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Why Republicans Should Support the FairTax
Feb. 11, 2004 | Wm. Donald Tabor Jr., DDS

Posted on 02/11/2004 11:47:11 AM PST by phil_will1

It would be a lot easier to get support from Republicans if it were called the ClearTax or the TrueTax, since 'fairness', in the political arena, has become a synonym for redistribution of wealth. But the FairTax is the road out of this class warfare mess that paralyzes the country and prevents the Congress and President from attending to the country's business.

Populists pander to their constituencies by manipulating a complex illusion, a fraud upon the public, we call the Income Tax. We waste our time and energies fighting over changes in that system, but the truth is that no one, neither corporation, nor individual, really pays income taxes, or FICA taxes either, for that matter. For all the fighting and demagoguery over every change in the tax code, those complex schemes are no more than changing assignments over who will be required to COLLECT a hidden sales tax from consumers.

Economists have long been aware that corporations don't pay taxes, they only pass them along to their customers, but the same is really true for all of us. We trade our labor for what we take home, not for what our employer forwards to the government in our names. Few people are even aware of the gross amount of their pay. We pass our perceived income taxes and FICA taxes along to our employers, as a cost of the 'business' of being employed. Employers then regard our withheld taxes as just another cost of doing business, like their own taxes. And like every other cost of doing business those taxes become a part of the price of whatever goods or services we produce.

The simple truth is that ALL taxes are passed along like this and eventually paid by the consumer, as a hidden sales tax buried in the cost of those goods and services. The average portion of the price of everything, from a loaf of bread to brain surgery, that is really someone else's Federal Income, FICA, or corporate tax is about 22% of the price of everything you buy. And since everyone buys products and services, rich or poor, no one escapes that taxation. The real impact of taxation is not on our Form 1040, but at the grocery store and the doctor's office.

Imagine the change in the political landscape if that truth suddenly became clear to every American.

It really doesn't matter if we shift the total income tax burden to the top 10% of tax payers or if everyone pays the same percentage from bottom to top, NONE of that is real. Varied income tax rates only change the relative prices of the things we buy. Healthcare costs more because the income tax system makes doctors collect a lot of tax to earn their after tax incomes. The only REAL tax is that hidden sales tax, because that is the only one that cannot be passed along to someone else down the line. The FairTax simply makes this hidden sales tax visible.

Under the FairTax plan, (www.FairTax.org) the IRS and FICA are gone. You get your whole paycheck with no Federal deductions. There would instead be a 28% Federal sales tax. This would be revenue neutral to the government, and cost neutral to us, since the increases in our paychecks and the fall in prices would exactly cancel out the new sales tax. It would have to be that way if you think about it, as all we really would be doing, in the short term, is to replace the existing hidden sales tax with a visible sales tax of the same size. So why do it?

The answer is CLARITY, and that is what changes everything.

No more could the populists pander to the voters with promises to tax someone else for their goodies. Everyone would know exactly what government costs them, it would be on every receipt they get for a hamburger or a new house. And they would know that the burden falls proportionately on all, as it always has, even though they do not know it now.

Any major new program would have to be accompanied by a raise in the sales tax, with no illusion that the cost could be shifted to someone else. Every cut in the size of government would be visible money in the pocket of every American.

Class Warfare would be DEAD forever and we could at last go about the business of the country and set our priorities based on an honest understanding of the costs. And that is how we can bring this country together to face the real threats to our liberty and prosperity.


TOPICS: Business/Economy; Constitution/Conservatism
KEYWORDS: axixofevil; fairtax; jobs; taxes; taxreform
Navigation: use the links below to view more comments.
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To: Texas Federalist
"As much as I loathe an income tax, the best bet we may have for sustained reform is to push for a flat rate income tax of around 20%."

You are quite right to loathe an income tax, but dead wrong to look to a flat income tax for "sustained reform". Our history is just the opposite. The Tax Reform Act of 86 flattened the rates to 3 levels, I believe, and eliminated many of the deductions in the name of simplicity. The lobbysists thought that they had died and gone to heaven. They immediately went to work reinstating all the old preferences (and then some) and billed their clients for that time, of course. The 86 TRA should have been labelled the tax lobbyists full employment bill. The mess that we have today is the 86 TRA amended hundreds of times and it is far worse than the system before 86. The trend toward increasing complexity and spiralling compliance costs with an income tax is inescapable.

The problem is that we have been trying to define just what "taxable income" is for over 90 years now and the result is a jumbled up mess that noone - not even the professionals - understand. The income tax is a failed experiment that we should acknowledge as such - sooner rather than later.
51 posted on 02/11/2004 2:00:27 PM PST by phil_will1
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To: phil_will1
Anything you want to tell us about how you earn your living, Willie Green?

I can't think of anything that's any of your goddam business.

52 posted on 02/11/2004 2:00:54 PM PST by Willie Green (Go Pat Go!!!)
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To: kevkrom; NYFriend
The NRST/FairTax is indeed a sales tax -- it is imposed/collected at the point of retail sale. If you choose to save or invest part of your paycheck, you would pay no taxes on it.

Well, you're introducing information not in the original essay, as are those who introduce exclusions based on some threshold of income, but I'll accept those for continued discussion.

However, just what is being sold? If I have sold my time and expertise, then my paycheck is my sale price. Just because I choose to invest that rather than consume it doesn't change my sale price. What I do with the money makes it an income issue, not a sale issue since that sale is complete when I provide it and am paid, not when I decide what to do with the income from that sale.

Let me be clear. My problem is not with a sales tax. It can indeed be regressive, but my solution to that is not to do something as bad as penalizing those who have provided a good or service someone values enough to pay for. Get rid of all income taxes - flat or otherwise.

And for sure get rid of a threshold amount before the flat tax cuts in. That makes it even more graduated than the current system. You know the vote-buying politicians will keep upping the exclusion amount anyway. Here's the point on that: Do lower income people not get to drive on the same roads as the rest of us? Is there some threshold of income where the military starts to defend you? As long as they are getting the same service, then should pay the same price for that service (at least as a percentage of income - though the only truly fair system would be the same absolute fee in dollars). Providing an income-based exclusion for the same services of government is the logical equivalent of letting lower-income people into movies for free. They get the same service and should pay a 'fair' price for that service. Besides, many of those who have low incomes are not poor. They are retired people living on their savings, or 'rich' college students. The key factor that determines if someone is poor or rich is not income, but wealth.

