Posted on 11/06/2002 1:39:57 PM PST by Tree of Liberty
Rebate means you still have to come up with the money first, right?
Else, it would not be called a rebate. The tax should not be applied to commodities/necessities in the first place. That affects the lower income people immediately, to tax up front. Like i said in the paragraph following what you pasted, the poor would also have a larger check due to NO TAXES BEING TAKEN OUT in the first place! I kind of like that idea!
I am not against the concept of a national sales tax, I just want to see what they come up with first...
I do lean more to a flat tax of income, with no rebate/refund at all, take 10% from my income and leave me alone after that. We would all pay the same on income, and that is fair.
You're right. Then I still can't come up with a calculation that reconfirms the tax neutrality at 23%. I will continue to wait for someone to clear up the mystery.
I wish I could believe your contention that prices would fall - I think there are more companies out there who would merely see this as an opportunity for higher profits and leave prices the same (OK, so I'm a pessimist on this subject - *GRIN*).
Based on the transaction tax percentages I've seen proposed, up to 23%, I still "lose" more money than I would with a flat tax, even as high as 20% (and I want it held to 10%, remember!) - I would also expect ss and medi-whatever to be funded out of this flat tax.
With my spending patterns (and I'm living the "American dream" with a house, kids in college, more than one car, etc., etc., etc.,), the percent IRS gets, plus the percent ss gets, plus the medicare/medicaide load, plus the state sales tax (and this WOULD go up over what we're paying right now), is STILL smaller than the proposals I've seen for a national sales tax - don't forget to factor in the state taxes.
I still think that all (ss, medi-whatever AND cost of gov't) should be funded out of a 10% flat tax.....
I keep hearing that #1 will be enforced, but not how.
Number 1. Though not all business owners will be honest for there will be a small percentage that don't. Harsh penalties will be a deterrence. Innocent until proven guilty would be the law and rule followed. No more guilty-until-proven-innocent as it is now with the IRS. The many states do a competent, non-intrusive and non-abusive job of ensuring that sales tax is collected fairly. Bring the accuser before the business being accused and the accuser has the burden of proof to prove that the business didn't give the government the sales tax. Many honest citizens are willing to help a police detective catch a criminal, honest business owners don't like cheaters and would likely be willing to help a government tax detective do his job when the business owner was certain the business was cheating. The honest business owner stands with the government as the accuser thus he too is exposed/transparent and wouldn't wrongfully accuse. Honest business owners don't like dishonest business owners that wrongfully accuse others of cheating on paying the sales tax to gain an unfair/illegal competitive advantage (use the government to attack an honest competitor)... A business would be killing it's own business if it accused an honest business for cheating. It would probably kill its business quicker for bearing false witness against an honest competitor than if it cheated on taxes itself. Nobody likes a cheater but even more reprehensible is a person that knowingly and wrongfully accuses an honest person of cheating.
I believe that it is inevitable that the government will mix in enforcement mechanisms 2 or 3 above, which although still unworkable, will end purchase privacy.
That defeats the purpose of replacing an already abusive intrusive IRS. Besides, it doesn't currently happen in any of the states that now have sales tax. You have only your opinion that an additional 23% tax despite a roughly same percentage lower product/service retail price will cause many business owners to become dishonest or create a viable black market and that the government would advocate returning to an abusive and intrusive measure which the people will have already spoken against in the first place by replacing the current tax system with a NRST. The pendulum is swinging in favor of the individual and individual life-and-property rights. The politicians and bureaucrats are being increasingly exposed for the frauds they are.... And that momentum has a snowballing effect. Honesty outlives the lie. It always has and always will.
Replacing the graduated income tax with a NRST is not an end all be all. It's but one of five key factors for collapsing a corrupt government while allowing a fair and honest government to rise in its place.
Replacing the graduated income tax with a NRST would set off a chain reaction of benefits.
The reader can get more information at Americans for Fair Tax on the fairtax.org Web site.
I will continue to wait for someone to clear up the mystery.
This is what the revenue neutrality claim is based on:
Cato Institute Policy Analysis Calculating the NRST Tax Rate
The calculation must be made with respect to total consumption expenditures including foreign purchases in the United Stats not just expenditure of us citizens.
The FCA is taken into account as a reduction in tax base. Then percentage of consumption expenditure is calculated based on total dollars expended in the US economy(taxes + consumption) to yield the required tax revenue for neutrality.
Just adjust by proportions for the increase in GDP from 1995 to now to estimate the absolute revenue received in present terms.
