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.
So the Fair Tax is an income tax???? Your logic defies logic. The Hooker will not submit her $30 tax on the $130 she was paid her for her services. She is cheating the Fair Tax system. It is not fair that the Hooker gets to pocket the full $130 for her services, while I only get to pocket $100. There is no ands, ifs, buts, or ors about it, the illegal transactions still cheat the system.
Your "taxpaying businesses" is a misnomer looey. It is the buyers who pay taxes; the businesses merely forward it to the state. And with that being the case there are no exemptions for them.
Hard to see what busineses you might be referring to.
Are you really saying that hookers are going to collect the tax?
No but that is the point. The avoid taxes under both systems. Whether you call it an income tax or a sales tax it does not matter. The Hooker is not paying tax for her services. Both tax system miss out on this tax base. What is fair about the Hooker getting to pocket $130 for her services, while I only get to pocket $100 of the $130 gross for my services. Saying the Hooker is not cheating the fair tax system is pure dishonesty.
Principled wrote:Well, you haven't been very effective in that fight. Because during that time, a lot of complexity was added to the tax code.
Of course! We've been fighting tooth and nail against needless complexity and bad tax policy for 8-10 years now.
Principled wrote:Actually, the Dems are very effective at what they do. I don't like what they do, but they are effective. When they have the power, the move things in their direction as much as they can. When the power is split, they scale back, but they still get something of what they want. And when they are out of power, they obstruct.
Kinda sounds like the Dem policy on - everything.
By comparison, Republicans give Dems most of they want when they are out of power, they give Dems more of the Dem agenda than they get in return when power is shared, and they are stymied by the Dem obstruction when the Republicans are technically in power.
The big problem is that the Republicans always want more power and more political capital so they can pass bigger and bigger plans and solutions. They don't get the whole ball of wax, so they end up with nothing. And they tell the electorate, if you just elect more of us, we could do something.
On the other hand, Dems do what they can when they can and don't try to overstep what is possible. So they are more effective.
Fair tax supporters often say things like, "I'll support the bill as it's written now, but I won't support it if it is changed." In reality, that means, "Forget it, I won't support it at all." Because the reality is that it will be changed before it passes, or it will never pass.
Check my post 782 here, there's a few starter suggestions for some things that can be done to move in the right direction.
And even if doing away with withholding isn't politically feasible, maybe sending a monthly or quarterly statement of taxes paid to each taxpayer is feasible. That would somewhat raise awareness of the cost of taxes today, and it would estabilish a mechanism for contacting every taxpayer periodically with personalized information, a key element of the rebate for the so called "fair tax."
Not at all - but maybe you should be a hooker if you think that.
She'll pay the sales tax when she buys at retail unles you think that everyone with unreported/evaded income has retail sources that will look the other way and NOT collect and forward the sales tax - which would require most retailers to chance their entire business just to help out that one sort of customer. That's ridiculous.
I certainly did not say the FairTax was an income tax, but that the income presently evading taxes will be taxed when spent - to the tune of 23% rather that a minor amount as at present.
So it's now not whether we've been fighting, but how effective we've been in your eyes?
I was fighting the existence of the income tax, not fighting the complexity of the income tax. So I had no dog in the income tax complexity fight.
It is fighting the complexity and fighting the spending battles that are futile while we're under an income tax system that rewards complexity and spending. They system, IMO, is the problem.
The working to change things is in the form of the FairTax bill which I believe will make to the floor and through the vote with very few changes. It should be no secret that status quo lovers are trying to either defeat it or make it ineffective - witness what the SQL folk attempt on these threads.
I'm sure you think you can predict the outcome through Congress but I doubt it and I think there is at least as much reason to believe that the bill will be largely in its present form. It largely depends on grassroots support.
And "as written" does not mean "won't support it" but instead means that the bill is very good as is. As I mentioned the 1913 IT bill was not that way at all and already had the things you pre-suppose for the FairTax bill embedded in it - check the 1913 tax form to see this.