A straight, honest sales tax is indeed regressive since those who are poor spend a higher proportion of their wealth on retail sales items. Many of the services that taxes provide are equivalently regressive ('poor' people ride buses more than 'rich' people), so I'm not bothered by some degree of that, but I think one could make the case that are also government services that benefit those with wealth more than those without. For example, an attack on our nation will cost rich people more than poor people, at least in material terms, and so one could make the case that the military benefits them more than the poor. So my solution for that is a direct tax on wealth in conjunction with a sales tax - scaled to be revenue-neutral overall. There would still be political argument on the right balance between sales and wealth taxes, and work to prevent loopholes like moving all your money outside the country to avoid wealth taxes (all solvable, but too much for this message). That way we achieve two key things. We tax those who have the money to spend or who are 'rich' by the definition of having wealth. And we get rid of the illogical penalites on those providing a service that is valued by someone else enough to pay for it.

Bottom line, any basis for taxes is better than income taxes - truly flat-rated, falsely flat-rated due to exclusions, or straight up progressive.
53 posted on 02/11/2004 2:01:01 PM PST by Gorjus
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To: kevkrom
Let me clarify my comment. Hypothetically, I have worked for 40 years and built up a large pile of US dollar bills after paying all income and payroll taxes. Your new tax regime is enacted. You are a new worker, and will not be subject to any income or payroll taxes, ever. You can therefore build up a pile of US dollar bills that will not be taxed until spent.

Yet when we now buy things, our dollar bills are both subject to the same new federal sales tax. You should be happy about that. I will not be, because I have been taxed on income when I earned my dollar bills and taxed again when I spent them, whereas you have been taxed only when you spent your dollar bills.

I'm not going to like your tax plan.

54 posted on 02/11/2004 2:05:10 PM PST by labard1
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To: Gorjus
"Well, you're introducing information not in the original essay."

The purpose of the article was not to introduce and fully explain the FairTax proposal. There are plenty of other sources for that. It merely speaks to the political benefits to Republicans. Actually, I'm not sure that it gets to the primary benefit, which to me is that good policy makes for good politics.

http://www.fairtax.org/

http://www.geocities.com/cmcofer/

http://linder.house.gov/
55 posted on 02/11/2004 2:12:30 PM PST by phil_will1
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To: phil_will1
You are quite right to loathe an income tax, but dead wrong to look to a flat income tax for "sustained reform".

Let me clarify my comment. I support the flat tax as an intermediate step to a 10% to 12% federal sales tax, rather than a permanent solution. The flat tax is a short-term fix while we can concentrate on cutting spending so that a sales tax of a smaller size can be instituted. The 28% tax is too large to be workable as a sales tax.

56 posted on 02/11/2004 2:13:03 PM PST by Texas Federalist
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To: Willie Green
The $154,000 vs. $200,000 purchase price advantage that landlord/investors enjoy over individual personal homebuyers can be expressed two ways: Landlord/investors enjoy a 23% discount compared to the individual personal home buyer. Individual personal home buyers must pay 29.87% more than landlord/investors.

But the landlord still gets no advantage, since the rent he charges is taxed -- therefore, the incentive to buy vs. rent for the personal homebuyer is no different than it is now. Since the seller gets the same amount regardless of whether the sale goes to the landlord or the personal home buyer, there's no advantage gained or lost there either.

The thing is, the article doesn't say 23%, and it doesn't say 29.87% It says 28%. 28 is NOT 23 and 28 is also NOT 29.87.

As I said, I don't know where the article gets "28%" from. Perhaps it is a typo. Who knows?

The definitive answer is in HR 25, which specifically states:

CHAPTER 1--INTERPRETATION; DEFINITIONS; IMPOSITION OF TAX; ETC.
SEC. 101. IMPOSITION OF SALES TAX
(b) Rate-
(1) FOR 2005- In the calendar year 2005, the rate of tax is 23 percent of the gross payments for the taxable property or service.

This is the 23% rate I mentioned above. So what IS the rate suppose to be nowadays anyway? Surely you can't keep it at 23% all these years and still claim that it's "revenue neutral", Not after all of Dubya's tax cuts... So what happened?

Why not? Do you subscribe to a static model that says that tax cuts equals less revenue? Reagan completely disproved that in the 80's. The 23% figure must still be revenue-neutral within the guidelines set by the CBO or Congress would not even be considering the bill.

57 posted on 02/11/2004 2:14:43 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: labard1
"Yet when we now buy things, our dollar bills are both subject to the same new federal sales tax. You should be happy about that. I will not be, because I have been taxed on income when I earned my dollar bills and taxed again when I spent them, whereas you have been taxed only when you spent your dollar bills."

Kevkrom's initial response to your concern is right on. Once competition drives out the cost of the current system, we will be paying approximately what we do now (on an after-tax basis) for our consumption (ignoring the effect of the Personal Consumption Allowance for now). The biggest difference is that, rather than being imbedded in the price, the taxes that you pay will be highly visible.

If you were going to buy a new car for, say, $25K before the FairTax were enacted and that same car costs app. $25K with the FairTax after it is implemented, are you any worse off because now you can plainly see the tax component? I think not.

When you add in the fact that you pay no taxes on a net basis up to the poverty level because of the PCA, you will then see a 15 - 30% increase in your purchasing power up to the poverty level.

You are going to LOVE the plan.
58 posted on 02/11/2004 2:22:21 PM PST by phil_will1
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To: labard1
Yet when we now buy things, our dollar bills are both subject to the same new federal sales tax. You should be happy about that. I will not be, because I have been taxed on income when I earned my dollar bills and taxed again when I spent them, whereas you have been taxed only when you spent your dollar bills. I'm not going to like your tax plan.

That's too bad for you, because you would be at no disadvantage under the new plan while holding back everyone else for the future.

