Oh yeah!!! I want one of those!!!
Posted on 03/06/2005 3:07:44 PM PST by smokeyb
PRICES UNDER FAIRTAX WILL NOT GO UP - JUST THE OPPOSITE
Within months of the start of FairTax you will see your cost at the register WITH your tax the same or lower than the cost today without the tax...here's how....
EXAMPLE: ACME TIE MANUFACTURING CO.- $20 tie - $5 profit margin
Today's Economy -$20 price of tie at purchase - no "visible" federal tax
Acme's price formula for a $5 profit margin on the sale (today under income tax):
$2 material
$8 labor
$5 IRS tax compliance costs of 25% Acme pays and passes on to consumer
$5 profit margin for Acme
$20 retail cost for the tie to YOU the consumer ( no visible Natl Tax to you but clearly you the consumer are paying Acme's $5 IRS tax costs for them and Acme makes $5 in the transaction)
NOW THE FAIR TAX:
Acme Tie Manufacturing under FairTax - SAME $5 PROFIT MARGIN
$2. material
$8 labor
0 IRS tax compliance costs to Acme
$5 profit margin for Acme
$15 cost of tie at retail - Acme receives the same $5 profit and is happy and they have NO taxes to pay to the IRS
BUT the consumer also pays the same $20 for the tie as before...the price does not go up.....see here's what your sales receipt would say under FairTax
Consumer costs under FairTax:
$15 tie at retail
+$5 - 30% natl retail sales tax (FairTax on new goods and services)
$20 cost to consumer for the tie (exactly the same as before but is it really?
As you can see under the current system or the FairTax, in this example Acme gets the same $5 profit, and the consumer pays the same $20 for the tie..but what has really been gained, what is different?
1. The consumer sees the cost of big government on his sales receipt, namely the $5 FairTax, a tax which he paid in the first example but was not aware of since it was hidden in the price - it's called honesty and 100% visibility in the cost of Big Government!
2. Acme can now broaden their base of sales at $15 to compete with the tax free Singapore Tie Company who has been selling their ties in the USA for $15 all along. FairTax now creates a better balance of trade and the ability for the American firm Acme to also go abroad with their ties and export them at $15. This will create Acme expansion including creating more American jobs available. Factory expansion means Labor becomes a commodity to compete for so salaries and benefits go up for everyone.
3. The ability for Mr NeckTie to open a factory and sell ties for $15 if Acme refuses to lower their price to $15 after IRS costs are removed from them. Or perhaps Mr NeckTie will be happy with a $4 profit margin and sell his ties for $14 creating a little price war that the consumer benefits from..Don't worry Acme & Mr NeckTie won't be working together to bring the price up to $17, cause there is always another American with the willingness to work hard and step into the market at $14 a tie, its called American ingenuity and the free market system. A little competition goes a long way.
4. Don't forget! The consumer can go to the flee market and buy a used tie and pay NO tax at all, lowering their costs to live and lowering their overall net effective tax rate under FairTax. You can't do that in today's tax system, since everything you purchase today is done with "after tax dollars".
All's right with the world, everything is honest, above board, fair, and you can now buy Dad that tie on Father's day for less money than you did before.
That's what's called personal liberty and free enterprise
go to www.pafairtax.org/calc.php and see what FairTax will do to your current tax rate. The new HHS rebate numbers are now included in the calculation.
You apparently have no idea what a VAT is.
Furthermore, the FairTax has a rebate up to the poverty line to remove the regressive element of sales taxes.
There is a dispute on this thread about the compliance costs.
What are they in reality?
If not 30 percent, then the original post would not be accurate.
Under the NRST, accountants and bookkeepers will still do everything they do now. They will still track all costs, accounts payable, accounts receivable, payroll, overhead, net profits, and fill out a few tax forms here and there.
In particular, they will still track and report wages to the SSA. They will not fill out federal (wage) tax forms once per month (or quarter) but instead they will fill out sales tax forms once (or more) per month.
You tell me, where are the compliance savings here?
There is a dispute on this thread about the compliance costs.
What are they in reality?
If not 30 percent, then the original post would not be accurate.
"Compliance Costs", as they are generally perceived, are not the dominant reason for reductions in the price producers receive for products(amount consumer pays less taxes) under the NRST.
