Posted on 06/10/2005 11:13:37 AM PDT by Always Right
1. The 23% sales tax rate turns 37%. A retailer who sells an item for $100 must charge his customer an additional $30 for federal sales tax. Most people familiar with state sales tax call this a 30% tax, since the tax is 30% of the seller's price. The Sales Tax folks call this a 23% tax, since $30 is 23% of the final price ($130 including tax), which they call the 'tax-inclusive' rate. Neither way is technically incorrect, it is just important to understand what is really being discussed. Remember this 30% tax-exclusive rate is only the federal portion of the tax, state sales tax will also be added in. With the elimination of federal reporting, states will have to replace their personal and corporate income receipts, with a sales tax. States collected nearly $500 Billion in 2003 through income tax and sales tax. With Personal Consumption at $7.76 Trillion in 2003, that is 6.4% in tax inclusive terms, which will add another 6.8% to the tax-exclusive rate. So if you buy $100 worth of goods, you will end of paying nearly $137 once State and Federal Sales tax.
2. Even 37% is not enough. One amazing fact when sales tax calculates their rate is that they assume 100% compliance. Everyone will cheerfully report every sale. There will be no under the table or black market sales. Also, no one will try to buy goods overseas to avoid this tax. This is pure fantasy. No one could believe any tax system will have perfect compliance and zero avoidance. The current income tax system has about a 15% tax-evasion rate. Conservatively, we could assume that the sales tax will have a similar tax evasion rate of 15% and a tax avoidance (like spending overseas) rate of 5%. With these more realistic assumptions, the tax rate would have to be bumped up to 44% to be revenue neutral. And these are very conservative assumption. Brookings Institute economist William Gale (National Retail Sales Tax, September, 2004) calculated that about a 60 percent sales tax would be required to be revenue neutral.
3. Fraudulent Calculations. Besides using ridiculous assumptions like 100% compliance, the sales tax economists create money out of thin air. Their paid for economists routinely double-count savings of their plan. The biggest one is being the $1.3 Trillion that individuals pay in taxes. Under the 30% Sales Tax bill, that money would end up in the pocket of individuals, and the proponents correctly tell you that take home pay will go up. But then the Sales Tax proponents go on to tell you that prices will go 25-33% to offset their 30% sales tax. Well if individuals are pocketing 67% of the taxes that are eliminated, how are businesses going to reduce prices very much? The sales tax eliminates about $650 Billion in taxes to businesses. Considering Americans consumers spend $8 Trillion on goods and services, that only allows for businesses to lower their costs by 8%. Once the 30% sales tax is added, the final end cost to the consumer will be 20% higher if the calculation were done honestly. Even allowing for a reasonable amount of savings in compliance costs to businesses under the sales tax system, prices would still shoot up 18-19%.
4. Millions must file. The Sales Tax supporters would have you believe that only retailers need to file under the Sales Tax. That simply is not true. In order to offer the 'low' 30% rate, the Sales Tax must tax services too. 'In 1993, 12,778,000 taxpayers filed individual returns with business income or losses, and another 1,919,000 filed farm returns. In addition, in 1992 the IRS received returns for 17,292,286 non-farm sole proprietorship businesses, 1,484,752 partnerships, and 3,868,004 corporations-all of which probably produced goods or services on which the sales tax would be levied. Thus the supposed simplicity of the sales tax turns out to be a mirage.' (Brookings Institution Policy Brief #31-March 1998) Thus over 35 million filers will still be subjected to reporting and audits, most of these are individuals. This doesn't even consider the 100 million of people who will still have their wages reported to the SSA. Also, all households must register every year with the 'sales tax administering authority' in order to receive your monthly tax rebate. Furthermore, individuals that buy things without sales tax, like overseas purchases, must submit monthly forms and payments to the government. Hardly the zero tax filings for individuals as the sales tax supporters claim.
5. Tax Evasion will skyrocket. 20 countries have tried a national sales tax, and 20 have switched to a value-added tax. These countries have gone on record and have flat out stated a retail tax of more then 12% is unworkable. People will avoid it, especially with the internet which makes it very easy for the common citizen to purchase goods from foreign sources. The fact that businesses to business sales are not taxed, makes it very tempting to buy personal stuff under a business name. It will take a mighty powerful and intrusive taxing authority to audit all business expensive to make sure. The sales tax rates we are talking about have never been successfully implemented in the history of the world, but it hasn't been for a lack of trying. "Many people would masquerade as businesses" to avoid the tax, says Robert Hall, an economist at the Hoover Institution. Gale reckons that evasion would be far higher than today 's estimated 15%.
