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.
I've asked them how the light bill, the copier payments, and supplies are paid for. They haven't replied.
I guess since they don't know the light bill in advance, it can't be paid with sales revenues. And the copier bill is based in part on # copies, which they don't know in advance, so it can't be paid with sales revenues, and they sure don't know what their supplies expense will be either, so they can't use sales revenue to pay for them either.
It's really amazing.
Not anywhere near as easily as they do with the Marxist income tax system under which NO ONE knows exactly how much they are paying!
The ONLY thing the FairTax bill REALLY does is make what is currently hidden apparent AND spread the burden out over a MUCH larger base.
With the income tax a taxpayer must endure the equivalent of the Spanish inquisition in order calculate what he owes. With the FairTax the government would not need to know even so much as his NAME!
It's ALL about FREEDOM!!!
Yes! And quite tiresome to boot!
What makes income tax costs any different?
What "words and language not used in the real world" are you referring to?
Light bills and copier payments as well as payroll taxes are a definite cost and totally unlike income taxes.
"Oh, you didn't make any profit next year you pay NO Light Bill." Now THAT is real idiocy.
The light bill is not definite either. Nobody knows what it'll be until the bill comes. Nobody knows the copier payment ahead of time either.
So how is the timing of knowing the exact amount due for income tax, or the light bill, or the copier bill related to whether the expense can be paid with sales revenues or from some still yet untold place you haven't disclosed?
How may companies do you know of which have remained in business by NOT making any profits?
So ancient_geezer's prescription for Economic Happiness is to just RAISE everyone's wages. LoL. If only.
Business prices would be lowered only by the payroll taxes not paid and that will be nowhere close to 30%. So prices will rise with the implementation of FT.
Consumer electronics price reductions fit quite well into the economic models we have. NONE of those reductions had anything to do with tax policy. They are all consistent with the Export cycle bringing in new sources of competition and economies of scale coming into play as the industry matured.
Your worst case scenario is not even close to what I foresee which is wages going up but prices going up more. At any rate companies select outputs to maximize profits and that will not change under FT. They would select the same point of production since maximum After Tax Earnings are achieved at that point whether we are taxed at 38% or 0%.
While the desire for transparency is laudable we are still faced with the fact that many pay no income taxes and they will essentially pay no sales taxes after the rebates etc. are implemented. This means the drive to spend other people's money will still dominate domestic politics. And it is a singular irony that it is in the higher income and higher taxed locales which are most supportive of bigger government and higher taxes.
You cannot just speak of taxes as one thing. Income taxes are different than Payroll taxes and cannot be treated the same way. I am ONLY speaking about Income Taxes. While all other taxes are paid just like light bills income taxes are NOT. Often they aren't owed, they are not a constant, not-to-be-avoided factor like the others. Income taxes are the prices of success whereas the others must be shouldered success or failure.
I stated that profit is a residual and you posted something which might be saying that but is too convoluted to make much sense.
Profits are often restated months or even years after the business year is ended. Do you have no experience reading financial reports or business news so that you are unaware of this simple fact?
A "corperate socialist" LoL. If you are going to try and insult someone at least spell the insult correctly so as to avoid looking like a total nimrod.
I tried to make the point earlier that the point of profit maximization will be the same with an income tax as without. Microeconomics is not our friends' strong suit.
But you are not worth my time.
The income tax system has costs to business even when there is zero income tax liability... plenty of costs.
Even if there's a lot of success, there can be zero tax liability AND a lot of money spent on tax planning and such...including making non-productive decisions solely for tax purposes.
That aside, I don't understand your position on why income taxes "are different" just because the amount due is not known ahead of time - and that difference means that the tax is not paid from sales revenue. Can you elaborate?
No formula needed. When you pay your workers you pay the government a fixed percent for SS, unemployment, workers comp. and medicaid/medicare. It is not variable nor avoidable. But you never even KNOW for sure if you will have to pay ANY income taxes. There is a huge difference.
There are costs associated with income tax calculation/estimation since you are paying someone to make them. Those costs are there EVEN IF YOU OWE NO INCOME TAX. Since these matters are easy to comprehend an inability to do so makes any economic predictions of those who cannot highly suspect.
They are indeed masters of circular argument and most everyone on this forum sees right through them. The ONLY reason anyone continues to fool with them is that they serve to educate the occasional drifter who REALLY wants to learn.