Based on the transaction tax percentages I've seen proposed, up to 23%, I still "lose" more money than I would with a flat tax,:
Which flat tax proposal before congress are you talking about. 10% imaginary and wish taxes don't qualify.
- I would also expect ss and medi-whatever to be funded out of this flat tax.
No "Flat Tax" proposed in Congress does. The NRST replaces all federal taxes except that 4% of federal revenues take as tarrifs and excise taxes.
Here's how tax rates come out for the Forbes/Armey/Shelby Flat Tax, a flat individual/corporate income tax, leaving all SS/Medicare, Federal Unemployment, excise taxes and tariffs in place and unchanged.
http://www.library.unt.edu/govinfo/subject/vital.html
- "The chart below shows a hypothetical set of flat tax rates and allowances that would result in revenue neutrality. This model, produced by the Congressional Budget Office shows that all federal income tax revenues could be fully replaced by a system with a flat tax rate of 13.1 percent and no deductions. Allowing total deductions for a family of four to reach $36,800 (more than double the amount allowed in 1995) would require a 19.9 percent rate."
Joint Economic Committee
Revenue Neutral Tax Rates for Alternative Allowances and Exemptions Under a Flat Tax Standard Allowances Option 1 Option 2 Option 3 Option 4 Option 5 Single $13,100 $13,100 $ 6,550 $ 6,550 $0 Joint $26,200 $26,200 $13,100 $13,100 $0 Head of Household $17,200 $17,200 $ 8,600 $ 8,600 $0 Dependent Exemption $ 5,300 $ 2,650 $ 5,300 $ 2,650 $0 Revenue Neutral Tax Rate 19.9% 19.4% 16.8% 16.3% 13.1% Source: Congressional Budget Office, 1995.
Under the Armey "flat" tax, as it is currently proposed,(HR1040 introduced 3/15/2001) a single person would pay:
7.65% ---- 7.65%(SS/Medicare) tax on wages/salary income below $13,600,
26.65% --- 19% + 7.65%(SS/Medicare) tax on wages/salary and other taxable income from $13,600-$75,000
20.45% --- 19% + 1.45% Medicare tax on wages/salaries and other taxable income from $75,001 up.
0% -------- on savings & bond income and stock dividends.
And that single person's business/employer pays,
19% ------ on earnings (Gross Receipts less allowed business deductions, exemptions and credits)
13.65% ---- 7.65% on SS/Medicare employment excises + 6% federally mandated unemployement excises levied on each employee's on wages up to $75,000.
7.45% ----- 1.45% on Medicare employment excises + 6% federally mandated unemployement excises levied on each employee's wages greater than $75,000.
Plus additional selective excises and tariffs dependant upon the nature of business engaged in.
Note: The base "Flat Tax Rate" is subject to meet revenue neutrality requirements under the Budget Enforcement act. The 19% rate stated in the Armey/Shelby Flat Tax proposal does not meet these requirements and would of necessity be adjusted upwards, and/or personal exemptions and business deductions be reduced to meet revenue neutrality criteria for enactment.
Further the Flat Tax is a VAT in the manner in which it transfers tax onto the consumer from business which is taxed at all stages of production and passed on to the consumer hidden in price of retail goods an services.
http://waysandmeans.house.gov/fullcomm/106cong/4-11-00/4-11kotl.htm
"Robert Hall, one of the originators of the proposal(Flat Tax), who describes his Flat Tax as, effectively, a Value Added Tax. A value added tax taxes output less investment (because firms get to deduct their investment.)"
"The Flat Tax differs from a VAT in only two respects. First, it asks workers, rather than firm managers, to mail in the check for the tax payment on that portion of output paid to them as wages. Second, it provides a subsidy to workers with low wages."
The Flat Income Tax (FIT) proposal, H.R. 1040, has two elements: a Flat Income Tax on an individual's earned income, and a VAT on businesses. The Flat Income Tax on businesses, is, by admission of Professors Robert E. Hall and Alvin Rabushka, who "wrote the book" on the FIT, a subtraction method Value Added Tax.
Quoting Hall and Rabushka ("The Flat Tax," Hoover Institution Press, 1995, pp55,56):
"To measure the total amount of income generated at a business, the best approach is to take the total receipts of the firm over the year and subtract the payments the firm has made to its workers and suppliers. This approach guarantees a comprehensive tax base. The successful value-added taxes in Europe work this way. The base for the business tax is the following:
Total revenue from sales of goods and services
less
purchases of inputs from other firms
less
wages, salaries, and pensions paid to workers
less
purchases of plant and equipment."