The reduction of 20 - 30% overtime in producer prices has several components to it, compliance (i.e. accounting and reporting) costs being the smallest factor burdening businesses.
| http://www.taxfoundation.org/compliance2002.html |
Overhead Compliance CostsThe complexity generated by the growth and constant change of the tax code creates two general types of economic cost: overhead and opportunity cost. Overhead can be divided into three principal activities: the economically sterile exercises of tax planning, compliance, and litigation, all of which act like tax surcharges on taxpayers. *** snip ***
The Burden of Compliance CostsAs shown in , and , the Tax Foundation estimates that in 2002 individuals, businesses and non-profits spent over 5.7 billion hours complying with the federal income tax. Using an hourly cost of $29.98 for individuals and $37.26 for businesses and non-profits, the estimated cost of compliance in 2002 is $194 billion (See Methodology section for details about how the hours and wages were determined)—Individuals bear a cost of $86.1 billion, businesses bear a cost of $102.5 billion and non-profits bear a cost of $5.4 billion. Therefore, the overall compliance cost surcharge alone amounts to nearly 20.4 cents for every $1 collected by the federal income tax. |
The total overhead costs have been estimated to be about 6-10 times higher than just the familiar "compliance cost" figures generally quoted in many tax articles.
For example the more comprehensive amount of Daniel Pilla:
Killing the IRS, By Daniel J. Pilla, Reason Magazine July 1995
"There is little about a flat-tax system that will trim the staggering cost of tax law compliance. At present, this burden is estimated at $700 billion annually. Much of the cost is associated with recordkeeping and tax law enforcement, neither of which is reduced by a flat tax. A flat tax certainly involves a simpler tax return, but return preparation is the smallest component of tax law compliance.
The solution to our tax problem is to adopt a national retail sales tax in place of the personal and corporate income tax. Only a sales tax can eliminate the invasiveness of the IRS, since one's income and lifestyle are irrelevant."
would indicate an "overhead cost" of 60-70 cents for each dollar of revenue collected by govenment.
While the combined overhead and opportunity costs are seen by many studies to be more than all the tax revenues received by government by a large factor:
Economic Burden of Taxation
William A. Niskanen
Presented October 2003
Friedman Conference
Federal Reserve Bank Dallas page 6.
www.dallasfed.org/news/research/2003/03ftc_niskanen.pdf"Given that the elasticity c implicit in recent U.S. fiscal conditions is about 0.8 and the average tax rate is about 0.3, the marginal cost of government spending and taxes in the United States may be about $2.75 per additional dollar of tax revenue. One wonders whether there are any government programs for which the marginal value is that high. Given the estimate of the long-term elasticity c from the U.S. time-series data, the marginal cost of government spending and taxes may be as high as $4.50 at the current average tax rate. "
Other estimates in the past have similarly ranged depending on the comprehensiveness of the study data series from which the estimates have been derived:
http://www.heritage.org/Research/Taxes/hl565.cfm
An American Economic Review study found that every dollar of taxes could impose as much as $4 of lost output on the economy, with the probable harm ranging between $1.32 and $1.47
Edgar K. Browning, "On the Marginal Welfare Cost of Taxation," American Economic Review, Vol. 77, No. 1 (March 1987), pp. 11-23."Another study in the Journal of Political Economy estimated that the corporate income tax costs more in lost output than it raises for the government."
Jane G. Gravelle and Laurence J. Kotlikoff, "The Incidence and Efficiency Costs of Corporate Taxation When Corporate and Noncorporate Firms Produce the Same Good," Journal of Political Economy, Vol. 97, No. 4 (1989), pp. 749-780.
Chief Executive, The New directions in tax reform -
May 1995.Tax expert Ernest Christian Jr., a partner with Washington's Patton, Boggs & Blow, reckons these are low estimates or at best incomplete. Citing a U.S. Treasury study which indicates that 6 billion man-hours are consumed each year just in the record keeping for income and payroll tax returns alone, Christian says the true burden on the U.S. economy is probably closer to $1 trillion. For example, Jane Gravelle of the Congressional Research Service estimates that economic loss from the corporate income tax is equal to about 97 percent of the corporate tax revenue collected.
STATEMENT OF REPRESENTATIVE DICK ARMEY
HEARING ON THE IMPACT ON
INDIVIDUALS AND FAMILIES OF REPLACING THE FEDERAL INCOME TAX
Committee on Ways and Means, Full Committee, 4-15-97 Testimony
Hinders Economic Opportunity
According to a study by Jane Gravelle, an economist with the Congressional Research Service, and Larry Kotlikoff, an economist at Boston University, the corporate income tax costs the economy more in lost production than it raises in revenue for the Treasury. Dale Jorgenson, the chairman of the Economics Department at Harvard University, found that each extra dollar the government raises in revenue through the current system costs the economy $1.39.
All taken in total, the burdens on trade and business in the economy are tremendous and not in all ways obvious. On the whole moving to an NRST where business is not burdened with the payment federal taxes removes significant costs as well as allows for significant expansion in productivity.
