New National Sales Tax

[retire@40]

Quote:

retire@40, I don't know where they got the payroll tax of $1600 .... and I could not find your example. *In any case, I know a single person making $10,000 is not likely to pay anything more than 7.65% FICA tax. *If the FairTax upfront rebate is as stated, then he wins under YOUR example. *Case closed.

Then lets close the case, here's the example they give on page 2. http://www.fairtax.org/pdfs/How%20th...e%20levels.pdf

[wabmester]

Charlie, most of us are engineers of some sort here. * This thing goes against every engineering grain in my body.

You know that the tax money has to come from somewhere. * *You know that a VAT is guaranteed to reduce taxes paid by corporations and high income individuals. *You know where the net difference will come from -- the rest of us.

Granted that the current tax code is spaghetti code. * But it has evolved over a long time, and it basically works. * How many spaghetti systems have you been able to throw away and start from scratch? * In my experience, the new systems are *always* more buggy and less robust than the evolved system, and the new system *always* ends up evolving into something at least as convoluted as the original.

You know there's no such thing as a free lunch. * Even if this were to give an initial boost to equity prices, you know that everything has to renormalize at some point. * And that simply means deferred pain, and probably much more concentrated pain for folks like us.

It boils down to this: *it is impossible to do a rigorous mathematical analysis of the effects of a VAT, but all of my experience with systems tells me that this thing would blow up in our face.

[charlie]

Wab, it is not a VAT. A VAT taxes each stage of the
manufacturing process. A national sales tax only
taxes the end product at the point of sale to the
consumer. It is similar to a state sales tax in that
items sold for resale are not taxed until bought
by the consumer.

Many states, Texas included, do not have state income
taxes ..... we already have the majority of the system
in place to implement a national sales tax. The
national tax would be in addition to the state sales
tax as I understand it.

HR 25, the bill in congress now, specifically states
that federal personal income tax, payroll taxes,
gift taxes, estate taxes and all corporate taxes
would be abolished. The 30% national sales tax
is supposed to be revenue neutral at the federal
level.

They claim that the revenue at the federal level
would be stabilized in recessions due to the
fact that consumption is less volatile than income.
People tend to continue eating, I suppose.

I agree with ex-jarhead that high income W2
earners would benefit. I don't have a problem
with that if low income persons benefit as well.

Maybe I see the glass half full, but I think there is
a good chance that corporations would pass some
of the payroll tax savings to the employee. Some of
the corporate tax savings and compliance savings would be passed to the consumer. Competitive
pressure in the market would insure this, IMHO.

Like I said before, the double taxation of after tax
savings may be the killer. I don't see any clean way
to resolve this problem. Some of this would be offset
by a one time windfall increase in stock and bond
valuations, but each person would have to look at his
own situation.

Think of all the tax that would be captured from a
1 trillion underground economy that goes untaxed
at present...... not to mention the billions in under
reported income.

I think we can all agree that the current tax system
is corrupt with special interests and loopholes. It
is burdensome to the max and needs to be fixed.
Wouldn't it be neat to send all the lobbiests on a
permanent vacation?

You say there is no free lunch and I agree but if the
numbers are real then what's the problem?

Maybe there is a better way, but if this is not a good
approach then what is?

Cheers,

Charlie

[charlie]

retire@40,

Thanks for the link. In this case a single parent
with 2 kids is getting about $4200 in earned income
credit. I think the payroll tax given is too high and,
as I said before, the "compliance tax" should not
be in the equation. All said and done, the single
parent breaks even IF the cost of new goods
drops by 22%. This is wishful thinking and the
single parent would loose. Obviously this would
need to be fixed somehow in the interest of fairness.

Cheers,

Charlie

[Cal]

Sorry, but if I am to understand this correctly, part of my "winning" under this new system is dependent on corporations giving me an increase in my wages for at least part of the employer taxes that they no longer have to pay AND that they will reduce the cost of their goods because the corporation no longer has to pay income tax? Yeah, right. :

Just like they reduced the cost of their products when they incorporated overseas and reduced/eliminated their tax burden.

Please give an example of corporations being so generous.

Corporations don't need to be generous. They just need to make money.

John Galt

[Cal]

Quote:

Corporations don't need to be generous. *They just need to make money. John Galt

My point exactly. They're not going to share any of their tax savings with me the employee nor with me the consumer. That's a pipe dream being used to get me to swallow a new tax.