Think also about the advantage you would get, in addition to what the young person with no savings would have: no capital gains taxes on your long-term (or short-term, for that matter) investments, including sale of a home. Any deferred income plan would be completely free from income taxes.

59 posted on 02/11/2004 2:23:26 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: Gorjus
However, just what is being sold? If I have sold my time and expertise, then my paycheck is my sale price. Just because I choose to invest that rather than consume it doesn't change my sale price. What I do with the money makes it an income issue, not a sale issue since that sale is complete when I provide it and am paid, not when I decide what to do with the income from that sale.

I'm not quite sure what you are asking. Could you please clarify?

60 posted on 02/11/2004 2:31:08 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: phil_will1
phil_will1 wrote:
Our history is just the opposite. The Tax Reform Act of 86 flattened the rates to 3 levels, I believe, and eliminated many of the deductions in the name of simplicity. The lobbysists thought that they had died and gone to heaven. They immediately went to work reinstating all the old preferences (and then some) and billed their clients for that time, of course. The 86 TRA should have been labelled the tax lobbyists full employment bill. The mess that we have today is the 86 TRA amended hundreds of times and it is far worse than the system before 86. The trend toward increasing complexity and spiralling compliance costs with an income tax is inescapable.
Actually, I'd agree with your last sentence if you had written: "The trend toward increasing complexity and spiralling compliance costs with any federal tax is inescapable."

Do you honestly think all those lobbyists are going to just evaporate or go find other work after the Fair Tax is implemented? If you believe that, I have a bridge to sell you.

Give those lobbyists a few years lobbying the social engineers and class wariors we have in the Congress and we'll have a really complicated, screwed up sales tax system to replace our really complicated, screwed up income tax system. That will be some improvement there.

That's my first major issue with the so called "Fair Tax".

Unless we throw out the bums in Congress who have foisted this unwieldy income tax code on us, changing to what will become an equally unwieldy sales tax code probably isn't a good solution. The compliance costs for businesses to sort out what will ultimately be different tax rates on different goods could easily far exceed the compliance costs we have today with the income tax system.

Fair tax supporters ignore the history of our Congress and of the lobbyists in Washington and fail to project the effects of those groups on their proposed "fair tax" system.

61 posted on 02/11/2004 2:32:06 PM PST by cc2k
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To: kevkrom
Why not? Do you subscribe to a static model that says that tax cuts equals less revenue?

No. Nor do I subscribe to a static model that says a 23% NRST will remain magicly "revenue neutral" year after year after year...

The economy is much too dynamic for that...

As screwed-up and convoluted as your snake-oil tax "reform" scam is, I'd think that you'd at least put SOME effort into adjusting the numbers to reflect changing economic conditions.

62 posted on 02/11/2004 2:32:10 PM PST by Willie Green (Go Pat Go!!!)
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To: kevkrom
You're changing the facts. In my example I merely own a pile of dollar bills. On those facts I get screwed. Perhaps in the interests of the greater good of society, but personally screwed nevertheless. That's the real transition problem you need to face.
63 posted on 02/11/2004 2:33:11 PM PST by labard1
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To: labard1
You're changing the facts. In my example I merely own a pile of dollar bills. On those facts I get screwed. Perhaps in the interests of the greater good of society, but personally screwed nevertheless. That's the real transition problem you need to face.

I suppose, but seriously, who just sits on piles of bills? The money is usually invested in some way, shape or form, with any gains on that investment currently subject to tax. Without an income tax, you would have an increased buying power with the same investment because you would get all of it -- no cutting the IRS in on a share -- when you cash in on it.

I suppose someone who just stuffs money in their mattress won't get those benefits, but even still, they are not hurt by the plan.

64 posted on 02/11/2004 2:36:01 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: Willie Green
"I can't think of anything that's any of your goddam business."

My, my, aren't we getting testy now, Willie? My question was based on my experience that most people who take the time to look at this proposal grasp its advantages rather quickly. If they don't, they just move on.

You, however, belong to a different group. You and LewisLynn have been bashing the proposal for several years now. If your objection was simply that it was a bad idea, you would have moved on by now. The passion and emotion in your posts (shills, none of your goddam business) reveals a deeper issue with you. You obviously feel very threatened by the idea. If you were as confident that it was a bad idea as you claim, you would not feel so threatened.

Everyone that I have ever met who refuses to acknowledge any of the many benefits has some vested interest in the current system. Anyone who keeps offering the same lame objections after they have been rebutted repeatedly obviously has a hidden agenda.

You don't want to reveal that, and that is fine, but this post is for everyone else on this thread. Please note the emptiness of Willie's arguments, in that he has to resort to insults and name calling.
65 posted on 02/11/2004 2:36:30 PM PST by phil_will1
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To: kevkrom
kevkrom wrote:
The rebate is not income-related, you get the same amount as everyone else (well, ok, different rates for adults and children) just by virtue of being a US citizen who is not incarcerated.
In the currently proposed legislation, that's true. How long before the lobbyists and social engineers in the Congress change that?
kevkrom wrote:
The actual amount of the rebate wouldn't be sufficient to live on... let's take that same example of $14,000 as the poverty line for a family of four. That's an annual rebate of $3,220, or $268 a month.
And explain to me again how sending a check to every household in the nation advances conservative principles.

You are proposing making everyone in this country at least somewhat dependent on the federal government for their monthly income. The amount of those checks will be a political football. DemocRATS and their leftist friends will insist that it isn't fair that the checks are so small, especially during an economic downturn. They will also point out how unfair it is that Bill Gates and all of Dick Cheney's rich friends at Haliburton get "refund" checks that they don't really need.

This is my second big issue with the so called "Fair Tax" proposal.

kevkrom wrote:
The alternative for a rebate is exempting certain items, but then you just open up the special interests and social engineering can of worms again.
You haven't detailed exactly how that can of worms is going to be closed. Does part of the so called "Fair Tax" plan make lobbying illegal? Is there a provision that expells all current members of Congress and all current Senators and prohibits any future members of those bodies from any "social engineering" activities?
66 posted on 02/11/2004 2:41:15 PM PST by cc2k
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To: Willie Green
Nor do I subscribe to a static model that says a 23% NRST will remain magicly "revenue neutral" year after year after year... The economy is much too dynamic for that.