FReepers, the Flat Income Tax is a Value Added Tax in respect of business taxation. Professor Hall testified to that effect in a Ways and Means Committee Hearing in 1995 as well as in his book on the subject "The Flat Tax" in that same year; And it is an income tax in respect of individual taxation.
So, let us quit wasting bandwidth arguing about the Flat Income Tax. It combines a VAT with an income tax. Those of you who do not like VATs should not like the FIT. And those of you who do not like income taxes should not like the FIT, either.
Is there any site on the web that makes the following explicit calculations:
A study that shows the projected NRST tax burden for each income quintile so that I can compare it to the current distribution of tax burden reported by the Joint Committee on Taxation on page three of this JCT Study
Read the following article if you really want to know about tax distribution in this society rather than soundbyte simplistic representaton in the JCT document.
For a discussion on tax distribution and how it relates to the NRST:
What's So Fair About a Tax on Income?
Dan R. Mastromarco of the Argus Group, Washington, argues that an honest examination of the income tax would reveal that it is less fair than a consumption tax.
|
Tax Analysts Document Number: Doc 1999-32575 (25 original pages) Citations: (October 8, 1999) Dan R. Mastromarco is a partner in the Argus Group of Washington, D.C. According to Mastromarco, distributional equity, or rather the perception of distributional equity, is the fulcrum on which the debate over tax reform will pivot. Is a consumption tax "fair" when compared to an income tax translates into: "will taxpayers pay their just share of taxes?" The orthodox wisdom, the author says, is that since the poor consume more of their income than the rich, a sales tax must be less progressive than an income tax; some say it is must even be regressive. However, he argues, this orthodoxy is based less on science than bias. Conclusions about distributive equity cannot be drawn until we (1) resolve the standard by which fairness is judged, and (2) are able to accurately measure distributional burdens against that standard. The author argues the current means of measuring distribution -- income taxes paid over annual income -- presumes the standard is correct. He asserts that other means of measuring distribution, such as taxes paid over consumption, may yield more useful comparisons. Moreover, the author argues, even if we accept the standard that distribution is properly measured as taxes paid over income, the results are today knowingly misrepresentative because they resemble snapshots taken with the wrong lens and the wrong filters. The author asserts that all known biases in distributional methodologies, assumptions, and presentations are now in favor of an income tax. An honest debate over consumption taxes can only follow re-evaluation of distributional assumptions, methods, and manners of presentation. The author recommends steps that can be taken by credible institutions to make honest comparisons of distributional equity. Only then, the author asserts, might a consumption tax can be properly evaluated as the debate progresses. |
1. SHOCKER! ...so, your income isn't taxed, eh? Surprise!
2. FCA! "Family Consumption Allowance."
For the first time in our history, the poor (those at or below the Federally defined Poverty Level) will be untaxed when the FairTax is enacted.
For info about virtually every aspect of the proposed FairTax (HR 2525), may I suggest this website: FairTax Facts!
Here's a copy of my letter to Treasury Secretary O'Neill urging him to 'get-on' with tax reform. I the FairTax (HR 2525): Letter To O'Neill!
Cliff Cofer - State Director, AFFT Iowa Volunteer Team
This is exactly what I have been asking for. All of the adjustments to personal expenditures are approximately a wash except state, local, and federal expenditures. I'm not sure I agree with the treatment. Using 1995 numbers, it says, in effect, last year we raised $1.3T in taxes from citizens. Had we had an NRST in place, we would have raised (approximately) 80% of that amount from citizens and 10% of that amount from taxing state, local governments and 10% from taxing federal expenditures.
I disagree with the validity of this treatment. Let's look at state expeditures. In order to afford what they could under the income tax, state and local government will have to raise 30% more revenue. The federal government is exactly in the same place in that they now pay $130 for what used to cost $100, but they get the $30 in tax. HOWEVER, to then count the $30 toward the goal of raising the same revenue as in the prior year appears incorrect. If that makes sense, why not tax ONLY government purchases at 100%, thereby raising enough to pay for government! This looks like double counting unless I'm missing something.
If I am right, a 26% (tax inclusive)/35% tax exclusive rate would be needed for neutrality---assuming all other CATO numbers are accurate and appropriate (I have no reason to think otherwise at this point.)
That's semantics. If you call it a prebate, would it mean any thing different ?
Checks would get issued to every household each month. The timing of when you purchase your necessities (before or after you get the check ?) is nobodys concern but your own.
