CAVUTO REPORTS THAT BUSH CONSIDERING SCRAPPING THE IRS CODE!!!

Fox News Channel | November 6, 2002 | n/a

[Zon]

How do you figure a 20% decrease in retail prices?

It's obvious that you didn't read the link I gave to you to fairtax.org in post 348. Fine, since you don't want to educate yourself I have no desire to help you whom doesn't want to help yourself. That's an honest answer and I suspect you'll want to assert the reason is something other than the one I just gave. The answer to your question is answered easily. Perhaps easier for you if I explain it to you than you reading the website I gave you. But you don't want to learn anyhow or you would have read the Web site.

[lewislynn]

Prices.

Prices for consumer goods and services quickly rise by the amount of the tax, and then some. The portion of the price increase in excess of the tax is due in part to the higher cost of imports (from the weaker dollar) coupled with the ability of some domestic producers of competing goods to hike their price to that of imports. Consumer prices similarly rise 25 percent -- roughly the nominal rate of sales tax, unadjusted for any exemptions or transition rules -- by 2002 and gradually drop from that peak to a level that remains about 18 percent above the pre-change baseline.

Examined on a year-over-year basis, these price increases generally amount to a large, one-time hike in prices as the NRST is imposed, with some moderation of this increase in the longer run. Due to a weaker dollar, merchandise import prices increase by nearly 4 percent shortly after the NRST is imposed and are 6.5 percent over baseline levels in 2010. Merchandise export prices are also above baseline levels. In 2001 and 2002 they are nearly 3 percent above the baseline. However, due to lower interest rates, which reduce business costs, export prices are only slightly greater than baseline levels for most of the remainder of the forecast period. The overall impact on prices is measured by the change in the GDP deflator, which initially rises 20 percent above the baseline price level before settling back to a 13 percent price rise relative to the baseline.

The notion espoused by some that pre-tax prices would drop some 20-30 percent under a NRST (so that after-tax prices would not rise and may even decline) is a peculiar one. This could only happen if all of the personal income tax, the corporation income tax and payroll taxes are currently embodied in retail prices. Tax incidence -- that is, who actually bears the ultimate tax burden -- is an elusive question that has been the focus of many economic papers, because the answer is not clear. However, the general consensus among economists is that perhaps a portion of the corporate income tax may be passed on to consumers in the form of higher prices, but that the majority is ultimately paid by corporate owners in the form of lower after-tax profits and by employees in the form of lower compensation. Most economists concede that personal income taxes and payroll taxes are ultimately borne by labor and are not passed on to consumers in the form of higher prices.

[BaghdadBarney]

Baloney. The 16th Amendment and Prohibition. Apples and Oranges, my friend. Everybody hates the IRS but Everybody loves their Social Security, their Medicare, their Unemployment Insurance, their Government-backed school loans, etc. etc. etc. I'm all for major reform of these programs but the fact of the matter is they do exist and anytime Republicans step foot in this quicksand they get clobbered politically and LOSE!!! Remember the 1995 budget battle. This should - and can - revisit the unfinished business of the 1986 tax reform bill. There were some good things - and some bad things - that came out of that bill that have been subsequently watered down or scrapped. Bringing the tax code down to TWO rates would be a good start. Scrapping a number of silly deductions would be another good way to go. But... the Congress should avoid RAISING the corporate tax and other crazy excise taxes to pay for these changes. I'm out. I'm getting long winded.

[BaghdadBarney]

I'm in no mood for a "book" numnuts, especially on a national sales tax. Read the Robbins' book on the Flat Tax, you might learn something... The home mortgage deduction is a big deal and if it weren't such a big deal Congress would have scrapped it in 1986 when they reformed the tax code!

[William Terrell]

Here's the whole post I made, answering my own question.

"How do you figure a 20% decrease in retail prices? The "hidden" padding companies charge to offset the cost of dealing with income taxes? What makes you think they will remove that from their base prices? If an NRST is implimented, people will expect a 30% increase of the prices they're currently paying. Surely you have noticed informal collusion in many industries to keep a price at a certain level. Maybe a law that they have to lower prices? Hee. "

I don't spend hours on a partisam site the link for which took you seconds to post. If you understand the issue, argue it yourself. Those who post links like that usually are enchanted with the vision in their minds of what they've been told about a topic, but don't understand the nuts and bolts, don't want to understand the nuts and bolts because a flaw would pop the baloon. Sort of like avoiding a medical physical because one is afraid of bad news.

I answered the point about the "hidden" taxes. If the website has a different argument, post it and defend it.

[Zon]

My concern is not that they couldn't figure out a way to enforce this but that in the process of enforcement they would eliminate all "illegitimate" vendors and possibly eliminate my ability to buy anonymously.

"Illegitimate" for the purpose this discussion is a business/vendor that doesn't collect the sales tax when it sells a new retail item to an end user/consumer and/or give that tax to the government. It's up to each business/vendor to decide whether or not they want to violate NRST laws. A business/vendor could eliminate it's own business by breaking the NRST laws. Your anonymity as a consumer/purchaser is greater with the NRST.

What businesses/vendors do you think would eliminate their own business by violating NRST laws?

[palmer]

What businesses/vendors do you think would eliminate their own business by violating NRST laws?

How would they be eliminated? I have given numerous examples in this thread of how sales tax is circumvented now and there is a lot incentive at 4.5% than there will be at 20 or 30%. Enforcement will only work if:
1. All businesses report gross sales honestly, or
2. All consumers report all transactions, or
3. All items are tracked from import or manufacture.