[Jarhead*]

[quote]Wab, it i

Think of all the tax that would be captured from a
1 trillion underground economy that goes untaxed
at present...... not to mention the billions in under
reported income. *

I think we can all agree that the current tax system
is corrupt with special interests and *loopholes. *It
is burdensome to the max and needs to be fixed.
Wouldn't it be neat to send all the lobbiests on a
permanent vacation?

Charly: Two very good points. Taxing drug money, prostitution, etc. would be a windfall for the IRS.
(Imagine a pimp driving a Toyota Tercel).
However, even if it worked to the benifit of the public at large, this board (Most members) would not be very receptive. (If you're paying next to no taxes, or no taxes, then you would have to jump a generation down, and think of the kids).
By the way, the very threat of something like this occuring, kept me from converting part of my I.R.A. to Roth. I decided not to pay any taxes until I had to.
In any case, while I can see the benefit to the I.R.S., and likely to a good share of the population, somebodys ox is going to get gored, and the likely candidates would be most of the retired high assett, non-defined benefit types that have their taxes under control, but like to spend a few bucks.
It is an interesting subject, and I'm sure that the IRS would like to turn the drug cartel into taxpayers.
Regards, Jarhead

[Cal]

The only way I swallow this is if the IRS is abolished (think of all those tax collectors no longer collecting a government salary - bad for them, good for us, smaller government) AND THERE WAS ABSOLUTELY NONE - NOT NOW, NOT EVER INCOME TAX and the constitution was amended to prevent an income tax when politicians run up future deficits.

(Because you know politicians can't stop spending the money they don't have. )

[retire@40]

Quote:

Charly: *Two very good points. *Taxing drug money, prostitution, etc. would be a windfall for the IRS. * (Imagine a pimp driving a Toyota Tercel)... It is an interesting subject, and I'm sure that the IRS would like to turn the drug cartel into taxpayers.

Are you for real? Can you see a drug dealer selling crack in some dark alley taking out his calculator and multiplying the sale by 30% to submit to the IRS? Or some hooker saying, "Hey sugar, that'll be $200 plus 30% NST."

[retire@40]

Perfect timing. Here's one of the fruitcakes I was talking about:

From 'The New York Times'
November 6, 2004
Libertarian Arrested for Tax Evasion

By THE ASSOCIATED PRESS
Filed at 12:17 p.m. ET

PHILADELPHIA (AP) -- A Libertarian who lost a race for
Congress on Tuesday has been arrested for evading $87,000 in
federal income taxes.

Arthur L. Farnsworth, 42, had vowed on his Web site that he
would never file an individual federal income-tax return
again.

A federal grand jury alleged the electrical engineer failed
to pay taxes for three years on more than $221,000 in income
and tried to conceal his earnings by transferring assets to
fraudulent trusts and overseas bank accounts.

Farnsworth, treasurer of the Pennsylvania Libertarian Party,
drew fewer than 4,000 votes in his bid for a seat in the
House of Representatives. Republican Michael Fitzpatrick won
the race.

Farnsworth was jailed Friday to await a Monday bail hearing.
If convicted of tax evasion, he could be jailed for at least
a year and ordered to pay all back taxes.

[Jarhead*]

Quote:

Are you for real? *Can you see a drug dealer selling crack in some dark alley taking out his calculator and multiplying the sale by 30% to submit to the IRS? *Or some hooker saying, "Hey sugar, that'll be $200 plus 30% NST."

Of course not. But when the pimp, or drug dealer purchases a Cadillac, pinky ring, etc. he/or she will be paying 30% on that purchase. On a $40,000 car that would be a tidy sum going to the IRS that is now going untaxed. Another point is I was only commenting on a point that Charly made about a benefit to the IRS that would be available under this type of program.
I am also skeptical about the dislocation that a program like this would cause.
The last time I checked I was for real. Real old, but real nevertheless

[sgeeeee]

If this idea ever gets close to reality, I will examine the numbers and evaluate it it in detail. But on the surface, I don't see how this can possibly be any good for early retirees.

I spent 34 years earning income and paying federal tax on those earnings. Now that I have entered my consumption phase and no longer earn income, why would I want to change the rules and tax consumption?