If anything the Dems should be for HR25 as it will help, for example, the union rank-and-file among others who are supposedly part of the lifeblood of the Dems. In fact, though, the bill is neither Rep or Dem leaning, but non-partisan.
Continuing with any form of IT - no matter how much tinkering is done - will accomplish nothing productive for the economy or the citizens since it perpetuates the evils of the IT. The FairTax bill will help both the economy and the citizens.
So the Hooker is not avoiding paying Sales Tax by pocketing the full $130 she charges???? I fail to see how anyone can not comprehend this. It doesn't matter what she does with the money in the future, she has cheated the system and you have not increased you base to capture this part of the economy. You analysis is fraudulant.
Nobody (except you) is saying that illegal transactions will have tax collected and remitted. Unless they're really dumb, they won't do that and disclose their illegal activities. They will, however, eventually spend the money and have it taxed. If, by some quirk, this criminal is wise with his money, he may save and invest his money - which is a situation similar to never having received the money.
I don't know why you think this is such a travesty. Nobody's lying.
It's a good thing you said "... may be worsse at collecting ..." since that also means that it may be better, too - which is what I believe to be the case. There has been a good bit of conspicuous consumption of expensive items in he US by those in the underground economy which can be seen from government confiscation sales and I think you'd have an uphill battle convincing most people that IT was paid on the funds used for those purchases.
Additionally, it isn't at all clear that the IT gets the money "going in" as you say since a good chunk of drug purchases are supported by stolen funds, not earned income.
THe original question to which I responded is above. IE how hr 25 will capture more taxes from a drug lord. Remember he now pays only a portion of his tax burden. HR 25 will make it so he pays his full share.
No - it's your reasoning that's fraudulent. She isn't taxed under the FairTax until she consumes at the retail end consumption level (and only then if she purchases new, not previously taxed items).
Hey pigdong --- where ya been hiding???
I haven't seen you around here for at least a couple years....
I thought maybe FraudTax.org laid you off during some kind of budget cutback or something...
So how've ya been???
Just fine Willie and I see you still have spelling difficulties over and above normal typos. No surprise at all. The real surprise is that you haven't launched into you socialist class-warfare garbage ... which I'm sure you'll now do.
Actually I'd seen some of that a while back when I was lurking but didn't bother to respond. Oh, and I am not and have never been associated with nor paid by any FairTax group. I merely recognize a superior tax system when I see one. What's your excuse?
Well my other guess was that perhaps they tossed you in the hoosegow along with former FraudTax sponsor (and convicted felon) Big Jim Traficant. But even if you weren't associated with him, I'm glad to see that you finally made parole, anyway. Welcome back!
Naw, Willie, I'm still out and about and no one's after me. When were you released?
pigdog wrote:I think you miss the point here pigdog. Always Right is pointing out that the so called "underground economy" will always be untaxed. Your flawed logic doesn't change that.
She'll pay the sales tax when she buys at retail unles you think that everyone with unreported/evaded income has retail sources that will look the other way and NOT collect and forward the sales tax
True, under the current system, it's the hooker who is evading taxes on her income. Under the so called "fair tax" system, it will be the john who evades taxes on the sale. But the fact remains that illegal activities won't be taxed under either system. You don't help your credibility by making claims that the fair tax will tax the "underground economy." By definition black market and illegal transactions don't get taxed under either system.
It makes people wonder why you have to exaggerate and distort your claims of advantages if this so called "fair tax" is really such a good deal. If it's really a good deal, it shouldn't be necessary to make up fictitious "advantages" that don't really exist.
Well, that is the end of that.
Damn.
"So then the question becomes, do you want to have to deal with a complex and convoluted tax code once a year for an income tax return? (Or once a quarter for your estimated tax payment?) Or do you want to pay the compliance cost of your grocery store, gas station, home improvement warehouse, convenience store, liquor store or whatever having to wade through a convoluted sales tax code every time you buy something? Because with the "fair tax," in 10 years, it will take a whole lot of computing horsepower and a fair amount of CPU time to calculate the sales tax on your weekly grocery run. And you can probably count on a lot more paperwork at least annually to compute what your monthly 'rebate' check will be.