Each household would register once, and again as circumstances change. New children, older kids move out, change of address, etc.
And those who want to drop off the screen completely wouldn't register in the first place.
The reason to avoid exemptions is it will short-circuit politicians and special interests from playing with the code to their advantage. An example : for many years in Texas kiln-fired portland cement was tax-exempt. Milk and bread are taxed but not "kiln-fired portland cement".
This is not something that should be repeated on the national scale.
I'm not sure what I can say except invite you to the flea market. You can talk to the merchants and ask them if they are honest and what they would do to enforce honesty. I have never seen anyone record anything except for most merchants who sell mostly new stuff using a cash box. Presumably at the end of eadh day they can count the cash and record the amount. Remember that tax is always included in the price and the price is often negotiated on the spot particularly when I buy in bulk.
I don't know what prevents dishonest merchants from undercounting their cash. Other merchants would have no idea whether another merchant undercounted or not, I doubt that their receipts are made public. I certainly have no incentive to report what I have purchased, but even if I did, the merchant could pay enough sales tax to cover that.
I have no knowledge of how the state currently enforces sales tax. One possibility is to have undercover agents estimating cash receipts and comparing that to records sent by the merchants. A better possibility is that they track inventory either from the distributors or at the market itself. With a high tax, there will be a great incentive to track it from the distributors since they can force them to either remit sales tax or remit records of buyers. Some people on this thread say that's not necessary but I see it as a distinct possibility. And it still doesn't address the people who make what they sell.
I'm suggesting that nothing can supercede the Preamble's limitations of scope, unless the amendment specifically amends the Preamble, and that hasn't happened.
That is, indeed, a pleasant thought. Unfortunately, it flies in the face of the most basic principles of English Common Law, upon which the Constitution and all of our subsequent laws are based. In fact, in Common Law, where a legal document allows amendment, as does our Constitution, such amendments to that document supersede and replace in law any conflicting part of the original document, without exception, unless amending certain paragraphs is specifically forbidden in the original document. Such specific prohibition of the Preamble does not exist in the Constitution. It would be nice if such a specific prohibition had been written into the Constitution. But, that is not the case.
An amendment to the Constitution does in fact, supersede in law, any conflicting part of the Constitution, including the Preamble. Not only would any court challenges based on such a frivolous argument be denied without action, but such denial would likely involve a substantial amount of laughter by the ruling jurist and others in the courtroom at the time.
I don't know what prevents dishonest merchants from undercounting their cash. Other merchants would have no idea whether another merchant undercounted or not, I doubt that their receipts are made public. I certainly have no incentive to report what I have purchased, but even if I did, the merchant could pay enough sales tax to cover that.
It appears to be a non-problem except for someone (government official) looking for a fishing expedition. Therein lies the greatest potential for abuse, IMO.
A better possibility is that they track inventory either from the distributors or at the market itself. With a high tax, there will be a great incentive to track it from the distributors since they can force them to either remit sales tax or remit records of buyers.
Distributors would have no sales tax to remit and reporting who purchase from the distributor is intrusive, opening potential for abuse and fishing expeditions. On the whole, percentage wise, business owners are more honest than government officials. Just look at who produces the goods and services that people need for survival and you won't find government on that list -- save for protection of individual life-and-property rights from domestic and foreign criminals. ...Valid government services.
Some people on this thread say that's not necessary but I see it as a distinct possibility. And it still doesn't address the people who make what they sell.
It is possible but the probability is decreasing as the pendulum swings with increasing momentum to exposing government abuse and upholding individual life-and-property rights. Addressing the people who make what they sell; are you honest because of threat of government stick or your character development? In light of the honesty/pendulum advantage people -- buyer and seller -- become increasingly repulsed at conspiring to cheat the sales tax. Honesty begets honesty as sure as voting for the lesser of evils begets evil.
I could easily foresee a day when the flea market is either shut down or patrolled with agents looking for "new" merchandise.
That could happen. But, let;s look at the worst case scenario.
That's worst case.
Then consider that although there are some moderately priced items occasionally sold at flea markets, the vast majority of flea market sales are low dollar items. As a result, the total dollar value of all flea market sales in the US is insignificant. One WalMart store probably generates more in taxable sales on a Saturday than 10 giant flea markets. Then consider that WalMart usually has several stores open 7 days a week in the same area. Add to that, K-Mart, Sears, JC Penny, etc. and you will see that enforcement in this very tiny segment of the economy will probably only be very sparse, where it exists at all. It just doesn't make sense to concentrate enforcement where there is so little financial gain potential. The additional tax collected would probably not pay the salary of the people required to process the few offenses that might be written up. The IRS uses the same logic uses when they concentrate 80% of their enforcement effort on the top 5% of income earners. I think you are swatting at gnats.
