Re: My take on the flawed "Fair Tax" (repost)


SWD wrote:
> js wrote:
>
> > SWD wrote:
> >
> >>AllYou! wrote:
> >>
> >>
> >>>"SWD" <aliwes1@xxxxxxxxxxxx> wrote in message
> >>>news:zUe0f.7933$QE1.1252@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
> >>>
> >>>
> >>>>AllYou! wrote:
> >>>
> >>>
> >>>>>>But the proposal before congress still one group of people paying
> >>>>>>the income tax.
> >
> >
> > Foreign corporations and nonresident aliens. Do you have any idea the
> > complexity of the current international equalization treatise?

didn't think so.

> >
> >>>With the NST, there are no personal filings to be done.
> >>
> >>You must file paperwork each year to get the rebate.
> >
> >
> > Whoopie. Amd this would be completely voluntary, too.
> >
> >
> >> Moreover,
> >>
> >>>corporate filings are significantly reduced. And finally, a NST just
> >>>doesn't lend itself to the kinds of complexities that we have today with
> >>>a PIT.
> >>
> >>Why not?
> >
> >
> > Because it is simple? NST cares not who or what or where - it just
> > cares that consumption happened and the tax is collected the same time
> > the cash is collected for the consumption.
>
> How about exempting different things?

I don't think it's necessary. The only two concessions I recommend are
how the occupancy tax is administered and how to handle the transition
rebates. I imagine that perhaps certain types of expenditures (health
care, school tuition, energy, even food) could be exempted. But, I
don't think its a good idea - a flat dollar exemption, to me, is the
easiest and most equitable way to administer the program.

> How about giving people permission to pay different rates of tax based
> on some criteria?

No - absolutely positively no. No. No. NO! No senior citizen
discounts. No veterans discounts. No luxury surcharges. No. No. NO!

> Maybe they will start graduation the amount of taxes paid on certain
> factors, such as age, health, retirement, income etc.

No. No. NO! This is in direct contradiction to the concept.

> How about exemptions based on home mortgages.

I told you the concept of occupancy tax. It is consistent with a
consumption tax and completely equitable - those with bigger, better,
and nicer homes pay MORE. No dfiffernce if you own or rent. No
implications in selling or buying.

Real estaste is just anothe4r investment.

> Maybe they will collect a one time tax on all tax deferred savings.

No. No. NO! transition is critical to acceptance.

> Who knows what else.

Under my government, I do.

> That's just some simple examples!

No, they are the same bastardizations HR25 promotes. Take a great
concept and put a political spin on it. The value is in the simplicity
and equity.

> >> You've never been able to show how this could happen. Even if
> >>
> >>>you go so far as to claim that different types of goods could be taxed
> >>>at different rates, although that'll add a little bit to the complexity,
> >>>it's still a drop in the bucket compared to the existing system. Please
> >>>make a case as to how a NST could get complex as compared with the
> >>>income tax.
>
> See above. I did.

No, you did not. You showed how congresscritters can take NST and
convert it back to an income tax.

> >>>
> >>>
> >>>
> >>>
> >>>>>>>OK, this argument makes no sense. Prices won't be reduced because
> >>>>>>>retailers will simply agree to do so, so asking them if they will
> >>>>>>>is, forgive me here, quite silly.
> >>>>>>
> >>>>>>
> >>>>>>
> >>>>>>No, it shows that they won't do it as a matter of course. Something
> >>>>>>is going to have to make them do that.
> >>>>>
> >>>>>
> >>>>>
> >>>>>But no one has ever claimed that prices will fall because retailers
> >>>>>will simply voluntarily agree to do so. Even the mot respected
> >>>>>opponents of a NST have never assumed that's how prices would fall.
> >>>>>However, if you believe in the free market system, than you've really
> >>>>>got no choice to acknowledge that prices rise and fall as costs rise
> >>>>>and fall.
> >>>>
> >>>>
> >>>>Prices rise and fall as supply and demand changes.
> >>>
> >>>
> >>>That's only partially true. Prices also rise and fall as costs to
> >>>produced those things which are priced rise and fall. OPEC raises the
> >>>price of oil, gas prices rise. Oil falls, gas falls.
> >
> >
> > That would be supply. The way OPEC raises prices is by limiting
> > supply.
>
> The above is not from my post. I believe in supply and demand.

