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Income taxes - The fool's game
F. Kelly

Posted on 08/29/2004 7:17:58 PM PDT by det dweller too

Income Taxes - The fool’s game

The political season is heating up again and the politicians are busy playing the fool’s game of appealing to our darker instincts. They call on us to tax the rich and everyone cheers, except a few that are immediately labeled as selfish and thereafter ignored. In the end, the politicians usually get their way by convincing the majority to raise income taxes on the rich.

The reason it is a fool’s game is the sad fact that the income tax operates as a hidden fixed cost on domestic business. If you put a large income tax load on the business owners, even if you deduct 100% of the income taxes from the workers, the price of the products they make still goes way up. In the past this was met with a yawn and a shrug as everyone paid the new price, but today there are alternatives. The businessman today that loses profitability because of higher taxes simply can turn to sources outside the US for products that are beyond the reach of our income tax laws. In this way, the businessman can support the tax change voted in by the majority while at the same time maintaining his profit margin by switching to imported products that undercut the pricing from domestic businesses. As the domestic businesses try to compete, they look for ways to cut costs. Since the tax costs cannot be avoided, the only area left to cut is the cost of their domestic labor. In the end it is the majority who voted on taxing the rich that end up losing their jobs, benefits, and wages.

The only effective way to quit this fool’s game is to stop hiding the cost of income taxes in our domestic products. Instead of income taxes, we should consider a simple excise tax on all products sold in this market, regardless of where they are made. Note that this is not a sales tax or value added tax, which can be abused by taxing the same product multiple times. Taxing a product once when it is brought to market takes the cost out of the product itself and puts it into the act of marketing the product here. Import and domestic products marketed here would be taxed at the same rate and exports would not be taxed at all. This will remove the hidden cost penalty that have been causing the loss of jobs in the US and immediately improve US global competitiveness.

F. Kelly
Canton, MI


TOPICS:
KEYWORDS: economic; fairtax; outsourcing; taxes; taxreform; trade
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To: Badray
First off I gotta say Rudy just gave a hell of a speech!!!
Next, your point that the NRST has been in the game for 10 years and is further down the road of acceptance is absolutely true.

But you say that the different rates possible in the excise tax open it up to political gimmicry. Then you tell me that selling a used car is not covered in the NRST. Well if I buy a used car now I have to pay state sales tax on it, so the lack of it in the NRST is also a form of gimmicry .

What I am trying to do is take a good idea and refine it. I can certainly live with a NRST, if you can get it passed. My problem is in watching the political monkey-business, that the democrats have gotten so strident and so radical that I think they will literally do anything to keep this from passing. The fight with them on this will be a drain.

Finally you question on the final rate, I have another study I prepared where I discuss that the fixed cost in our domestically produced products from the income tax is high enough that when we start pulling that out, that it will offset most if not all of the price increase in either the NRST or excise tax replacement.

I just think the excise tax is a refinement of the NRST that improves some significant weaknesses. But either way I'm OK. What I can't live with is the current system that is burying my kids in a shitty system where decent jobs are becomming as rare as virgins in a whore house.

51 posted on 08/30/2004 9:03:45 PM PDT by det dweller too
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To: CSM
If a person does not pay federal taxes, then they should not be allowed to participate in federal elections. Same for all levels, state, local, etc. I would venture a guess that the budgets would be whipped into shape in no time if the moochers couldn't vote themselves pay raises!

I would go one farther. Any place that you own property or a business and so pay local taxes you should be allowed to vote in the local election. You shouldn't get more than one vote for President but you should be able to vote for Mayor and City Council if you are paying city taxes.

52 posted on 08/30/2004 9:13:31 PM PDT by Libertarianize the GOP (Make all taxes truly voluntary)
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To: det dweller too
The purpose of not taxing used items is that no item is ever taxed more than once. It's not a gimmick, but a fundamental part of the FairTax concept.

Admittedly there are more GOP than Dem cosponsors, but one of the original sponsors is a Dem. There is a lot of interest in certain Dem circles but they are facing a lot of pressure from leadership to oppose it.

"What I can't live with is the current system that is burying my kids in a shitty system where decent jobs are becomming as rare as virgins in a whore house."

Here we fully agree. And that's the thing that confounds me so much. Everyone knows how bad the system is, but some defend it because their particular ox *may* get gored.

To my thinking, even if we pay more but rid ourselfs of the IRS and the Federal Income Tax code, we will be lightyears ahead in passing liberty to our children and grandchildren.

53 posted on 08/31/2004 12:32:10 AM PDT by Badray (Stay well - Stay safe - Stay armed - Yorktown. RIP harpseal.)
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To: Badray
Apparently, the price of products and services to government are immune to the laws of supply and demand. When the cost of the embedded taxes goes away, it goes away for government too. With the cost coming down, there is no legitimate reason for other taxes to rise to offset it.
What makes you think consumer costs would go down to make up for the sales tax?

