Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

National Retail Sales Tax proposal gains momentum for real tax reform
News Target ^ | November 12, 2004

Posted on 11/12/2004 9:45:11 AM PST by Tumbleweed_Connection

If there's one thing to like about the Republicans, it's the fact that they support tax reform. In theory, at least. The party hasn't produced any meaningful tax reform in decades, but now there's talk of a revolutionary overhaul that could end taxes on the poor, eliminate the IRS, and greatly simplify taxes for all Americans. It would free up billions of dollars in productivity that are now wasted on filling out tax paperwork, crunching numbers, and arguing with the IRS over how much you already deposited on what date and for what purpose.

The Democrats, for some reason, don't like the national retail sales tax. I think they honestly just don't get the concept, because the national sales tax would eliminate taxes on the poor by sending every low-income wage earner a bonus check each year that covered the sales taxes for basic cost-of-living items like food, clothing and rent. The real tax payers, under this system, would be the big-time spenders: rich people who want to drive $85,000 Hummers or float around on million-dollar yachts.

Under the National Retail Sales Tax (also called the Fair Tax in a slightly different rendition) allows each individual to control how much tax they want to pay by controlling their spending. If you don't like to pay taxes, then you can choose to buy less stuff. If you choose to consume at a high level, however, you're going to pay your fair share of the federal budget.

As readers of this site know, I think the Bush Administration is a political and humanitarian disaster. But if it manages to pass meaningful tax reform, that would at least be one positive thing the administration will have accomplished. It's foolish to automatically disagree with everything the Republicans propose. Smart Americans evaluate each proposal, regardless of which party sponsored it. Sadly, though, I think many well-meaning Democrats are against this tax reform simply because the Republicans are behind it. And that's a bad reason to oppose a good idea.

It's time to stop taxing poor people and start making the wealthy consumers in society pay for their lavish lifestyles. The Fair Tax or National Retail Sales Tax is the way to make that happen. The political party that thought of it first doesn't really matter.


TOPICS: Business/Economy
KEYWORDS: fairtax; tax8reform; taxes; taxreform
Navigation: use the links below to view more comments.
first 1-5051-85 next last

1 posted on 11/12/2004 9:45:11 AM PST by Tumbleweed_Connection
[ Post Reply | Private Reply | View Replies]

To: Tumbleweed_Connection
..the national sales tax would eliminate taxes on the poor by sending every low-income wage earner a bonus check each year that covered the sales taxes for basic cost-of-living items like food, clothing and rent.

While I think the national sales tax is a viable substitue for the income tax, the procedure in the above sentence seems like trouble. If you send every low-income wage earner a bonus check, you're instituting a parallel income assessment scheme, with all of the complexity and likelihood for cheating we've come to know so well. Better to exempt food, rent to a certain level, clothes to a certain indexed level, and simply collect the tax than to collect and redistribute.

2 posted on 11/12/2004 9:49:52 AM PST by Pearls Before Swine
[ Post Reply | Private Reply | To 1 | View Replies]

To: Tumbleweed_Connection

Imagine the taxes TRex would have to pay to buy the Fly Squirrel II. :)


3 posted on 11/12/2004 9:50:52 AM PST by ProudVet77 (02NOV04 - America to Kerry "Your fired!")
[ Post Reply | Private Reply | To 1 | View Replies]

To: Pearls Before Swine

It's easier than that. The monthly poverty level is determined and the tax paid on that amount of purchases is calculated. This amount is then sent to each and every legal resident. Thus someone making and spending exactly the poverty level would pay zero net taxes. John Kerry would get some money to pay for snowboard wax. No one would have to report what they made.


4 posted on 11/12/2004 9:52:48 AM PST by KarlInOhio (In a just world, Arafat would have died at the end of a rope.)
[ Post Reply | Private Reply | To 2 | View Replies]

To: Tumbleweed_Connection; Taxman; Principled; Bigun; EternalVigilance; kevkrom; n-tres-ted; Poohbah; ..
A Taxreform bump for you all.

If you would like to be added to this ping list let me know.

John Linder in the House & Saxby Chambliss Senate, offer a comprehensive bill to kill all income and payroll taxes outright, and provide a IRS free replacement in the form of a retail sales tax:

H.R.25, S.1493
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 for additional information: http://www.fairtax.org, http://www.salestax.org & http://www.geocities.com/cmcofer/ftax.html


5 posted on 11/12/2004 9:55:16 AM PST by ancient_geezer
[ Post Reply | Private Reply | To 1 | View Replies]

To: ancient_geezer


What's the latest news for those who have a passing interest on the bill?