6. Big Government gets Bigger. In the 20 countries where the national sales tax has been implemented, and in each case replaced by necessity by a Value-Added Tax, the amount of federal taxes quickly grew from about 20% of GDP, as currently in the US, to 40% and above of their GDP. Not a promising precedent.
7. Underground Economy still not taxed. The NRST advocates falsely claim that the underground economy now will be taxed. Nothing could be further then the truth. Sure, when the money re-enters the legal economy the money is taxed, but that is true today. But will the drug dealers and prostitutes remit sales tax for their goods and services under the NRST? Absolutely not, this portion of the economy is still invisible to the tax collector and therefore not taxed. According to Bruce Bartlett, 'thus whatever revenue is gained when drug dealers spend their ill-gotten gains will be lost because no tax was collected on their drug sales.' (Bruce R. Bartlett, senior fellow, National Center for Policy, Analysis, November 5, 1997).
8. Lower and Middle Income pay more. Steven Sheffrin of UC Davis in a 1996 CPS brief says that a revue-neutral consumption tax even with a generous personal exemption shifts the tax burden to the lower to middle income households. A 1992 Congressional Budget Office study of consumption based tax concluded the consumption tax would decrease the tax on the wealthiest 20% by five percent, while hitting all other groups with a higher tax burden. The poorest quintile being hit the hardest with a 20% increase in tax and the 20-40% income quintile being hit with 9.3% increase in their effective tax rate. This is because the poorest spend a much higher percentage of their income each year and in many cases are even forced to borrow to keep up with their expenses. These numbers are much worst today as the federal tax liability for the bottom 20% has been greatly reduced through expansion of the earned income tax credit.
9. Elderly assets are unfairly burdened. While people currently working will get to keep more of their paycheck, people on fixed incomes will stay the same. Elderly, who have already worked and saved under the income tax system, will now be faced with paying additional high consumption taxes. This group of especially hard hit people, will not have the opportunity to earn tax-free wages, so all their already taxed wealth will be taxed again when they spend it. Come January 1, 2007, if someone's rent was $1000, they will owe an additional $300 in federal tax alone, and many without any additional source of income.
10. Government Taxes Itself. One amazing thing is under the Sale Tax is that government somehow raises money by taxing itself. Whereas this is an interesting way to reduce government, it is typical of the smoke and mirrors the fraudulent analysis of the so-called fair taxers use. Under the plan, the government is considered the consumer and most of it's purchases and employee salaries are taxable. So if the state of Alabama pays its clerk $30,000 in salary, it would be liable to pay the federal sales tax of $9000. The same applies to the federal government, but it pays itself. An interesting way to raise revenue, but it more fraud on their part. If government could truely tax itself, why not just put 100% sales tax on government and then no one else would have to pay taxes.
11. Auto and Housing Industry Hit Hard. As the luxury taxes have proven in the past, adding a large sales tax on item deters people from buying. In 1991, after the Democrats snuckered Bush Sr. into signing the Luxury Tax, Yacht retailers reported a 77 percent drop in sales that year, while boat builders estimated layoffs at 25,000. And that was only for a 10% tax! With new homes and autos having to compete against existing homes and used cars, paying the additional 30% sales tax will be hard to swallow for most consumers.
In 1163, Principled accidentally mistyped your quote. He corrected it in 1164. There was no attempt to misquote. You, though, have chosen to dodge questions, avoid debate and act like a spoiled child by calling names.
You are so right about him.
Insults? I've been called every name in the book by lots of people and I'm still here. It goes back to understanding that old saw about sticks and stone. . .
I just laugh at them. That really pisses them off.
LOL
Whatever was I thinking trying to use logic, common sense, reality. . . . ? That's it. I must be lying.
Did you see the movie, "A Few Good Men" and the Marine private was on the stand being cross examined by the JAG prosecutor? He got caught in his little lie and then got confused and kept repeating the same thing trying to get out of the hole, but just kept getting deeper.
That's what your response reminds me of.
In that question, I have GRANTED you your premise and everything bad that can possibly happen and am having it all happen all at once to make the situation as bad as it can possibly be.
How much as a pay cut do I have to take to be at the point where I would actually be worse off. You are the boss. Start cutting.
Please don't repeat your projected objection. Just give me a number where a pay cut would hurt me. What number makes me NET worse off in my gross paycheck? And is it really a reason to be upset IF I still have the same NET purchasing power?
CG,
Take a look at my post at #1206, please. Tell me what, if anything I am missing. Always Right is insisting that employees MUST take a pay cut for the FairTax to be viable.
