Replies

Under the new law, Little Miss Nanny should be charging the 30% NSRT on her services to my friends, taking here income, and then spending it personally and paying the NSRT on her purchases. Thus, we're missing half the taxation that should be going on, here.

What!?!? An under the table nanny is going to start charging 30% more? Are you kidding?

What makes you think your friends who hire her are going to be stupid enough to pay her? Unless she produces a receipt, which she won't do unless she has a real business, which puts her on the radar of the state collection agency, she won't be raising her prices. That's a silly example. This is the open market, remember?

What!?!? An under the table nanny is going to start charging 30% more? Are you kidding? What makes you think your friends who hire her are going to be stupid enough to pay her? Unless she produces a receipt, which she won't do unless she has a real business, which puts her on the radar of the state collection agency, she won't be raising her prices. That's a silly example. This is the open market, remember?

Actually, the nanny isn't liable for the tax. The bill defines "any household employing domestic servants" as a taxable employer and further states that "in the case of wages or salary paid by a taxable employer which are taxable services, the employer shall remit the tax imposed." Sitetest's friends would be liable and would have to remit the tax.

So then you'd agree that there exist certain untaxed consumption transactions under the FairTax scheme (a different underground, if you will.) Presuming you're right and the nanny DOESN'T raise her prices and act as an "in the game" tax collector, the flow of money from above ground employer to homeowner to underground nanny to above ground retailer only taxes each dollar once: at the above ground retailer.

In the current scheme, the same flow only taxes the money once: at the employer through withholding.

While the FairTax does collect tax from different entities at different points, and some tax from money that escaped taxation in the prior current scheme, other monies, now taxed, escape. It is certainly not clear that the the tax base is significantly larger, but it is different.

Dear ovrtaxt,

I think you may have missed my point.

I was pointing out that Little Miss Nanny is legally obligated to collect the 30% NRST, yet she will not.

She and the family are, under the NRST, evading taxation. Just as she and the family avoided taxation under the income tax.

The differences are 1) she must pay taxes on her purchases now; but 2) the couple previously paid taxes on the income used to pay her.

Thus, under the old law and the new, tax was to be paid twice.

Under the old law, tax should have been paid by the couple at the point of income, and the nanny should have paid tax, also at the point of income. But only one tax is paid.

Under the new law, tax, again, should be paid twice. The couple should pay tax in their transaction with the nanny, and the nanny should pay tax on her purchases. But, again, only one tax is paid.

Thus, the approximate level of tax evasion remains the same, the new NRST doesn't "capture" any part of the underground economy not captured by the previous income tax.

sitetest