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.
Amen!
You talking about honesty is like Bill Clinton talking about fidelity and chastity...or honesty...
And the laughter is right back atcha' pittipat. Wrong is wrong (unless, of course, you're Always Righht).
Since you think it's "neat" to use the incorrect number we'll just to have to point out from time to time why you do it.
While you're at it pittipat, you might read the bill as well as the economic data on the FairTax website since you've never done either.
In the bill you'll notice the t-i number is specified as 23% and that's not an estimate but a specific number in the bill.
Well, asking a bunch of legislators to vote for something that is very much against their self-interest is a very difficult task. One needs to either gain tremendous leverage over them, or try a different path. I feel that the Executive and Legislative Branches need to tell the Judiciary to stuff it when they come up with their outrageous 'decisions'. That would make a good start. As far as leverage goes, currently most Reps have safe seats, so that would have to change -- by de-gerrymandering districts via new rules limiting the length of perimeter a district could have compared with its square-root area, perhaps.
Dale Jorgenson's analysis(not assumption) is rooted the relationships of emirically measured changes in production and prices, in regard to changes in tax policy.What's "emirically measured changes"?
Thass no joke, you've been talkin' to my wife again. Told you not to ...
If you'd like to slather snake oil all over yourself, use the lead-in to this thread as it is overflowing with it. Then, too, you don't do so bad yourself.
I have been in business since I was 17, That first business I started with a loan from my parents and within ten months I was making over 1k a week. (That was in 1977.)
Over the past 28 Years I have started and sold several succesful businesses including an Teen Nightclub, a Furniture/Electronics store, and a local TV/Advertising Business. I have worked in all facets of those businesses from advertising, purchasing, sales, delivery and management. I even produced, directed and stared in most of the TV and Radio advertisement.
Currently I am in business with my family in Flooring and Real Estate (Family owned S Corp) plus I have transitioned a small hobby shop into a very successful online business.
Business Schooling: None (unless you count the few Real Estate Classes I took in preparation to take the test to become an agent. I never took the test.)
We live a very laid back lifestyle and could easily stop (not sell just close down all our businesses) and not have a care in the world as far as money goes. Due to the amount of real estate and investments we have accrued over the years by investing our profits.
I can say with a good bit of certainty I know how business works, being I have done about every job associated with running a business. I learned the ins and outs of business from some very successful people at a young age, and I continue to learn to this very day.
Ah, pittipat ... wait and see! The government WILL pass it as soon as they realize the many economic benefits and that it is what the grasroots voters want.
You'll find that once the people understand it, most with more than half a brain will be for it.
After all, you're 'Always Right'! Right? Even when you're wrong....You've just described every FairTax supporter ever.
I can read just fine,nightie. And what I read merely illustrates your spinmeistership.
I'll remind you of that when the bill (not "proposal") passes in pretty much its currect form.
That will no doubt shock you to tears, pittipat.
Since you've never read the bill, though, it doesn't argue too well for your powers of prognostication since you don't know what's in it - but maybe you have the "perfect foresight" that nightie was trying to ridicule earlier.
That's one man's opinion. Snake oil?
Here's my opinion: The Fair Tax website is thorough, researched, backed up, and full of information. It couldn't be more honest and up front. But the SQL's around here would have us believe differently.
Zell Miller is a big proponent of the fair tax. Think he's a snake oil salesman?
Really, pittipat, that wasn't a prayer (though maybe it should have been ... one of thankfulness).
Well, I'm quite impressed, but also surprised and puzzled because your comments indicated to me a naivity about pricing that seemed to go with little business experience.
I ran a $25M business where decisions on product differentiation and pricing were very important. It seems to me that we should both know how business operates.
Tax prognostications and now political analysis all wrapped into one fuzzball. That's great.
You don't think the politician's "self-interest" includes getting re-elected, then??? They all have such safe seats they can just ignore voters??? Got news for you pitipat.
You do that. I'll be shocked, but won't cry -- at that point, anyway. I will also admit that I was wrong! Will you do the same when Congress passes a very-different Tax Reform Bill?
And you are trying to convince me that when a price advantage of 8-30% (Based on numbers thrown about on this thread.) is up for grabs that Wal-Mart's competitors would not seek to use it?
Please explain.
Don't waste your breath on pittipat, Mad Dawgg. He doesn't want to hear about the real world.
Prefers to live in a dream one.
And as for the "correct" figure, 29.87% would be the normal statistical rounding to two places and NOT 30.00%. That's merely more dishonesty. Use 29.87% and I have no complaints; use 30% and it's obvious you're trying to fool people.LOL! Then I guess the AFT is trying to fool people [shock!].
Submission of Americans for Fair Taxation on the FairTax Comprehensive Tax Reform Proposal
to
The President's Advisory Panel on Federal Tax Reform
April 29, 2005"Several independent researchers confirm the FairTax is revenue neutral at 23 percent (tax inclusive) or 30 percent (tax exclusive)."
They also use the 30 percent rate all through their website. Fool.
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