Posted on 12/18/2005 4:46:00 PM PST by FairOpinion
YES! 83% (8832 votes) A consumption tax would be great for the American economy. Do away with complicated income taxes!
NO! 17% (1761) A consumption tax would not be fair for low-income households. Keep the current income tax system!
We'll send your vote to your congressional representative and senators.
"I haven't read it, but does it eliminate the IT in one felled swoop or do we have to pass this one and wait for another bill to crush the IT?"
It repeals the Internal Revenue Code, or those portions of Title whatever which constitute it. Steve King of Iowa is the primary sponsor of the repeal the 16th bill, which is separate and distinct.
"Please point me to a 'country' in the strict definition of the word who has switched successfully from IT to NST."
Please point me to another country (other than the USA)which raises the bulk of its national revenues through individual income and payroll taxes.
"I would like to see some success around he world before I jump on board."
So your view is that the USA should be a follower, not a leader. Is that true across the board or just in the area of tax reform?
"No, I'd rather keep hammering at the Flat tax proposal with NO Deductions. That's a one track plan that has gathered steam over the years."
What "steam" are you referring to? The flat tax in its various incarnations has been around a lot longer than the FairTax and yet the FairTax has more widespread support. That doesn't even count the fact that the FairTax is a specific proposal while the flat tax is a form of taxation which has various versions, none of whcih seem to have much traction.
Answer me this, please. If the flat tax with no deductions has such traction and popularity, why did the sponsor of the leading flat tax bill in the house (Rep. Burgess) decide a year or so ago to change Mr Armey's original design and make the flat tax an option, which means it does not replace a single word of the 60,000 page mess we have now - not even the despised and feared AMT.
That would not strike most people as a show of confidence in the flat tax as a complete replacement of the current dysfunctional system. What do you know that Rep. Burgess does not?
"Most people of this 83% polling don't realize the road ahead for the parallel path of starting one and eliminating the other. Too much room for Liberal dirty tricks."
Do you have any data to back that up or are you just pontificating? I would bet that most of the 83% know something that has apparently escaped you - which is that while there may be risks associated with converting to another tax system, continuing down the path we are on is hardly a low risk option. In fact, if you look at just the trendline in our balance of trade (to name just one economic problem exacerbated by our current tax system), it would be silly to make the case that we aren't headed for major problems.
That doesn't even count our individual savings rate of almost zero, the spiral of complexity and ever higher compliance costs, and the looming demographic time bomb in SS and Medicare. Sticking with the status quo because of fear of change is definitely short-sighted IMHO.
"HR25 apparently has the 'Fair Tax' in it."
As does S 25.
"And it doesn't involve a 2-track procedure that COULD leave us holding the bag and paying 2 taxes."
You may not have to "pay" two taxes with the Burgess bill, but you sure as heck would be stuck with both systems. In addition, the flat tax leaves most of the major economic problems that we face with the current system untouched.
We understand the Flat Tax very well.
However, there are many economic shortcomings of a Flat Tax on income, even if you could somehow guarantee it would not revert to the same mess we have now.
A Flat Income Tax doesn't reduce the costs to business and shift the burden completely to the individual where it belongs. This has the effect of building taxes and compliance burdens into prices, which make the tax rate appear lower than it really is. That makes American businesses less competitive than other countries, where their exports result in VATs refunded back to the producer. The territorial nature of a consumption tax is a key benefit compared to an income tax.
"Income taxes simply are not an expense in the production function and your inability to understand/admit that does not elevate you above those who know different. Such taxes come AFTER all activity has ceased: production, and sale. Then profit is calculated and only after these three steps is income tax finally determined."
NOTE TO ALL:
This is a silly argument and a diversion put forth by those with a vested interest in the current tax system. It has been going on for years on FR now. Ask yourself one simple question: Where does the money come from in most businesses to pay taxes (income or otherwise)? When you answer that simple question, you will see right through the attempts to obscure what is very obvious to most.
"Do income taxes increase the cost of a good? NO. They aren't even calculated until long after the good has been sold."
Have you ever been involved in the budgeting process for a company? I have, for quite a few. Do you know how many I have included a line item for corporate income taxes on? All of them that were profitable. I found that IF (big if) the company budget was accurate as it related to sales revenue and expenses, we could be reasonably accurate with respect to income taxes. I also found that if I had been with the organization long enough to understand the cost relationships (esp which were sales variable and which were not), then I could forecast expenses very accurately IF (big if again)our sales forecast was accurate. However, the toughest area to forecast on the P&L was the top one - revenue - especially in a fast growth company.