In a worst case scenario, you might end up having to provide a federal taxpayer ID of some kind in order to buy anything at a store. I doubt that's on the immediate horizon. But I also doubt that in 1913 anyone could forsee that you would have to provide a taxpayer ID number and photo ID to an employer before they could hire you."
That's a pretty frightening picture you paint. Before we get too frightened by it, let's examine it a bit further.
First of all, even if differential rates on various consumption items and complicating the rebate are inevitable, as you suggest, that still doesn't even come close to the 60,000 page monstrosity that we have now. Absent from the equation would still be holding periods for capital gains/losses, computing the tax basis for capital property, amortization of business start-up costs and other intangibles, AMT calculations, depreciation schedules (inc. different useful lives and depreciation methods for different types of assets), floors and ceilings for all sorts of deductions, R&D tax credits, deferred taxes for book purposes (which may be an asset or a liability), different types of retirement accounts and the distinct tax treatment of each, different types of child credits, etc. etc. etc. etc. etc. etc. etc. IOW, even if the worst case scenario that you paint for the implementation of a sales tax were to come about, it still would not be nearly as bad as what we have now.
Now, let's examine the likelihood of your worst case scenario developing. Since you brought up the importance of historical precedent, let's think about our extensive history with sales taxes. I believe there are 45 states which currently have sales taxes. Correct me if I am wrong, but I don't think any of those have been added within the past 15 years or so. How many of them have the degree of complexity that you insist is inevitable for an NRST? Zero, zip, nada, nary a one. In fact, most of the complexity with state and local sales taxes arises from jurisdictional differences, a problem that would be non-existent with an NRST. Furthermore, there is already a substantial move to simplify and standardize sales taxes nationally. You can learn more about the SSTP here
http://informationweek.com/story/showArticle.jhtml?articleID=163105744
So here is what we can say about our rather extensive experience in this country with sales taxes
1. in no case are they nearly as complex as the scary scenario that you painted, which isn't even as bad as the current system from a complexity standpoint,
2. the elimination of deductions removes a vast "playground" for elected officials to exercise their proclivity for complication,
3. contrary to income taxes, the trend right now in mid 2005 is toward simplifying sales taxes. That certainly isn't a recognizable trend with respect to income taxes.
4. Because the FairTax would encourage states to harmonize their tax systems with the FairTax, and there are good reasons to believe that they will, passing the FairTax can even be expected to have a positive effect on state revenue systems, as far as complexity goes.
Therefore, I don't think it is even debatable whether or not passage of the FairTax would result in a simpler, less burdensome system than the current one, both initially upon passage and for years and years afterward. The FairTax as currently written represents pretty much the "irreducable minimum" as far as simplicity. The question is to what extent FairTax supporters would be able to successfully fight to keep it "pure". Even a huge, exponential complication of that current irreducable minimum would leave us with a much, much simpler system than the one that we have today.
There is one very important reason that simplifying the current system is impractical. The jumbled up mess of spaghetti that our current system has evolved into is one in which any change in one area will have a ripple effect on others. I don't believe, for example, that President Bush set out to complicate the tax system with his tax cuts when he came into office 4+ years ago. It is simply the nature of the current system. There are major problems with the current system which must be addressed, such as the AMT. Trying to do so without adding complexity will be an exercise in futility. And I'm just talking about the major equity problems, not the economic problems. There is no way, for example, that I am aware of to retain the current system and make our tax system border adjustable so that our producers can compete on a level playing field with their international counterparts without MAJOR redesign and complication.
A friend of mine with a technology background made a good analogy that I think is appropriate to this discussion. He said that there are times in business when the application software that the business runs on has been modified so many times and has had so many "band-aids" applied, that it just makes more sense to throw the whole system out and start all over with a comprehensive, well-designed replacement, even though software conversions are a major pain in the ___." He said that we are probably a good 10 - 15 years beyond that point with our tax system.
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