Posted on 08/22/2005 6:53:28 PM PDT by RobFromGa
Dear RobFromGa,
"That is one of the hats I wear as a business owner. I am an engineer, a salesman, an accountant, an accounts receivable clerk, a secretary, a copywriter, an advertising wizard, a trade show planner, an errand boy, mail room clerk, copy room attendant, bill payer, coffee maker, janitor and a psychologist as well as being an unpaid minion of the IRS for about 25 hours a year. And I do all of this out of my office in my house, and from my car and hotel rooms."
ROTFLMAO!! You really ARE a small businessman, aren't you?
But you forgot my own two favorite titles: "Chief Cook and Bottle Washer"!! LOL!!!
sitetest
Incorrect.
No "extra overhead."
The sales tax is embedded in the price.
Don't see how they would actually. I just don't see how the amount of money would increase due to the tax change.
People will have to spend more money to get what they want. OTOH, people will have more money to spend.
The question is will there be a real, national, increase in wealth due to less compliance costs and the ending of costs associated with avoiding compliance?
And, will there be increases in economic efficiency due to the lessening of the influence of the tax code on business decisions -- hiring staff vs. independent contractors, the timing of the purchase of capital goods etc?
FYI. The IRS frowns on that practice with "extreme prejudice". There is no faster way to get a room in the Iron Bar Hotel.
So, the IRS is your friend?
"The tax on services will mean that many things will get even more expensive, like college education."
Incorrect - educational expenses are treated as an investment under the FairTax and are not taxable. Because education will be paid for with pre-tax dollars, it will be more affordable under the FairTax.
"Moreover, even things the U.S. Government buys, like office supplies and fighter jets will have that extra overhead attached."
They already have imbedded taxes in them and would continue to do so under the flat tax. The biggest difference is that the taxes that the government would pay would be more visible under the FairTax than under the current system - or the flat tax.
I understand that. My question was do people pay taxes on services? They do not here in Georgia
You seem to be a small business owner who has a "good thing" (in your view) going with the present tax system and oppose any change - despite your nonsense statements to the contrary from time to time. It's clear you're one of the SQL crowd since you're really defending the Status Quo.
Your letter to Linder/Boortz or Boortz/Linder or Linder or Boortz is merely a vanity ploy in your eyes and makes very little sense. It's certainly a good thing you're a single, small businessman since you'd quickly trash one of any size.
And you - or your compatriots Nightie, s-test, etc. do not understand the mechanism of cascading tax costs and are more than willing to go around misstating facts relating the both that and the FairTax in general. It's called the Chicken Little approach to try to scare unsuspecting people who are unknowledgeable in tax systems by feeding them misinformation hyped mercilessly by your crowd to be something it is not - valid information.
The cascading mechanism is clearly shown with a simple example and it is not only for C-corporations as you keep proffering, but to businesses (period):
LEVEL 1 2 3 4 5 6 $1.00 $1.41 $2.00 $2.82 $3.98 $5.62 33.00% PROFIT MARGIN $0.33 $0.47 $0.66 $0.93 $1.31 $1.86 25.00% TAX COSTS $0.08 $0.12 $0.16 $0.23 $0.33 $0.46 SELL PRICE $1.41 $2.00 $2.82 $3.98 $5.62 $7.94 Accumulated tax costs $0.08 $0.20 $0.36 $0.60 $0.92 $1.39 Tax costs as % of 5.84% 9.98% 12.90% 14.98% 16.44% 17.48% sell price
The fact that you pay taxes from your business as personal income taxes on a 1040 does not matter; those taxes still figure in to your business and the cascading still applies. You can dredge up all the figures you wish about what your "business" does and does not pay and any expenses it does or does not have - after all who can argue since it is, after all, your solely-operated business. It would take the IRS to break it apart and see what all "inconsistencies" there might be. That certainly means nothing in the big scheme of things as I think most people would realize.
Pretending, as the Squirrel squad does, that only Subchapter C corporations pay taxes that "count" for economic purposes with he FairTax is utter nonsense and graphically illustrates your shortcomings in economic understanding.
More than that your are overwhelmed by your own selfish (and incorrect) interests in the effects of the FairTax on your busines as well as in the benefits it offers the economy (and taxpayers) as a whole. Even this vanity post of yours illustrates your narcissistic attitude - you think it's all about YOU!!! Got news for you, pal - it's not about you at all, but about our country and how to best help it economically (your thrashings and railings notwithstanding).
