National Sales Tax?

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Ah ha! Making fun of the Sand Dune Messiah? You can expect a visit from the Bene Gesserit.

Yeah - it is going to get worse. The University cuts were from the state budget. There is a ballot initiative that we residents will be voting on soon, and that will have a big effect on city and county governments - it arbitrarily reverses and then caps real estate taxes. I think it will pass - people are very aware of the fact that they pay taxes, not so aware of what will happen if those taxes are significantly cut.

Last night on the TV I saw a bunch of people protesting at the local city hall here in sunny Florida. Seems that lots of the 'taxes' are being converted to 'fees' so they wont be affected by the new limits on 'taxes'. Some tax payers don't like the idea that $77 that they save on their taxes will be offset by $77 of new fees. And some of the churches are going beserk; churches are exempt from taxes, but not fees. So now the churches are getting hit with thousands of dollars of storm water management 'fees' and they think it is a violation of their First Amendment rights.

I personally think they should eliminate all storm water services, and when it rains and a neighborhood floods, that is just too bad. It's simple: Don't live in a low lying area if you don't want to pay for the services you will need there. And if you live on high ground, don't expect to drive across town during the rain. No man is an island.

It's just a shell game. The money has to be made up somewhere. When we approved the lottery, voters stopped approving bond issues for schools because, "now we have the lottery funding schools," so schools haven't seen an increase in funding as a result of the lottery.

Increased funding of schools was a major selling point for the lottery.

The state constitution prohibhits an income tax. Periodically legislators will propose a constitutional amendment allowing income tax on the wealthiest 1/10 of 1% of wage earners. It's an attempt to get a foot in the door so that later they can tax everybody's income.

While many who are invested in the current U.S. income tax system seek to demagog the well-researched FairTax plan (1), FairTax's theoretical underpinnings have been professionally reviewed (2), and its acceptance in the professional / academic community continues to grow (3).

Renown economist Laurence Kotlikoff believes that failure to enact the FairTax - choosing instead to try to "flatten" what he deems to be a non-flattenable income tax system - will eventuate into an irrevocable economic meltdown (4) because of the hidden aspects of the current system that make political accountability impossible. Tom Frey, of the DiVinci Institute, foresees the coming collapse of the income tax system (5).

Here is why the FairTax MUST replace the income tax. It's:

• SIMPLE, easy to understand
• EFFICIENT, inexpensive to comply with and doesn't cause less-than-optimal business decisions for tax minimization purposes
• FAIR, loophole free and everyone pays their share
• LOW TAX RATE, achieved by broad base with no exclusions
• PREDICTABLE, doesn't change, so financial planning is possible
• UNINTRUSIVE, doesn't intrude into our personal affairs or limit our liberty
• VISIBLE, not hidden from the public in tax-inflated prices or otherwise
• PRODUCTIVE, rewards, rather than penalizes, work and productivity

Its benefits are as follows:

For INDIVIDUALS:
• No more tax on income - make as much as you wish
• You receive your full paycheck - no more deductions
• You pay the tax when you buy "at retail" - not "used"
• No more double taxation (e.g. like on current Capital Gains)
• Reduction of "pre-FairTaxed" retail prices by 20%-30%
• Adding back 29.9% FairTax maintains current price levels
• FairTax would constitute 23% portion of new prices
• Every household receives a monthly check, or "pre-bate"
• "Prebate" is "advance payback" for taxes payable on monthly consumption to poverty level
• FairTax's "prebate" ensures progressivity, poverty protection
• Finally, citizens are knowledgeable of what their tax IS
• Elimination of "parasitic" Income Tax industry
• NO MORE IRS. NO MORE FILING OF TAX RETURNS by individuals
• Those possessing illicit forms of income will ALSO pay the FairTax
• Households have more disposable income to purchase goods
• Savings is bolstered with reduction of interest rates

For BUSINESSES:
• Corporate income and payroll taxes revoked under FairTax
• Business compensated for collecting tax at "cash register"
• No more tax-related lawyers, lobbyists on company payrolls
• No more embedded (hidden) income/payroll taxes in prices
• Reduced costs. Competition - not tax policy - drives prices
• Off-shore "tax haven" headquarters can now return to U.S
• No more "favors" from politicians at expense of taxpayers
• Resources go to R&D and study of competition - not taxes
• Marketplace distortions eliminated for fair competition
• US exports increase their share of foreign markets

For the COUNTRY:
• 7% - 13% economic growth projected in the first year of the FairTax
• Jobs return to the U.S.
• Foreign corporations "set up shop" in the U.S.
• Tax system trends are corrected to "enlarge the pie"
• Larger economic "pie," means thinner tax rate "slices"
• Initial 23% portion of price is pressured downward as "pie"
increases
• No more "closed door" tax deals by politicians and business
• FairTax sets new global standard. Other countries will follow

(1) http://snipurl.com/taxpanelrebutted (.pdf)
(2) http://snipurl.com/taxnotes_galerebut (.pdf)
(3) http://snipurl.com/econsopenletter (.pdf)
(4) http://snipurl.com/meltdowninprogress
(5) http://snipurl.com/incometaxcollapse

It's well past time to scrap the tax code ( http://snipr.com/scrapthecode ) and pay for government the way that America's working men and women are paid - when something is sold.

In 2000, we had a new consumption tax (Goods and Services Tax or GST) introduced. It replaced our Sales Taxes and a whole lot of other State government duties and taxes. The benefit was it reduced the number of taxes business had to comply with, the object being to reduce the cost of administration and to make taxes more simple.