But, the important thing to remember is that enforcement will be a state issue. No more massive, unwarranted confiscation of private property by the IRS, where the burden of proof is on the individual or company. At least, at the state level, you can fight it.
I guess I see the Constitution as in three parts. The law as you have remarked it applies to the second and third parts, we'd agree.
It is with the first part -- the preamble, which is a declaration of scope and intent, that I wonder about, even given your advice as to how that view would be ridiculed. To me, it seems like a Master Plan, and itself would have to be modified by admendment, if any part of the body (part 2) or admendments (part 3) would be at odds with it.
I mean a constitution is different than a statute, it is a primary charter and not all or not only normal statutory interpretations -- perhaps -- can be applied to it. Just wondering.
But obviously relying on honesty makes more and more sense as the government earns more respect from everyone. But there will also be the potential of abuse in both directions, merchants underreporting sales and government agents abusing merchants in search of higher revenue. It will take constant vigilance to prevent both.
That would be less likely at flea markets because typically they have very low overhead companies or individuals who aren't paying any incremental taxes now. The people who go there are looking for the very lowest possible prices so the sales tax increase will matter more to them than to higher end shoppers.
Like I said to Zon, the flea market is fertile ground for sales tax avoidance so I brought it up as an example of what will happen if sales taxes are raised without new mechanisms to enforce compliance. It doesn't matter if flea markets a zillionth of a percent of current sales, what matters is their relative advantage once sales taxes are increased. They will certainly attract more shoppers if those shoppers get a 20 or 30% discount there. Once they grow above a certain amount the government will get a lot more interested which could lead to a great loss in purchasing privacy if we are not careful.
If your income tax rate is 23%, you earn $100 and you get to spend $77... paying $23 in tax. Most of the civilized world calls this a 23% tax. In fact, it's a 23% tax inclusive rate.
Under the nrst, if you choose to spend $100, $23 goes to tax and you get $77 worth of stuff. Most civilized beings call this a 23% rate. BTW this is also tax inclusive rate.
Your confusion likely lies in your preconceived notions of a sales tax being tax exclusive. Not a problem...
Suppose you earn the same $100 and pay $23 in tax. We already know how easy it is to figure the tax inclusive rate, as that's the way we've always figured income tax. But what rate would it be tax exclusive? It would be 29.87%.
If someone came to you and said he paid 23% income tax and later you found out that he earned $100 and paid $23 in tax, would you need some kind of clarification? Would you feel misled? Would you call it mathematical subterfuge?
Of course not.
There is no reason to think anyone but you is missing this. If this confuses you, please don't vote.
I disagree with the validity of this treatment. Let's look at state expeditures. In order to afford what they could under the income tax, state and local government will have to raise 30% more revenue.
Just how does the state end up having to raise 30% more revenue just because the federal government ends up with the same tax revenue after enactment of an NRST as before?
Your claim makes no sense at all.
State expenditures do not go up 30% for a change in the mode (not quantity) of federal taxation. In fact the NRST compensates the states for administering the NRST and, at least in the opinion of the Texas Comptroller's office, this represents no problems to the state at all.
Committee on Ways and Means, Full Committee, 4-11-00 Testimony Carole Keeton Rylander, the Texas Comptroller of Public Accounts, was delighted to receive an invitation to testify before this committee regarding the Fundamental Tax Reform measures under consideration today. Last year, the Texas Comptroller collected
http://waysandmeans.house.gov/fullcomm/106cong/4-11-00/4-11hami.htm
Had we had an NRST in place, we would have raised (approximately) 80% of that amount from citizens and 10% of that amount from taxing state, local governments and 10% from taxing federal expenditures.
Government does tax itself through consumption purchases now. Nothing about the NRST changes the amount of such taxation it just separates it out into a specific declaration on the price tag of goods and services instead of being embedded in the price as an inflationary component and hidden from easy view:
The following article covers the mechanism on how the current Federal tax system propagates and is embedded into consumption expenditure.
DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation
The same principle is true of state taxation.
That is why the NRST does not exempt federal consumption purchases from the NRST.
Actually if it did, it wouldn't matter as the costs of government would decline by the amount that they currently receive through via government consumption purchases arising from taxes on business that of necissity pass through business receipts that businesses can pay any tax, wages on which taxes are paid, etc. at all.
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