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  NATIONAL RETAIL SALES TAX: DONíT BUY IT!
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ContributorRP 
Last EditedRP  Aug 10, 2004 06:09pm
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News DateMonday, August 9, 2004 08:00:00 AM UTC0:0
DescriptionHouse Speaker Dennis Hastert (R-Ill.) created a flurry of excitement in Republican circles the other day when it was reported that he is proposing abolition of the Internal Revenue Service in a new book. This would be accomplished by eliminating all existing federal taxes and replacing them with a national retail sales tax.

When Congressís Joint Committee on Taxation scored the Linder proposal 4 years ago, it estimated that it would actually require a tax-inclusive rate of 36 percent, not 23 percent, to equal current federal revenues. Calculating the rate in a normal, tax-exclusive manner would mean a 57 percent rate.

Economist Bill Gale of the Brookings Institution notes that supporters of the sales tax assume that there will be no tax evasion under their proposal and that the size of government will not grow, even though they would send a large annual check to every American in order to offset the regressivity of the tax. Making realistic assumptions, Mr. Gale estimates that the tax-inclusive rate, comparable to Linderís proposed 23 percent rate, would actually have to be about 50 percent. A rate comparable to existing sales taxes would be close to 100 percent.

And let us not forget that state and local sales taxes would come on top of the federal sales tax, pushing the total rate even higher.
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LBT:1433Mark Yannone ( 0.0000 points)
Sat, August 14, 2004 06:40:18 AM UTC0:00
The federal income tax WILL be replaced--not because the chosen replacement is an improvement but because the administration of the income tax is fraudulent, and Americans are discovering that by the millions.

When a law-abiding taxpayer asks the IRS to fulfill its stated mission and asks for answers to six simple questions about the Internal Revenue Code and the underlying regulations, and the response from the IRS is a threat followed by an illegal armed home invasion and illegal confiscation of private property, then it is suddenly very clear that the IRS is no better than the Mafia--worse, actually. Such a revelation by a nation that had been force-fed a lifetime diet of "fair share" propaganda is a force too big for any government to confront head-on.

So the immediate solution is to provide an alternative tax system--one that doesn't disadvantage the federal government. The so-called "Fair Tax" fits the bill, and it's coming soon.

Those who fret about the retail sales tax rate are wasting their time. The tax rate will be enormously variable across industries, products, individuals, retailers, geography, etc. The sales tax will be used to curry favor and grow power and influence just as the income tax does now. It will be uncontrollable by those who will be forced to pay it. Like the income tax, it will be tweaked to provide the maximum return to the government with the least political effort.

Contrary to popular belief, this tax is even worse than the income tax. Aside from the uncontrollable rate and its inescapable nature, the Fair Tax will make unwilling tax collectors of millions of service providers.

In addition, the plan includes a monthly "prebate" check that will be sent to each taxpayer via direct deposit whenever possible. We will then have a captive nation--everyone dependent on the government for a monthly check--a nation under complete control of its federal government. One word of dissent and the monthly check can mysteriously stop, and the direct deposit account can be locked "by mistake."

Those who try to buck the system will be criminals, and the temptation to do so will be enormous. Black market sales will yield tremendous profits, but many will be caught and our prisons will overflow with otherwise productive citizens.

Worst of all, when a person's income stops or becomes inadequate, after the last asset has been liquidated and spent, the sales tax will still be due and payable.

The answer is to replace the income tax with voluntary contributions. Let there be no force, no threat of force, and no theft by our federal government. America's citizens and visitors must be free to contribute as much as they like to the federal government to pay for the activities that are authorized by the US Constitution. My answer to those who doubt that voluntary contributions can support our federal government is this: The entire non-government sector of our economy, the private sector, has been sustained by voluntary contributions since before government was formed on this continent.
How should Americans fund their federal government?
Income tax. 15 (48.38%)
Voluntary contributions only. 6 (19.35%)
National sales tax. 5 (16.12%)
Combination of 2 and 3. 3 (9.67%)
Combination of 1, 2, and 3. 1 (3.22%)
None of the above. 1 (3.22%)
Combination of 1 and 2. 0 (0%)
Combination of 1 and 3. 0 (0%)
31 Votes Cast
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Polls Close August 20, 2005 12:05am

 
R:549kal ( -57.2262 points)
Sat, August 14, 2004 05:05:02 PM UTC0:00
I like a flat income tax inconjunction with a flat payroll tax that doesn't have the roughly $80,000 cap.

A flat income taxs implemented in Russia resulted in a drastic increase in tax compliance with lead to a hugh increase in tax revenues.

The payroll tax ensures that every wage earner pays at least a little tax. I believe every American should be vested in the government by paying at least some Federal tax. I just think only the employee's share should not be capped so that the payroll tax doesn't disproportionately tax the lower incomes. The employers contributions should be capped so that even more payroll burden is not places in businesses.

