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.
You're enslaved to certain distortions in the economy created by the Stupid Tax, and are fearful of freedom.
Find some courage to break the chains and be free, Always Right.
I thought you said it was SIMPLE??? Why are you throwing around all of those IRS Form numbers??? And sending people to H&R Block or the IRS to do their taxes??
With the FairTax, all of that nonsense goes away.
Are you trying to be funny?
The income tax requires lots of document and government intrusion into the individual. The FairTax eliminates all of that.
The social security program taxes you and maintains records on you now to track your income. (Your benefits are determined by a separate law which can be changed, BTW, to eliminate or change the benefit any time they want.) Those records will still be maintained so that you can collect when you retire.
IF, and ONLY IF, you choose to receive the prebate, will you have to submit your name, address, and the SS numbers of those in your household once a year.
Is that truly the only thing standing in your way -- the choice of words of someone explaining the incredible difference in reporting requirements?
The bill clearly spells out that requirement. Since I find it unlikely that I would register for the prebate, I might commit the horrible sin of saying that there was NO requirement when it is actually quite minimal.
Name, address, SSN.
Even soldiers held captive can give their "name, rank, and serial number' and not violate the oath they took.
Do you know that there are
You are as demented as pigdog -- or short of valid arguments on the more important stuff. The number 30 (or 29.9, if youlike) is derived from the number 23, which is only an estimate, anyway, so you are obsessing worse than Queeg over the strawberries.
The power sought by the FairTaxers is for a return of the power to the people of the United States.
And the conquest we're looking for is one of the people over the social engineers in Washington, DC.
This is wrong how?
Oh, I see - the numnber does not matter, eh??? How about if we use 20% then rather than 23% (or 15%; or 10% ...)??
The conversion from t-i to t-e is a calculation - and it comes out to be 29.87%, not 30 or 30.0 or30.00. The 23% number is the starting point for the calculation and not the other way around. Boosting the t-e artificially as you do is merely more of the dishonestly that permeates the SQL bunch.
You also make the mistake of thinking that EVERY time the doctor provides a service that it is fully taxable. It isn't.
If the patient has insurance, tax has been paid on that insurance and services provided under that insurance are not taxable, only the co-payment or deductible.
'Preciate your concern ... and I'm NOT Your Lord!!
Such a wunnerful idea. Why don't you send it to the President's Tax Panel?
You guys are incredible! 30 is 29.87 rounded to the nearest integer and perfectly correct. Getting 20,15, or 10 from 29.87 is just outright cheating -- which says something about your other arguments, I think.
-Barry Goldwater
No, you certainly are not.
Are you saying my health insurance premiums are going to have 30% (or 29.87%) added on? This is not something the FT fanatics talk about too loudly.
It is a commentary on the level of government SPENDING.
The only thing you end up repeatedly doing is arguing against the means to make that level of excessive SPENDING as VISIBLE to the American people as is possible.
Mirroring the FairTax would lower the states rates by broadening the base. It would also make their tax system transparent and simple and fair.
That's a good thing.
LOL! What's this "you" crap? It's piggy and the ancient one who are arguing that it is 29.87% and not 30%. I'm just falling out of my chair laughing at them!
I think that greater visibility of the tax burden is a good thing (withhlding could be the worse thing that hapened to the country), but I can't stomach the BS that is sprayedd around by the acolytes of the Fair Tax proposal.
I think that greater visibility of the tax burden is a good thing (withholding could be the worse thing that hapened to the country), but I can't stomach the BS that is sprayed around by the acolytes of the Fair Tax proposal.
You already do.
... especially when I know there is no way in hell I can reduce my prices more than 10%.
And your drywall guys can, and your framers can, and your lumber yard can, etc. So there will be enough room to reduce prices so that the nrst brings prices back to where they are today. In fact, because there are SO many links in the production chain of a new home, it is likely that this industry will enjoy one of the bigger cost savings.
Competing against existing homes that will be 20% cheaper will kill the new home industry.
What makes you think existing homes will be cheaper? The sellers of the existing homes are going to recover all their costs - including the taxes and tax costs they paid when they purchased the home.
Just because no tax is paid to the feds, they seller is dang sure gonna charge whatever he needs in order to recover his costs! (excepting distressed sales).
Good grief I can't believe you're this dense.
Then you should support the only plan on the table that brings the entire tax burden out in the open, and to one place...the point of retail sale.
Nothing else even comes close.
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