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.
Alright then oh learned oracle of economics please explain just how are the great unwashed supposed to interpret the following statement from you in post # 662?:
If we exported much more the inflation rate would soon bring us back to the stagflation of the 70s.Oh and did you miss my question in post #647 to whit:
How may companies do you know of which have remained in business by NOT making any profits?
You were the one who brought up the pay 'em more argument not I thus I made a little fun of it. But Bigun actually bought it and is using it too.
I do not argue that there would be some relief afforded by the reduction of compliance costs but do not see it as having more than a small effect on productivity or efficiency. And there are other productivity lowering aspects you do not mention. For starters the current tax code encourages investment because of the write offs and depreciation deductions these would disappear and I can even envision the change in the code lowering investment and retarding productivity. Economics is filled with examples of counterintuitive results.
Reductions in cost through tax relief can lead to greater profitability without any necessary change in technology or investment plans and could be a one time thing. Reductions in costs due to increased competition can be the result of the forced new technologies caused by increased competition. Your question was difficult to frame and my answer is too. If this is not sufficient try again and I will also.
Everything equal implementation of the FT will increase takehome wages by the no-longer-paid employee share of SS/Medicare which is around 8% however there is going to be a 30% sales tax on purchases. FT advocates maintain that the base price is going to drop so that the final price will be no greater than the REAL price paid prior to FT. I don't believe that will happen in such a smooth and seamless manner. If I am correct the real wage will fall at least initially until the new code is incorporated in the economy. Depending upon how sticky price adjustments are it could be as much as 20% but probably around 10%. I cannot prove this but it seems logical to me. Cost declines due to compliance cost removal will at first show up in increased profits thus this decline will be a one time thing.
And we should not overlook the fact that these compliance costs are declining because of the computerization of accounting and bookkeeping. Personally I don't accept the estimates of the actual cost of compliance in any event and believe them to be overstated.
It is just that "sticker shock" which I fear will wreck the Big Ticket sectors like autos and housing. Adding a visible sales tax of almost 30% will cause demand in those sectors to collapse in my view though I understand you do not agree that will be the result. So even if you are getting a bigger paycheck you stop buying because of that ss. But IF I am correct we are screwed.
Nonsense, Chicago is no home of "inherited wealth" but a blue collar working town like most of the cities. Even NY is not some kind of Palm Beach.
Alan Keyes is not an authority on Economics and his rhetoric may make you feel good but is not an argument.
I take it to mean that you also haven't a clue. Why in the world should I want to educate such a staunch status quo defender? You also are welcome to think whatever you like.
So you admit you cannot back up you slander of my comments.
No, nobody says that except you. And it's really a dumb statement.
If you find someone else saying it, let me know. Hint: it won't be there.
What will be there is something different than you think. You are unable so far to understand that there are costs to the income tax system other than the tax themselves.
For example, I'd be willing to make and sell more of my product at its current profit... but by earning more, my marginal profit decreases to the point I choose not to make and sell them. Of course there are other types of costs that are a result of the income tax. That was just one.
LOL! Anyone interested can go here and read (requires acrobat reader) an open letter to the President, the Congress, and the American people signed by 75 economists from across this land, whom "my side" has convinced, endorsing the Fairtax.
Of course I FULLY expect you to say that THESE folks don't known what they are talking about either!
NO, You don't seem to understand. Taxes that are imposed on the employer, are just another cost of employing....like salary. In terms of calculating an absorption rate....the nature of the cost is immaterial....as long as you have estimated the total costs correctly. The distinction is immaterial.
The figure you cite is a tax exclusive number, not tax inclusive and it is erroneous as well.
If you think the erroneous 57% figure will start flourishing evasion, what do you think would happen if there were, say a 56.95 or higher rate on the same basis (which there already is for those in the 28% IT bracket; 38.89% of IT and 15.3% of P/R ... that 28% is a tax inclusive figure just like the 23% FairTax tax inclusive rate). There also rates above the 28% tax inclusive rate in the IT - 33% and 35% - so as an exercise you might tell us what THOSE tax exclusive rates amount to.
