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.
FairTax is growing longer legs! Fancy that!
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.
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.
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.
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.
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.
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:
- 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
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:
- "the oppression arising from taxation, is not from the amount but, from the mode -- a thorough acquaintance with the condition of the people, is necessary to a just distribution of taxes. The whole wisdom of the science of Government, with respect to taxation, consists in selecting the mode of collection which will best accommodate to the convenience of the people."
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." |
"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.
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.
The same could be said for the standard deduction and personal exemptions in the current tax code, which the FCA is analagous to.
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. This paper was prepared for presentation at the 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. |
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...
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.
Where you post "TANSTAFFEL" should be "TANSTAAFL" (There Ain't No Such Thing As A Free Lunch)
So you openly admit to a desire to severely disrupt and destabilize our entire economy???
Idiot.
>>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.
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
There are no exemptions. See post 8.
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
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.
Especially if you never try it.
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.