Is there any chance at all of this coming to a vote anytime soon?


6 posted on 11/12/2004 9:56:30 AM PST by Josh in PA
[ Post Reply | Private Reply | To 5 | View Replies]

To: Pearls Before Swine
Exemptions are a bad idea. If you exempt one thing, lobbyists will be hired to get other "essential" goods exempted. Pile on this exemption and that credit, and soon the Fair Tax looks like our current system, with it's arcane loopholes and unintended side-effects.

Under Fair Tax, EVERYONE will get a check sufficient to cover the estimated tax collected at retail on the basic necessities of life, not just low income earners. Therefore, no personal income reporting is even necessary, and there is no incentive for individuals to cheat.

Compliance will be reduced to making sure that businesses which are selling goods collect and remit the proper amount of tax, and it's much easier to audit one business than it's 10,000 individual customers.
7 posted on 11/12/2004 9:57:07 AM PST by MTOrlando
[ Post Reply | Private Reply | To 2 | View Replies]

To: Pearls Before Swine
Under H.R.25(Fair Tax Act), all legal residents will receive a monthly demogrant called the Family Consumption Allowence(FCA) equivalent to the FairTax paid on essential goods and services, also known as the poverty level expenditures. The FCA is paid in advance, in equal installments each month. The size of the monthly FCA will be determined by the government's Poverty Level for a particular family size, multiplied by the tax rate, and paid to all households regardless of income or actual expenditure. The HHS poverty llevel is a well-accepted, long-used poverty-level calculation that includes food, clothing, shelter, transportation, medical care, etc. See chart in Figure 1 below.

 

Figure 1: 2004 FCA calculation
Family
size

HHS annual poverty level

FairTax annual
consumption
allowance
(single person)
Annual rebate (single person)

Monthly rebate (single person)

FairTax annual consumption allowance
(married couple)

Annual rebate (married couple)

Monthly rebate (married couple)

1

2

3

4

5

6

7

8

$9,310

$12,490

$15,670

$18,850

$22,030

$25,210

$28,390

$31,570

$9,310

$12,490

$15,670

$18,850

$22,030

$25,210

$28,390

$31,570

$2,141

$2,873

$3,604

$4,336

$5,067

$5,798

$6,530

$7,261

$178

$239

$300

$361

$422

$483

$544

$605

N/A

$18,620

$21,800

$24,980

$28,160

$31,340

$34,520

$37,700

N/A

$4,283

$5,014

$5,745

$6,477

$7,208

$7,940

$8,671

N/A

$357

$418

$479

$540

$601

$662

$723

[ The monthly FCA for each adult is .23 * (HSS poverty level for a single person)/12 to assure no marriage penalty due to the manner in which the poverty level is dependant on family size. The monthly FCA for each child is .23 * (the incremental increase of HSS poverty level for a family with one child over no child) ] A. Geezer

A family of four, for example, could spend $24,980 per year free of tax because they will have received over the course of the year a demogrant totaling $5,745. $5,745 is the amount of sales tax paid on $24,980 in expenditures. That family spending double the "poverty level" or $49,960per year will effectively pay tax on only half of their spending and, therefore, have an effective tax rate of 11 ½ percent or half the FairTax rate.

The beauty of the FairTax is that you can control how much you pay in taxes. If you happen to save, invest or spend a portion on used [previously taxed] items, you can get your effective tax rate below 9%.

To illustrate examine the tax burden that a family of four will have at various annual expenditure levels as compared to that same family under the current tax law, (2004 income plus FICA/MC):

 

H.R.25 "The FairTax Act

Not only does every family receive a FCA based on family size, not income, but they will also receive 100% of their paycheck.

8 posted on 11/12/2004 10:00:07 AM PST by ancient_geezer
[ Post Reply | Private Reply | To 2 | View Replies]

To: Tumbleweed_Connection; All

I'm all in favor of NRST .. and absolutely against a flat tax... it sounded like the people at the GOPAC meeting in DC Monday want to push a flat tax; they seem to think it would be too difficult to administer a NRST... and they didn't take into consideration the benefits of a NRST which would basically lower the cost of goods and almost offset the cost of the sales tax.


