Spring 96:
No spending assures a recession (if not worse).
NO spending assures starvation to many.
OTOH Some investment and some spending under the choice of the individual, assures prices fall by the amount that businesses save in overhead costs & taxes from the repeal of income and payroll taxes. Prices fall with increased productivity and reductions in costs, as is the consequence of going to an NRST.
In fact an economic expension is the effect of releasing non-productiver resource to productive use in going to an NRST.
How well do you think those investments will do with no one consuming? Consumers are the engine of the economy. No consumers, no profits on investments.
Since everyone will continue to consume, your strawman is rather poor isn't it.
80% increase in the rate of savings and investment over what we do now only pressures prices downward by the amount of lowered costs to business and productivity increases realised with the release of resouces from repeal of business taxes.
No-one starves, businesses maintain profitibility out of lower costs and higher productivity, the economy grows at subsequent higher rates for the spur of investment and stonger purchasing power of the dollar.
80% increase in the rate of savings and investment over what we do now only pressures prices downward by the amount of lowered costs to business and productivity increases realised with the release of resouces from repeal of business taxes.Again, you see an outrageous number and don't even question it. Jorgenson's infine-horizon model does not accurately portray the savings and investment rate in the short term (or the long term, for that matter). An 80% increase in savings and investment the first year is stupidly unrealistic. Of course, that doesn't matter to you.
Since everyone will continue to consume, your strawman is rather poor isn't it.What strawman. Jorgenson's model shows consumption dropping a large amount.
First you ask for a source, then when it's provided, you ask for a "verification source". It's never ending. You will never be placated because you still haven't told the real reason you oppose the nrst.
What strawman. Jorgenson's model shows consumption dropping a large amount.
Hmmm, 5.6% decline in consumption first year do to initial increased investment incentives, then consumption overtakes the income tax case by second year ultimately rise to a 5.5% rise over the income tax Base Case, While GDP rises 13.2% first year and Investment rises 78% over income tax investment rates then returning to more normal levels 16% above the income tax Base Case.
Unlike the Flat Tax/VAT case which depresses investment and does little for GDP and or future growth in consumption or anything else for that matter.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.