The amount of money that the federal government requires does not change because of the tax structure. So everybody can't benefit from this. If corporate taxes are reduced, supply and demand pressures could result in a reduction of cost. But the reduction in taxes still has to be accounted for. Who pays if not the consumer?

[Nords]

Quote:

Perfect timing. *Here's one of the fruitcakes I was talking about:

Hey, Retire@40, he's only a fruitcake because he got caught. Otherwise he'd be a "fee-only financial planner".

For those who brought up the VAT, Hawaii has a 4% version of it. It's what helps the state keep its perennial top-three ranking in Forbes' "Most Business-hostile States" list.

In our last 26 tax-paying years (unlike Mr. Farnsworth, we filed a return for every one of 'em) our taxes have ranged from 6%-18% of our total income. The percentage stayed above 14% for our final ten working years and finally dropped below that in retirement. Last year it was 6%.

I don't like seeing the "flat-tax" numbers that are being proposed here!

[retire@40]

Quote:

...when the pimp, or drug dealer purchases a Cadillac, pinky ring, etc. he/or she will be paying 30% on that purchase. *On a $40,000 car that would be a tidy sum going to the IRS that is now going untaxed...

Ok, I was thinking more in terms of the selling side vs. the buying side, but let's look at the buying side. Pimps and drug dealers are usually one step ahead of the rest of us. This system may get them on assets that need to be registered like a car, but they are going to circumvent the NST on almost everything else. With a NST there is going to be a huge black market of goods that people are going to buy for cash. Since the entire tax code would have been scrapped, there will be no gift tax issues to worry about, so you are going to see lots of things being bartered for or gifted. It won't happen in the Wal-Marts, but it will happen in mom & pop stores.

For example, I am a drug dealer and you are pinky ring salesman. I am a good friend of yours and sell you drugs on a regular basis. I want to buy a $2000 diamond-studded pinky ring from you, so I will trade you the drugs for the pinky ring to evade the tax. Or, if we are just friends, I am going to pay you $2000 cash for the ring, but you are going to give me a receipt for $200 plus 30% = $260.

All I am saying is that there is a reason why no country in the world strictly has a national sales tax. These mental cases pushing for a NST, if they are successful, are going to find themselves stuck with a NST or VAT on top of an income tax. And as I have proved, they are doing all kinds of math tricks like those on that website pushing for a NST.

[retire@40]

Quote:

Hey, Retire@40, he's only a fruitcake because he got caught.

No, he's a bona-fide fruitcake. Look at one of his newsgroup postings http://groups.google.com/groups?q=%2...er.com&rnum=23

After reading the excellent arguments here against a National Sales Tax, I have come to the conclusion that this tax has an almost zero chance of getting of through Congress.

Hell will freeze over first!

[sgeeeee]

Quote:

After reading the excellent arguments here against a National Sales Tax, I have come to the conclusion that this tax has an almost zero chance of getting of through Congress. Hell will freeze over first!

I imagine you're right, Cut-Throat. I do tend to believe that even the dim wits we've sent to represent us in Washington will see enough problems with this to choke on it.

One the other hand, I can't help thinking about the fact that 60% of the people who voted for Shrub believed that Saddam was behind 9/11. . . or that the number one reason people voted for him was moral reasons. Apparently, a coke sniffing, draft dodging, lier is their moral standard now.

[Nords]

Quote:

No, he's a bona-fide fruitcake. *Look at one of his newsgroup postings http://groups.google.com/groups?q=%2...er.com&rnum=23

Ya know, you're absolutely right. Geez I bet he had a tough time finding a defense lawyer.

[haha]

Quote:

So everybody can't benefit from this. Who pays if not the consumer?

Since an income tax is really a tax on productivity, and since whatever you tax you will get less of, a sales tax, if accompanied by repeal of the income tax should increase the productive capacity of the economy. It also would free up a lot of completely wasted effort that now goes into tax compliance and enforcement.

The tax also should decrease consumption which automatically means it increases savings throughout the economy. It might be mostly corporate or mostly government, but savings should increase.

This is contingent on finding export markets to absorb whatever sales are lost from the domestic economy.

I think this tax overhaul is unlikely to happen. At the least the part about repealing income tax. Income tax has been a very useful political and "law enforcement" tool that the Police State Mind is highly unlikely to let pass.

Mikey