9 posted on 11/12/2004 10:01:53 AM PST by Arizona Carolyn
[ Post Reply | Private Reply | To 1 | View Replies]

To: Tumbleweed_Connection

ping to read later


10 posted on 11/12/2004 10:02:20 AM PST by melbell (groovy)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Your Nightmare; lewislynn
Same sh!t, different day.


11 posted on 11/12/2004 10:03:25 AM PST by balrog666 (Lack of money is the root of all evil.)
[ Post Reply | Private Reply | To 8 | View Replies]

To: ancient_geezer; MTOrlando; KarlInOhio
Ohhh, I get it. Everyone gets an estimated poverty level tax rebate. Cute.

Sooooo 23% Federal, 5% State -- sounds about right. I'm on board.

This puts spending and taxing right out front where everyone can see it, every day. I like that.

12 posted on 11/12/2004 10:05:18 AM PST by Pearls Before Swine
[ Post Reply | Private Reply | To 8 | View Replies]

To: Josh in PA

What's the latest news for those who have a passing interest on the bill?

Is there any chance at all of this coming to a vote anytime soon?

Don't expect anything until the next session of Congress is well underway.

Committee hearings are to be held on the tax reform with focus on the Fair Tax proposal, according to DeLay, and we also need to hear from the President's proposed commission on tax reform, etc before substantive moves can expected to occur.

One factor that appears to be in the works is that HR25 is undergoing a full economic review by the Congressional Research Service. I expect a rate adjustment downward out of that, to bring the legislation in line with making President Bush's tax cuts permanent.

So there are a number of things going on in the background that need to be brought to successful conclusion to prepare for success in both the House & Senate.

13 posted on 11/12/2004 10:12:49 AM PST by ancient_geezer
[ Post Reply | Private Reply | To 6 | View Replies]

To: All

yes, and all the rebates will be handled through each individual state agency - the states are already set up for this since they handle welfare distributions-so the infrastructure is already in place, very simple to implement.


14 posted on 11/12/2004 10:14:46 AM PST by michaelbfree
[ Post Reply | Private Reply | To 12 | View Replies]

To: Pearls Before Swine

This puts spending and taxing right out front where everyone can see it, every day. I like that.

Should helps reduce that spending constituency old Walter Williams talks about when discussing the current income tax:

"So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?"

and turn them into budget freeks,

Hmmm!

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

15% ..... rate if Social Security and Medicare were eliminated
14% .......... rate if Nat'l Endowment for the Arts were eliminated
12%........ rate if Dept. of Education were eliminated
10%.......... rate if welfare & foreign aid were eliminated
etc.

So lets look at what the maximum it would take to fund those functions clearly authorized under Article I Section 8 of the Constitution, in current dollars:

http://w3.access.gpo.gov/usbudget/fy2001/guide02.html#Spending

Institute an across the board, Flat rate, single stage National Retail Sales Tax, which taxes all imports and domestic products with the same rate.

Replacing all current federal tax law with a retail sales tax would be 23% on new goods and services paid and receipted at the retail register. No hidden tax, no exceptions, exemptions everyone participates.

Such a tax acts in a natural manner to encourage the elimination of excess government functions through visibility of burden among all constituencies of the electorate.

The total federal government budget would move from $2,000 billions towards something less than $580 billions calculated.

The across the board federal tax rate on new goods and services would decline towards less than 6.7%.

As tax rate on sales decreases the economic burden on retail items, the sales volumes and growth in the economy would be tremendous allowing even further reductions in tax rates below that less than 6.7% theoretic level.

That is what I perceive as the ultimate achievements possible under a National Retail Sales Tax structured in the manner of the revenue bill H.R.25. Simple common sense applied to the principal of TANSTAFFEL,( no free lunch, everyone participates in paying their way in proportion to the benefit the extract from their consumption.) encourages the natural change in attitudes required of the electorate as regards the burden of government largess in their lives.

Thomas Hobbes from Leviathan

Hmmmmmm....... It's do able, with time and effort, once the blinders are removed from the electorate.

15 posted on 11/12/2004 10:19:34 AM PST by ancient_geezer
[ Post Reply | Private Reply | To 12 | View Replies]

To: michaelbfree

yes, and all the rebates will be handled through each individual state agency - the states are already set up for this since they handle welfare distributions-so the infrastructure is already in place, very simple to implement.