Or maybe you'd rather not know ...
Also, you'll note there are no links posted to the erroneous 57% ststement so it can be viewed in context.
I am happy to leave any judgments as to just who of us is credible to them.
"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."
You are right, Principled, this is certainly one of the more inane arguments the guardians of the status quo have put forth. And they keep using it, as if they think anyone with more than a 6th grade education would find it persuasive.
In fact, my experience with budgeting has taught me that corporate income taxes are relatively easy to project, provided that your sales forecast is reasonably accurate. IOW, it isn't the last revenue/expense item on the income statement that is challenging to predict, it is the first. Of course, using their ridiculous logic, that means that businesses shouldn't even try to forecast sales and that they are clueless as to how to price their products.
No reason to do so at all. We're not discussing pricing practices and tactics for alternate marketplaces.
That's merely one of the red herrings you love to drag out. It is meaningless to the FairTax discussion.
I understand the costs quite well. I pay for it every year. But what you don't understand is, no matter what the tax system is, I still need an accountant to account for all my expenses. I still need to know how much I make and to provide banks with financial statements. The cost of filling out forms 941, 1120S, 1040, 1099, W-4 really ain't that big of deal and really won't be much different under a Fair Tax. I still have monthly sales forms to submit and I still have payroll info I must send to Social Security Admin. What you save me amounts to squat. Really you tax system does not do crap as far as saving me money, and I really don't see how it is gonna save other businesses. To tell me I understand it, when it is really you who are ignorant about costs of compliance.
For example, I'd be willing to make and sell more of my product at its current profit... but by earning more, my marginal profit decreases to the point I choose not to make and sell them.
And you are a nut. That makes no sense.
Bullcrap, you guys say that on every thread. You tell us that prices will come down 30% but you haven't one f-ing clue how. Your numbers don't add up to anywhere near 30%. You guys are so f-ing clueless and so f-ing dumb it is beyond pointless to explain anything to you.
The Theory of Perfect Competition is based upon the assumption that no single participant in the market can affect the market price. Now changing that assumption requires that the theory change to accommodate the new situation.
A small business in a market which does not have all the assumptions in place required by the ToPC does not follow the Model. Therefore you do have more control over the price you charge but it is limited as you know since you cannot charge ANY price you wish. But that cannot be extended to sectors which have more of the assumptions in place. In addition, we must distinguish between the short run impacts and the long run. Say you have the only gas station in town and decide you want to charge the monopoly price of $5 a gallon. You could get away with it for the short run but in the Long Run someone is going to realize that you are making a higher than normal rate of profit and open up another station.
Theory is a means of getting a grasp on how an economy works I try not to make it a straightjacket beyond which one cannot move. Knowing how to adjust the model as the assumptions are violated or removed is crucial.
I speak only of the actual income tax itself not the costs of complying with the law which are not removed by lack of profits. So you can easily be in a situation where you pay no actual tax but pay thousands of dollars in costs.
But you don't have the other variable to plug into the formula, the amount of profit, as you do with the other costs.
It's good to know that your IT forms "ain't that big of a deal". They certainly are to a lot of businessmen who have to figure complex recapture/depreciation schedules, etc. along with the accountiosta involved with doing the payroll taxes and their forms. You probably aren't aware how much work is involved in doing those forms yourself since no doubt you don't do them.
Be that as it may, the costs of doing the required paper work under the FairTax are not only zero, but you are paid to do them. Does the government pay you to even purchase all of the requisite tax forms now ... let alone pay you to fill them out?
The payroll invormation required under the FairTax is required due to existing S/S laws and even THAT is greatly simplified compared to requirements now.
I figured out complicated recaptures and depreciation for years before I incorporated all by myself. It ain't all that tricky, and with computers, it's just a matter of plugging in the numbers. I deprecreated rental properties, office equipment, and all sorts of things. Besides, with the increase in section 179, you can easily write off most of your expenses without worrying about depreciating it.
The only way the government pays me is by charging a higher tax. That money has to come from somewhere and the money comes from taxes on my gross sales.
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