You're overlooking the fact that regardless of the dynamics of the economy, consumption is very stable year-in and year-out. In lean times, people dip into savings or borrow -- in better times, they retire debt and save. But consumption shows much less variation than the economy at large. This is how the 23% rate can still be within a narrow enough window to stay revenue-neutral. It would take a trend lasting longer than a couple of years to change that materially.

67 posted on 02/11/2004 2:41:48 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: cc2k
You haven't detailed exactly how that can of worms is going to be closed. Does part of the so called "Fair Tax" plan make lobbying illegal? Is there a provision that expells all current members of Congress and all current Senators and prohibits any future members of those bodies from any "social engineering" activities?

Nope, it's up to all of us outside the Beltway to make sure that it stays that way. The NRST provides a blank slate to start from -- but there's no point introducing problems now just because Congress may be able to do so later.

68 posted on 02/11/2004 2:44:08 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: cc2k
Unless we throw out the bums in Congress who have foisted this unwieldy income tax code on us, changing to what will become an equally unwieldy sales tax code probably isn't a good solution. The compliance costs for businesses to sort out what will ultimately be different tax rates on different goods could easily far exceed the compliance costs we have today with the income tax system.

That would make business owners a natural constituency to fight any such tinkering. Congress loves to tinker, but they also like their own jobs better.

69 posted on 02/11/2004 2:46:10 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: cc2k
And explain to me again how sending a check to every household in the nation advances conservative principles.

Easy -- by holding to the fact that the essentials of life are not subject to taxation by the government. But rather than have a one-size-fits-all draconion set of rules and regulations, give an across-the-board credit for what would be spent of subsistence spending and let people decide for themselves how to use it.

Sounds pretty conservative to me.

70 posted on 02/11/2004 2:48:40 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: cc2k
"The trend toward increasing complexity and spiralling compliance costs with any federal tax is inescapable."

I disagree. The primary source of complexity with our income tax system is in the area of deductions. Depreciation, holding periods, floors and ceilings on various types of deductions, the AMT, etc, etc, etc. Therefore removing the entire area of deductions is a MAJOR step toward simplification. Sales taxes are relatively simple. The biggest problem that we face today in that area is related to differences between different taxing jurisdictions and that situation would be improved because there are incentives for states to "harmonize" their taxes with the FairTax.

In addition, those of us who support the FairTax would vehemently fight attempts to complicate it. Did you notice the responses to the gentleman on this thread who was concerned about being taxed when he spent his savings? In addition to the fact that he is not in fact being disadvantaged by having the taxes that he pays become more visible, there is also the problem of complexity if we were to make an exception to win his support.
71 posted on 02/11/2004 2:50:07 PM PST by phil_will1
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To: phil_will1
You, however, belong to a different group.

Yep. I've been a FReeper "Since May 29, 1998".
I've posted a total of 5,817 threads and 25,759 replies on a wide variety of topics.
Of all the threads I've started, I can't remember any that were specificly anti-NRST.
For the most part, I'm content to promote a relatively low (10~15%) flat-rate revenue tariff on imported goods in conjunction with a revenue neutral reduction in the corporate income tax. And there are many other issues that interest me as well.

I don't focus on persecuting you paranoid NRST shills as much as you imagine. But having wasted too much of my time wading through your bilge in the past, I feel an obligation to warn others about what a hoax it actually is.

72 posted on 02/11/2004 2:54:34 PM PST by Willie Green (Go Pat Go!!!)
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To: Willie Green
As a "Go Pat Go" person, you of all people should love an NRST. Currently, companies that import goods into the US do not pay any income taxes (the actual importers do, but let's talk about the producers here). This gives them a huge price advantage over domestic businesses, whose prices are inflated by US taxes and regulations. A conservatively low estimate on the amount of final product price that is due to federal taxes is 20%.

The NRST would level that playing field. Domestic goods could cost 20% less and still keep their same profit margins against foreign goods. The same holds true for exports -- US goods would leave the country 20% cheaper than before, either providing a higher profit margin or larger market share in foreign markets.

Both cases mean more and better paying domestic jobs, particularly in areas near and dear to your heart, such as manufacturing.

Instead, you advocate raising prices via a tariff and keeping a hidden corporate income tax that makes American goods less competitive at home and abroad. Are you really an "America-first" type?

73 posted on 02/11/2004 3:01:25 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: kevkrom
Unfortunately, you're just wrong. My dollar bills get taxed when earned and again when spent. Your dollar bills get taxed only when spent. No way is that fair.

I'm using the dollar bill example to illustrate the principle as clearly as possible. Complicating it just confuses the analysis.
74 posted on 02/11/2004 3:04:28 PM PST by labard1
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To: Willie Green
I've posted a total of 5,817 threads and 25,759 replies on a wide variety of topics.

Completely off-topic, but where do you find that info? I'd be curious to see my own stats...

75 posted on 02/11/2004 3:05:01 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: kevkrom
Corporate income taxes are NOT a cost that can be passed along to the consumer. This is because the tax obligation can only be determined after sales have been transacted and costs have been deducted from revenues. Corporate Income tax is imposed only on the profit that is made, IF a profit is made.

In a competitive free market, there is no guarantee of either sales or profit. Thus there is no guarantee that there will be a Corporate Income Tax obligation to "pass along" to the consumer.

NRST advocates who insist that corporate income taxes are "embedded" in the sales price of a product are just plain wrong. This assumes that companies can dictate market price in order to cover any costs that they incur when price is actually determined by supply and demand in a competitive market. Any attempt to raise the product price to accomodate the income tax would have to overcome lower priced product from competitors who did not incompetently attempt to incorporate such "costs" in their pricing strategy. The result would be that the company that attempted to "pass along" the tax would actually lose sales volume, possibly even to the point of losing profitablility. Conversely, the lower priced competitors who did not attempt to "pass along" the tax would gain sales volume and enhance their profitability.