All taken together provide the potential for the average shelf price of goods and services at retail level to fall around 20% in the first year and lower with time as the effects of increased capital investments in business infrastructure perculate through the economy.
There is no hourly cost when you sit down and do your own income taxes.
For that matter, there is no hourly cost to any small business that does their own taxes.
For medium and large scale businesses, tax preparation is a (comparitively) small add-on cost to their own internal tracking and analysis of their own costs and market performance.
There is no hourly cost when you sit down and do your own income taxes.
Where the government mandates that I spend my time and dollars in minimizing their demands on me, my time is very expensive.
Your time might be of no value, mine is very expensive especially in tasks I don't care to be doing especially when I could be doing something productive and earning instead of handing my hard earned dollars over to uncle.
For that matter, there is no hourly cost to any small business that does their own taxes.
As opposed to earning more, and being profitable instead of hiding income and dodging IRS audits. LOL.
For medium and large scale businesses, tax preparation is a (comparitively) small add-on cost to their own internal tracking and analysis of their own costs and market performance.
10 cents for every tax dollar paid to government is the average "compliance cost", unfortunately "compliance costs" are not the dominant factor in why prices can fall under an NRST. "Compliance costs" are the least element of the full overhead and opportunity losses that are created by the income/payroll tax system.
Denial, is not a river in Egypt my friend. But in your case it just as well be.
BUMP for later
If nobody is writing a check to reimburse you, it doesn't count.
This is delusionary and there is no evidence to support its conclusions. Faith is good but not for tax policy.
It is off by a factor of 10 at least.
Is tuition to be taxed too?
Income taxes simply are NOT included in product prices. Federal corporate income tax collections are a tiny portion of total taxes and many of our largest companies rarely pay them.
Chrysler was bought by a better and more productive company why it wanted the company is beyond me since their cars have always been crappy AFAIAC.
Oh yeah!!! I want one of those!!!
"check out any high school text book to see what a VAT tax is." (My, isn't that just cheeky and condescending of you.)
No need to. I'm a tax lawyer with seventeen years of experience both in and out of the government and I've published three textbooks utilized by colleges and law schools across the country. I know a VAT when I see one. You call it what you want. I call it an open invitation to taxes run amock.
I accept your apology.
Do you honestly in your heart believe that this tax, as proposed, would stay the way it reads? Honestly?
AMEN BROTHER!
Talkin' power to the truth!
A VAT is a VAT is a VAT whether you call it a Fair tax, a Sales tax or a socilaistic grab at our money!
Go on Brother! Say it the heavens!
You are the pithy one, aren't you.
Do not suppose to speak on my behalf. I am quite capable of speaking my own mind on this issue. It's a VAT - period.
What you see in it, what benefit it provides you or what dog you may have in this fight, I will not deign to surmise. As for me, I don;t relish a VAT that can get ratcheted up and up and up with little or no accountability by those who run the program.
If nobody is writing a check to reimburse you, it doesn't count.
I see, when I loose a sale because of time I must spend in squaring accounts with the IRS, that doesn't count because Congress mandates slave labor.
| "a free people that pays slave taxes to its government is willingly training itself for bondage." |
Lick the hand that feeds you friend.
Income taxes simply are NOT included in product prices. Federal corporate income tax collections are a tiny portion of total taxes and many of our largest companies rarely pay them.
Your are neglecting the costs incurred in minimzing that income tax a cost that hits companies whether the pay one penny in income tax or not.
The second area of taxes you miss are the payroll excises paid by employers that are paid regardless of whether or not one dollar of profit exists anywhere in the business, and not to mention the overhead that goes with remitting those taxes as well as handling withholding accounts on behalf of one's employees.
Under the Fair Tax Act (HR25) federal income and payroll taxes are repealed, not tax is collected on business purchases and the business tax related overhead costs fall by more than 90% of what they are today.
Under the NRST only puchase of new goods and services for non-business, and non-investment uses are taxed, collected by the business and remitted to state tax agencies in parallel with state and local sales taxes. Thus all the businesses that feed into retail level consumption are no longer burdened with any costs of the tax system, and retail businesses receive compensation acting as agent in collecting the NRST for government.
As a consequence the potential for shelf price of consumption products to be reduced is much greater than just the taxes received by government from business.
Do you honestly in your heart believe that this tax, as proposed, would stay the way it reads? Honestly?
Yes, because if it is amended in anyway that destoys its intent as explicitly laid out in the bills language the bill will be withdrawn by its sponse Rep Linder, and support for it will vanish on the part of its supporters and original authors.
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