Gee, now why didn't Henry just raise wages when the Depression hit? And why did he fight the Unions with scabs, strikebreakers and goon squads rather than JUST RAISE WAGES as they wanted.
Another convert to the Raise Wages to Achieve Prosperity school of economic development, lol.
Your argument that income taxes are not definite and hence cannot be paid with sales revenue is not valid.
The light bill is not definite either. Nobody knows what it'll be until the bill comes. Nobody knows the copier payment ahead of time either.
So how is the timing of knowing the exact amount due for income tax, or the light bill, or the copier bill related to whether the expense can be paid with sales revenues or from some still yet untold place you haven't disclosed?
phil_will1 wrote:Right, but exempting certain products from the NRST, or charging higher or lower rates for certain products is an option not present in the current system. And there's the monthly check to every household that will be a huge political football.
One of the most significant differences is that deductions against income are taken off the table by the FairTax.
I'm not saying that there won't be some valid tweaking and tuning that might be needed. But I would guess that over time, the sales tax code under the "fair tax" proposal will grow and get more complex. You can bet the first modifications will be "for the children" and will be popular. School books can be exempt from federal sales tax. Maybe we take "deadbeat dad's" refund check and send it to his children or whoever has custody of the children. Things like that.
Once the door is opened, every special interest will want special reduced rates for their friends and punitive rates for their enemies. SUV's waste too much fuel, tax them more so people will buy fuel efficient vehicles. Hybrid cars aren't competitive on price, give them a tax brake to help them out. The list goes on. Pretty soon you're approaching a sales tax code that's as complex as the income tax code we have today.
The problem isn't that we have an income tax instead of a sales tax. The problem is that our tax code has been horribly screwed up by lobbyists and legislative power brokers. And you won't convince me that the same lobbyists and legislative power brokers can't screw up a sales tax code just as badly as they screwed up our current income tax code.
As I have pointed out, we really need to evaluate how many of these special interest tax breaks and changes to the current code were approved and voted for by the sponsors of this "fair tax" bill. Since they seem know that messing with the tax code is bad, the question is how many times have they actually done what they say is bad. And we can expect that they will do bad things to their new "fair tax" just as frequently and for the same reasons that they have been tinkering with the current income tax code.
Yes, starting with a clean slate does simplify things for a little while. But you can start with a clean slate with a flat income tax and get the same effect. And you can expect that over time, the lobbyists and legislative power brokers will mess it up again. But it's insanity to think that they can't or won't screw up a sales tax code just as badly.
Bigun wrote:The problem isn't that nobody knows. The information is there, on your pay stub, and on your income tax forms. Self employed people know today because they write the check every quarter (at least) for their taxes. If someone is too ignorant or too apathetic to look at their tax burden under the current system, what makes you think they will notice or care about the little line on their receipt showing how much they pay in NRST.
Not anywhere near as easily as they do with the Marxist income tax system under which NO ONE knows exactly how much they are paying!
And if that does start a taxpayer "revolt," how long before the law is changed to forbid businesses from disclosing the amount of the tax and you just get the total on your receipt and the business/tax collector worries about how much of that total is taxes. Because if revenues fall or if taxpayers start getting stingey with their buying and paying taxes, the government isn't going to just make due with less. It never has in the past, and there is no reason to believe that it will in the future.
How do YOU explain the fact that most of FoMoCo's customers early on were also it's employees? (Of course it couldn't possibly have anything to do with the fact that FoMoCo paid it's employees far more than the prevailing wage at the time could it?)
Let's clarify some of your incorrect and/or misleading statements in the post #209.
I'd point oput that "... living in a cave, hunting your own food, etc. ..." is in no wise tax evasion but quite legal and amounts to tax minimization, not evasion.
The statement about those now evading taxes is intended to apply to drug dealers, etc. and is not intended to mean they pay NO taxes presently since - as you point out - they pay SOME taxes when they buy things whose prices have been goosed by 30% due to taxation. That merely means any purchases of that sort pay only the portion of the tax that would apply to that 30% increase and they DO NOT pay taxes on the full purchase price of the thing involved as they would with the FairTax (which amount would be greater than that tax portion now paid) nor do they pay income taxes - a much greater evasion than the incremental tax accidentally paid when purchasing things presently.