The skewed logic utilized by NRST advocates to claim that corporate income tax is paid by the consumer is completely bogus. To accept their convoluted logic is to deny how businesses actually operate in a competitive market. Further evidence of corporations' inability to "pass along" their income tax obligation is published every day in the business section of our nation's newspapers: "ABC Corporation fails to meet 3rd quarter expectations" or "XYZ Inc. incurs 2nd quarter loss". Once again, with future sales and tax obligations (if any) being unknown, it is IMPOSSIBLE for companies to "pass along" their income tax obligation to the consumer.

The Ivory Tower "experts" who concoct this theory are in denial of how business actually operate in a competitive free market. Their fundamental assumption that companies can dictate the market price of their product to accomodate income tax liability is fallacious and reflective of marxist influence.

76 posted on 02/11/2004 3:08:25 PM PST by Willie Green (Go Pat Go!!!)
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To: labard1
Unfortunately, you're just wrong. My dollar bills get taxed when earned and again when spent. Your dollar bills get taxed only when spent. No way is that fair.

And your dollar bills, under the current system, are taxed both when earned and spent. No difference to you. You are not harmed in any way by the transition.

But to be against such fundamental reform that doesn't hurt you because someone else might do better off than you is a lousy attitude.

And your hypothetical is a bad example, no matter how much you're trying to simplify. It points out the worst possible case. And even in those conditions, the NRST still works out OK for you -- just because it works out better for others doesn't make it less fair or right. You have the same opportunity as anyone else under the new system -- take that lump of cash and invest it to see tax-free growth. Then you too will have new dollar bills that are untaxed when earned.

77 posted on 02/11/2004 3:12:51 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: kevkrom
Completely off-topic, but where do you find that info? I'd be curious to see my own stats...

On the "Latest Posts" page, click on your own name at the very top of the page, next to where it says "My Mail" or "My Comments"

78 posted on 02/11/2004 3:13:55 PM PST by Willie Green (Go Pat Go!!!)
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To: Willie Green
Corporate income taxes are NOT a cost that can be passed along to the consumer.

That is the funniest thing I've rad in a while, thanks.

NEWSFLASH: all taxes are paid by individuals in the form of higher prices, lower wages, or lower return on investment. Corporations do not pay taxes, they merely collect them. Plus, all of the additional costs involved in tax compliance and other activites related to minimizing tax liability.

79 posted on 02/11/2004 3:16:11 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: Willie Green
On the "Latest Posts" page, click on your own name at the very top of the page, next to where it says "My Mail" or "My Comments"

Thanks! Pretty few new threads (34), but 7,493 replies... I have been busy from time to time.

:)

80 posted on 02/11/2004 3:17:56 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: kevkrom
Since you've been a member since Nov 24, 1998, you probably have a few more posts than that.
I think that data is only available going back to the major software/database revision we had sometime back in '99 or so. Nothing available from the "old" forum. The exact date was mentioned on a Forum Update thread when this little statistic was introduced a month or two ago, but I forget what that date was.
81 posted on 02/11/2004 3:28:39 PM PST by Willie Green (Go Pat Go!!!)
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To: Willie Green
Since you've been a member since Nov 24, 1998, you probably have a few more posts than that. I think that data is only available going back to the major software/database revision we had sometime back in '99 or so. Nothing available from the "old" forum. The exact date was mentioned on a Forum Update thread when this little statistic was introduced a month or two ago, but I forget what that date was.

Probably true. I vaguely remember the switchover. That was a fun time of flamewars between the Keyes and Buchanan supporters, I recall.

82 posted on 02/11/2004 3:30:09 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: kevkrom
Under the current system there is NO FEDERAL SALES TAX, so my income is taxed by the Feds when earned but NOT when spent. Don't try to convince me that I'm not harmed by the new system in my hypothetical.

My hypothetical was not my personal facts, but INTENDED to be the worst case. There are many retired folks who are close to those facts, and those folks vote.

My own personal view is that a federal sales tax (to replace ALL income and payroll taxes) is not a bad idea if the transition problems are dealt with in a sensible way. But I assure you that retirees whose facts approach my hypothetical will be up in arms, and if you don't have any better answer than to denounce their "lousy attitude" you can't sell your idea.
83 posted on 02/11/2004 3:34:33 PM PST by labard1
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To: labard1
You are no more harmed by the Fair-Tax than you were when Bush passed his tax-cut. The dollars you earned prior to said tax cut were taxed at a higher rate then the dollars of the worker who started earning dollars after said tax cut.

84 posted on 02/11/2004 3:39:20 PM PST by free me (Fight Socialism - Support the Fair Tax! (NRST))
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To: labard1
Under the current system there is NO FEDERAL SALES TAX, so my income is taxed by the Feds when earned but NOT when spent. Don't try to convince me that I'm not harmed by the new system in my hypothetical.

That's what the politicians love about the income tax. So much of it comes in the form of hidden taxes on every good or service that it looks much smaller than it really is. The truth is that you're paying 20-40% more than you have to for everything you buy because of the effect of income taxes. You've got corporate income taxes, accounting costs, human resources costs for administering tax-deferred or pre-tax programs, employer's share of FICA taxes on payroll, and so on and so on. Most of these taxes pile up through the stages of production.

No, there is no federal sales tax. But the income tax acts like a VAT -- all the NRST will do is replace the hidden taxes with explicit taxes. Final prices should remain roughly neutral after factoring in both the actual tax savings plus administrative savings.

85 posted on 02/11/2004 3:41:11 PM PST by kevkrom (Ask your Congresscritter about his or her stance on HR 25 -- the NRST)
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To: kevkrom
That was a fun time of flamewars between the Keyes and Buchanan supporters, I recall.

I don't recall any such flamewar.
In fact, while I voted Buchanan/Reform in the Y2K general election, I also voted for Keyes in the Y2K Michigan GOP primary. Of all the conservative candidates running that year, I thought Buchanan and Keyes had the most in common. If Keyes would have received the GOP nomination instead of Dubya that year, I probably would have voted for him instead of PJB in the general election.