Actually the bill turns the job over to Social Security Administration which has an even better infrastructure to handle mass check mailings and electronic transfers now. They all ready have the proper database in Social Security number tracking, necessary to assuring only legal residents receive the FCA, is their football not the state's.

16 posted on 11/12/2004 10:24:48 AM PST by ancient_geezer
[ Post Reply | Private Reply | To 14 | View Replies]

To: Arizona Carolyn
they didn't take into consideration the benefits of a NRST which would basically lower the cost of goods and almost offset the cost of the sales tax.

That's because they know it isn't possible.

17 posted on 11/12/2004 10:27:07 AM PST by lewislynn (The meaning of life can be described in one word...Grandchildren)
[ Post Reply | Private Reply | To 9 | View Replies]

To: Pearls Before Swine
Ohhh, I get it. Everyone gets an estimated poverty level tax rebate.

If that's such a good idea why not increase the rebate to another magic level so even more people can live tax free?

18 posted on 11/12/2004 10:30:33 AM PST by lewislynn (The meaning of life can be described in one word...Grandchildren)
[ Post Reply | Private Reply | To 12 | View Replies]

To: ancient_geezer


If the bill starts moving along, I can visualize the Dems and media firing up a misinformation campaign on it in 2006.


19 posted on 11/12/2004 10:35:44 AM PST by Josh in PA
[ Post Reply | Private Reply | To 13 | View Replies]

To: Pearls Before Swine
While I think the national sales tax is a viable substitue for the income tax, the procedure in the above sentence seems like trouble.

Statement of John G. Wilkins, Managing Director,
Barcroft Consulting Group, on behalf of National Retail Federation
Testimony Before the House Committee on Ways and Means
Hearing on Fundamental Tax Reform

Mr. Chairman and Members of the Committee:

