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.
20/80 or 25%
I'll play your silly game...25% of what?
LOL! This really is funny! I believe the last time I saw that probelm I was in second grade and, believe me, that was a LONG time ago!
What a dolt.
of the total excluding tax, retard!
You said 80 was the whole (total).
If you "exclude the tax" how does the 25% become a tax rate?
Using your idiocy and second grade math. If my "exclusive income tax rate" is 4% what's my inclusive income tax rate?
"Read the bill so you'll have a better grasp of what you're discussing."
It's not a matter of 'grasping' what's in the bill. I'm not disputing your account of the contents or the intent of this legislation. My issue is that regardless of the content, that content must be translated into rules, regulations and definitions by an army of bureaucrats. Congress leaves these items to be defined by the bureaucrats that administer the law. No one can predict the outcome of this process. And, this process will occur.
My second concern is 'how do we transition to this system?' Suppose this law is passed effective on 31 December of 2006. I realize that the law has provisions for granting tax credits to businesses that hold inventory on that date. If I buy something on 1 January, an item will cost me 25% more than on 31 December. Will there be a buying spree on the 31st? (I can see the sale ads now.) But, I'll have the same amount of money in my checking account.
Sure, business costs will go down, but that will happen over time and no one can predict the extent of this. How will businesses deal with this risk in their pricing strategies? Will the prices go down to match the increase in sales taxes? What will the effect of this uncertainty have on production and sales? Will businesses take a 'wait and see' attitude? What will the effect be?
Will some businesses speed up inventory purchases to get the tax credit? Or, will they delay purchases? What effects will this have on employment?
Meanwhile, prices will have gone up by the amount of the sales tax but the amount in my check book remains the same. Sure, I'll get some tax credits and my next paycheck will be increased by having no withold but that won't happen for a week or so.
I don't believe any one can accurately predict the effects these factors will have on the economy.
Apparently you have never heard of Corporate Bonds or Preferred stock. And the idea that they are purchased by INVESTORS will undoubtably be shocking.
You really haven't paid much attention to stock movements have you? If you had you would have noticed that the fastest rising stocks are often those WITHOUT any net earnings. Investors are betting that there WILL be earnings but NOT on the fact that there ARE currently earnings. Once the company settles down into a consistent earning pattern the days of high flying prices are over. Ebay is an excellent example of this. Conversely you will find mean companies with low P/E which barely move in price.
Disregarding accounting tricks the decision to invest is unaffected by income taxes since 38% is 38% so the key is to select the company with higher gross profits which means the 62% remaining is larger. It will also be larger with 0% IT or with 95% IT.
I never said that IT are "constant."
Analysis is necessary for understanding and that means to break apart and isolate the aspects of a concept from everything else as much as possible. Reintegration of the knowledge derived to view the whole is then the next step by a competent analyst. Economics is predicated upon using strict assumptions to establish a model which can then be manipulated by selectively relaxing the assumptions.
If I buy something on 1 January, an item will cost me 25% more than on 31 December.
Actually it's 30% and that's 30% on anything and everything including other taxes included in the gross payment.
This would be where they call me a liar and that "of the gross payment" doesn't really mean "of the gross payment".
An excise does not have to be on a "sale" but can also be on "consumption" of an article. Remember the Whiskey Rebellion? Those excises were on Production and Consumption with taxes on sales having little to do with the opposition since much of the commodity was never sold and often produced for personal consumption. And yes they did drink a lot in those days.
An excise tax is much more than a "sales" tax. The latter can be a part of the former but the former is NOT identical with the latter.
The point is that an excise tax CAN be a sales tax but is much more. It is a tax on Manufacture (no sale involved) or consumption (no sale necessarily involved)
Look at the Whiskey Rebellion for an example of taxing manufacture and consumption.
Sorry, but I did and I see it as a model attempting to explain away things that the authors don't like in the models under study. All models are not built upon spreadsheets and arithmetic studies despite what you think.
The model they present of attempting to criticise the other models suffers from the same failings of the very models they look at - it must make assumptions (as they do). If you can't see the bias involved by the modelers looking at the other models, then it is YOU who needs to read with more understanding.
The thread is not about the model or the models being modeled. It's about the FairTax and you seem to be doing your normal soft-shoe shuffle to stay away from discurring that.
A sales tax is an excise tax but an excise tax is not necessarily a sales tax. It can just tax manufacture and consumption and not sales.
If not, those extra people would should have a lot of downtime on their hands. Perhaps they could model some more economic models.
Back to your Nightmare VAT/Nightmare Flat ... how many congressional backers does the plan have???
So those folks are "biased" but the FT advocates are pure as the driven snow? LoL
A percentage by itself is meaningless, the 25% is supposed to be 25% of SOMETHING. It would be nice to know where the other 75% of that something is.