 
D:1RP ( 3311.3784 points)
Sat, August 14, 2004 09:41:19 PM UTC0:00
"The entire non-government sector of our economy, the private sector, has been sustained by voluntary contributions since before government was formed on this continent." - Mark Yannone

Uh yeah.... Since I can go the the store and walk out with any product I want and only pay if I feel like it....

 
D:1353MadViking ( 1612.9830 points)
Sun, August 15, 2004 01:50:33 AM UTC0:00
Bob Brinker, who has a national radio show focusing on finance, pointed out today that a National Sales tax would hit the elderly particularly hard. Considering the elderly are one of the most powerful lobbying and voting groups out there, I agree with Brinker in that we will never see a national sales tax replace the income tax.

He also pointed out it would be a huge break for the wealthy. If you make 1 Million a year in income, you don't generally spend anywhere near that in purchases that would be taxed

 
R:549kal ( -57.2262 points)
Sun, August 15, 2004 04:14:37 AM UTC0:00
Although I don't support a national sales tax, I don't think the rate will have to be as high as believed.

There is a large amount of unreported income. All income made through illegal means (Drugs, Prostitution etc.) is not currently taxed but would be with a sales tax.

There is also a lot of unreported income especially for handy-man types of skills. Many carpenters, painters, electricians, mechanics etc. earn extra money by working after their regular work hours or on weekends. This money is also untaxed as income but would be with a sales tax.

 
D:1RP ( 3311.3784 points)
Sun, August 15, 2004 04:25:04 AM UTC0:00
"All income made through illegal means (Drugs, Prostitution etc.) is not currently taxed but would be with a sales tax." - Kal El

What, you think drug dealers and prostitutes will collect sales tax? :)

 
D:263mtrz ( -39.8779 points)
Sun, August 15, 2004 04:26:03 AM UTC0:00
"There is a large amount of unreported income. All income made through illegal means (Drugs, Prostitution etc.) is not currently taxed but would be with a sales tax."

Could be, but I think it's possible there would be just as much, prehaps more, evasion of sales taxes.

 
R:549kal ( -57.2262 points)
Sun, August 15, 2004 04:48:03 AM UTC0:00
They won't collect sales tax but they will pay it when they purchase products.

If I earn 10K as a painter and get paid with cash, I've made 10K and paid no federal income tax and I still have 10K. With a sales tax of say 20%, I will pay 2K when I make purchases with that money.

It seems it would be less likely for tax evasion to occur at the point of sale as it would when people evade paying taxes by being paid with cash and not reporting it as income.

I'm sure there are several people on this site who have worked as waiters or waitresses. Many of them will tell you that they didn't report all of thier tips. Usually just enough is reported to show that the person made minimum wage or maybe just a little above it. A waiter at an expensive restraunt could earn several thousand dollars a year and not report it as income for tax purposes.

 
R:250Mr. Politics ( 191.5293 points)
Sun, August 15, 2004 05:26:52 AM UTC0:00
This idea gets recycled every few years. It makes the talk show rounds and stuff like that then fades away.

 
D:64James in Sacramento ( 633.9631 points)
Sun, August 15, 2004 06:46:32 AM UTC0:00
If I earn 10K as a painter and get paid with cash, I've made 10K and paid no federal income tax and I still have 10K. With a sales tax of say 20%, I will pay 2K when I make purchases with that money.

Except when you pay for drugs, prostitution, or painter type services under the table so that the recipients avoid paying the tax as well.

 
Reg:16None Entered ( 1178.9144 points)
Sun, August 15, 2004 07:54:39 AM UTC0:00
Drug dealers and prostitutes spend their money only on drugs and other prostitutes? Live and learn!

 
D:64James in Sacramento ( 633.9631 points)
Sun, August 15, 2004 08:34:43 AM UTC0:00
To say that you can find a way to tax the underground economy in this manner is to ignore the fact that a national sales tax would create a whole new problem, just trading unreported income for unreported sales.

 
Un:1317Patrick ( 3338.9863 points)
Sun, August 15, 2004 08:40:33 AM UTC0:00
But James, I don't wanna pay taxes I want a swimming pool.

 
D:1RP ( 3311.3784 points)
Sun, August 15, 2004 10:24:06 AM UTC0:00
"If I earn 10K as a painter and get paid with cash, I've made 10K and paid no federal income tax and I still have 10K. With a sales tax of say 20%, I will pay 2K when I make purchases with that money." - Kal El

Except that you will charge your customer sales tax for the work, but fail to submit those taxes to the government. In the current system, the same money as you collected in your sales tax system is collected from the income tax of the people getting the work done. Either way, about the same amount of money is lost through the person comitting the fraud.

No matter what system you have, somebody is going to attempt fraud with it. If they're going to attempt fraud of one type, why wouldn't they attempt it with another?

All you're doing is shifting it from income tax fraud to sales tax fraud. Fraud will follow the money.

"Drug dealers and prostitutes spend their money only on drugs and other prostitutes? Live and learn!" - Eggplant

Of course not. But again, the same amount of fraud is being done. Right now, that money is being taxed from the purchaser's income. In a sales tax system, it switches to being collected from the prostitute/drug dealer's purchases, but then the money isn't collected from the original purchaser's income. You're just moving it, not preventing the fraud from occurring.

