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.
Ah, but they did not do that, nightie - it was you who claimed that in the last thread and it was debunked in #440:
http://www.freerepublic.com/focus/f-news/1416127/posts?q=1&&page=440
In case you don't remember, I had counted 11 lies you managed to put forth on that thread. Perhaps I should continue doing that as this comment clearly qualifies as yet another.
Anyone caring to check out how devious you are in your posts can go to the link given and find out about the two whoppers you put forth there (and then tried to lie your way out of them).
I can think of no reason why anyone should believe your material at all.
It's not, but you're too dense, or too stubborn, to admit it.
The only really good tax is no tax.
When I say that I mean that people would not pay taxes.
We would allow the government to tax the creation of money. It would take 10% of all money created by the government in order to run the economy.
Soooooo....here is what would happen.....
1. It would give the government and not the FED the responsibility of printing money. That would give us immediate results in 2 ways. First it would get rid of the monkey on our back that is the Federal Reserve. And it would get rid of the IRS...the enforcement arm of the central bankers.
2. It would keep the government to 10% of the economic power of the US, more than enough to allow it to function within its constitutional limits.
3. It would save massive amounts of enforcement dollars because there would be cheating on any tax that would involve a flat tax or a sales tax. You still would need some agency to enforce any law mandating anyone to file.
3. There would be no filing. No paperwork, no mailing, no reporting to anyone how much you made.
4.There would be no more April 15th and no more anguish that a deadline would make. This is a blind tax. One that requires the government to be job friendly instead of passing laws that benefit the companies that move production overseas.
The flat tax and sales tax people forget that when you have the government collecting data on how much you made or making business a tax collection arm of the government, you get higher costs to cover those expenses.
A tax on the creation of money is the only sane and reasonable tax that would make sense.
My personal return yes, my corporate returns no, but I could.
Are you aware that when a large number of tax 'experts' are asked to each prepare the taxes of one single filer, they invariably arrive at completely different amounts owed by said taxpayer?
Yes, there are many different elections an accountant can make. And many accountants I have run into really don't understand the code and make mistakes.
Why the love affair with an obviously unfair, overly-complicated, convoluted, invasive system?
I have no love affair with it, but I do understand it and I do prosper under our current economy. I do not like the prospects of building and selling houses with a 30% tax added on the price, especially when I know there is no way in hell I can reduce my prices more than 10%. Competing against existing homes that will be 20% cheaper will kill the new home industry. I can now build with cheaper or at the same price as comparable existing homes, under the NRST there is no way.
It's not a "wash" at all. See #787.
Does the thought of the the dismantlement of the IRS, and the destruction of its multitude of files on individual Americans (all of which occurs immediately upon the enactment of the FairTax) warm the cockles of your heart?
(Consider that question a test of how much you love freedom.)
Allow the government to collect the money as soon as it is needed for the economic activity. WIll save time, agrivation and money in the long run.
That's perhaps the funniest thing on the thread...
A guy going down on the Titanic saying "I'll save the ship; jump in my lifeboat".
An interesting concept. The biggest problem is limiting the government to 10%. Once you give the government the power to simply create money, there is nothing to keep them in check and inflation would run out of control. The federal reserves serves a purpose, but I agree the federal reserve system is corrupt and is a huge subsidy for banks.
Uhmmm....100% of accountants, tax attorneys and individual filers 'make mistakes'. Every single one.
There is not an American alive that understands the code as it stands. Not one.
Every American is a lawbreaker, in this sense; since ignorance of the law is no excuse, as they say.
This system is a monstrosity, and you're continuing to defend it.
Have you read the bill? What is the first thing the bill does? Makes the Consumer (read individual) liable for the tax. It relieves the consumer the liability only if they get an offical receipt from a registered retailer with seven pieces of specific information about the purchase. If the Collection agency thinks you owe tax, they can audit you. So even under this proclaimed freedom, you better well keep every receipt of every penny you spend. So no, it really does not warm the crockles of my heart.
If an income tax rate change is attempted it will be done as every tax increase was done by selling people on the idea that it only going to raise someone else's taxes, not their own. The 'rich' will be the target. Those not defined as rich will cheer it.
Try to raise a single rate sales tax that E V E R Y O N E pays and E V E R Y O N E will fight it.
See? It easy if you think about it.
What is your reason for supporting the status quo?
Even though that paragraph is shot through with fallacies, as your posts usually are, I'll ignore that for a moment and say:
What you do, with that attitude, is sacrifice the future liberty and prosperity of our children and grandchildren on the altar of your own self-interest.
No, most returns are simple for most filers. If you don't own a business or have investment income, it is a piece of cake to file. Probably only slightly more time then registering for the rebate under the sales tax.
There is not an American alive that understands the code as it stands. Not one.
Probably not the entire code, but the ones relevant to them, yes there are.
Every American is a lawbreaker, in this sense; since ignorance of the law is no excuse, as they say.
Not all, but probably millions.
This system is a monstrosity, and you're continuing to defend it.
I am all for simplification of the code. I just think the sales tax is a stupid idea. A real stupid idea.
"Gross Payments" you say??? Here's the section of the bill dealing with the receipt required. Where do you see the term "gross payments"?
"`(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--
`(1) the property or services price exclusive of tax;
`(2) the amount of tax paid;
`(3) the property or service price inclusive of tax;
`(4) the tax rate (the amount of tax paid (per paragraph (2)) divided by the property or service price inclusive of tax (per paragraph (3));
`(5) the date that the good or service was sold;
`(6) the name of the vendor; and
`(7) the vendor registration number."
To most people the "cost" in your context would be what one pays for the thing ... which would be the total price (t-i). IOW, out of pocket price.
Your #811 is one of your most disingenuous posts yet...and that's saying something.
Defending industries like the auto and homebuilding industry may be in my self-interest, but I also beleive it is neccessary for the future of this county. I love this country and think overall it is the greatest country ever and will continue to be so.
Not at all, the 30.0% number is not correct and you surely know it.
Everything I said was true. As long as we have tax collectors trying to collect over $2 Trillion, nobody is off limits to their eyes. They will get into everyones lifes making sure proper taxes were paid on all purchases. If you don't believe that, you are in denial.
Translation: You want a simpler implementation of one of the planks of the Communist Manifesto, aka the income tax.
Which, of course, is a pipedream, a misdirection, anyhow, since the very purpose of the income tax is to control the people, to social engineer, to divide and conquer, to enslave...
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