Posted on 01/13/2008 5:16:11 AM PST by Man50D
Do you think that maybe, just maybe, a sales tax auditor MIGHT be able to pick up on the fact that a business has excessive shrinkage? Wow. I know it will be difficult, but I think it can be done.
So prove it isn’t just bad management. No paper trail, no intent, no case.There is still nothing in this country that tells you you have to run a profitable business.
A balanced budget would only be balanced if it included debt repayment.
No tax code is designed or can be designed specifically to address spending. However The Fair Tax does reduce spending to some extent by abolishing the IRS and its $11 billion dollar price tag.
Well, I have considered these “points” (perhaps more accurately termed “claims”) and, as desperate as I am to enact significant federal tax reform, I am still not convinced. Overall, the problem I have with your response to my post is that it does not even recognize the revenue neutrality assumption embedded in the proposal and what that means for how the tax must operate in the real world. Your answers presume a feature of the fair tax that is ruled out from the beginning, that changes in consumption will be allowed to influence tax revenues.
While I focused on the need for any tax reform proposal to reduce spending you focused on the claim that it would reduce the IRS bureaucracy. But, according to the “revenue neutrality“ pledge it doesn’t matter how much bureaucracy is reduced in the IRS, the fair tax must still raise the same amount of revenue as before reform. So even if we spend less on the taxing bureaucracy, which I am not ready to admit will likely happen, it will not matter overall because the government will get the same amount of tax money as before which it will just spend on some other government programs which will be administered with another governmental bureaucracy. It is not the total number of people employed by the IRS that is the central problem, it is the total amount of money spent by the government.
I’m not sure what you mean by “No tax code is designed or can be designed specifically to address spending.” They are inextricably linked. Governmental spending is necessarily limited by the tax revenues raised and taxing schemes are designed with that in mind. Right now federal revenues depend on peoples’ incomes. When incomes go down the federal tax revenues are decreased and governmental spending must either be cut or income tax rates must be raised to meet spending demands. With the fair tax revenue neutrality pledge, if individuals consume less to avoid the fair tax, the fair tax rates must be raised until revenue neutrality is reached. It won’t matter that you quit buying some things to avoid the fair tax, rates on everything else you do buy will be raised to make up the difference. Without this happening there can be no “revenue neutrality.”
I appreciate your quote from James Madison, my favorite founder, but I believe his analysis of how a consumption tax would work was based on the assumption that people could determine with their consumption behavior how much tax they would pay. He says in Federalist 21: “The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal’ and private oppression may always be avoided by a judicious selection of objects proper for such impositions.” Under Madison’s example, if the consumption tax was too high, people would not buy the goods and tax receipts would go down. Allowing tax revenues to go down in response to lowered consumption is a necessary component if a consumption tax is to work as you (and Madison) claim. But this simply can’t happen under the fair tax because revenues by definition will not be allowed to decrease due to the revenue neutrality assumption.
Lastly, I also do not accept the argument that because the IRS is already extremely intrusive that we should accept an equally intrusive “fair tax” bureaucracy and no one will convince me that a government agency that hands out money every month to a large portion of the population will not be extremely intrusive. One signal advantage of the sales tax is that it is administered more or less automatically and without the need to identify individuals. The “prebate” part of the fair tax negates that benefit and opens the door for what is supposed to be essentially a sales tax to be administered as a welfare program with all the concomitant lobbying, need for personal identifying information and politically correct posturing by politicians.
If the fair tax prebate is truly not determined by income, spending or any other factor other than family size, as I understand you to claim, then it also has no connection to the amount of sales taxes that have been (or will be) paid. If there is no connection to actual taxes paid then the governmental payment is not a rebate at all, it is merely a transfer payment made by head count. I really do not see any advantage at all and many serious problems this with this “prebate” concept. In my view we have enough people getting transfer payments from the government right now and expanding this to a greater portion of the citizenry just further impairs our ability to maintain our system of republican self-governance.
I must correct a statement in my response above #145: it was Hamilton, not Madison, who is credited with writing Federalist 21.
One way or another, all taxes are naturally limited.
With all taxes, the motive to avoid and evade goes up with the tax. A 30% tax on goods and services, plus state and local sales taxes where they apply will create a powerful motive to avoid, and that motive will create the means and opportunities.
Even so, I prefer more any tax that does not intrude on my privacy, or enslave me as my own tax collector. And when I get it wrong; even in good faith, am penalized for it.
Would like to know what your solution is. Stay the course?
And let you make money on it too? Actually, if Congress thinks of it, they will write provisions in the law prohibiting it, and that would unnecessarily complicate what is being billed as the simplest of all taxes.
That is not true and hasn't been for 100 years. Congress just spends money they do not have -- deficit spending -- regardless of the amount of revenues. Government always tends to grow faster than the underlining economy.
I agree with the other poster. No tax system can change that.
“Why are accountants for it?”
A friend of mine has his own small CPA practice and he tells me that about 60% of his billings come from tax work. He is a big FairTax supporter because he sees just how dysfunctional the current system is and how the same transaction can get entirely different tax treatment with different taxpayers. He tells me that I would be amazed at how many clients he can’t get to take perfectly legitimate deductions because they are afraid that it will trigger an audit. His view is that that should not be happening in America, the home of the brave and the land of the free.
As for his own business, he feels that there are plenty of other services he can perform for expanding and growing businesses in a post-FairTax world and most of them are more interesting and satisfying than doing tax work.
I know other people who work in the tax field who don’t grasp the big picture as this friend does and who are scared to death of the FT. The tens of billions of dollars that we spend on compliance don’t just evaporate into thin air; they go into the pockets of some Americans and those who benefit personally aren’t eager to see their tax knowledge depreciated.
I have no doubt that a substantial number of the SQLs here on Free Republic are in that category. The more momentum the FT picks up, the more strident and emotional their attacks are.
“Me too. I’m going to make a fortune teaching businesses how to legally avoid the fair tax.”
Small piece of advice: don’t quit your day job.
“I haven’t been able to figure out a way to buy real estate overseas and import it into the U.S...”
Ahhhhhh, the old “they’ll be smuggling real estate across the border” objection! I haven’t seen that one in a year or more. Some posters didn’t believe me when I told them on later threads that some SQL actually raised that as an objection.
But here it is, once again!!! I’ll have to figure out a way to bookmark this post.
“No tax reform can really be called tax reform without a meaningful decrease of Federal spending and fiscal responsibility.”
No tax reform proposal which is not revenue neutral is going to be seriously taken up in congress.
“Alexander Hamilton was referring to taxes on imports...”
Then why didn’t he say that? Are you saying that Alexander Hamilton was not articulate enough to make his meaning clear?
That is my day job.
“That is my day job.”
You now make your living teaching people how to avoid the FairTax? Very interesting!
Cute reply, but not very constructive. But, I’ve come to expect nothing else from so-called fairtaxers.
He did say that, If duties are too high, they lessen the consumption...
No one is so articulate that he can prevent the meaning of his words from being twisted by those who have an ax to grind.
Sorry, the income tax predates Karl Marx by a couple hundred years. Try again. (Typical FT/TP - Doesn’t know history, and doomed to repeat it.)
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