 
PM's:711None Entered ( 9.6681 points)
Sun, August 15, 2004 10:29:45 AM UTC0:00
what system is in place to ensure collection of sales taxes at the state level now? I cannot comment on this issue until I have an idea of the mechanics of collection, as I have always wondered what keeps companies from simply pocketing the sales tax

 
D:1RP ( 3311.3784 points)
Sun, August 15, 2004 11:26:36 AM UTC0:00
Nothing other than the possibility of an audit. Same thing as with income taxes.

 
R:549kal ( -57.2262 points)
Sun, August 15, 2004 12:55:24 PM UTC0:00
Let me say again, I am not in favor of a sales tax, I just don't believe the rate will have to be as high to collect the same amount of revenue

No James. Any money earned will have taxes paid on it when purchases are made at stores. That drug dealer didn't pay any income tax on 50K but when he purchases him a 50K car with his ill gotten gains, he would pay federal taxes.

I think the possiblity of tax fraud is diminished with sales tax rather than an income tax. It is easy for someone to have unreported income.

It seems it would be easier for the IRS to audit businesses than individuals and businesses under the current system.

In my community the city collects all sales taxes state, local, parish and for the other towns in the parish. I don't know what how they monitor for compliance.

 
PM's:711None Entered ( 9.6681 points)
Sun, August 15, 2004 09:07:17 PM UTC0:00
between Texas(which has state sales tax) and Oregon(which has state income tax) I heard far more stories about failing to meet the budgets for schools and cutting funds for schools in Oregon than Texas. The state income tax system with no taxes on any food products is the perfect system in my opinion because it collects more revenue without having it be regressive to the poor.

 
D:64James in Sacramento ( 633.9631 points)
Sun, August 15, 2004 11:00:22 PM UTC0:00
Some money that is not currently being taxed will be taxed, but a lot of money that is being taxed right now in the form of wages will disappear in another underground economy of sales. Look at the internet now, people can avoid sales tax by buying out of state, how are you going to audit all those eBay type sales? Part of the reason why the California budget was held up this year was the fact that Republicans wanted to keep the sales tax exclusion for people who keep their yacht they purchased offshore for a period of time just to avoid the tax. You don't think that you'd find such preferential legislation drafted with the VAT?

 
R:2NoMoreBS ( 789.4441 points)
Tue, August 17, 2004 12:53:57 AM UTC0:00
If we are comparing the best possible versions of a national sales tax to the best versions of an income tax, I think the income tax wins based on simplicity.

I would much prefer a simple and consistent income tax to a sales tax. I think a sales tax would discourage consumer spending in the short term, while encouraging savings.

I think any changes to the income tax ought to be subserviant to certain principles:

1) Efficiency: it should take 95% of the population less than 5 minutes to fill out their income tax forms.

2) Exemptions should be few and far, far between.

3) Everyone should get a tax breakdown for government programs, showing how much they personally paid for each program.

 
R:277Tony82 ( 373.0044 points)
Tue, August 17, 2004 10:35:29 PM UTC0:00
Good argument here that conservatives should NOT focus their tax reform efforts on a national sales tax: [Link]

 
I:1123Chase McFadden ( 71.6261 points)
Wed, August 18, 2004 03:35:33 AM UTC0:00
A national sales tax would be worse than the income tax that exists right now. Value Added Taxes would also be a really bad thing. If people have to pay taxes when they buy things, then they are more likely to hoard money and not spend it, which hurts the economy. Workers start getting laid off, and jobs are lost simply because of the existence of the sales tax.

There are certain things that people need to buy, but I am convinced that a national sales tax would eliminate auto manufacturing jobs by encouraging people to hold on to their old cars for a longer time. People would think about whether or not they should really spend money, and that is a good thing that would encourage savings, but it would also hurt the economy.


 
R:525PragCon 3.0 ( 199.7647 points)
Fri, August 27, 2004 06:45:43 PM UTC0:00
Minnesota not only doesn't have a sales tax on food and medicines, it doesn't have a sales tax on clothing items. I'm still not used to going into the Mall of America to buy some shoes and finding the price I pay at the register is the same one listed on the box!

Part of me cringes every time I hear the mention of a national sales tax. I fear we could end up like Canada: high national and provincial sales taxes in addition to high income taxes!

I am much more in favor of creating a flatter tax system with few or no deductions than I am a national sales tax.

The type of taxes I would like to see eliminated are property taxes. Under the property tax system, a person doesn't really own his or her land: he or she renting it from the government.

At the very least, one's primary residence should be exempt from property taxation.

 
D:38DFWDem ( 534.9620 points)
Fri, August 27, 2004 07:18:03 PM UTC0:00
It is a blatant copyright violation to copy entire articles into your posts, Rob. Please refrain from doing so.

 
MFL:882The Oncoming Storm ( 344.8853 points)
Fri, August 27, 2004 07:23:51 PM UTC0:00
Ibid