Nope, I thought I got along well with the Keyes supporters.
Same with the Quayle, Forbes, Bauer and Smith supportors.
But those further to the left (Nader, Gore, McCain, Bush, Browne, Hagelin) usually instigated greater conflict.

86 posted on 02/11/2004 3:54:24 PM PST by Willie Green (Go Pat Go!!!)
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To: kevkrom
kevkrom wrote:
Nope, it's up to all of us outside the Beltway to make sure that it stays that way. The NRST provides a blank slate to start from -- but there's no point introducing problems now just because Congress may be able to do so later.
Well, we haven't done a very good job of it with the income tax system. There's no reason to believe that it will be any better with a sales tax system.

Perhaps you Fair Tax supporters would do better if you proposed a major simplification of the existing income tax code and a 5 year freeze on changes to that code. If we could hold the current system unchanged for that period, I might believe that an alternative system could also be held relatively stable for the long term.

Perhaps it's time to pass the entire 1986 tax simplification act again, this time with a committment to holding the system stable like that for at least 5 to 10 years.

In the absense of a real demonstration of a committment by the Congress to resist the temptation of the lobbyists and social engineers, I don't see any hope that a sales tax system would be any better.

The fact that the "fair tax" proposal doesn't repeal any current "social engineering" excise taxes is also a bad sign to me. We have lots of excise taxes on the sale or manufacture of a wide variety of things. Many of these taxes are more about social engineering than they are about revenue. If "fair tax" supporters are serious about doing away with social engineering in the tax system, they should also be calling for a repeal of the "gas guzzler" tax, tobacco taxes, taxes on alcohol, federal taxes on fuel, etc. The fact that the "fair tax" doesn't repeal these taxes is further indication that there is not enough committment to doing away with "social engineering" in the tax system.

kevkrom wrote:
That would make business owners a natural constituency to fight any such tinkering. Congress loves to tinker, but they also like their own jobs better.
The way for the Congress and the lobbyists to get around that is to make changes that affect relatively few "tax collection points." A higher tax on luxury automobiles and trucks would only affect a few businesses. A higher tax on boats and boat supplies would only affect a few businesses. After severa dozen of these relatively harmless tax system adjustments, we would have a big mess that resembles the current income tax system.

Again, a real demonstration to keeping the tax code stable for a reasonably long period would go a long way toward winning my support for this. Without such a demonstration, I'll take a system that I (somewhat) know and understand that will be tinkered with ad infinitum over a system that I don't know and don't fully understand the ramifications of that will also be tinkered with ad infinitum.

We need a committment to long term tax system stability much worse than we need a fundamental change in the type of tax system we have. We also need some committment to reducing the absolute size and influence of the federal government, but there isn't any support for that from either of the two parties currently sharing power in our government.

Actually, the so called "Fair Tax" will give the federal government a one time windfall/growth spurt. As the cost of goods and services falls by the estimated 30% or more that "Fair Tax" supporters claim, federal budget dollars will buy that much more goods and services. Since the "fair tax" is revenue neutral, that windfall won't be refunded to the taxpayers, but rather, it will be spent on more goods and services for the government. That doesn't sound like a positive thing for conservatives who support smaller government. Actually, for Republicans who like big government solutions, it's probably a good thing, but I'm more conservative than Republican.

kevkrom wrote:
Easy -- by holding to the fact that the essentials of life are not subject to taxation by the government. But rather than have a one-size-fits-all draconion set of rules and regulations, give an across-the-board credit for what would be spent of subsistence spending and let people decide for themselves how to use it.

Sounds pretty conservative to me.


You still haven't explained how you plan to deal with the political ramifications of sending checks to everyone every month. You haven't even acknowledged that you understand the fundamental problem with this.

For many families, that check is going to be a significant portion of their monthly budget. The pressure from "progressive" politicians to deliver more dollars to "working families" and to screw "the rich" will be applied to those checks. If we assume for a moment that you are correct and there won't be any playing with tax rates for social engineering purposes (a long shot, but I'll give it to you for this paragraph), then manipulating the refund checks is really the only outlet for social engineering types. There are two problems with this.

First, the calculations are based on figures and statistics from various executive branch bureacracies. So, a "progressive" administration could arrange to cook the books, or maybe fundamentally change the way those figures are calculated, and as a result change the amounts (and possibly even the distribution) of those checks.

The other problem is that there will always be political hay to be made by altering the formulae and directing more money toward your constituencies and away from your oponents constituencies. So, there will undoubtedly be proposals to increase the ammount of the checks for people below a certain income level, and eliminate them for people above a certain income level. Or proposals to increase the "child credit" so that families with children get more. Or proposals to add 10% to your refund if you don't buy any tobacco products. Or proposals to take away your refunds for a year if you buy an SUV. There is no end to the mischief that can be conceived here.

87 posted on 02/11/2004 3:57:18 PM PST by cc2k
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To: free me
You're right that no system can produce perfect fairness, and requiring that standard would produce total paralysis, and thus cannot be taken seriously.

I'm only talking about very big differences.
88 posted on 02/11/2004 4:03:58 PM PST by labard1
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To: phil_will1
phil_will1 wrote:
The primary source of complexity with our income tax system is in the area of deductions. Depreciation, holding periods, floors and ceilings on various types of deductions, the AMT, etc, etc, etc. Therefore removing the entire area of deductions is a MAJOR step toward simplification.
That's because those are the areas where the lobbyists apply the most pressure, and those are the areas where the social engineers in the Congress make the most changes.

In a "fair tax" environment, those lobbyists and social engineers will move to other areas. They will adjust/complicate/improve the "refund" structure to make it more "fair" for "working families" and make "the rich" pay "their fair share of the burden." And they will change rates and/or implement other excise taxes and "refundable excise tax credits" to encourage sales of certain goods and services and to discourage the sales of other goods and services.

Until you can explain to me how you can get rid of the lobbyists and social engineers, you will have to explain exactly what you believe the lobbyists and social engineers will be doing and how you plan to stop or at least control them. I don't believe that they will just go away.

