Posted on 05/11/2007 5:30:56 AM PDT by Dick Bachert
I have a little scenario I would like to paint for those of you out there who just insist on finding something wrong with the FairTax. Admittedly, the FairTax isn't perfect. No tax plan is. How, after all, can you come up with a perfect way for a government to take its operating funds from its subjects? If you know an easier and more equitable way to do it, by all means, let me know!
I'm going to ask you to crank up your imagination for a moment here ... and by "you," I mean those of you who think that this FairTax thing is a bad idea and you're not prepared to come on board.
I want you to imagine a scenario. Don't worry about whether or not this scenario is possible .. Just accept it as I present it, and then consider the alternative picture I'm going to also present. Simple as that.
Let's imagine that the FairTax is the law. We've been operating under the FairTax since the day you drew your first paycheck. It's all you know. Here is your imaginarily "reality."
On every payday you get your complete paycheck. There are no deductions. If you earn $2,000 per week, you get a check for $4,000 every two weeks. You never have to save receipts or create any records pertaining to federal taxes. You can invest money without paying any taxes on it. You don't have to pay taxes on the money you earn through your investment portfolio. You pay no taxes on any money you put in your savings account. When you die you get to leave your entire estate, everything you own, to whomever you wish. The federal government will take no taxes from your estate. Your death is not a taxable event. When you go to the store to buy an item, and the price tag says $19.99, you will had a $20 bill to the cashier and get one penny back. The price tag is the price. There are four people in your household. You, your spouse and two rug rats. At the beginning of every month you get a check or a credit to your checking or charge card account in the amount of $506.00 to compensate you for the federal sales taxes that are included in the price of everything you buy; right up to the poverty level.
All in all .. not such a bad deal. You keep all of the money you earn and you get five hundred bucks a month from the feds. Plus .. you only pay taxes when you spend money.
Now .. .here comes some politician who has a grand scheme for a new tax system. He wants to explain it to you. Here's his great idea ..... give him a listen and tell us what you think.
The plan is simple. First the federal sales tax is going to be removed from the price of everything you buy. This will mean that everything will cost 23% less than it does now. But ... he's going to levy an income tax on every single individual and business who plays any role at all in bringing those products to the marketplace. These people and companies are all going to pass the cost of these taxes down the economic line to the final consumer of the products they manufacture. These taxes will end up embedded into the prices of products in our retail marketplace, bringing those prices right up to the current level. So .. no loss, no gain.
Next your political benefactor is going to take away your $500 per month prebate from the government. In its place he's going to tax every penny you earn. It doesn't matter where the money comes from. Your salary, your investment income, winnings at the track ... whatever you earn and however you earn it, it's going to be taxed.
Wait! He's not through. He's also going to tax your wages for Social Security and Medicare. He's going to try to soften the blow by telling you that your employer is going to match the taxes he takes out of your paycheck, but you're employer has made it clear that this money is all going to come out of the money he has budgeted to hire you. You'll probably lose out on your next raise while the boss his accounting in order.
There are some more nifty ideas in your congressman's tax reform plan. When you die your family is going to have to file a complicated estate tax return. A huge amount of the wealth you have managed to build during your life is going to be sent to the government. Your survivors may well have to sell the family business in order to come up with the money to pay for these death taxes.
One more thing .. you're going to have to keep records of all of your financial transactions. Every year you're going to have to spend no less than about 30 hours or spend hundreds of dollars to hire someone to fill out tax forms for you. If mistakes are made you will be hit with a huge penalty and interest. Oh .. and the government is going to have access to all of your financial records to make sure that you are paying everything you "owe."
The question, of course, is why does this politician want to change the tax system in this way? Power, that's why. They want to be able to enact little changes to the tax code that will benefit certain constituents ... which constituents will then benefit the politicians -- with money or with votes. Under the FairTax system these politicians have no power to favor one group of voters over another for the benefit of votes. The new system would give them that power.
Your choice, my friends. If we had the FairTax now ... would you be willing to make the switch?
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
So your argument leads nowhere except to illustrate how dense you are.
You really don't know how the real estate market works, do you?