Therefore, to use your logic (or lack thereof), companies cannot predict with a high rate of accuracy either their sales nor any sales related expenses. Therefore, they have no clue as to how to price their product.
You may want to rethink your position.
Another fallacy in logic is your contention that the timing of income tax calculations somehow disconnects them from the business activities that produced them. In fact, one of the fundamental principles in basic accounting is the matching principle. The matching principle says that one of the goals of accounting is to produce financial statements which match revenues with the expenses which are associated with them. I am not aware of any textbook which excludes tax expenses from that goal.
There are, in fact, only a limited number of sources to fund tax expenses from:
1. From operations (meaning from sales minus other expenses)
2. From shareholders (meaning that you sell stock to pay your tax bill periodically)
3. From debt (meaning that you take out a loan from your bank to pay your taxes)
This is WAY more bandwidth than we should be expending to divert ourselves from the real task at hand - which is how do we transition from the current mess of a tax system to one which spells freedom for all Americans and stimulates our economy?
HA! HA! HA! HA! HA! HA!
HA! HA! HA!
Laughing them out of existence.
Maybe pitiful too.
"Markets set prices. And they do so without reference to income taxes."
You obviously don't understand markets at all. Or competition. Markets are made up of all the producers and all the consumers of an item. When any change is made to the production environment -- more efficient production methods, lower material costs, lower labor costs, or lower taxes -- the net effect of the thousands of producers will be to lower prices.
Your argument attempts to predict the success of an individual producer's changes to pricing. That is meaningless. The effect on prices will be the net effect of all producers attempting to maximize their after-tax profit. That means some will fail to achieve profitable pricing, and they will leave the market. The market itself remains with all the other producers.
Your understanding of ROI is also inadequate. Any ROI that is not an AFTER-TAX ROI is meaningless. If anybody has told you differently, then they were probably simplifying for you on the assumption that the tax would be a minor component.
A flat tax is not fair to everyone. Those without incomes do not pay any tax.
A flat tax still requires a large intrusive bureaucracy to verify reported incomes and compliance.
Why should the government know how much we make? Why should the government get first crack at our paycheck?
Right now we do have two tax structures. We pay the income tax AND we pay the imbedded cost of the tax on business. The total tax paid won't change significantly, but we will be able to see what government really costs. Revealing the cost is the first step in reigning it in.
With the vote to pass the FairTax, the income tax is voted out. It is a separate process to repeal the 16th Amendment. Answer this for me. After legislation is passed and the FairTax is enacted and you start getting your entire paycheck, will you sit on the sofa and just curse Congress if the don't act to undo the 16th? Will you just huddle under the covers if your state doesn't vote to repeal the 16th?
Or will you join us with pitchfork in hand demanding that they act? Did you see what happened in Pennsylvania over the last few months?
In the dark of night, without debate the State Legislature voted themselves a pay raise that ranged from 16% to 54%. This was on top of a recent 10% hike in the PA Income Tax and a hike of over 6% in the budget. They've done it in the past and the anger has always subsided within a few weeks. Well, not this time. The anger grew as the Internet, talk radio, and the old media pounded the story every day. What also helped were the incredibly stupid remarks by the legislators themselves.
Finally, four months later, just after the fall election, they voted to repeal the increase and that vote was almost unanimous because they were afraid of losing their jobs. In that election in November, we tossed a Supreme Court justice for the first time in our history just because the Chief Justice was involved in the scheme up to his eyeballs, but he wasn't up for retention. The 2nd judge up for retention barely kept her job. Normally, retention votes are in the 70% range. She got 54%. That was what really got the attention of the legislators. There are more challengers to incumbents than ever before. There are retirements in record numbers because these guys do not want to face the voters again.
We exercised our power here in PA. We can do it to keep the change in tax plans too. Don't forget that Myers withdrew after pressure from conservatives. We have the power. We just need to realize it and use it.
I don't know why people don't get it.
If after all is said and done, if I don't make what I need to make my efforts worthwhile, I will raise my prices.
No matter how you figure it, my customers pay all my taxes and all my other expenses and my profit margin. I don't get it from any of the trees in my back yard or from a text book or from a professor who never met a payroll.
"Income taxes are not an expense."
There are five major categories of financial data:
1. revenues
2. expenses
3. assets
4. liabilities
5. owners' equity
Since income taxes are not an expense, which of the other categories would you place them in? Ok, they can be a liability, but only up until the time they are paid.
"Your use of both rates is an anomaly among those pushing this new scheme."