I am managing director of the Barcroft Consulting Group and I am here on behalf of the National Retail Federation. My statement reports on the findings of a study undertaken by PricewaterhouseCoopers ("PWC") for the National Retail Federation Foundation. I was principal author of that study, which examines the economic impact of substituting a national retail sales tax ("NRST") for the federal income tax.

~~~SNIP~~~

Conclusion

If a NRST is enacted, the U.S. economy would lag behind for at least three years and employment would dip by more than one million jobs. Beneficial effects would not be felt for at least five years after adoption. While it is admirable to seek a fairer and simpler tax structure to replace the incredibly complex income tax code, trading an income tax in for a national sales tax is an experiment that could bring serious harm to a flourishing national economy. Uncertain long-run benefits are far insufficient to risk the short-run setbacks in virtually all sectors of the economy.


20 posted on 11/12/2004 10:39:01 AM PST by Willie Green
[ Post Reply | Private Reply | To 2 | View Replies]

To: ancient_geezer

FairTax is growing longer legs! Fancy that!


21 posted on 11/12/2004 10:41:13 AM PST by Taxman (So that the beautiful pressure does not diminish!)
[ Post Reply | Private Reply | To 5 | View Replies]

To: Tumbleweed_Connection

I'd support the NRST over the other alternatives. It only requries one arbitrary calculation (percent of the sale) as opposed to the FTA which appears to be derived from several calculations that require an accountant to explain. I also think that the NRST is better than the flat tax because in effect, you only pay taxes when you can afford to. The down side of NRST for some will be the exemptions, and there will be exemptions if there's going to be any chance of getting it passed in Congress. If I were a politician, I'd lobby for the NRST and use exemptions as my bargaining chip to get others into my camp.


22 posted on 11/12/2004 10:41:24 AM PST by Chris_Shugart
[ Post Reply | Private Reply | To 1 | View Replies]

To: lewislynn
If that's such a good idea why not increase the rebate to another magic level so even more people can live tax free?

Haha. Your sarcasm is understandable, but there's no way that a flat-for-all tax would ever pass. There will be no change if the current no-tax or low-tax brackets for the low-income are not saved in some way.

23 posted on 11/12/2004 10:55:01 AM PST by Pearls Before Swine
[ Post Reply | Private Reply | To 18 | View Replies]

To: Willie Green
If a NRST is enacted, the U.S. economy would lag behind for at least three years and employment would dip by more than one million jobs.

This study doesn't come from what I'd call an unbiased source--the retail industry. If a sales tax were initiated without it being a full replacement for the current system, they'd be right, too--because it would simply be an excuse for higher taxes. But, I think a flat out assessment that the economy would shrink if taxes were collected in a different way isn't very convincing.

24 posted on 11/12/2004 10:57:05 AM PST by Pearls Before Swine
[ Post Reply | Private Reply | To 20 | View Replies]

To: All

So we'll have a national sales tax, a state income tax, a state property tax, and a state sales tax, not to mention all the state use taxes.

So what will my effective tax rate be now? 50%?

Yeah, this will be a great step forward.


25 posted on 11/12/2004 10:57:32 AM PST by skip_intro
[ Post Reply | Private Reply | To 1 | View Replies]

To: Pearls Before Swine
But, I think a flat out assessment that the economy would shrink if taxes were collected in a different way isn't very convincing.

The entire nation's financial planning (both business and personal) has been based on the current taxation structure. Such a radical shift can't possibly avoid being severely disruptive to those plans.

26 posted on 11/12/2004 11:02:46 AM PST by Willie Green
[ Post Reply | Private Reply | To 24 | View Replies]

To: skip_intro

So what will my effective tax rate be now? 50%?

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

 

The issue in tax reform is not the rate, it is how we are being taxed. How much is a separate issue to be addressed by reducing government to begin with.

 

Patrick Henry, Virginia Ratifying Convention June 12, 1788:

This is what we have now, and what the NRST repeals and corrects:

 

"As a matter of fact, what the income tax does — and this is the debate that I think we always try to get into in order to let you and him fight, see — and the people of this country are led down a path where the actual control of their resources, which in the end is the control over their will, is handed off to the government."

. . .

"The government then manipulates that will in order to destroy the freedom of our electoral system through the income tax structure, and we call the resulting slavery a free system."

"In point of fact, it is not as the founders understood, and the only way to restore real freedom is to give people back control over the income that they earn so that they won‘t, at the voting booth and in other phony issues, be subject to that manipulation."

- KEYES TRANSCRIPT (01/28/02)

 

"A hand from Washington will be stretched out and placed upon every man's business; the eye of the federal inspector will be in every man's counting house....The law will of necessity have inquisical features, it will provide penalties, it will create complicated machinery. Under it men will be hauled into courts distant from their homes. Heavy fines imposed by distant and unfamiliar tribunals will constantly menace the tax payer. An army of federal inspectors, spies, and detectives will descend upon the state."
