Posted on 09/16/2005 5:15:32 PM PDT by Man50D
Dear Editor, I've just read a new best-seller, which I highly recommend to you and your readers: "The Fair Tax Book, Saying Goodbye to the Income Tax and the IRS."
The co-authors are "reformed lawyer" and syndicated talk show host Neal Boortz, and Congressman John Linder, R-Ga.
Linder is also the principal author/sponsor of The Fair Tax Bill (H.R. 25), currently before Congress.
In the interest of brevity (the book is only 180 pages, by the way), I'll quote from the back of the dust jacket.
"What the Fair Tax will do for America: eliminate the income tax and the dreaded IRS; jump start the U.S. economy; bring businesses and jobs back to the United States; and recapture billions of untaxed dollars currently lost to criminal and offshore businesses.
"What the Fair Tax will do for you: allow you to keep 100 percent of your hard-earned paycheck; let you choose to save all the money you want .... and pay taxes only when you spend it; eliminate countless taxes you don't even know you're paying; lower interest rates; and make April 15th just another beautiful spring day."
The authors provide ample citations from the works of various economic think-tanks to back each of those assertions.
The Fair Tax would replace all current federal, income-based taxes with one universal, federal "consumption tax," on both goods and services, at the retail level only. There would be no exemptions whatsoever. The proposed, "revenue neutral," initial tax rate would be 23 percent. Predictions are that the resulting economic boom would make it possible to lower that rate in short order.
As described so far, the Fair Tax would be so regressive as not to stand a snowball's chance in hell of passage. Here's the solution.
At the first of every month, every head-of-household, irrespective of income/net worth, would receive a federal "pre-bate" check equal to the taxes due on his or her appropriate "poverty level spending" for the coming month. To quote the authors, "'Poverty level spending' is, by definition, that spending necessary for a household of a given size to pay for its necessities. It is adjusted every year by the Department of Health and Human Services."
For example, if the Fair Tax were currently in effect, every family of four would receive a monthly pre-bate of $491.82 to cover the 23 percent tax on its first $2,138.22 spent -- its "poverty level spending." All spending above that level (that month) would have a net federal tax cost of 23 cents on the dollar -- be it for sneakers or a yacht.
The federal sales tax would be collected by the states' sales tax offices. Moreover, don't forget that everyone's "take-home-pay" would be their full, gross earnings under the Fair Tax.
It is a most interesting, concise and thought-provoking read that can be knocked out in two or three sittings. Suggested full retail is $24.95. There is at least one copy available at the Camden County Public Library.
I hope that you and your readers will both enjoy the book and come to support the bill.
No one is figuring tax liability. All the facts are known, it is right on their finacial sheets. What every rational person is figuring is how much eliminating that tax can reduce the price they charge the customer and still maintain their same profit.
Goodbye IRS, goodbye tax liens, property confiscation and Inquisition-like audits. Goodbye long hours of tax form preparation and sweating wondering whether you goofed somewhere deep in that arcane and byzantine form.
The total amount spent on federal tax compliance is about 13 percent of the total HP Corporate Tax Department budget. It is interesting to note that HP’s total costs of local (U.S.) sales and use tax compliance exceed its federal income tax compliance costs.
http://ntj.tax.org/wwtax/ntjrec.nsf/EEA087F6813237A585256863004A5933/$FILE/v50n3487.pdf
Seems HP had about 112,000 employees, of which 33 are tax professionals and HP does all their tax work in house. Of those 33, only the equivalent of 3 man years are used for federal income tax complinace. HP spends a much bigger part of their budget complying with state and local sales and use tax. If pigdog's numbers were to be believed, HP should be spending over 6 percent of their gross revenues on tax complinace. Being about a $40 billion company that would be $2.4 Billion. Instead the figure is around $500K, which is 4800 times less than what pigdog's numbers would suggest.
I have seen a number of studies but the one I have in front of me is James L. Payne's COSTLY RETURNS The Burdens of the U.S. Tax System in which Dr. Payne concludes that for every dollar collected in tax another $.65 is spent on compliance.
It's a little dated but that only mean that it's even worse now!
You are right. However, is there redistribution in the taxation system itself like we currently have through progressive taxation and the gawdawful EIC? If we can chip away at the redistribution, is that not a step in the right direction?
That's not the case but in any event trying to present numbers as a % of revenue is misleading when talking about taxes since additional tax costs have already been embedded into prices by the action of any income-based tax system.
Those "hidden taxes" are part of that revenue you mention and probably quite a good bit of it. And indeed taxes are computed on income and not revenue.
Oh, but it (the %) does have a bearing since tax costs cascade (which are calculated based upon profit) and become embedded into the prices of everything we buy.
These "hidden taxes" exist and are a real - but non-productive - increase in prices that we all pay in everything we buy. The analysis was right on.
And if you look critically at the HP presentation you'll see it's just a puff piece by the HP tax department pros telling everyone how great they are. You'll also notice that even in their description that not all compliance costs are included; just their one department. If you read the study, many other parts of HP are involved in the compliance effort but not counted by these guys.
Just think that with the FairTax this entire department can be eliminated for HP which would save them a few million right there plus the costs of all of the others presently involved in working with the "tax pros" to report and pay the taxes.
Oh, and BTW, I've never suggested any percentage of gross revenue due to tax compliance. I do suggest, though, that the prices of HPs products are higher than they might otherwise be (without the income tax) due to the cascading, embedded taxes that boost the prices of all that we buy.