On one hand FairTaxers argue that the income tax motivates the productive to work less to avoid paying more of their income in tax (exercise control over how much tax they pay) while on the other hand they argue that the income tax gives the individual no control over how much tax he pays. Do both hands ever get together to make a congruent argument?
http://www.mises.org/fullstory.aspx?Id=1814
I thought you would appreciate this description of FairTax freedom
In addition to making American households dependent upon a monthly government check, the fair tax proposal expands the number of tax gathers to include individual tradesmen and entrepreneurs, and, even ordinary working people engaged in self employment, forcing them to all "register" with folks in government in order to pursue a livelihood [ see SEC. 502. REGISTRATION]. In short, the FT proposal would require these poor souls to become a modern-day regiment of enlisted tax gathers for government, increasing the number of tax gathers throughout the United States to an all time high, and compelling each to maintain burdensome and inquisitorial records and reports under a penalty of perjury [just as is now done with the income tax] to satisfy the wants and fancies of tyrants in government___ all the above to be implemented under the pretext of the "Fair Tax Reform“, a reform which promises to abolish the IRS and income taxation, but in substance and truth will only tighten the iron fist of government around the people’s productivity, while demanding the people to shamefully kneel to the iron fist of government, to receive their monthly government check.
http://www.geoffmetcalf.com/wwwboard/messages/4894.html
That’s right, realtors will submit the NRST under the FairTax bundled through escrow and they will not pay an Income tax.
Escrow or financing banks will be the NRST agents.
Should realtors not lower fees and require the buyer to pay NRST while the realtor simultaneously benefits from not having to pay income tax, the buyer is going to tell them to shove it. People are smart and will not put up with that nonsense.
Realtor fees will stay the same. It’s easy for people to figue out. The realtor is not paying income tax. Therefore people will know that realtor fees will come down to keep costs stable as the NRST is added on.
You’re the one that is dense thinking there are no taxes embedded in the cost of things sold.
How could you be so daft thinking taxes are not passed on?
And your stealing my comments and trying to provoke a wimpy argument.
Why don’t you grow some character and face the fact you have no argument.
You are constantly on these FairTax message threads trying to interject your nonsense and getting nowhere.
Your stake is one of defending the Income tax against a superior form of taxation. That can only mean you derive benefit from the Income tax like working for the IRS.
I got news for you, there’s going to be a change in the form of taxation within the next six years because of demographics. You should think about retraining yourself to service the NRST and abandon your asinine attempts at arguing for the Income tax.
You got less than six years, get busy.
This sounds remarkably familiar... Willie Green's old shtick, and still equally as wrong, regardless of how many times its recycled.
The investment purchaser is buying it because he expects to do something with it -- if it's rented, the rent is taxed, which offsets any "competitive advantage" the landlord would get buying the property; he still needs to charge a high enough rent to make a profit (especially since it's no longer a tax shelter), but with the tax applied, the rent vs. own numbers are no improvement for him. Besides, tax is due on the property if it's ever converted from rental to a primary residence, which impacts his sales options down the road.
If the property is just held for appreciation, it, unlike other properties around it that have already had the taxes paid, is still untaxed, which means that when sold for a profit, the tax is owed on the original price plus the profit. This is not only no advantage for the "investor", it's a drawback.
You can call it a sales tax, but from a Realtor's perspective it is a gross income tax. Sales Tax = Gross Income Tax on Businesses. And for people who provide services, it ends up being a much higher tax because there are not deductions for expenses.
Besides, why should realtors lower their rate? Everyone else gets to take home more pay, why not realtors? They need to earn more to keep up with the higher prices too.
Yes, I agree. I am in favor of a National Retail Sales Tax, and one compelling reason is that I like the transparency of it being there in black and white in every retail purchase.
I support the FairTax proposal, although if I had my druthers, I would rather see a NRST with no prebate and a transaction cap of, say, $5,000 of tax per transaction so that large purchases such as that of homes and cars would not be so prohibitively taxed.
I think that the full 30% being applied to a home costing $300,000 making for $90,000 in NRST would be much like the old "luxury" tax of 10% in its dire effect on large sales. From a CPA website's take on that fiasco:
One of the more controversial provisions passed by Congress in its attempt to reduce the burgeoning federal deficit was the luxury excise tax. The tax, introduced as part of RRA 90, levies a 10% surcharge on certain high-priced items to the extent that they exceed certain statutory limits. Effective January 1, 1991, the tax applies to the "first retail sale" of luxury goods with a sales price above the following thresholds: automobiles $500,000; boats $100,000; aircraft $25,000; and jewelry and furst exceeding $10,000. the tax was originally projected to provide revenues of $9 billion over the next five years. It has become obvious that the original projections are, at best, unrealistic. In addition, on a larger scale, the imposition of the excise tax has been reported in the press as aggravating the plight of the luxury industries already hard hit by current economic conditions.