-- Virginian House Speaker Richard E. Byrd, 1910, predicting the consequences of an income tax.

27 posted on 11/12/2004 11:10:26 AM PST by ancient_geezer
[ Post Reply | Private Reply | To 25 | View Replies]

To: ancient_geezer

Since I will still have to prepare state income tax forms, I'll still have a compliance cost. I'm unaware how regulatory costs would be affected by a "fair tax".

I do know that anyone who created a Roth IRA would be screwed, since all the money that was supposed come out tax free would now be taxed.


28 posted on 11/12/2004 11:14:51 AM PST by skip_intro
[ Post Reply | Private Reply | To 27 | View Replies]

To: lewislynn
If that's such a good idea why not increase the rebate to another magic level so even more people can live tax free?

The same could be said for the standard deduction and personal exemptions in the current tax code, which the FCA is analagous to.

29 posted on 11/12/2004 11:15:22 AM PST by kevkrom (Power corrupts. Absolute power corrupts absolutely. But it rocks absolutely, too.)
[ Post Reply | Private Reply | To 18 | View Replies]

To: Willie Green

The entire nation's financial planning (both business and personal) has been based on the current taxation structure. Such a radical shift can't possibly avoid being severely disruptive to those plans.

Absolutely, I certainly hope so:

 

http://www.economics.harvard.edu/faculty/jorgenson/papers/baker.pdf

Revised April 12, 1999.
THE ECONOMIC IMPACT OF FUNDAMENTAL TAX REFORM
by
Dale W. Jorgenson Harvard University
and
Peter J. Wilcoxen University of Texas, Austin

This paper was prepared for presentation at the
Baker Institute Conference
on Tax Policy Reform
Rice University Houston,
Texas November 6, 1998


page 21:


We have simulated the impact of implementing two different versions of a consumption tax at the beginning of 1996. The first is the Armey-Shelby Flat Tax. The Armey-Shelby proposal levies taxes on the difference between business receipts and the sum of business purchases and business payrolls. Labor income is taxed at the individual level. An important feature of the proposal is the system of personal exemptions at the individual level that we have described.

The second proposal we have considered is the National Retail Sales Tax. The tax base is the same as in our simulations of the Flat Tax. However, the method of tax collection is different. The Arrney-Shelby Flat Tax preserves the existing structures of the corporate and individual income taxes, but alters the tax base. The National Retail Sales Tax eliminates corporate and individual income taxes; retail establishments would collect the taxes. This would require a broad definition of these establishments to include real estate developers and providers of services, such as medical, legal, and personal services. Most important, no personal exemptions are provided.


PDF page 25-27:

5. Figure 7 compares the impact of the two tax reform proposals on investment. The impact of the Flat Tax in 1996 is to depress investment by 8.6 percent, relative to the Base Case. Investment recovers over time, eventually reaching a level that is only 1.7 percent below the Base Case in the year 2020. Substitution of the Sales Tax for existing income taxes generates a dramatic investment boom. The impact in 1996 is a whopping 78.5 percent increase in the level of investment that gradually gives way by the year 2000 to a substantial increase of 16.5 percent, relative to the Base Case.


6. Figure 8 compares the impacts of the tax reforms on exports, while Figure 9 compares the impacts on imports. It is important to keep in mind that net foreign investment, the difference between exports and imports in nominal terms, is exogenous in our simulations, while the exchange rate is endogenous. The Flat Tax results in a very modest decline in exports of 0.5 percent in 1996, relative to the Base Case, but exports recover rapidly and exceed Base Case levels in 1997, rising eventually to 4.6 percent above these levels in 2020. Imports initially rise by 2.0 percent, relative to the Base Case, in 1996, but this impact declines to only 0.3 percent by 2020. The Sales Tax generates a substantial export boom; the level jumps to 29.2 percent about the Base Case level in 1996, but declines by 2020, reaching 18.9 percent of this level. Imports in 1996 exceed the Base Case level by 2.5 percent, but fall to 1.3 percent below this level in 2020.


7. The inter-temporal price system provides the mechanism for re-allocations of resources in our simulations. Figures 10 and 11 give the impacts of the tax reforms on the prices of investment goods and consumption goods and services. Under the Flat Tax the price of investment goods drops by more that 6.8 per cent in 1996 and the price decline continues, falling only modestly to a little over six percent by 2020. The Sales Tax produces a reduction in investment goods prices exceeding twenty percent in 1996, rising gradually to between twenty-five and thirty percent over the period 2000-2020.

8. The implied subsidy to leisure time is equal to the marginal tax rate on labor income and would drop to zero when the individual income tax is abolished. Individuals sharply curtail consumption of both goods and leisure under the Sales Tax. Figure 12 shows that labor supply (and demand) jumps initially by thirty percent in 1996. This labor supply response recedes to a level of around fifeen percent by 2020. By contrast the Flat Tax generates an increase in both consumption and labor supply. The labor supply response is only two percent in 1996, but gradually rises to more than five percent by 2020.