Oh, but it does. Under the FairTax not only is the income tax repealed, but the IRS is both eliminated AND defunded (just to be sure) and the income tax records are required to be destroyed.
Oh - BTW this pdf was posted about 20 or so threads ago by Nightie. I'm surprised you missed it.
Oh - BTW this pdf was posted about 20 or so threads ago by Nightie. I'm surprised you missed it.What does that have to do with anything?
BTW, didn't you request a stop to the derogatory names/remarks...Well?
In addition to noticing the sales tax figures, did you overlook this quote? :
"For a company of its size and complexity,
HP’s outlay on federal tax compliance
is quite modest."
......
A conservative estimate by Professor Joel Slemrod puts compliance costs at around 125 billion dollars a yar and another 10 billion for theIRS. this does not include tax planning to minimize tax costs.
....A recent comprehensive study done by IBM Business Consulting Services under contract to the IRS concluded that, in tax year 2000, the 125.9 million individual taxpayers had a total compliance burden of 3.21 billion hours and $18.8 billion in monetary expenditures. This translates into an average burden of 25.5 hours and $149 per taxpayer. Although self-employed taxpayers represent only about 25% of all individual taxpayers, they experienced approximately 60% of the time and money burden. As a result, the average time and money burden of self-employed taxpayers (59.5 hours, $363) was substantially greater than that of those taxpayers with only wage and investment income (13.8 hours, $75). Not surprisingly, the average compliance burden was also consistently higher among taxpayers who have more complex tax returns; for example, non-self-employed taxpayers who itemize their returns spend an average of 21.3 hours and $114 on tax compliance, compared with 11.4 hours and $63 for non-itemizers. The current system is not, however, complicated for everyone, and is generally not that complicated or costly for the tens of millions of taxpayers who file Form 1040EZ or 1040A; survey evidence suggests that 30% of taxpayers spend fewer than five hours on all tax matters over an entire year. By applying a range of dollar values to each hour of time burden, IBM estimated that the annual resource cost of compliance for individual taxpayers is between $67 billion and $99 billion.
A series of analyses by the Office of Tax Policy Research at the Ross School of Business at the University of Michigan , under contract to the IRS, have examined the compliance cost of large and medium-sized businesses. In 1996 the total compliance cost for the 1,500 largest companies exceeded $2 billion, or over a million dollars per company; for Fortune 500 companies, the average cost was nearly $4 million. For businesses smaller than the biggest 1,500, but with assets in excess of $5 million, in 2002 the total compliance cost came to about $22 billion. There is clear evidence that business compliance costs are regressive --costs as a percentage of company size are higher for smaller companies than they are for larger companies. For instance, companies with between $100 million to $250 million of assets have only about seven times higher compliance costs than companies with between $5 million to $10 million of assets, even though they are between 10 and 50 times bigger.
In written testimony I submitted to this committee on June 15, 2004, I drew on these and other studies to estimate the total annual cost of collecting the federal income tax in 2004. My best estimate came to $135 billion per year. Of this total, $85 billion consists of the total compliance cost borne directly by individuals (including sole proprietorships), and another $40 billion relates to business. Adding an IRS budget of about $10 billion produces the overall collection cost estimate of $135 billion. This is 14.5% of individual and corporation income tax receipts in fiscal year 2004, and about 1.2% of 2004 GDP.
The $135 billion annual cost of complexity is the value of the resources used up in the process of collecting taxes, and the amount of resources that could --if taxes could be collected costlessly --be freed up for whatever else Americans would prefer to use their time and money for. This is an economic cost of collecting taxes that should be added to the cost incurred when the tax system discourages people from working as much as otherwise, businesses from investing as much as otherwise, and so on.
The negative consequences of tax complexity, though, go beyond what can be estimated in dollars. Complexity causes a capricious and inequitable distribution of tax burdens because it rewards those who have the means and inclination to find all the tax angles, and leaves the dutiful among us holding the bag. Moreover, the unfairness complexity causes --and the complexity itself --undermine trust in the fairness of the tax system, which may in turn undermine voluntary compliance. Complexity reduces the transparency --who bears how much burden and why --of the tax system, which I believe is inimical to a properly functioning democracy......
Here is Prof Slemrods statement, which you can again try and cherry pick to your advantage..it does give some good discussion of the tax situation.(6/9/05)
http://www.irstaxattorney.com/tax-reform-legislation/Statement_of_Joel_Slemrod.html
Doing nothing isn't my position, as any reading of my posts will show.
Not everything is a choice between doing what you want or doing nothing.
There are other possibilities.
http://www.constitutionparty.com/
And Slemrod is invariably on the low end of the estimates of compliance costs. Most range around $225-250 billion - with some much higher.
When the "net tax gap" of the IRS determination is included ($300 billion) it gets into some real money (1/2 Trillion $) as described here:
http://www.freerepublic.com/focus/news/1487572/posts?page=1
That is a lot lower than the $650 Billion in compliance cost pigdog keeps telling us. I can believe there is about $100-200 Billion in compliance costs including a reasonable salary people would pay themselves for the time they spent. At most actual real savings in compliance costs realized by business may be around $100 Billion by eliminating the federal income tax. But then again compliance with the sales tax will not be zero, and I don't buy the 90% less either.
And Slemrod is invariably on the low end of the estimates of compliance costs. Most range around $225-250 billion - with some much higher.List them.
LOL, as if the sales tax compliance will be any better. Trying to collect a 30% sales tax on services will be a huge nightmare. Worse than any compliance problem we have today. Also the abuse of using business property for personal use is another area where the sales tax will be hit by non-compliance much worse than today.
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