I don't buy it, but in context, is it necessarily bad if the net purchasing power is the same or better?
Slap me silly if I am wrong, please.
Theoretically, if everyone took a pay cut in the amount of taxes they paid, prices overall might stay the same. The problem then becomes many negotiated contracts like employment contracts, rents, and mortgages can not be changed, so theory is not possible. And the reality is some businesses and people will be better off under the new system ans aome will be much worse off,
What don't you understand about my question?
Or are you dancing around it?
In my scenario, prices are nailed to the wall right where they are. An act of congress, as the saying goes, will not budge them. You are claiming that wages must fall. You have the sole authority to set the new wages and you are cutting them. How much?
How much must they fall before the employee no longer has the same purchasing power as before the change in taxes structures? And if it only falls to that point (or just above) is the worker/consumer really disadvantaged?
In my scenario, prices are nailed to the wall right where they are. An act of congress, as the saying goes, will not budge them. You are claiming that wages must fall. You have the sole authority to set the new wages and you are cutting them. How much?
I thought I was fairly clear, wages must go down by the amount of taxes you pay. If you make $1000 and take home $700, you pay would have to go down to $700. Otherwise businesses would not be able to stay in business at the current prices.
Read Romans and maybe Col 1.
Excuse me? *I* am calling names?
According the the FT thugs here I am:
#1221 "a spoiled child"
#1215 I don't "get any attention back home" and display "extreme ignorance"
#1212 All I deliver is a "childish stream of insults" (ha ha ha ha). And of course, I shouldn't let my mind wander, "it's far too small to be let out on its own"
#1204 - Ah, yes, this charming post:
"You are really slow on the uptake"
"you are too freaking stupid to have graduated from college" " you must have blackmailed your profs to get the grades needed to pass."
Just out of curiosity - I assume you CAN support those accusations, Einstein? I mean, you would never post a fraudulent claim to FR, would you? Because that would also indicate that you likely made fraudulent claims to support other assertions - say like the FT proposal.
Oh, just out of curiosity, you did graduate from college, didn't you? For my erudition - what college and what was your GPA? (ha ha ha)
#1201 "Did you have pictures of the profs in order to graduate from college?" (Whatever you meant by that - oh, wait, you did explain that little bit of spittle in a later post.)
And, I think you impugned my honesty in that post, sir. Were you a shadow of a gentleman, I might be offended. However, as a clown, your accusations provide an ironic and droll amusement.
I could go on, I suppose, buy I think I have demonstrated your charges that I have resorted to name-calling to be hollow indeed, based on the tactics of abuse and thuggery on your side.
Partly both.
1. WE need to reject any tax on professional services; no exceptions.
2. The existing 'revenue' infrastructure ('Leviathan') will continue to shape the regulations that that get published in the register. These regulations have the potential to completely turn the bill on it's head. This is what has happened to every bill that congress has passed regarding the income tax, and congress has done nothing to correct the sabotage; I fear that the same will happen with a NRST bill, and a retail tax is potentially far more dangerous to the working class than the income tax is, thus we can be celebrating our victory as we sink deeper into the mire of taxes.
That is simply not true. It is the legislation that is the overriding guide to how the law operates, not its publication in the Federal Register.
There will be FAR fewer regulations required with a simple, straightforward tax such as the FairTax than with the present convoluted and arcane tax system. Not even close. It sounds as though you are "whistlling past the graveyard" and scaring yourself.
In rereading your prior response you did say that. I apologize.
The reason that I missed it is that I am having so much trouble understanding how you can possibly be right. What you suggest just doesn't sound right.
Can you, for the sake of everyone here, explain in simple terms why wages must fall by an amount equal to the taxes paid for businesses to survive in the brave new world that I envision?
Just taking a quick look thru your posts, you started insulting people and calling names as far back as post #228 and I count no less than 10 such posts.
And you still don't answer direct questions.
Please read the bill so you can discuss it with some correct information.
You really do need to stay away from the keyboard when you are off your meds. You can't even tell the difference between the flat tax proposals that really change nothing about the staus quo and the FairTax which revolutionizes this nation.
There is also a huge difference between an additional 'sin tax' like those on cigarettes and a replacement tax such as the FairTax which returns control to the people.
And NO!, you do not answer direct questions because you are entirely incapable of honesty and common sense.
So, with that whimper I take it you're giving up and I win?
"Win"??? There's no win involved.
Not with all this mud-slinging, anyway. Get down with the pigs, and you end up smelling like a dog. Or something like that. Something to do with getting dirty or smelly, like a wet dog. Or a pig. Wet or otherwise.
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