9. Since producers would no longer pay taxes on profits or other forms of income from capital and workers would would no longer pay taxes on wages, prices received by producers under the Sales Tax, shown in Figure 13, would fall by an average of twenty percent in 1996. Figure 14 shows that prices received by producers would fall by an average of twenty-five percent by 2020. The impact of the Flat Tax on prices received by producers is much less dramatic. Prices decline in the range of six to eight percent for most industries in 1996 and five to seven percent by 2020.


30 posted on 11/12/2004 11:16:51 AM PST by ancient_geezer
[ Post Reply | Private Reply | To 26 | View Replies]

To: Tumbleweed_Connection

This whole national sales tax thing is silly. As much as I'd support it if it TOTALLY REPLACED the income tax, it just won't fly, and here's why:

If you tax a thing, you reduce it. It works with income to a degree, but people make money because they watch tv and have seriously nurtured an adiction to "stuff."


People would be somewhat more motivated to save their money rather than spend it, especially with a combined sales tax (in states with sales tax) that could easily approach 50%.

Television induced "Stuff Aquisition Syndrome" is what drives our economy. But massive tax at the till would curtail enough of it to create an economic catastrophy chain reaction.

If you tax consumer spending, but not income, you will get less spending. And less spending does not improve sales. Which would lead to layoffs and, ultimately, a complete implosion of our consumer driven economy.

The only way we will see a federal sales tax is if they keep all, or most, of the other taxes TOO.

In other words, it becomes a NEW tax.

No thanks...


31 posted on 11/12/2004 11:21:23 AM PST by RobRoy
[ Post Reply | Private Reply | To 1 | View Replies]

To: skip_intro

Since I will still have to prepare state income tax forms, I'll still have a compliance cost. I'm unaware how regulatory costs would be affected by a "fair tax".

You will note that state income taxes have been predicated and founded on the Federal Tax system, state income taxes are highly dependant upon the national law's existance and the IRS infra-structure supporting those laws.

With repeal of the federal income tax, most states will find it much more cost effective to go the same route as the NRST collecting their taxes in parallel with that system. In doing so the taxbase is double of what the income tax base is and the state tax rates on sales would about half of where they are now, covering revenues from state income taxes would bring state tax rates up to where you now see them.

The NRST is one big incentive for states to replace their own income taxes along with the federal move to do so.

32 posted on 11/12/2004 11:24:17 AM PST by ancient_geezer
[ Post Reply | Private Reply | To 28 | View Replies]

To: ancient_geezer
If I may be allowed to pick a little nit...

Where you post "TANSTAFFEL" should be "TANSTAAFL" (There Ain't No Such Thing As A Free Lunch)

33 posted on 11/12/2004 11:24:29 AM PST by Dementon (I hear the voices in my head, I swear to God it sounds like they're snoring...)
[ Post Reply | Private Reply | To 15 | View Replies]

To: ancient_geezer
Absolutely, I certainly hope so:

So you openly admit to a desire to severely disrupt and destabilize our entire economy???

Idiot.

34 posted on 11/12/2004 11:24:37 AM PST by Willie Green
[ Post Reply | Private Reply | To 30 | View Replies]

To: Pearls Before Swine

>>This puts spending and taxing right out front where everyone can see it, every day. I like that.<<

That is why I would like it. If I had my way, businesses would pay no tax. Only human beings that could fog a mirror would pay taxes. No hidden business taxes in the prices. 'Course, if you found yourself paying 85% at the till, there just "might" be a tax revolt.


35 posted on 11/12/2004 11:25:11 AM PST by RobRoy
[ Post Reply | Private Reply | To 12 | View Replies]

To: skip_intro

I do know that anyone who created a Roth IRA would be screwed, since all the money that was supposed come out tax free would now be taxed.

They are taxed under the current system now. Just through the back door in a way you don't see it.

Read:

DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?

by D. Sherman Cox J.D. L.L.M. Taxation


36 posted on 11/12/2004 11:26:47 AM PST by ancient_geezer
[ Post Reply | Private Reply | To 28 | View Replies]

To: Chris_Shugart
The down side of NRST for some will be the exemptions, and there will be exemptions if there's going to be any chance of getting it passed in Congress.

There are no exemptions. See post 8.

37 posted on 11/12/2004 11:27:22 AM PST by Dementon (I hear the voices in my head, I swear to God it sounds like they're snoring...)
[ Post Reply | Private Reply | To 22 | View Replies]

To: ancient_geezer

Here is a link on a Bloomberg commentary supporting tax reform and quoting Senator-elect DeMint.

http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_currier&sid=aO7VA_KAe50A


38 posted on 11/12/2004 11:37:14 AM PST by n-tres-ted (Remember November!)
[ Post Reply | Private Reply | To 5 | View Replies]

To: Tumbleweed_Connection

Come on baby I'm tired of talking
Grab your coat and let's start walking
Come on, come on
Come on, come on
Come on, come on
Don't procrastinate, don't articulate
Girl it's getting late, gettin' upset waitin' around