The drug dealers (and others) evading taxes are evading INCOME taxes on their ill-gotten gains which ARE taxed with the FairTax as they purchase things at retail rather than just the relatively small amount paid on embedded taxes. With the levels of income many of these folk have, that income tax amount would be substantial (which bye the bye) is not counted in the evasion/non-compliance figures of the IRS.
Certainly FairTax advocates are not saying that the drug dealer is going to collect the sales tax and forward it to the state. That failure merely offers legal avenue to pursue him - but that's not the topic at hand.
As to the flea market situation, if it falls under the de minimus provisions of HR25 that's fine. If it goes beyond that point, then the seller would be violating the law to not collect and report taxes and provide the buyer with a receipt as required. Lest you think that such "open air" sales are not checked by sales tax bodies presently you must live in a state that is quite lax. They are in my state where "buyers" are sent around to make on-the-grounds checks and they can also penalize those sellers who do not have reseller's permits. The provisions and implementations vary from state to state.
All of the above clearly shows the gross misrepresentation in your statement:
"Transactions that go untaxed due to tax avoidance or tax evasion under the current system will also be untaxed for the same reason under the NRST."
My statement about the income tax before 1913 is correct enough since the 1895 Supreme Court "Pollock" decision struck down the last income tax of 1894. From that time on (until the infamous year of 1913) Congress generally believed the income tax to be unconstitutional. The 1913 IT (income tax) was a fairly "flat tax" as can be seen from the form and instructions for them - http://www.salestax.org/library/1913form1040.html
Prior to 1894 there was an IT with the first such law passed in 1861 (which was apparently was not too effective for a while). The first IT form for use by taxpayers was the IT of 1863 and here is what that form - and instructions - looked like:
http://www.salestax.org/library/1863form24.html
The 1861 IT law was allowed to expire in 1872, 9 years before the Supreme Court got into the game heavily in 1881 with "Springer".
The complete effect of repealing the 16th is not at all clear but it certainly would be a big help in making the IT a thing of the past for at least quite a long time. It might be that the Springer and/or Pollock decisions would have to be revisited .. especially the Pollock which I think you may be alluding to. In any event, that's not what this thread is about.
With the lapsing of PAYGO provisions it would still be extremely difficult to pass a bill through Congress that was NOT revenue neutral due to opposition from either (or both) sides of the political spectrum. Keep in mind, though, that the Tax Panel has been given the revenue neutral charge by the President presumably hinting at a veto if otherwise.
As gfor the vote to repeal the 16th, let's suppose that the FairTax bill becomes law. There is now a revenue-neutral tax law in operation. As people become familiar with it's many benefits to most it will be well-liked (compared to the IT, you naysayers notwithstanding), As sauch the 16th amendment will then be an anachronism serving no purpose and - much like repeal of Prohibition - will relatively easily be passed in Congress and ratified by the states.
Certainly the FairTax backers have no argument with the fact that the government sspends too much - and for many of the wrong things - but the FairTax is a tax bill, not a spending bill and must be seen in that light. It's more than a bit difficult where your statement about a "windfall" for the government and an expansion of their powers comes from since that is clearly not the case from the wording or intent of the bill ... in other words, a completely unsupported statement.
The income and FICA withholding are only a part of what is taxed and what people see and even if those were their complete tax burden there is really no way for them to do anything about it where with the FairTax - despite what you think - the populace can place pressure on their elected reps (and I doubt that would be to raise the tax). The other taxes you don't mention (estate, inheritance, etc.) are decidedly NOT on their check stubs but those are real taxes also - and done away with by the FairTax.
The assumption you make opf 2,000 changes in the first 5 years (as with the past 5 per your numbers) is quite funny in view of the utter simplicity of the FairTax as it now is written. There is nothing like the corpus of arcana that exists with the IT. By comparison the FairTax is an open book and changes would be MUCH more visible - and therefore those attempting them would be more accountable than at present. I believe it would be MUCH more difficult to make the sow's ear when starting with a silk purse that is apparent to all.
That certainly does not mean changes - or derailment won't be attempted (witness the attempts by you and other status quo lovers on these threads, for example) since some feel their entire being threatened they are so ingrained to living under government-control of their lifestyle via the tax code. Certainly the taxpayers will haave far more of an opportunity to resist and defeat such political mischief under the FairTax than the IT (or VAT or Flat tax). The K Street crown will thin out considerably or move to attempts to shape other legislation since the opportunity available under the FairTax will be greatly smaller.
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