This is one of the biggest problems about the FT and one which assures it will never be passed since the calculation method is utter nonsense AND IT DOESN'T HAVE TO BE. Other than admitting the rate to be 30% being a disastrous admission. It is unworkable.
I have seen it illustrated by myself and others on these threads endliess times. It is also explained on the FT webite for all the world to see. I'm sorry. I don't think it is deceitful at all. It is simple math.
I don't think it is deceitful at all. It is simple math.Simple math? Change one rate that has been added to another (the FairTax rate is the sum of three) and see what happens to the revenue collected by the unchanged rate.
From the Fair Tax website FAQ:
I know the FairTax rate is 23 percent when compared to current income taxes. What will the rate of the sales tax be at the retail counter?
30 percent. This issue is often confusing, so we explain more here
When income tax rates are quoted, economists call that a tax-inclusive quote: “I paid 23 percent last year.” If that were the case, for $100 one earned, $23 went to Uncle Sam. Or, “I had to make $130 to have $100 to spend.” That’s a 23-percent tax-inclusive rate.
We choose to compare the FairTax to income taxes, quoting the rate the same way, because the FairTax replaces such taxes. That rate is 23 percent.
Sales taxes, on the other hand, are generally quoted tax-exclusive: “I bought a $77 shirt and had to pay that same $23 in sales tax. This is a 30-percent sales tax.” Or, “I spent a dollar, 77¢ for the product and 23¢ in tax.” This rate, when programmed into a point-of-purchase terminal, is 30 percent.
Note that no matter which way it is quoted, the amount of tax is the same. Under an income tax rate of 23 percent, you have to earn $130 to spend $100.
Spend that same $100 under a sales tax, you pay that same $30, and the rate is quoted as 30 percent.
Perhaps the biggest difference between the two is under the income tax, controlling the amount of tax you pay is a complex nightmare. Under the FairTax, you may simply choose not to spend, or to spend less.
The point really is that by reading the bill you can see not only the intent of the bill but the requirements that it be interpreted under from a legal standpoint.
And there is no "army of bureaucrats" that you suppose to translate the FairTax into rules. The rules are already in the bill. Even the contents of the report required from the merchant is called out as is the content of the receipt to the consumer. This is wquite different from the existing IT code which indeed DOES require an army of bureaucrats to haul the books containing the Tax Code around let alone interpret it into IRS rulings, forms, publications, etc.
The bill calls out the procedure for the inventory credits in transition. Aside from that there are really very few transition concerns - less so thaaan even to a few changes in the existing IT Code which sometimes cause a real trauma in transition.
As to timing purchases to give yourself maximum benefit, that shouldn't be too hard. Prices will drop quite repidly once the FairTax is in effect and I suspect that prices will actually begin dropping once the law passes but before its effective date. If youi're a wage earner, you'll get more money in your check quickly and have the prebate also so that is of immediate benefit to you.
The belief of most economists who favor the FairTax is that prices will decline enough to offset the tax (or pehaps by more) so that you'll pay about the same for things BUT that will include the tax. I believe the effect will lower prices move than that. In addition, you'll have more money in your pocket from the prebate and the elimination of IT.
It is widely held by these same economists that business will greatly increase and the US economy (and thereby you) will benefit a good deal. Businesses will deal with these sorts of changes at least as easily as they now do - and probably even easier than at present - with changes it the tax laws and business conditions.
By reading the bill more carefully I believe you should see at least some of this.
"And there is no "army of bureaucrats" that you suppose to translate the FairTax into rules. The rules are already in the bill."
So you say. Almost every bill passed by congress requires an army of bureaucrats for it's interpretation and enforcement. You're naive to think this will be otherwise.
"The bill calls out the procedure for the inventory credits in transition. Aside from that there are really very few transition concerns - less so thaaan even to a few changes in the existing IT Code which sometimes cause a real trauma in transition."
Just because the bill describes 'inventory credits in transition' is no assurance that there will not be transitional issues. As you point out, even a 'few changes' in the IT code can be traumatic, yet you ignore the fact that the complete abolition of this code can also be traumatic.
"As to timing purchases to give yourself maximum benefit, that shouldn't be too hard."
Of course it's not difficult. That's why it could be traumatic to the economy if millions decide to pursue their economic best interest in doing so.
"The belief of most economists who favor the FairTax is that prices will decline enough to offset the tax (or pehaps by more) so that you'll pay about the same for things BUT that will include the tax."
Possibly true over time, but getting over that time might be traumatic.
"By reading the bill more carefully I believe you should see at least some of this."
Are you so certain that your zealousness, which isn't necessarily a bad thing, hasn't blinded you to some potential shortfalls?
At least some part of those stock movements are no doubt due to the "greater fool theory" rather than any real relying of whether there will be future earnings or not.
Speculation is speculation, P/E's etc notwithstanding.
Also I guess I'm not as great a fan of the assumptions of economic models being "strict" since these assumptions may be incorrect, making the modelled results out of whack.
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