I keep hearing that #1 will be enforced, but not how. See my posts #637 and #642. The flea market is a crude example of more sophisticated black markets that will arise from a high sales tax. 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.

[Deuce]

The general consensus among economists is that perhaps a portion of the corporate income tax may be passed on to consumers in the form of higher prices, but that the majority is ultimately paid by corporate owners in the form of lower after-tax profits and by employees in the form of lower compensation.

I don't know your basis for saying this, but it certainly comports with my gut feel. The NRST supporters' claim that prices would decline 20%-30% doesn't pass the smell test for me. However, the link you provided to a study paid for by opponents, appears to tilt the analysis in the other direction and is also suspect.

However, I'm very glad you linked me to the article because it cleared up a mystery for me. I have been trying to reconstruct a calculation that demonstrated that a 23% tax would raise sufficient revenues and I kept falling short. I now realize that the tax is actually a 30% tax not a 23% tax. NRST supporters should acknowledge that their proposal is a 30% tax (rather than calling it a 23% tax through mathematical subterfuge) and let it stand or fall on its actual merits.

Ancient_Geezer, did you know the tax is actually 30%? If so, why didn't you just point it out to me when I kept coming up short using 23%? It would have saved me lot's of time.

[ancient_geezer]

I built a $80,000 airplane from a $16,000 kit, and a $250,000 house from $100,000 of materials.

You forget the tax paid on the matterials & kits you use. Once the tax is paid, that's the end of it. What you do with the materials you purchased and paid the tax on is your affair.

If you are an individual (non-business) building such things you pay the taxes on the materials you use to construct your goodies. Pay the tax once but only once is the rule.

What happens when I sell them?

If you are a business doing this for business purpose, you didn't pay tax on the materials you will be required to collect the tax from your customer providing a reciept, then remit such to the state tax authority.

If you are an individual doing such on an infrequent basis. You have paid tax on the materials, kits, etc. And that is the end of it.

[Ditto]

Baloney. The 16th Amendment and Prohibition. Apples and Oranges, my friend. Everybody hates the IRS but Everybody loves their Social Security, their Medicare, their Unemployment Insurance, their Government-backed school loans, etc. etc. etc.

Who's doing apples & oranges? I'm talking about how to collect revenue and you're going on about spending. The Fair Tax bill in congress is designed to be revenue neutral (i.e. people's government handouts don't change) while the hassle and abuse we get from the IRS goes away.

[Zon]

I have spoken to senior groups, business groups, unions, etc on this topic and can personally say that 95% of the people support this change, but are very skeptical and therefore do not get involved.

What is their primary skepticism? I would think it is the government's too big and powerful to overcome and thus skepticism that an NRST could ever be a reality. So they don't see themselves investing time or energy in what they think would fail anyhow. That's just a guess. What do you hear from the people you talked with?

[ancient_geezer]

But there will still be a need for an Revenue Service to insure that that state collection agencies are properly collecting, reporting, and sending in the sales tax as required by law.

That's called the U.S. Treasury. And how does that relate to an IRS which is designed to administer the income tax law with regard to individuals.

Your objection has no substance.

[Zon]

If true, this converts the NRST into a free lunch.

It's not a free lunch. The source of revenue is moved from productivity; revenue from payroll taxes and numerous government regulatory fees and hidden taxes are moved to a sales tax on consumption of new products and services sold to the end user/consumer.

[ancient_geezer]

Since the tax is national then there is no cross state safe havens. Not good.

Sure there is, move to another country and buy your stuff there. What kind of safe haven you looking for as regards a "National" as opposed to a state tax?

What happened to the flat tax?

No safe havens other than rescinding your citizenship. Its still an income tax, doesn't get rid of the IRS, doesn't get rid of witholding, doesn't get rid of FICA, is still just as intrusive as the income tax, and is just as complex to figure out what taxable income is inspite of only having to put the final numbers on a single sheet of paper.

Read:

Flat Tax as Seen by a Tax Preparer
by Vern Hoven

Vern Hoven Tax Seminars

[DeathTaxesNoles]

A black-market already exsists, most people are just too lazy to find out where to purchase items from it.

[ancient_geezer]

Ancient_Geezer, did you know the tax is actually 30%?

You were calculating distributions in regard to income, it is 23% of a tax inclusive measure same as the income tax is stated.

23% of total expenditure for NRST, 24.2% of gross income for income/payroll taxes.

29.87% added onto shelf prices for NRST, 31.93% added onto takehome pay for the income/payroll tax.

And your problem with the measure is??

One compares apples with apples not apples with oranges.

[Zon]

I don't spend hours on a partisam site the link for which took you seconds to post. If you understand the issue, argue it yourself.

You're in the small minority and I have no need or desire to educate "heathens". That you don't want to educate yourself fine -- so be it. Any reader that wants to can learn at Americans for Fair Tax on the fairtax.org. Web site.

[ninenot]

If they are smart enough to understand the IRS Tas Code, they are smart enough to do any job.

They aren't.

There will be plenty of retail clerk jobs available when taxpayers can become PURCHASERS again.

[ThinkDifferent]

However, the general consensus among economists is that perhaps a portion of the corporate income tax may be passed on to consumers in the form of higher prices, but that the majority is ultimately paid by corporate owners in the form of lower after-tax profits and by employees in the form of lower compensation.

If this is true, then the NRST won't reduce prices but will increase wages, which is effectively the same thing.