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.
Probably true. I vaguely remember the switchover. That was a fun time of flamewars between the Keyes and Buchanan supporters, I recall.
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.
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.
kevkrom wrote: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.
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.
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: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.
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.
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: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.
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.
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.
phil_will1 wrote: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.
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.
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: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.
In addition, those of us who support the FairTax would vehemently fight attempts to complicate it.
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."
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.)
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.
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.
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.
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:
- 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.
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 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.
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.
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:
- Compliance costs - record keeping, monies spent on tax planning, computers and software purchased to fulfill IRS requirements, etc.
- Enforcement costs - IRS audits, field investigations, service center corrections, criminal investigations, litigation, and forced collections.
- Emotional, moral and cultural costs - families forced onto welfare, time and creative energy lost figuring out how to avoid taxes, etc.
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
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.
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