Incorrect again. It is an anomaly that income taxes and sales taxes have historically been calculated using different methods. It hasn't come up before since no one has suggested replacing income taxes with sales taxes before. If you ignore the difference in calculation method, you introduce a bias in favor of income taxes. That is to say, that the exact same amount of taxes relative to the exact same amount the taxpayer is left with after taxes would be expressed as a lower percentage as an income tax using traditional methods and mislead some into thinking they are paying less under an income tax regime. Of course, if you have a bias toward the current horrid system, you probably say "what is wrong with that?"
BTW, I have noticed that the term "scheme" is a term of disparagement widely used on FR by those who want to maintain the current dysfunctional system. However, few of those will admit that to be their real objective. Apparently, the current system is so widely despised that even those who have carved out a nice niche for themselves and want to keep it for some perverse reason won't readily admit it. They just attack the leading threat to their little game, magnifying every defect (real or imagined), all the while pretending that they actually support tax reform, just not this type of tax reform.
"Your fundamental misunderstanding is that you believe profit (and thus the tax on it) is an expense/cost of production."
Your fundamental misunderstanding is the inability to distinguish between profit and tax EXPENSE. They are not indistinguishable, your efforts to pretend otherwise notwithstanding. There is both pre-tax and post tax profit, but neither is inseperable from tax EXPENSE.
"When your accountant prepares you tax return he does not include income tax as an expense."
When an accountant prepares a tax return, it is for the sole purpose of determining what the taxes due are. What you are saying is that income taxes are not a deductible expense for tax computation purposes. Well, DUUUUH!! I wonder why.
I would direct your attention to the second page of Intel's annual report, more specifically the second page, which is the income statement, and even more specifically to the three lines entitled "income before taxes, provision for taxes, net income".
http://www.sec.gov/Archives/edgar/data/50863/000089161805000821/f12965e10vq.htm
Please also note that the income statement starts with net revenue and subtracts a number of expense items to arrive at the bottom line - net income. One of the items that is SUBTRACTED is "provision for taxes". By definition, anything that is subtracted from revenue to arrive at net income is an EXPENSE.
Can we make this any clearer, hardhead? This stuff isn't nearly as hard as you are making it.
"I , and many others, have posted many reasons why we don't seem to be sold on the fair-tax plan.
It always seems to fall of deaf ears of the proponents of the plan."
Not at all. The fact that FairTax supporters don't agree with your objections doesn't mean they are falling on deaf ears. For example, on this thread, one of the skeptics has argued that corporate income taxes are not an expense. I had to go to the SEC database and pull out a company at random to disprove that silly point. Do you think he will change his mind? Of course not, facts won't sway him, his mind is made up.
Do you think I should just forget my years of training in accounting and accept his silly point of view? Never happen.
"Never happen. Too much fraud potential."
Spoken like a true CPA. As if the current system didn't have massive fraud potential.
Well, not this time. ...we tossed a Supreme Court justice
People back East in Western New York, Eire county, are livid, hammering the county legislature for trying to raise the county sales tax by 1/2 of one percent. The county Commissioner had an approval rating of just 9%. It wouldn't seem possible that it could go any lower. Recently his approval rating reached a measly 5%. Not a snowball's chance in he!! that he'll be reelected.
We have the power. We just need to realize it and use it.
I heard a similar scenario happened in Wisconsin dealing with the state sales tax. I think the visible goods and services would remain about the same with only minimal swing up or down.
"Rates of return on investment are calculated prior to any taxation of business income. They are affected by expenses but not by income taxes. ROI are the means of determining whether to make a certain investment rather than another. They are devices to allocate resources and are not affected by income taxes which tax profits at the same rate."
That is totally incorrect, but why am I not surprised. You have obviously never been involved with venture capital decisions.
Profits are taxed at the same rate only if they are at the same level and in the same tax jurisdiction. That is because we have a graduated tax system and because different countries have different tax systems.
Are you aware that Ireland went from having one of the slowest economies in Europe to one of the fastest? Any idea why that happened?
In fact, I worked with an inventor who wanted to build his manufacturing plant in the USVI because they had a development zone down there and, even though it is a US territory, you could apply for a special program in which you got a substantial credit against US income taxes. As I recall, it was substantial enough that you probably would not have had to pay any income taxes your first few profitable years. Why would the USVI have such a program if all entrepreneurs and venture capitalists cared about were pre-tax profits?
You have put out an amazing amount of misinformation on this single thread. Is there some kind of award on FR for putting out the most BS?
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