Sales tax was levied at the wholesaler or manufactuter, not the retailer. It was very messy.

The GST exempts medical and education services in most circumstances, but not all. Some areas are complex and messy. IMO its better to have no exemptions and one single rate. Simple. Less opportunity to cheat.

However, what happens in Australia is that the Federal Government takes over all taxing roles from the States, in return the Feds allocate money to the States. What happens next is the Feds starve the States of money and bribe or blackmail them into handing over more powers to the central government or doing what the Feds want.

If your (US) States have to give anything up, it could centralise power and may lead to the demise of the States having an independent financial base, which IMO is a bad thing.

Looking at the FairTax, I see some issues.
First, 'twould require what no one seems
willing to do, which is moving social security
into the general fund.

Also, I have worries about the burden of the
tax. Necessities should probably be exempted,
to make it a reasonable sales tax. But, determining
just what is a necessity, and what isn't becomes a
tricky and cumbersome problem, in and of itself.

Finally, it has the effect of suppressing consumption.
Now, I'm all in favor of this, but seems likely that the
economy is predicated upon rampant consumerism.
Might make more sense if it includes the sales of used
items, as the whole definition of what is "used" becomes
REALLY fuzzy. If a builder constructs a house, on property,
the property was obviously present, but the house is new,
how does one determine the difference?

Now, if all transactions are covered, this would be interesting.
As, moving wealth through any means would be taxable. Thus
stocks and other instruments of finance would be taxable. VERY
interesting, indeed. I'm heavily opposed to any system which
rewards those with inherited wealth over those who have to
actually work for an income.

That's interesting. How does that apply to the sale and re-sale of stocks, bonds, mutual funds, commodity futures, real estate and other equities and securities? Also, are all renowned economists in complete agreement on this, or is there a dissenting camp?

Actually, Bazza, the idea behind the FairTax requires that in order to keep the rate low (as a comparative "tax inclusive" rate, or "parts of a dollar spent," it would be 23%; as a classic "sales tax," on top of reduced retail prices, it would be 29.85%; anyway you look at it, the dollars are the same, and prices will be commensurate with pre-FairTax due to externalization of taxes currently embedded in price) - which includes advance cash rebates to all citizen families' spending to the poverty level, only educational costs are exempted - as these are inputs into production. The only tax on investing is on the fees charged by brokers. Also, FairTax de-centralizes tax collections to the states, who are paid to collect, and remit, them to the Federal gov't.

And, "calandale," for all intents and purposes, the Social Security funds are utilized by the general fund through non-negotiable bonds. I don't see much change there. And, given that FairTax is revenue neutral, we're already paying these taxes, only they're hidden in higher prices (tax business, business passes costs through in higher taxes, it's the citizen that pays all taxes). Here's something substantive to see how the greater visibility and accountibility via the FairTax improves the situation for taxpayers (because it worsens control and manipulation by politicians, lobbyists, large money bankers, special interests):

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Prices AFTER FairTax would look SIMILAR to prices BEFORE FairTax - NOT 30% HIGHER - as opponents contend; competition would see to it. The FairTax rate on new items would be 29.9% (on the new, reduced cost of items because business isn't taxed under FairTax - thus lowering retail prices by 20% to 30%), or 23% of the "tax inclusive" price tag - this is the way INCOME TAX is figured (parts of the total dollar).

The effective tax percentages, that different income groups would pay under a FairTax consumption tax, are calculated by crediting the monthly "prebate" (rebate of tax on necessities) against all likely monthly spending of citizen families (1 member, and greater based on figures established by the Dept. of HHS; a single person might receive ~$200/mo. A family of four might receive ~$500 - in addition to receiving their WHOLE paycheck). Prof.'s Kotlikoff and Rapson (10/06) have concluded,

(From study: http://snipurl.com/kotcomparetaxrates ) "...the FairTax imposes much lower average taxes on working-age households than does the current system. The FairTax broadens the tax base from what is now primarily a system of labor income taxation to a system that taxes, albeit indirectly, both labor income and existing wealth. By including existing wealth in the effective tax base, much of which is owned by rich and middle-class elderly households, the FairTax is able to tax labor income at a lower effective rate and, thereby, lower the average lifetime tax rates facing working-age Americans.

"Consider, as an example, a single household age 30 earning $50,000. The household’s average tax rate under the current system is 21.1 percent. It’s 13.5 percent under the FairTax. Since the FairTax would preserve the purchasing power of Social Security benefits and also provide a tax rebate, older low-income workers who will live primarily or exclusively on Social Security would be better off. As an example, the average remaining lifetime tax rate for an age 60 married couple with $20,000 of earnings falls from its current value of 7.2 percent to -11.0 percent under the FairTax. As another example, compare the current 24.0 percent remaining lifetime average tax rate of a married age 45 couple with $100,000 in earnings to the 14.7 percent rate that arises under the FairTax."

Further,

(From study: http://snipurl.com/kotftmacromicro ) "...once one moves to generations postdating the baby boomers there are positive welfare gains for all income groups in each cohort. Under a 23 percent FairTax policy, the poorest members of the generation born in 1990 enjoy a 13.5 percent welfare gain. Their middle-class and rich contemporaries experience 5 and 2 percent welfare gains, respectively. The welfare gains are largest for future generations. Take the cohort born in 2030. The poorest members of this cohort enjoy a huge 26 percent improvement in their well-being. For middle class members of this birth group, there's a 12 percent welfare gain. And for the richest members of the group, the gain is 5 percent."

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