Even if prices did go down, we would still be paying 30% of our federal taxes through "hidden" taxes.
54 posted on 08/31/2004 4:35:38 AM PDT by Your Nightmare
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To: Your Nightmare

"At least 30% of the taxes that would be collected by the FairTax will not be paid by citizens at the cash register, it would be paid by the federal, state, and local governments. The citizen will only see this hidden, embedded tax in increases in their state sales tax, their property tax, and state income tax."

And what exactly is wrong with driving all levels of governmental expenses out into the open and giving people the knowledge of the costs associated with these "services"? It will force people to chose between necessary services and frivolous entitlements, my guess is that an overall reduction at all levels of government would soon follow.


55 posted on 08/31/2004 5:38:09 AM PDT by CSM (To spread the wealth the liberal is willing, he'll take YOUR dollar and keep his shilling. -albertp)
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To: CSM
And what exactly is wrong with driving all levels of governmental expenses out into the open and giving people the knowledge of the costs associated with these "services"? It will force people to chose between necessary services and frivolous entitlements, my guess is that an overall reduction at all levels of government would soon follow.
How is paying hidden federal taxes through our state and local government taxes "driving all levels of governmental expenses out into the open and giving people the knowledge of the costs associated with these 'services'"?
56 posted on 08/31/2004 5:40:33 AM PDT by Your Nightmare
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To: det dweller too

"The truth is not hidden from anyone. For example, a few years back Ross Perot proposed a 50¢/gal federal gas tax [excise] and all hell broke loose. People know the tax is there and how much it would cost them. There is just a whole lot of advantages for an excise tax over a sales tax besides the "in your face" zing factor:"

Those same people have forgetten that the price of fuel contains these excise taxes today. If the appropriate levels of government were willing to fore-go the revenues they receive from the gas taxes, then the price would be reduced tremondously. Michael W. Smith proposed this to Jenny from the (Canadian) Bloc and she quickly changed the subject. The average citizen will gripe about a raise in taxes, but they will soon forget. The "evil corporation" crowd wins that battle. That is why we need all citizens to be reminded every day what their government costs them.


57 posted on 08/31/2004 5:41:21 AM PDT by CSM (To spread the wealth the liberal is willing, he'll take YOUR dollar and keep his shilling. -albertp)
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To: Libertarianize the GOP

That is what I meant when I carried it forward "to all levels". We're on the same page....


58 posted on 08/31/2004 5:43:53 AM PDT by CSM (To spread the wealth the liberal is willing, he'll take YOUR dollar and keep his shilling. -albertp)
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To: Your Nightmare

How is the sales tax, that everyone must pay and is keenly reminded of, "hidden"? How is it "hidden" when the local politicians will try to blame the Federal government for the revenue shortfalls?


59 posted on 08/31/2004 5:45:58 AM PDT by CSM (To spread the wealth the liberal is willing, he'll take YOUR dollar and keep his shilling. -albertp)
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To: det dweller too

"3. It is flexible. A NRST would have ONE rate for everything. With an excise tax, as we do today, you can have different rates based on the comodity, high on sin taxes like liquor and cigarettes and low on produce and food."

Isn't that how we ended up in the mess we have today? Wouldn't that open the door to lobbying efforts and politicians capability to bribe certain interest groups with favorable tax rates? Why is it acceptable for the government to determine what is appropriate for the citizens to purchase? (at least more appropriate than other items)


60 posted on 08/31/2004 5:47:48 AM PDT by CSM (To spread the wealth the liberal is willing, he'll take YOUR dollar and keep his shilling. -albertp)
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To: CSM
How is the sales tax, that everyone must pay and is keenly reminded of, "hidden"?
Because that's only 70% of what they are paying.
61 posted on 08/31/2004 6:14:02 AM PDT by Your Nightmare
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To: Your Nightmare

Can you explain what you mean? I don't have any idea what you're saying.....


62 posted on 08/31/2004 7:00:46 AM PDT by CSM (To spread the wealth the liberal is willing, he'll take YOUR dollar and keep his shilling. -albertp)
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To: CSM
Can you explain what you mean? I don't have any idea what you're saying.....
Only 70% of the taxes collected by the FairTax would be paid by customers at the register. The other 30% will be paid by taxing government expenditures which those governments will in turn pass on to their citizens (us) in the form of higher taxes. Only people can pay taxes, it has to get back to us eventually.

If you want to know what we would really be paying in federal taxes based on our consumption, the tax base for the FairTax excluding government consumption in 2001 was $4,721 billion. The taxes being replaced were $1,857 billion. We will effectively be paying a sales tax rate of 39.5%, not 29.87% (that's 28.3% inclusive vs 23% inclusive for you Kool-Aid drinkers).
63 posted on 08/31/2004 8:13:49 AM PDT by Your Nightmare
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To: CSM

In all the critics calculations, they overlook or try to ignore the fact that the economy is dynamic, not static. Anytime you want to increase tax revenue, lower the rate.