A little less conversation, a little more action please
All this aggravation ain't satisfactioning me
A little more bite and a little less bark
A little less fight and a little more spark
Close your mouth and open up your heart and baby satisfy me
Satisfy me baby

Thank ya, thankyaverrrymuch.


39 posted on 11/12/2004 11:40:16 AM PST by numberonepal (Don't Even Think About Treading On Me)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Pearls Before Swine
There will be no change if the current no-tax or low-tax brackets for the low-income are not saved in some way.

Especially if you never try it.

40 posted on 11/12/2004 12:01:50 PM PST by lewislynn (The meaning of life can be described in one word...Grandchildren)
[ Post Reply | Private Reply | To 23 | View Replies]

To: Pearls Before Swine
If you send every low-income wage earner a bonus check,..

That's not how it goes. The "bonus check" as they call it is a demogrant, or "prebate" of taxes to be paid on necessities.

Each and every valid SS card holder may choose to receive it.

The prebate is not in any way tied to income level. It is tied only to the family size of the valid SS card holders. I can get the prebate, you can get it (if you have a valid SSN), and Bill Gates can choose to get it.

Look here for an explanation.

41 posted on 11/12/2004 12:37:46 PM PST by Principled
[ Post Reply | Private Reply | To 2 | View Replies]

To: michaelbfree
and all the rebates will be handled through each individual state agency...

I think SSA handles sending the prebate.

42 posted on 11/12/2004 12:39:56 PM PST by Principled
[ Post Reply | Private Reply | To 14 | View Replies]

To: skip_intro
I do know that anyone who created a Roth IRA would be screwed, since all the money that was supposed come out tax free would now be taxed.

No. Folks who put $ into Roths will spend the same on taxes if we have an nrst or an income tax.

Today's prices contain a tax costs component of about 25%. It just isn't printed on any receipts. The nrst is about the same amount - and replaces the invisible tax.

There will be no change in purchasing power for Roth owners... they'll get exactly what they've always expected - but they'll receive their full paycheck with no federal deductions, they'll pay no payroll tax, they'll pay no tax on SS benefits, all their investments will grow tax free, and they'll be no death tax nor will their be a gift tax anymore.

Take a look at a short FAQ page and you'll smile.

43 posted on 11/12/2004 12:46:26 PM PST by Principled
[ Post Reply | Private Reply | To 28 | View Replies]

To: Tumbleweed_Connection
It's time to stop taxing poor people and start making the wealthy consumers in society pay for their lavish lifestyles.

Who does he think is paying for them and the fed gov now?

44 posted on 11/12/2004 12:50:07 PM PST by Camachee
[ Post Reply | Private Reply | To 1 | View Replies]

To: RobRoy
This whole national sales tax thing is silly.

Doubling the size of our economy is silly?

I'd support it if it TOTALLY REPLACED the income tax,

It does totally replace the income tax. It also eliminates payroll tax, self employment tax, capital gains tax, estate tax, gift tax, and it eliminates taxes on the necessities of life.

Under an nrst, our economy booms.

Go and search "economic impact. You'll see lots of research on the topic.

45 posted on 11/12/2004 12:52:27 PM PST by Principled
[ Post Reply | Private Reply | To 31 | View Replies]

To: Principled

Thanks, that looks like a great site.

As I said in my previous posts, I would LOVE a national sales tax. I just don't think it is gonna happen. Too many sacred cows would have to be slaughtered to make it happen.

Way too many.


46 posted on 11/12/2004 1:05:12 PM PST by RobRoy (Science is about "how." Christianity is about "why.")
[ Post Reply | Private Reply | To 45 | View Replies]

To: Principled
The prebate is not in any way tied to income level.

I get it, and understand how it operates: everyone receives it. I was focusing on its effect on the low-wealth group as effectively substituting for current low-bracket and EITC policies. The prebate makes the biggest difference for the smallest spenders, effectively making them tax free.

47 posted on 11/12/2004 1:39:24 PM PST by Pearls Before Swine
[ Post Reply | Private Reply | To 41 | View Replies]

To: kevkrom
The same could be said for the standard deduction and personal exemptions in the current tax code, which the FCA is analagous to.

Silly me. I thought the whole idea of a nst was to NOT be analagous analogous to the current tax code.

48 posted on 11/12/2004 1:41:55 PM PST by lewislynn (The meaning of life can be described in one word...Grandchildren)
[ Post Reply | Private Reply | To 29 | View Replies]

To: Pearls Before Swine
The prebate makes the biggest difference for the smallest spenders, effectively making them tax free.

Bingo. And an added benefit -- illegals (who don't have valid SSNs) will wind up paying a much higher effective tax rate than people who are supposed to be here.

49 posted on 11/12/2004 1:43:40 PM PST by kevkrom (Power corrupts. Absolute power corrupts absolutely. But it rocks absolutely, too.)
[ Post Reply | Private Reply | To 47 | View Replies]

To: Pearls Before Swine
The prebate makes the biggest difference for the smallest spenders, effectively making them tax free.

Yeah. Some will have a negative tax rate - just like now.

50 posted on 11/12/2004 2:39:31 PM PST by Principled
[ Post Reply | Private Reply | To 47 | View Replies]


Navigation: use the links below to view more comments.
first 1-5051-85 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson