Posted on 05/12/2005 7:46:54 PM PDT by Your Nightmare
Members of the President's Advisory Panel on Federal Tax Reform on May 11 expressed concerns over the FairTax national retail sales tax, a plan that has emerged as an alternative with a major grass-roots push.
Panel chair Connie Mack, vice chair John B. Breaux, and other members worried the plan would be difficult to enforce, would be regressive, and would require a high rate in order to take in enough money to fund the government.
Breaux raised concerns that the proposed 23 percent (tax-inclusive) rate would not be sufficient to raise the revenue necessary to fund the government. The Joint Committee on Taxation estimated that it would take as much as a 57 percent (tax-exclusive) rate to be revenue-neutral. Further, Breaux said he thought exemptions that would be carved out to make the sales tax progressive would also complicate it.
Mack, who raised concerns similar to his fellow panelists', said he was "intrigued" by the plan. "But if it's such a great idea, why haven't other political entities around the world pursued it?" he asked.
Americans for Fair Taxation Executive Director Tom Wright emphasized that the plan emerged after "thorough academic research" and "thorough polling" The strong grass-roots push has resulted in some of the group's 600,000 members appearing at each of the panel's hearings and has inspired a large comment-writing campaign to the panel in support of the plan.
Sales tax advocates were among the 20 witnesses who gathered before the panel for a full day of testimony on tax reform proposals. Although the group has held several other hearings in Washington and around the country, the May 11 meeting was its first hearing on specific reform plans since Bush appointed the panel in January. The panel has been charged with identifying tax reform proposals that are progressive, encourage charitable giving and home purchases, and are revenue-neutral. The proposals are due by July 31.
Among the tax replacement and reform plans presented to the panel were the value added tax, consumption-based tax, and the flat tax, as well as proposals that would use the current income tax as the foundation.
Witnesses generally claimed that theirs was the fairest, simplest, most flexible, most transparent revenue-neutral proposal that would improve economic growth and savings while meeting the president's criteria of encouraging charitable giving and home buying. Witnesses presenting consumption-based plans praised their overhaul as taking millions of low-income taxpayers off the rolls, being easy to transition to on a worldwide basis, and including safeguards to prevent new loopholes that would result in increased complexity down the road.
Tax reform panel members, who agree the current tax system needs to be fixed, grilled witnesses without revealing whether they will ultimately endorse a consumption- or income-based tax or a different mixture of the two.
The ONLY reason to use an inclusive rate is to hide the size of the exclusive rate. No one would propose such a nightmarish method otherwise.
Baloney,
| The Wrong Camera: The Denominator of the Tax Incidence Equation. Dan R. Mastromarco; LLM, Argus Group, Washington D.C. Tax Analysts Document Number: Doc 1999-32575 Citations: (October 8, 1999) B. Use a Consistent Size Screen to Portray It. [118] When considering the rate of a national sales tax, or any tax for that matter, one must always decide which of two distinct means of portraying this rate -- the "tax-inclusive rate" or "tax- exclusive rate" -- best expresses the tax burden. Which one we employ changes absolutely nothing in terms of the taxes that are actually raised or paid by the taxpayer under the taxing regime examined, in the same way that measuring a journey in inches or meters does not change the distance. However, how the rate is presented changes how the relative tax burden is perceived by those who wish to compare the merits of competing tax proposals. Confusion results when we compare alternatives under different measuring scales. [119] The sales tax is particularly susceptible to this confusion because state sales taxes are normally expressed on a tax- exclusive basis, while income, estate, and payroll taxes, as well as the Flat Tax and other VATs, are normally expressed on a tax- inclusive basis. If we were to express a sales tax rate as a percent of the product price as is done in the states, we would be unfairly overstating the burden of the tax when we compare it to what it is meant to replace at the national level. Or conversely, we would be greatly understating the relative burden of the federal income and payroll taxes for those who don't have time to learn the different measuring systems. |
Suggest you read the whole article sometime.
Multiplication is easier than division for the simple fact that the latter uses the former.
On a calculator or computer, as any vender of goods is going to use? Come on give me a break.
For the customer, all that is required is multiplication and addition and subtraction to check his receipts out. Even that is done with calculators by folks nowdays.
New car 50 Gs including tax. What is the tax? 50000/1.23=40650.41, 50000-40650.41= 9349.59.
See you mangled that problem well.
New Car 50Gs including tax = $50,000.
Tax inclusive rate, = 0.23.
0.23 * $50,000 = $11,500 dollars tax to the government.
Price with out tax = $50,000 - $11,500 = $38,500.
Customer checks price without tax on the reciept = 38,500 yep.
Customer checks tax inclusive price on the reciept = $50,000, Yep.
Customer checks amount of tax on the receipt = $11,500, Yep.
And if he is really paranoid, customer adds tax amount on the reciept to price without tax = $50,000 check to see if that equals tax inclusive price on the reciept, Yep.
Now, you were saying? Absolutely no arithmetic different from what a customer does checking the numbers on a sales slip today.
"If you remove non-income tax taxes from exports the other countries will remove their VAT taxes which will leave you with no change."
VAT countries already do that; it is one of the main principles behind VAT taxation. Therefore, there would be no change in this respect.
Since I (and other economists) do not believe income taxes are worked into prices I do not accept that conclusion.
From what I can see, economists agree on an arbitrary rule is not very much support for your position.
| Tax Incidence, Tax Burden, and Tax Shifting Who Really Pays the Tax Inconsistent Attribution and Sloppy Theory. Furthermore, the conventions used in tax analysis are often inconsistent from one tax to the next and fail to do a good job of demonstrating even the initial incidence of the taxes. In standard JCT burden tables, and in Treasury and CBO analytical work, consumption taxes are usually assumed to be “passed forward” to consumers in the form of higher prices. *** Snip *** Meanwhile, income taxes and other taxes on factors are assumed to be “passed backwards” to workers and owners of capital in the form of lower take-home pay and after-tax incomes from saving and investing. *** Snip *** Customs fees are an exception to this pattern. They are consumption taxes but are assumed (by the Treasury) to be borne by the suppliers of the foreign labor and capital that produced them. Consumption taxes, such as a retail sales tax, a VAT, or excise taxes, whether imposed on consumers or on manufacturers, are routinely described as being paid by consumers in the form of higher prices because it is assumed that consumers are less flexible than producers, so that consumer prices increase by an amount equal to the tax, with none of the tax borne by the producers of the taxed goods. It is as if the supply of goods and services were totally elastic, such that production would dwindle to zero if there were any reduction in the price received by the producers, so the consumers must foot the entire bill. *** Snip *** The distribution of the corporate income tax is so uncertain that it is left out of most burden tables but is thought to be borne mainly by either shareholders (at least in the short run) or workers (in the long run, as capital adapts). These taxes are described as if workers, savers, and investors offered their labor and capital in totally inelastic supply, undiminished in quantity, when the tax cuts their compensation. It is assumed that they make no demand for an increase in compensation in response to the tax, so they swallow the entire burden of the income and other factor taxes that they pay. *** Snip *** In effect, the analysts pretend that producers can shift consumption taxes onto their customers but must absorb income taxes placed on their own earnings. Supply is infinitely elastic and infinitely inelastic at the same time. This is an inconsistent approach to tax shifting that is at odds with both economic theory and real-world experience. In addition, neither approach deals with any further adjustments that occur in the real world when taxes are imposed and resources are shifted in response from one use to another. |
Bottomline as stated by CBO in regards the corporate income tax, but easily seen from above to be applicable to any other tax paid by a business.
In the words of CBO's Incidence of the Corporate Income Tax,(1998):
|
"Easier" is in the eye opf the beholder. It really isn't any easier at all since division is just the reciprocal of division.
With a simple calculator it is truly trivial.
However - a prime reason to use the tax-inclusive rate is not to fool anyone (except looey) since both t-i and t-e are stated by backers of the FairTax. It is more meaningful when contrasted with the IT rate structure so people can relate to where the rate is in relation to the income tax rate structure.
If the IT used tax-exclusive rates there would be no confusion on your part. Do you suppose our government is trying to hide the size of the tax brackets citizens get into with the IT?????
You seem to be confusing Terms of Trade with exchange rates.
The rest of your statements has nothing to do with my discussion and seems to be based upon confusion as to who introduced certain elements into the discussion.
"To that extent WTO rules would not allow the US to develop an advantage by removing CNIT."
Can you cite the WTO rule that requires member nations to retain a corporate income tax?
