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.
Does that mean under the "pure national sales tax" it will be passed on to the consumer...like you claim it does now?
No, for its not a vat, turnover, or business transfer tax which are just passed on to a consumer integrally embedded into pricing.
The FairTax NRST is a "pure national retail sales tax" tax collected at retail level only and directly from the consumer quite openly and visibly, the amount listed separately as a line item of the retail sales receipt just as retail sales taxes collected and receipted throughout the United States today.
H.R.25Fair Tax Act of 2005 (Introduced in House) `SEC. 510. TAX TO BE SEPARATELY STATED AND CHARGED.`(a) In General- For each purchase of taxable property or services for which a tax is imposed by section 101, the seller shall charge the tax imposed by section 101 separately from the purchase. For purchase of taxable property or services for which a tax is imposed by section 101, the seller shall provide to the purchaser a receipt for each transaction that includes--
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Since it is a "pure national retail sales tax", purchases for business and investment purposes are exempt from the NRST.
H.R.25Fair Tax Act of 2005 (Introduced in House) SEC. 101. IMPOSITION OF SALES TAX. (d) Liability for Tax-
`SEC. 102. INTERMEDIATE AND EXPORT SALES.`(a) In General- For purposes of this subtitle--
`(b) Business Purposes- For purposes of this section, the term `purchased for a business purpose in a trade or business' means purchased by a person engaged in a trade or business and used in that trade or business--
`(c) Investment Purposes- For purposes of this section, the term `purchased for an investment purpose' means property purchased exclusively for purposes of appreciation or the production of income but not entailing more than minor personal efforts. |
For examples of the potential change in tax inclusive prices of goods from various sectors of the economy, I have transcribed data from Dale Jorgenson's US Business sector estimates of change in production output and change in price received by producers,But Jorgenson's model is a full employment model and allows for wages to drop. That's where most of the savings comes from. You yourself said that this can't happen (and I agree).
When the burden in tax related overhead is greater than tax revenues collected as they are under the current income tax system,Really? We are talking about businesses here. The overall tax related overhead is greater than the tax revenues collected?
Yes. Which is why it is nonsense to talk about nominal wages.
Which "embedded taxes" that I claim are in prices are also "embedded" in wages?
Yes. Which is why it is nonsense to talk about nominal wages.No it's not. Wages are very difficult to change en masse (see "sticky wages"). If nominal wages can't fall, for "purchasing power" to remain constant, consumer prices must rise.
Human capital formation would collapse under a Fair Tax scheme. Can you imagine having to borrow ANOTHER 30% to pay for college? At 30 grand a year this would be another 10 and further lengthen the payback for loans.
No one who is in favor of FT can explain how putting such a burden on real estate and mortgages would have any result except collapse. This plan is a disaster waiting to happen.
Which "embedded taxes" that I claim are in prices are also "embedded" in wages?Why are you asking me?
This ill-conceived scheme would be a disaster and implementing it would cause most people to PAY MORE than the current one. Its impact on major purchases: real estate, education, automobiles etc would lead to economic collapse unless you totally accept the rosy and utterly unrealistic scenarios painted by its advocates.
The major flaw in it is the claim that income taxes are worked into the prices of products when they clearly are not, coming as they do at the end of economic calculations rather than at the beginning as with other costs.
he either doesn't understand cost cascading in the real world or wishes not to and so your explanations will fall on deaf ears.I really would like to see some "real world" numbers on this "cost cascading" theory.
Its impact on major purchases: real estate, education, automobiles etc would lead to economic collapse unless you totally accept the rosy and utterly unrealistic scenarios painted by its advocates.Under the FairTax, education expenses would be exempt. The rest of your issues are right on, though. What bank would loan a person an extra $60,000 for tax on a $200,000 home? What is the collateral for the $60k?
Such over the top rhetoric is one reason this scheme will go nowhere. Living in societies (you do know what these are I hope) COSTS money. Thus states must raise money to pay those costs and no "theft" or "stealing" is involved.
Childish complaints and whining about being robbed are counterproductive to any mature discussions.
So book purchases, rent, food for college students is exempt? That sounds nice but one more layer of corruption and complication is added to this "simple" scheme. Before long it will be just as complicated as the current scheme and require as many experts and advisers and enforcement officials.
"Did John Linder appear as a witness?"
The committee won't allow sitting congresspersons to testify. Their sense is that they are going to recommend something to the congress to act on and so it doesn't make sense to encourage input from congress that they will turn back around to them. That is probably why Senator DeMint didn't present his bill.
"There is little hope of the FairTax or any national retail sales tax being recommended by this panel."
Wishful thinking on your part, YN. And if they do, it's only because the panel has been "misled" by FairTax supporters, right YN?
Remember a couple of months ago when you were parroting the MSM's belief that the administration was "running away from" the sales tax because of the uproar over the President's comments on the campaign trail in Florida? Then I posted Secretary Snow's comments directly contradicting that?
Then you posted the MSM's assertion that the reference to the home ownership and charitable contributions concerns ruled out a sales tax. I then posted the exact language of the Executive Order which clearly did NOT rule out any proposal that did not have a tax deduction for those items.
There is a lesson here. Don't believe everything that you read in the media, especially if it is from the MSM (which is largely clueless on this issue) or from a biased source that benefits from the current system.
"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."
Interesting that this reporter didn't mention that Senator Mack went on to "answer his own questions" in his words in a manner that was very favorable to the FairTax.
I wonder why the reporter didn't mention that.
"Any specifics of this report you want to point out as being biased? It seems a pretty accurate report of the hearing. MarketWatch stated 'backers of a national sales tax received a lukewarm reception from the advisory panel.'"
I just pointed out one very obvious indication in how they reported Senator Mack's comments.
What do you expect them to do ..... put "Make April 15 Just Another Day" bumper stickers on the front of their nameplates?
LOL. The FairTax is getting the most careful scrutiny because it is the clear frontrunner. Even a braindead defender of the status quo should be able to figure that one out.
But Jorgenson's model is a full employment model and allows for wages to drop.
To allow for wage to drop, and also allows for wages to remain the same or rise as well.
Interesting that there is no indication of them dropping in the results isn't there.
As the businesses experience decrease in costs, there simply is no pressure to increase, nor decrease contracted wages. As there the tax rate is held at revenue neutrality against the current tax system through the 25 year simulation run, there is no increase in the level of taxation to create pressures for rising wages.
With increased output to exports intially and capital investment in the long run, wages remain stable with increasing production and higher demand for labor supply that arises from incentives for investment.
That's where most of the savings comes from.
Most business savings come from decreased burden on business and higher productivity.
You yourself said that this can't happen (and I agree).
Gross contracted wages remain constant insofar as pressures relative tax burden are concerned, I agree. However, with increase capital investment into techonological productivity impovement real wages and purchasing power do rise overtime as the economy expands in real terms.
Just as, with higher productivity and opening markets, increased savings and investment, producer prices are able to fall maintaining payments by the consumer (including NRST) a range approximately equal to current prices paid by the consumer.
Even Kontlikoff points out, in a much more restrictive tax simulation,with a higher NRST tax rate than the FairTax legislation calls for, there is an overall growth of 15% and more in standard of living over time.
Why are you asking me?
Cuz you told me that the embedded taxes that I claim are in prices are also in wages.
Look at the third sentence after the quote.
"BTW I wonder why the panel didn't have a presentation on the Nigntmare VAT or Nightmare Flat?"
Yes, I was disappointed to miss that one, too. I wonder how much the panel would have "picked that one apart."
LOL
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