A lot of people (including you) do not understand that cascaded tax costs are a real thing and affect prices right now in everything one might buy (and there is no option of not paying the tax when you purchase). That's why those with existing savings accounts will be hit with the additional equivalent of a tax in the form of embedded tax costs that run something like 20-25% of the price of everything they buy and will be no worse off under thr FairTax. YOU may not wish to admit this (or your Squirrel buddies) - in fact, you can't - but most economists certainly are aware of the mechanism. You can argue about whether it's 10, 20, or 50% ... but it's there and boosts prices right across the board.
So you might as well stop your Chicken Little economics since you're obviously not well equipped for that academically.
In most state sales tax systems (which I presume you're talking about), the states do not tax services (or many other things for that matter) and are replete with execptions and exemptions as well.
The FairTax taxes both goods and services purchased by the final consumer (not by a business for resale or to help produce things) at retail. Also, used (previously taxed) things are not taxed. The plan is to tax things once and only once - and only taxable things.
From a macro economics standpoint, savings is also spending, and probably a more economically benificial form of spending -- (unless you choose to save your money in a coffee can). Savings is mearly "spending via a 3rd party".
Every dollar is "spent".
Perhaps you are all those things, and more RobGaGa, but you are certainly no economic wizard.
You should stop masquerading as one.
"Please tell me what would cause this 'economic boom' to take place...."
Several factors, but I will list perhaps the three biggest ones.
1. Various studies have attempted to measure the compliance costs of the current system and they vary widely, depending on how expansive a definition of the term "compliance costs" is used. However, all these studies show that those costs under the current system run into the tens of billions of dollars per year. They are probably well over the tax cuts that were so hotly contested during Bush's first term. Most, if not all, of those costs could be saved under the FairTax. Chairman Greenspan testified before congress during the go-go late 90s about the success of our economy in growing rapidly with modest inflationary pressure. He would typically be asked how he accounted for the fact that growth rates of 4% and above were traditionally thought by economists to be inflationary and yet we had little inflationary pressure after several years of 4+% growth. I won't attempt to recount Greenspeak verbatim, but a one word summary of his stock response was "productivity gains". Ok, that's two words. There is probably no single public policy decision which would have a greater impact on national productivity than getting rid of a horribly antiquated and inefficient federal tax system.
2. We currently have a tax system which puts US producers at a disadvantage in our increasingly global economy. The FairTax would create price shifts which would make US produced goods more competitive than under the current system - or under the flat tax. More demand for US produced goods means more capital investment and more jobs here in the USA.
3. Current estimates are that there is approximately $11 trillion stranded offshore by our tax system. Much of this would come back into the USA looking for good investment opportunities if we removed the financial impediment to doing so.
Bob does not now pay the employeer's 7%+ portion of Fed wage taxes for his employee? And he doesn't pay the full 15%+ of his own Fed wage taxes?
Lucky Bob.
"If there were a Fair Tax, everyone would be waiting around for everyone else to lower their prices first and no one would ever do it.."
Right. No one would understand that they could increase market share by lowering their prices and that they could increase their profits by increasing their market share.
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
"Wal-mart is not lowering it's prices..it has always been cheap.."
Why does Wal-Mart sell its stuff cheap? Why don't they just increase their prices 50% and make a lot more money?
Right. No one would understand that they could increase market share by lowering their prices and that they could increase their profits by increasing their market share.
--
Gee, thats nice in theory.
I run a service business which charges XX an hour. Under the "fair tax" system I would have to drop my hourly rate to keep prices where they are now. So I am making less per hour. Am I keeping more of my check? maybe. If its not there or my clients decide its not worth spending the bucks, no.
Competition may possibly force prices down - but you would need a deflation in value of things to keep prices where they are now.
Sorry, but the claim that you will get 50% more business by adding on a 25-30% sales tax (while removing income tax) is wrong.
"Fair tax" might be good for goods based businesses (larger ones), but it will crush the backbone of America, the small business.
"The present system with all of its flaws is one in which 300 million people are presently engaged in, and it has created the most prosperous and free nation in the history of the Earth."
Our current tax system has created our prosperity? Can you elaborate on that? You are the first person, other than lewislynn that I have ever heard say anything like that.
Most economists consider our tax system to be a major impediment to our prosperity.
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
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