As I said, the fact that the "fair tax" proposal doesn't repeal and eliminate other federal excise taxes is a definite indication of where the social engineers and lobbyists will be focusing their energies in a "fair tax" environment.

phil_will1 wrote:
In addition, those of us who support the FairTax would vehemently fight attempts to complicate it.
Perhaps you would do well to prove your resolve by fighting for simplification of the current system and fighting any attempts to complicate the current system. If you can show me some success in that area, I will have a much better impression of your potential to accomplish that stability in a "fair tax". Without a real demonstration of a committment to simplification and stability, you won't convince me.

Many of the sponsors and supporters of this "fair tax" legislation also voted for most (if not all) of the needless complications in our current tax system. John Linder likes to point out how many thousands of changes have been made to the tax code since the 1986 Tax Simplification Act. But he doesn't like anyone to ask him exactly how many of those changes did he vote in favor of. The answer to that question is very important to this debate because a committment to stability is a very important part of this proposed change.

I'm not going to be impressed by a politician who trys to say, "Trust me, I won't screw this new system up as badly as I screwed up the old system."

89 posted on 02/11/2004 4:13:30 PM PST by cc2k
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To: kevkrom
"Corporate income taxes are NOT a cost that can be passed along to the consumer."

"That is the funniest thing I've read in a while, thanks."

This is the same stuff that he and LewisLynn were posting about the FairTax a couple of years ago. They were corrected then, but it obviously didn't take. This is really very simple. Let me break it down for you.
(1) Businesses exist to make a profit.
(2) A profit is what remains of your sales revenues after covering your operating costs - ALL of your operating costs.
(3) Taxes and the compliance costs thereon, are operating costs.

Using Willie's convoluted logic, businesses don't really have a clue as to how to price their products, because they don't know until after the sale what their costs are. Taxes are just as predictable as most business expenses are.
If you can't predict taxes, there are quite a few other operating expenses that you can't predict.

Does that put this loopy logic to bed once and for all? Of course not. Willie and Lewis Lynn won't let rationality and economics get in the way of bashing the proposal.


90 posted on 02/11/2004 4:14:14 PM PST by phil_will1
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To: labard1
Point taken. But the reality, (as opposed to your original hypothetical), is that most savings accumulated over any period of time are in either tax-deferred accounts, real property or accounts where the earnings are tax free but the contributions are after-tax.

So I don't think many people would complain about the unfairness. On the other hand, if you or anyone else comes up with a way to mitigate it, well so much the better.
91 posted on 02/11/2004 4:14:51 PM PST by free me (Fight Socialism - Support the Fair Tax! (NRST))
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To: kevkrom
OK, you've convinced me you have a respectable first answer. I'm very skeptical that the factors you mention equal anything like the full Federal Sales Tax, but it's a start. And you don't need to establish total fairness, that's never the test.

Unfortunately, your next burden is how to sell your basic point to a public that lacks economic sophistication. They really believe half the social security taxes are borne by the employer. That's why Bush gave his dividend tax break (15% rate) to shareholders, rather than giving a deduction to corporations, which would be a more sensible regime under the current tax code. I know you're right, but how can you possibly explain it to economic illiterates, who, alas, constitute a majority of voters in our fair land?
92 posted on 02/11/2004 4:21:22 PM PST by labard1
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To: labard1
"I know you're right, but how can you possibly explain it to economic illiterates, who, alas, constitute a majority of voters in our fair land?"

I had the exact same concern when I found out about this a couple of years ago. What I have discovered, however, is very encouraging. We don't have to convince a majority of voters to get political momentum. Since most elections in our system are relatively close, an issue that affects the voting pattern of a relatively small proportion of the electorate (such as 3 - 5%)gets the attention of candidates. We are seeing evidence of that here in Georgia. We now have 5 of 8 House members (all Republicans) and both US senators signed onto the bill. The reason for that is that Georgia voters understand the proposal more than most Americans and it is seen by politicians as one that moves votes - even if the numbers of votes are not huge.
93 posted on 02/11/2004 4:32:47 PM PST by phil_will1
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To: NYFriend

How are commodity investments handled?

Same as any investment, transaction fees and broker commisions are taxed, the capital invested is not.

You do not pay the NRST until you purchase at the retail register for consumption as opposed to production/investment. At the retail register all products are treated equally, (i.e. taxed once but only once.)

94 posted on 02/11/2004 5:36:53 PM PST by ancient_geezer (Equality, the French disease: Everyone is equal beneath a guillotine.)
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To: kevkrom
I'm not quite sure what you are asking. Could you please clarify?

Your comment was that the tax to be paid depended on what someone would do with the money (not taxed if it's invested, etc.), not the actual sale. On that basis, I maintain this is still an income tax, not a sales tax. It's a tax on what you do with the money after the sale itself is completed (keep it, invest it). Money at that point is income, not a sale.

For me, the key value in a sales tax is if it equally applies to all sales. The tax (and tax rate) should be the same if I sell an hour of my time, or buy a candy bar. When money earned by providing a service someone wants to pay for it taxed differently than a candy bar, it's still an income tax with - if the low-income exclusions still apply - an even worse progressive structure than the current income tax, especially after a year of Democratic control of taxes, when the exclusion will be up so that about 60% of the people pay no 'income' (or pseudo-'flat') tax at all.
95 posted on 02/11/2004 5:38:47 PM PST by Gorjus
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To: labard1

In short, this proposal would subject all current assets already taxed under current law to a brand new sales tax on all purchases.

Actually under the current system that is when you pay the taxes embedded in prices now. The premise of this article. The difference being, under the NRST you will recieve an explict receipt for the tax you are paying. Under the current income/payroll tax system you have little or no idea what the tax burden is.

96 posted on 02/11/2004 5:40:47 PM PST by ancient_geezer (Equality, the French disease: Everyone is equal beneath a guillotine.)
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To: Willie Green

Hey! Why are the shills still claiming 23% when the article says it's 28% ?

By law the tax is generally remitted by the seller, 23% of total payment = 29.87% + retail price. Same amount either way it is figured.

The percentage is calculated from the perspective of the Seller who is held liable for the NRST under the legislation.

Secondly, we now pay 23% of gross income in income & payroll taxes, which are replaced by the 23% retail sales tax. Thus an apples to apples comparison is appropriate when comparing the two systems.

