Posted on 10/09/2007 5:27:15 AM PDT by Man50D
Ron Petrucci's Sept. 24 letter addressing Charles Firth is right on a number of points. We have been running more than an $800 billion trade deficit. That can't go on for very long. Ron says we're a debtor nation and we are.
Our manufacturing continues to move overseas to "more tax friendly" locations. We can't exist by providing each other services. Picture everyone doing their neighbor's laundry. We need to produce products to exist.
What Ron neglected to say is that the reason for that migration is our tax system. Federal taxes and associated compliance costs comprise an average of 25.9 percent of prices of our goods and services. Imported goods and services arrive at our shores essentially tax-free, because most foreign governments encourage exports by rebating their taxes at their borders. We don't do that.
When we try to sell there, they add their taxes to our prices, so our goods and services end up bearing double taxes. American companies have a raw deal both ways. That's why they have trouble competing.
There is an answer, though in the form of HR 25, The Fair Tax Act. That bill is in the House ways and means committee. It is the most thoroughly researched tax bill ever.
For the second time, a group of noted economists recently wrote a letter to Congress and the president, urging them to pass it and sign it into law.
The bill already has more cosponsors than any other tax bill in 80 years. It is a grass-roots proposal. It will pass only if enough citizens support it and tell their representatives. If passed, the current federal tax system would be replaced by a national retail sales tax applied at the final retail sale and collected by the states.
Net retail prices paid would be about the same. Revenue raised would be about the same. Collecting a sales tax is much more efficient than collecting an income tax, it provides a steady revenue flow and everyone would pay.
It needs to pass now, though, before this president leaves office, because no first-term president will entertain changing the tax system, and Social Security will run out of liquid assets at about the end of the next president's first term.
Check the proposal out at www.fairtax.org
The voice of experience speaking -- and practicing what he preaches.
“We have been running more than an $800 billion trade deficit. That can’t go on for very long. Ron says we’re a debtor nation and we are.”
Trade deficit is not debt. Trade deficits are paid for.
I don't really see how you can address it. The 401K is just tax deferred, so you would pay taxes on income, so shifting to a sales tax really doesn't have much effect on it. However, the taxes have already been paid on the Roth IRA and spent by the government. I don't see how the government is going to suddenly give all those tax dollars back to people, and I really don't see any other fair solution.
This country was run on import/excise taxes from its inception until 1916. It served us well then and wouldn’t hurt us now IMO.
Taxes were very low prior to 1916. The nice thing about low taxes is that they don't have a large effect regardless of where you collect them.
Every other country uses this system.
I'm not sure what you mean. Every other country gets a large portion of it's tax revenue from taxes on imports?
I don’t see compliance costs being more onerous to a business than the current collection of state sales taxes.
I read somewhere that only about 60% of goods and services in the US are taxed by a sales tax. The fair tax takes that to 100%. There are a lot of services that are not taxed that would be taxed under the fair tax.
The compliance costs for a sales tax will likely be considerably less than the compliance costs under our current system, however while our current tax system is irritating, the compliance costs aren't really as high as some would lead you to believe. Companies still need to do bookkeeping and report profits and track where their funds go. They have to report such things to stockholders, and the government's concerns about money laundering and people and organizations funding terrorists aren't going to go away. Deducting payroll taxes is not a big burden, and there is far less reporting overhead on reporting payroll than reporting each and every sales transaction.
I would think that a flat personal income tax with no corporate tax would have far less conformance costs than either a the current income tax or the Fair Tax, so in my mind conformance costs savings really isn't a benefit of the Fair Tax when comparing it to other options, because I don't limit the options to the current tax system and the Fair Tax.
You will never get rid of tax fraud. I think compliance/enforcement will be significantly less costly because there will be less opportunity to fudge, and there will be fewer entities reporting taxes.
The number of entities reporting taxes decreases significantly, the number of taxed transactions skyrockets.
However, the biggest problem is likely going to be directly imported goods.
How many people do you know that don't buy bigger ticket items on-line or from catalogs to avoid paying sales tax when it is cheaper than shipping?
That is to avoid paying a relatively low tax of what 7% or so. What do you think happens with a sales tax of 30% on top of the state sales tax.
It should be a great boon to Mexico and Canada as they import our goods at a low price due to no business or sales taxes, and then sell them back to Americans over the Internet. What are shipping costs compared to 37% in state and federal sales taxes?
International shipping companies will either make a huge fortune, or be crushed out of business by governmental regulations as the government attempts to stop people from buying things from outside the US and having them shipped to them at home.
What about Ebay? New items get taxed, used items do not. It will probably be good for the environment since fewer things will get thrown away, but I also expect that a lot of new items will get sold as used items to avoid a 30% sales tax.
This will after all create a huge market for used goods, and a lot of stores will be selling both, so how does the government audit that? They track every item produced or imported?
If you restore or repair a used item and then resell it, how does that get taxed. There is definitely a service and likely materials involved. Do people fixing things up need to track the time and materials invested and come up with a value for those that get taxed?
Taxing the sale of new items only avoids double taxation, but it creates an enforcement nightmare.
I also think that the savings/investment rate of individuals will tend to increase because the tax will be visible on consumption, thus discouraging some.
However, they will also be receiving much more money in their paychecks, and most people seem to spend up to if not beyond their means. I think a lot of people will hang onto used items longer, or resell used items rather than throw them away because of the more visible tax on new items. That is good for the environment, but not necessarily good for the economy. It is much harder for the economy to grow when people don't want to buy new things.
