Posted on 08/25/2007 9:11:11 PM PDT by gpapa
For a business to be able to remit 23% of their gross income and not come out broke as a result, they’d have to add 30% to their prices to cover their new tax.
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NEGATIVE; the cost of goods would go down a like amount basically leaving prices unchanged , if you had read the book or bill you would have noticed the provisions for the cutover to the new system...
They're points of policy that need to be addressed - is this the desired end goal, not falling into the same mantra as the FairTaxers. I think we've come to the point where people are fed up enough with the existing system to be willing to talk not only about options, but hopefully, the profound changes in our entire economy those changes will bring.
Or we can continue on the FT is good vs the FT is bad debate, and end up in a circular argument.
the productive people who pay are fed up with the amount they have to pay, the majority is not fed up, they just want the productive to pay more so they can have more...
“Mr. Bartlett was deputy assistant secretary of the Treasury for economic policy from 1988 to 1993.”
Thats why. When you carry water for the system, you tend to defend the system.
Once the imbedded taxes are wrung out of the goods and services, that 1 billion tank will cost the govt 777mil[or so] then the 23% is added for a cost of 1 bil.
[Don’t flog me for the math...its still dark here...]
Point is that this guy doesn’t have a clue and doesn’t want others to have one either.
Well, I don’t have a big problem with the complexity of the current mess. My personal taxes take me a couple of hours a year on TurboTax, and my prep for annual business return is about a half day a year, and I pay the CPA less than $800 a year. Total time to do all quarterly federal and GA returns and remit taxes is about another half day total. So, my compliance costs are tops— less than $800 and less than 0.5% of my time.
But the biggest problem with the FairTax is that it won’t work at 30% due to improper calculatin’ on their part, and the fact that evasion will occur at rates greater than 30% sales tax requiring even higher rates causing more evasion...
Please apply the book's theories to twenty ounces of pure gold, purchased retail. Open up your newspaper, find out the present spot price of gold, call up your local gold investment broker, ask what it'd run you to buy that twenty ounces (physical) of gold.
There, you've now the exact amount of money built in to account for taxes, profits, salaries and cost of business. You know it to the penny. Please tell me how fair tax will squeeze that five percent over.
Stop reading a book, and apply the theories to your own business, or standard investments. Figure out how it will change life, then debate those issues, rather than using fatally flawed arguments that are simply written out. Sorry, there's only one book I believe word for word, and Fair Tax has another 1995 years to mature before it can even catch up to today.
If people are keeping 100% of their paychecks (in other words the people keep their income and payroll taxes currently being removed from their paychecks), then their employers do NOT see a large reduction in their costs, and there is NO large reduction in prices before tax. Maybe 7-8% reduction for domestic items with a lot of labor in them.
When you have an 8% price reduction, it brings the $100 item to $92. But the 30% Fairtax brings the price up to about $120 (VS $100 now). I think the FairTax (for reasons stated above and in those threads) is too low and would really be at least 36% to start and likely quite a bit higher. I think it would start to approach mid-40% range before they added back in the emergency income tax on “rich” people making over $75k or so.
Then you misunderstood my point. I was discussing why people want to keep the current code, not why some are against the “Fair Tax” itself.
If you add 40% to the take-home pay I'm using to pay for it, then, yeah.
Any other questions?
I was resistant to the notion of shifting our tax burden to the "fair tax," or a national sales tax, until I heard the notion of reimbursements. It was first floated by the Cato Institute, I think, and is now part of the Fair Tax proposals.
The idea is simple: figure out how much money someone at the poverty line paid in tax, and then refund that amount. The same amount to everyone. The assumption is that everyone at the poverty line spends every thin dime on necessities -- that's what the line is supposed to mean.
If you spend a lot more, you pay a lot more, and that's part of the idea. If you pay less, you might get back more than you paid, and that's part of the idea. Works for me. Bump up prices by a big percentage, and bump up my bank balance by a bigger percentage, and I can learn to live with that.
What about people who already have saved after-tax money? What do you tell them now that their saved money is worth 20-30% less than it was the day before the FairTax was made the law of the land?
As the other poster stated, in comes out of other goods, but it also comes out of the markup. Additonally, items may be sold at at or below cost to get customers in to buy the stuff that isn’t on sale or to get rid of inventory. Using “loss leaders” to increase sales is an established practice.
I’d also like to point out that complicated taxes cost alot more than the taxes themselves.
The problem is, initially an increased sales tax will hit the retired and people on disability very hard. It will also have an effect on newer buyers on the purchase of automobiles, furniture, basic household items, etc.
The main benefit it will have is taxing individuals that hide income. However, who is going to enforce the payment of sales tax. Right off, you will end up with a huge black market of untaxed items.
Also, during the initial implementation of this program, there will be a problem of sticker shock due to the increased cost of the sales tax itself. I think people will quit buying high dollar items for at least a short period of time. I am not sure the economy could survive the transition period.
That is a definite problem, and I’ll admit I don’t have a good answer. I’m one of those folks set to get screwed by the change-over. If I oaid income tax on a Roth IRA, and I take that money out to buy a can of beans with the fair tax attached, I’m paying tax twice on the same money.
Any change in the tax system will be subject to that problem. I don’t see any way to get around it; either you build a whole new bureaucracy to distinguish pre-tax from post-tax money, or you just suck it up. Any transition has short-term pain, and that shouldn’t blind us to the long-term benefit.
I repeat, for emphasis, that I’m one of the folks who will pay the double-tax. I still think it’s worth it in the long run.
It’s one of many flaws in the FairTax plan. And not every tax reform plan will have the same problem. In this case, with the retail sales tax, you wouldn’t have the problem if people were expecting to get approximately their current take home pay (employees and business owners).
But the promise of 25% larger paychecks (the guy up higher in this thread is expecting a 40% higher paycheck) is where most of the problems with the FairTax stem from...
Gone where? Into price reductions or into the pockets of the workers and the business owners? I really don't see employees lining up to take pay cuts so that it may be passed to the consumer. Prices increase under the fair tax, period.
The world doesn't work that way.
Sellers would maintain prices and pocket the tax savings.
Since sellers would be paying their employees 100% of their paychecks according to the FairTax mantras, there are very few tax savings to the business to begin with.
The business owner payroll is almost as much as before, he just cuts the whole check to the employee rather than giving the employee his after-withholding check, and writing checks to the FedGov in addition for the employee's FICA and income tax withholding...
It always amazes me to see how many of the FairTax supporters have bought into the Free Lunch— “100% paychecks, prices stay the same”. It’s kind of sad.
A little common sense is all that is needed...
Tax Rule # 1: The only fair tax is that tax that taxes you and and not me.
Tax Rule #2: When in doubt, deduct it.
Tax Rule #3: Who's gonna know?
Those are the only Tax Rules you need to memorize, because everything else about taxes changes all the time and you have to look it up.
And that is where this proposal will be weak, because the same politicians who refuse to accept term limits will tinker with the reimbursement portion of this tax code, just the way they practiced social engineering within the IRC.
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