You would know that if you bothered to read and understand how the tax works.

H.R.25
SPONSOR: Rep Linder, John (introduced 01/7/2003)
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.


97 posted on 02/11/2004 5:48:53 PM PST by ancient_geezer (Equality, the French disease: Everyone is equal beneath a guillotine.)
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To: Texas Federalist

This "limit" that Hamilton talks about is well below 28%. I am wholeheartedly for reform, but can you point to any examples where a sales tax as high as 28% was ever successful? I think the FairTax needs to be about 10% or 12% if it is to work.

What programs would you like to get rid of so the tax rate can be that low?

23%........... Effective total federal tax rate with respect to consumption expenditure

14.91% ..... rate if Social Security and Medicare were eliminated
14% .......... rate if Nat'l Endowment for the Arts were eliminated
11.9%........ rate if Dept. of Education were eliminated
10% .......... rate if welfare were eliminated
9.8%.......... rate if foreign aid were eliminated
etc.

End the entitlements and Congressional spendfest, and the rate can drop.

98 posted on 02/11/2004 5:52:40 PM PST by ancient_geezer (Equality, the French disease: Everyone is equal beneath a guillotine.)
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To: Willie Green

Posing as "tax reform", the NRST (HR 2525) also represents a "land grab" where business interests are favored over individuals purchasing for their own use:

Same ole rhetoric, demands the same ole refutation to you Willy

Posing?

H.R.25
SPONSOR: Rep Linder, John (introduced 01/7/2003)
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.
Refer:
http://www.fairtax.org & http://www.salestax.org

Sure looks like tax reform to me.

Willy, how many years you going to continue with the same wornout irrational diatribe? You never change it or try even to clean it up to present a more coherent and rational argument for your postition. Just through it out there to bump a thread because you don't like seeing the NRST touted as a alternative to the income tax.

You continually throw it out inspite of the fact it has been totally refuted everytime you have posted it.

Now to answer your specific allegations:

This a significant inequity between individuals trying to buy their own new homes and landord/investors looking to buy the same single family dwelling as a rental investment.

ROTFLM(_|_)O!

Still playing rich man against poor man aren't you Willy.

You do know of course, that investors are home buyers and renters too, don't you?

Why don't you mention:

These factors more than overcomes any imagined advantage of investor over the homebuyer so that all homebuyers can become an investors too.

But then good socialists never consider becoming investors themselves now do they W.G.


Now, lets take a look at some of your points and see how they hold up:

  • A family purchasing their own new home house(residential land is not taxed) for $200,000 pays NRST at a tax-included 23% rate. This means that of the $200,000 paid, $154,000 goes to the seller, and the Gov't receives $46,000 in tax.
  • A typical family purchasing their own new house today has 25% or more of their gross income extracted by the Federal government before they even think about buying a new or even an older house. That is not even counting the tax costs and costs of compliance placed on businesses of an additional 20 to 30% and embedded in the price of the new house.  

  • A landlord/investor can exploit the business exemption of NRST and purchase the same new single family dwelling tax free as a rental investment for only $154,000. Tenants pay NRST on rent and Landlords act as tax collectors for the government
  • Of course that landlord/investor also pays the same tax on the house he lives in or rents before he can ever become an "investor/landlord" in the first place. Or do you figure such folks live in NY allies and sleep on park benches.

    Additionally, a buyer of an older home, is not charged the NRST, which is the case of most first time buyers of homes.

  • The $154,000 vs. $200,000 purchase price advantage that landlord/investors enjoy over individual personal homebuyers can be expressed two ways:
    • Landlord/investors enjoy a 23% discount compared to the individual personal home buyer.
  • Actually not, as the Landlord/invester pays the 23% tax on the home he lives in whether rented or purchased, the same manner as any other individual.

    Again untrue, the landlord/investor pays the same tax on the home he rents or buys new for his personal use. All individuals are treated the same under the NRST. Infact, because the individual receives the full benefit and control of his gross income, as opposed to merely after tax income under the current system. That plus the NRST prebate paid to ALL households provides an enhanced opportunity for everyone to become investors.

    Under the current Income/Payroll tax system, the total contribution of the federal tax system(including taxes in gross wage/salaries) to the price of retail consumption goods and services is 36% for taxes alone. Including cost of compliance at around $600billion/year, increases that percentage to about a 47% total burden with respect to current family consumption expenditure caused by the federal tax system as it exists today.

     


    Frankly, I'll be happy to pay 23% of the total payment for new goods and services, or as you would put it (30% added on) to the tax free price any day. Considering that I have available my full gross pay from which to accrue tax free growth of my savings and investments.

    Compared to what we are hit with now:

    We must . . . End Tax Slavery Now; Nov '97
    by Jarret B. Wollstein

    HOW MUCH DO YOU REALLY PAY?

         According to the Tax Foundation, in 1994 the average American paid 22.4% of his or her income in federal taxes, plus 11.8% in state and local taxes - 34.2% total.

         But that's just the beginning! Dr. James Payne of the University of California found that in addition to direct taxes we also pay huge, hidden taxes including:

         For every $1 we pay in direct taxes, we spend an additional $0.65 in compliance costs. And even that figure doesn't include the cost of import duties, license fees and other government regulations. For a typical U.S. family, the real cost of taxes and regulations is at least:

    Federal taxes              22.4% of income
    State & local taxes      11.8%
    Compliance costs        22.2%
    Regulatory costs         12.7%

    70.1% of your income is now consumed by government


    99 posted on 02/11/2004 5:55:47 PM PST by ancient_geezer (Equality, the French disease: Everyone is equal beneath a guillotine.)
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    To: Willie Green

    Anything you want to tell us about how you earn your living, Willie Green?

    I can't think of anything that's any of your goddam business.

    Then why do you figure it's the govenment's business? You post indicate you are satisfied with the income/payroll tax system in which all that become the governments business. Reportable once a year.

    100 posted on 02/11/2004 5:59:56 PM PST by ancient_geezer (Equality, the French disease: Everyone is equal beneath a guillotine.)
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