Legislators levied the tax on only five industries, allegedly to make the tax easier administer. It was decided, for example, that electronics should be dropped as a category since there are too many different types of dealers and equipment. Needless to say, the industries affected have been quite vocal in their criticism. The producers singled out are concerned that consumers who misunderstand the "threshold" concept may be resistant to purchase so called "luxury items." This would occur, for example, if consumers were to believe that $3,000 in additional tax would be owed on the purchase of a $30,000 automobile, when in fact none would actually be due. For the consumer, the tax is particularly worrisome because, once the statute is in place, it is simple to lower the threshold amounts or increase the rate. Opponents claim that the provision will affect not only the consumers, but also the industries, and in time will translate into lost jobs.
In the boating industry, this has already become obvious. According to a recent The Wall Street Journal editorial, the Labor Department estimates that in Florida, the nation's leading boat building state, builders laid off 5,000 out of 18,000 laborers by the end of 1990 and these layoffs are not isolated. Retailers, manufacturers, and services aligned to the boating industry are simultaneously affected. To provide even the slightest justification for these job losses, the government should at least be realizing substantial revenue gains. Nevertheless, according to the same editorial, the Joint Committee of Taxation has released collection estimates of which only $3 million were attributable to boats in 1991. Where is the justification?
How could you be so daft thinking taxes are not passed on?
Its easier to rebut arguments when you make them up. I didn't say taxes were not passed on. I did say that you don't understand the real estate market.
When a contractor builds a spec home, he hopes to make a profit after all his expenses, cost of lot, materials, labor, etc. are met. The final price of the home, however, depends on the value of comparable homes in the neighborhood and the market.
For instance, a contractor built two spec homes in my neighborhood. By the time he completed them, we were in recession and the real estate market was soft to say the least. It took a year and a half to sell the homes. During that time, he reduced the price of the homes several times and had to pay property taxes while waiting for the homes to sell. In other words, his tax burden on the homes increased even as the market value of the homes decreased.
When the market is hot, the inverse is true; its not uncommon for the selling price to be significantly more than the asking price.
That you would post some silly anecdote about spec homes in your neighborhood and claim some expertise in real estate is laughable and indicates to everyone you got a big image of yourself.
You are confusing market risk with costs of production.
Every business that produces bears costs. Businesses expect a market to cover their cost and yield back a profit. That’s Business 101 for ANY business. But there is always market risk, ALWAYS! Again that is so basic a child can understand it.
But you have a problem understanding what a child can understand.
I’ll repeat what was said above:
“You are confusing MARKET RISK with COSTS of production.”
I understand the real estate market much better than you can ever hope to.
Let's test the depth of your knowledge in real estate with a question. During the real estate market collapse in California in 1990, why did home prices not fall on average in the four years following?
You’re out of your league here. Your arguments wouldn’t pass muster in a freshman class.
The FairTax taxes the renter, not the landlord; the landlord merely becomes the agent of the state (and gets a little money to pay him for his efforts), collecting the tax and passing it on to the government.
The renter gets his monthly check from the government to "help" him offset the tax he pays to the government. (The government giveth and the government taketh away; blessed be the government)
The landlord has a competitive advantage when he buys a new home, because he pays less. The landlord NEVER pays the sales tax unless he converts the home from a rental to his own private use. If he sells the home to a buyer who intends to use it as a residence, the buyer pays the tax, not the landlord. If the buyer intends to also rent it out, no tax is paid.
If the property is just held for appreciation, it, unlike other properties around it that have already had the taxes paid, is still untaxed, which means that when sold for a profit, the tax is owed on the original price plus the profit.
This is news to me - I thought the FairTax exempted investment profits from the tax. Are you telling me now that if I buy a business and sell it later for a profit, I pay sales tax on the profit?
Because as a realtor my objective is to take the business away from the competing realtor.
It’s called market share.
Why are you asking such basic questions? Are you a high school student?
Are you such a pitiful debater that you have to keep resorting to personal insults to prop up your non-arguments. You have already had a post pulled from this thread for your child-like tactics and there are several others that would have been had anyone bother to hit the abuse button.
I understand that very well. I'm saying that the market has as least as much to do with the selling price of a home than the embedded taxes.
During the real estate market collapse in California in 1990, why did home prices not fall on average in the four years following?
"On average" is the operative phrase. Prices did fall in some California markets (notably, the area where I live).
As an aside; you really seem to be a hostile person. Have you considered therapy to get that under control?
What? You can’t handle the level of the debate and so you complain like a kid on the playground who doesn’t get his way?
The fact is that you have not backed up your claim. And as I said to be fair you can’t back it up because it is not capable of being supported. Now if you make unsubstantiated unsupported claims on such an important matter, then why should anyone give you the time of day?
Here is all that people need to know about you:
http://www.freerepublic.com/focus/f-news/1831865/posts?page=160#159
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