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.
I intend to continue working to pass the FairTax bill until we succeed.
Shouldn't take much longer, wouldn't you agree?.
Probably not -- though I don't know him. But I also don't believe he's been posting BS here on this thread. The example I gave was one of BS. It's snake-oil if he spouts it without believing it.
However, since the 23% number is an estimate, only, the 29.9% number is no more accurate than the 23.0% number.
Interesting.
Do you have a better number that represents the "revenue neutral" policy the president has laid out as the criteria for enactment of a major tax reform bill?
Personally I believe, if we are to actually discuss rates, rather than just state "the revenue neutral rate", what ever that may be, we should be discussing a rate in the range as would eventually be implemented in a final bill that could make it through the political process.
What common measure should be used to specify this tax rates so it can be compared between the different proposals out there, whether they be NRST, Flat Tax, VAT, or some lesser modification of the graduated income tax.
What is your estimate of that realizable revenue neutral rate for this discussion, framing the debate around the actual criteria the president has laid down.
For everyone's reference the criteria are:
| President's Advisory Panel on Federal Tax Reform - Executive Order http://www.taxreformpanel.gov/executive-order.shtml Sec. 3. Purpose. The purpose of the Advisory Panel shall be to submit to the Secretary of the Treasury in accordance with this order a report with revenue neutral policy options for reforming the Federal Internal Revenue Code. These options should: (a) simplify Federal tax laws to reduce the costs and administrative burdens of compliance with such laws; (b) share the burdens and benefits of the Federal tax structure in an appropriately progressive manner while recognizing the importance of homeownership and charity in American society; and (c) promote long-run economic growth and job creation, and better encourage work effort, saving, and investment, so as to strengthen the competitiveness of the United States in the global marketplace. At least one option submitted by the Advisory Panel should use the Federal income tax as the base for its recommended reforms. |
For the above is what any tax reform bill that is to meet muster by this president and the majority of Congress will require:
By the way, as framed by the president, Tax Cut is not Tax Reform.
Tax Cut is a separate issue to be addressed by separate legislation.
I haven't studied their businesses, but suspect their profit margins are so lousy that they might well be very happy to go along with the higher prices and better margins they can get away with in that case. You think they are going to start a price-war with Wal-Mart,who could easily crush them at that game?
I doubt they're trying to fool anyone - that's your M. O. remember. Why would they try to fool them into thinking the tax rate is higher that it really is?
I imagine they just got tired of telling morons like you the correct rate - which is STILL 29.87% t-e. It's calculated from the 23% figure used in the bill.
More probably they figure (as does pittipat) that the number doesn't mean that much to most people. It does, however, to me. I prefer the correct figure but I klnow you guys can't even spell 29.87%.
The government would be held responsible.
If the government created too much money, there would be inflation. If it did not create enough, it would stifle economic activity.
ANs lets face it, there is inflation now. The Fed just won't admit it.
We would have to be vigilant by electing congressional representatives that would watch the government's printing of money.
That was the way it was originally.
You're reading his mind but he's the snake oil salesman. Uh, huh.
Ah, but they did not do that, nightie - it was you who claimed that in the last thread and it was debunked in #440:ROTFLMAO! You call that debunking? You didn't debunk doodoo. And then you lied about having "worked with this model" to make it look like you knew what the hell you were talking about when it's obvious you are completely clueless. The formula I posted clearly show that in the Jorgenson/Wilcoxen/IGEM/"Squeally worked on it first 10 years ago" model, the price of labor declines as the marginal tax rate on labor income declines - thus wages are reduced as the income tax is reduce (or eliminated). Even the other FTKs don't backup most of your asinine arguments.
People who push something like NRST with the fanaticism of the FairTaxers are usually looking for power and conquest- my way or die! and "my way" is totalist.
Course it might be worthwhile, in order to make such a judgement, to find out just who these people are, why they dislike the income payroll tax system that exists so much, how the proposed legislation came into being, and who is supporting it in Congress don't you think?
If you claim to be sure that the revenue-neutral number is 23.0% and not 23.1%, then you are either BS'ing me or delusional.
That's not enough of a check on misuse of the printing press for me, I'm afraid.
Yes, but inflation could be blamed on the government and not on too many people working like the FED likes to blame.
Once we educate the people that inflation is nothing more than printing too much money to chase goods and services and then there would be accountability.
The FED does serve a purpose....to make lots of money for the banks involved in the FEDERAL RESERVE.
I said "if he spouts it without believing it", and was therefore clearly not reading his mind, nor trying to.
Wow, still beating that. Why do you stop at only two digits, why not carry it out to 10? If someone makes a million dollar purchase it might make a difference! Why isn't 23% quoted as 23.00%? Suppose they rounded it down? None of the figures being debated is being takening to 4 significant digits. Technically, it is incorrect to take a number with two signficant digits and calculating something out to 4 significant digits. But it is technically ignorant even to be arguing this.
You talking about honesty is like Bill Clinton talking about fidelity and chastity...or honesty...This is where I ask for an example of me being dishonest and you fail to provide it.
I'll repeat it again, in another way, since no one seems to be listening:
If the rate were 99%, that rate still wouldn't be an honest argument against the revenue neutral FairTax, since all the NRST would be doing is making visible what is already being taken now under the mostly hidden Stupid Tax.
To argue against the FairTax on the basis of the level of its intitial revenue neutral rate is in fact to argue for the status quo...a status quo of hidden, utterly inefficient and invasive taxation.
Well I guess we're back to square one. I asked you for examples and this is what you come up with.
Yes of course they will just meekly sit by and not try and increase market share.
Tell me do you really believe this theory or are you just trolling?
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.Why would you want to differentiate your product from your competitors? All you have to do is price your product $0.05 less than their's and people will buy it (until they price their's $0.05 less then your's, but then you could price your's $0.05 less than their's, until they price their's...)
It's piggy and the ancient one who are arguing that it is 29.87% and not 30%.
Actually I figure the final rate will be much closer to 19% tax inclusive or 23.46% tax exclusive, based on federal tax cuts implemented since the original rate was calculated for the 1999 intoduction of the bill.
Why not use 19% or 23% tax exclusive as may actually come out of Congress in meeting the presidents revenue neutral policy, looks like a better number for discussion purposes than either of the above to me.
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