Such a high sales tax will also encourage people to do a lot of things themselves. Paying that tax will encourage me to do a lot more of the work on my car myself. It will encourage me to do home remodeling myself. I do have some experience in both working on cars and in home remodeling, but it's a lot more efficient for me to go get paid to do what I do well, and then pay someone else to tear my car apart and put it back together, and the same goes for some home improvement tasks.
A high sales tax encourages self sufficiency, but it also discourages efficiency at the same time.
While avoiding double taxation is admirable, inflating the costs of new goods compared to used ones is not good for the economy.
That rebate would amount to a huge wealth transfer unless it is capped to the amount of taxes actually paid by the individual recipient. But if that were the case, then you’d need an IRS to file your sales tax forms to to claim your rebate.
The rebate alone is a poison pill. Couldn’t possibly support that. I can’t have the drugged out panhandlers around here who I daily choose not to give money to, suddenly getting $30K/year on my back.
I figure 3% covers all that ... :)
“To argue the FairTaxScam is a silver bullet that will fix a non-existent problem is laughable at best.”
http://www.fairtax.org/PDF/Open_Letter.pdf
Then argue with this link. I’m not an economist. Are you?
The best initial approach is probably just to consolidate all federal taxes (corporate income, FICA, communications, tarrifs, etc.) into a single simplified personal income tax, and to fund as many Federal services by user fees as possible.
No tax is fair. Income tax is probably less fair than sales tax (b/c it requires people to divulge their income). But we already easily avoid sales tax by buying on the Internet, and the Federal policing of the Internet that would be necessary to fight that would probably be as bad as the IRS.
Then there is that insane wealth transfer known as the Fair Tax “rebate”...
In your world do retailers not account for every transaction? Nice work if you can get it.
Just as I thought -- you don't have intelligence or good manners enough to answer for your own insipid crap.
“Democrats are guaranteed to say “rich people” (which they define as a family earnign more than 80k) should not get the prebate at all. [for the children]”
Exactly. And how are the Dems going to know who is rich? Back comes the IRS!
Have you ever seen POS software ?
I use it in my businesses, as do most who run cash registers.
Three clicks with a mouse and I have my sales tax accounting completed in less than 5 minutes.
Add in 10 minutes to file it electronically, and that’s the sum total of my time every month to be in compliance.
Ooooohhhh, THAT was tough.
Do I like collecting/paying it ? No, but you wildly exaggerate the burden on a business.
You’re falling into the fallacious trap. The FairTax makes no pretense about lowering the rate of taxation. Never has. That is not what the debate is about. That’s a non-argument.
I would think that a flat personal income tax with no corporate tax would have far less conformance costs than either a the current income tax or the Fair Tax,
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well I would think it would be a lot cheaper to tax corps instead of people for several reasons:
1) a lot more people than corps
2) corps already have accountants and can benefit from economies of scale
3) a registered corp is less likely to engage in illegal activity than people
Hey, you guys run to the mods when you don’t like a tag line don’t you?
“Democrats are starting to get heat from their constituents to support H.R. 25 / S. 1025. They have begun to join the movement.”
Democrats should have no trouble getting on board the Fair Tax. It guarantees a $30K income to every citizen (and illegal alien with fake IDs). There’s a wealth transfer Dems never dreamed of.
Your points about new versus used is valid.
Your point about selling to Mexico and thenpurchasing across the internet just means that customs would have to collect the tax, which they do already for any import duties we already have.
All businesses but cash businesses already use POS systems(and we know why they don’t). A few clicks of the mouse and you have sales tax reports. I don’t see any problem with doing the same thing for the Fair Tax.
Every other country imposes import duties on a wide variety of products. We used to, years ago, get most of our federal revenue from the same. Norway, for example, imposes a 400% VAT on imported alcohol.
The biggest problem I see is that all individuals/families should pay some tax. We currently have almost 50% of filers who don’t owe/pay tax - so anything they get from the government is essentially “free”. That MUST change. Those people vote Democrat because the Dems promise more giveaways.
Think healthcare/insurance. If you don’t currently pay federal taxes, and you believe the government runs efficient healthcare systems in other nations as Michael Moore has told us, and then you see 2 politicians, one of whom is promising “free” government health insurance/care, what would you do ?
We will NEVER even get close to constitutional principles if we don’t make people understand that the government cannot provide “free” anything.
And the best way to do that is to remind them every time they open their wallets. What we have now, the witholding process, does more to encourage this dissonance.
I’d go 5 percent if they would step up the WOT...
I don't care. The average paid was around 25%. If you can dispute that, then you have something to talk about.
"Add state corporate taxes of 9-12% in CA and the Northeast, plus local taxes"
The article talked about 25.9% in federal taxes. Those aren't federal -- God, are you ignorant.
"Add in unemployment compensation, workers comp"
More ignorance.
"7% FICA, plus 9% FICA/Medicare from employees"
Yep. I got those. And without employee withholding, you'll never get to 25.9%. Try.
"However, it does mean that your local drug dealer WILL pay some income tax every time he spends money on his bling, buys a drink in a bar, and a fancy car."
According to the article, he pays 25.9% today when he buys those items.
You are massively confused. You contradict yourself. You think state corporate taxes and unemployment compensation go to the federal government.
Educate yourself then come back. This is embarrassing.
I’ll buy that ! but only if they add in border enforcement and prosecution of sedition at home.
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