With imbedded tax cost gone, costs will come down. Income will go up (it's no longer being confiscated). Sales will increase. Tax revenues will increase.

Do you ever hear people gripe about working overtime? They hate it because the tax man gets so much of it. In the new economy that this will produce, overtime will really mean something to them. Unions that fight this proposal will face extinction when workers realize the benefits that they were told to forego.


64 posted on 08/31/2004 11:13:21 AM PDT by Badray (Stay well - Stay safe - Stay armed - Yorktown. RIP harpseal.)
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To: Your Nightmare

I still don't understand how you are equating the state/local government agencies requirement to pay the NRST with today's "hidden" taxes. I do understand your concern about the percieved tax increases associated with these agencies paying the NRST, but I still don't see it as "hidden".

Well, not anymore than the typical Democrat believes Gov. Granholm when she blames the President for the lagging of MI's economy when compared to the rest of the country. The rhetoric for socialism will always persist, but the best weapon against this rhetoric is knowledge. The NRST is a great way to make people knowledgeable as to the costs of government entitlements.....


65 posted on 08/31/2004 11:22:53 AM PDT by CSM (To spread the wealth the liberal is willing, he'll take YOUR dollar and keep his shilling. -albertp)
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To: Badray

I agree, there is no pie to be divided up, or to have shares fought over. RR proved the thoughts supporting that POV to be incorrect.


66 posted on 08/31/2004 11:24:29 AM PDT by CSM (To spread the wealth the liberal is willing, he'll take YOUR dollar and keep his shilling. -albertp)
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To: CSM
I still don't understand how you are equating the state/local government agencies requirement to pay the NRST with today's "hidden" taxes. I do understand your concern about the percieved tax increases associated with these agencies paying the NRST, but I still don't see it as "hidden".
How is a business being charge a tax by the feds and making you pay it through higher taxes any different than the states being charged a tax and making you pay it through higher state taxes? Aren't they both hidden federal taxes?
67 posted on 08/31/2004 11:42:20 AM PDT by Your Nightmare
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To: Your Nightmare

Anything the States purchase today has the imbedded tax. Specifically, the sales tax would become a line item in their expenses, just as it would be for individuals, and it would be readily accessible by the State's residents. They would still have access to the budget planning and budget spend, just as they do today.

Even if I were to agree that this 30% you reference is "hidden", wouldn't that be a significant improvement over the 100% hidden amount today?


68 posted on 08/31/2004 12:40:18 PM PDT by CSM (To spread the wealth the liberal is willing, he'll take YOUR dollar and keep his shilling. -albertp)
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To: CSM
Specifically, the sales tax would become a line item in their expenses, just as it would be for individuals, and it would be readily accessible by the State's residents.,/I>
How would that tell me how much I paid in federal taxes through my state and local taxes? What you are suggesting could be done today by looking at the total amount of federal corporate income tax paid, but what does that really tell you?


Even if I were to agree that this 30% you reference is "hidden", wouldn't that be a significant improvement over the 100% hidden amount today?
100% hidden? How is today's tax 100% hidden?
69 posted on 08/31/2004 1:08:12 PM PDT by Your Nightmare
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To: Your Nightmare
Excuse me for jumping in, but income taxes are hidden because they are not dependent on an event like a salees tax is, they accumulate over the entire year. The business also knows the taxes must be paid before the workers or shareholders get anything. the pricing of any sales must account for this tax revenue. So even if the workers are at 0% income tax, the products their company produces has a large part of the cost going to the hidden tax. If he is an American worker making widgets, he may find the widgets are cheaper coming from overseas. Then his company gives him a delima. They must cut costs to compete with china's widgets and so that benefit package he was counting on will be eliminated, if he is lucky. If not lucky, maybe his job goes away. And the politicians and union leaders all blame it on the evil and greedy company owners

This hidden tax business is a bitch!

70 posted on 08/31/2004 2:25:48 PM PDT by det dweller too
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To: CSM

Yep. It's that simple, but some refuse to see.


71 posted on 09/01/2004 12:06:07 AM PDT by Badray (Stay well - Stay safe - Stay armed - Yorktown. RIP harpseal.)
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To: Badray

Also the underground economy pays equally as well. (I.E., drug dealers, hookers, etc.)


72 posted on 09/01/2004 3:15:41 PM PDT by Mikey (Freedom isn't free, but slavery is.)
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To: CSM
"Once politics become a tug-of-war for shares in the income pie, decent government is impossible."
Friedrich A. Hayek

73 posted on 09/01/2004 3:20:24 PM PDT by Mikey (Freedom isn't free, but slavery is.)
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