The fart tax? Whoa, now they stepped over the line. No way a fart tax will ever gain traction in this country.
I took your question about FT as an honest one without negative implications.
There have been no economists cited by me in support of any point I have raised. If you know of any who claim that income taxes are in prices I would appreciate you revealing them. None of the points are "personal" all are just standard theory.
I was raised in SE Arkansas nothing is more "country" than that.
"Third, my point is that I want the taxes of all Americans to go down. The best and quickest way to that objective is to reduce the cost of government."
So how do you propose to do that? Remember, you said the "quickest way".
Let's be a bit more precise "... since you and SOME other economists do not believe ...".
Certainly, as we've seen from the earlier post about the dismal science, you're welcome to your own opinion. To try to make us believe that all other economists believe as you do is the worst sort of patent nonsense.
I just gave an illustration of the 75 economists who disagree enough to endorse the FairTax publicly.
To attempt to mask ignorance of real world situations.
You seem to be confusing Terms of Trade with exchange rates.
Nice try, but I do mean exchange rates, just as these folks mean exchange rates:
| ftp://ftp.usitc.gov/pub/reports/studies/PUB3110.PDF PDF page 33 Finally, Hines (1996b) argues that exchange rates move to reflect international differences in goods prices. Thus any increase in export competitiveness caused by a move to destination basis would ultimately be offset by appreciation of the U.S. dollar. Another line of reasoning is that countries use receipts from exports either to import immediately, or to make investments abroad which ultimately provide income to pay for a larger volume of imports in the future. Both of these arguments are based upon the observation that strong economic forces keep a country’s trade in approximate balance regardless of what other policy changes it may undergo. The likelihood that the change from an origin-based system to a destination-based system would in fact generate incentives to export and disincentives to import ultimately depends on the strength with which the long-run tendency toward balanced trade in fact operates. Grubert and Newlon (1995 and 1997) point out that a destination-based consumption tax does create an incentive for cross-border shopping, if goods can be reentered tax free, and for consumption abroad through travel or emigration. Finally, the ultimate effect of a flat consumption tax on the price of particular goods will depend on demand elasticities. Those goods for which demand is relatively inelastic may be able to pass through a larger price increase (tax inclusive) to purchasers than those with elastic demands.29 Whether this would happen in specific cases would depend, among other things, on the price behavior of production inputs and competing products. |
The rest of your statements has nothing to do with my discussion and seems to be based upon confusion as to who introduced certain elements into the discussion.
Hmm, seeing as each response was in regard you own specific statements to me, the only factors introduced are hardly a basis of such confusion, and indeed were directed at the discussion as you framed it to that point.
That calculation has you calculating a tax on a tax. This makes my point even more pointed. The car costs 38,500 and you pay a 30% tax of 11500. Multipling the total price by the tax rate of 23% gives a tax on the car plus a tax on the tax. This is worse than I thought. It is impossible to tell what the actual tax rate is since 23% includes the tax on the tax.
And I completely disagree with the logic of the article you posted in support of this convoluted method.
Final Price = Price +Tax = Price + 30% that is the only clarity in this mess.
That is a long piece which will require me to put some time into fully following. Maybe tonight. Thanks for posting it.
They have non VAT taxes as well.
Hard to think what you believe these posts prove. Many of the statements are conditiional saying "if this, then this" and "if that, then that" (Kotlikoff's quote wher he ASSUMES and then goes on to talp about this assumption) rather than any specific description and many of them come from the same folks who bring us such niceties ad the Tax Burden charts (JCT, CBO, etc.) which are anything but realistic.
Some, in fact, come from out and out die-hard FairTax opponents (the consultant Wilkins who makes his money opposing the FairTax for some of his clients), etc.
You've posted this nonsense before and it wasn't pertinent then and certainly isn't now.
There is no such rule I was speaking of obtaining an advantage by backing out income tax effects from export prices as is done with VAT. WTO doesn't care if you have an IT or not but will not reward you for removing it if you do.
Help yourself, lover boy!
Monetary policy is only one of the factors influencing prices and not "determinative".
And I suppose you believe that I was born into wealth which allowed me to obtain an education without effort or working. Do you really want me to list all the jobs I had during the twelve years it took from beginning to end? Shall I go into my family history refuting such a thing as well?
But since you believe me to be a LIAR that would not help now would it.
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