OK - I found the comment to be worthy of rejoinder. If there is a
misattribution of my doing, please accept my apology. It was
unintential and without malice.


> >>>>> Did you
> >>>>>ever hear the old adage that we all pay the cost of shoplifting? Do
> >>>>>you believe it? Well, the same principle what makes that true makes
> >>>>>it true that when you eliminate a cost common to all business,
> >>>>>competitive pressures squeeze those costs out of pricing. That's
> >>>>>economics 101.
> >>>>>
> >>>>>Like I said, asking retailers if they simply reduce their prices is
> >>>>>as silly as it gets.
> >>>
> >>>
> >>>
> >>>>>>>Almost no one who of any credibility who opposes the NST concept
> >>>>>>>disagrees that the corporate income tax is embedded in the price of
> >>>>>>>all goods and services, ad that it would be removed under a NST.
> >>>>>>>Are you sure you want to debate that one too? Let me know, but I'm
> >>>>>>>just trying to save some time here.
> >>>>>>
> >>>>>>
> >>>>>>
> >>>>>>Sure, there are some taxes embedded in the price of goods and services.
> >>>>>>That doesn't mean that they will reduce their prices automatically
> >>>>>>if the NST goes into existence. Supply and demand will determine
> >>>>>>prices not the removal of embedded taxes.
> >>>>>
> >>>>>
> >>>>>
> >>>>>Competition will assure it. Take 5 companies each of which compete
> >>>>>with all the others. Now add the same cost of doing business to all
> >>>>>of them. They'll all resist increasing their prices, but because
> >>>>>they're all interested in maintain their ROI, at some point, one of
> >>>>>them will raise its price a little bit. Then another, then another,
> >>>>>then the first again, etc, and before you know it, prices have risen
> >>>>>to include that added cost.
> >>>>>
> >>>>>Now let's say that the same cost is removed from all 5. The opposite
> >>>>>phenomenon will occur, and prices will fall. One company will want
> >>>>>to increase it's competitive edge and will reduce prices a little,
> >>>>>then another will match or exceed the first, and then the next, and
> >>>>>so on, and so on. It's really that simple.
> >>>>>
> >>>>>If you're not buying into that, then we really can't pursue this much
> >>>>>more until you learn a little about the free market system.
> >>>>
> >>>>
> >>>>You don't believe in supply and demand?
> >>>
> >>>
> >>>I most certainly do. However, you're claiming that's the only reason
> >>>that prices rise and fall, and I'm here to tell you that costs have much
> >>>to do with it as well. why have you not speciffically addressed my
> >>>arguments to that effect?
> >
> >
> > Oh please. let me....
> >
>
> The above is not from my post. I believe in supply and demand.

Again, that was not the intent.

> >
> >>Ok, here's an example. I make a product and in one area can sell it for
> >> $5.oo apiece, in another area, less than 60 miles away I have to sell
> >>it for $4.00 to get any sales. It's supply and demand. I've always
> >>been able to sell more in the $5.00 area than the $4.00 area simply
> >>because of supply and because there is more income per capita in the
> >>first location.

This is an intersting comment reading it again. I think the writer is
not trained in economics and would fail as a businessman.

If he can sell more in the $5 market than in the $4, why sell in the $4
market at all?

> >>It has nothing to do with the cost of producing this product.
> >
> >
> > Well, it has a little to do with the cost of production. It's hard to
> > sustain a supply when the cost of production exceeds the revenue that
> > sales generate - in the absence of a subsidy, that is.
>
> In the case above, it has absolutely nothing to do with the cost of
> procucing this product.

Just want to make an argument or what?

> How do I know? I'm produce and sell the
> product. And I'm am selling at a profit.

Yes, you may well be. And in fact, you are in luck! Your competitor
is not as efficient as you and has since dropped out of the market.
Guess what? same demand, less supply, more profit for YOU!

But wait - another producer, seeing the possibility of profits, enters
the market. Boo, hiss - economics foiled your ability for long term
economic profits.

> But I do agree if you can't produce a product for a price that makes a
> profit, you will go out of business, unless as you say that you have a
> subsidy.

> > But all in all, as producers drop out of the market (under the
> > efficient market hypothesis), supply decreases, prices rise. Problem
> > solved.
>
> Problem not solved because I'm saying that products will cost more when
> there is a sales tax, because unless demand decreases, the products will
> sell for the same price plus the sales tax. This immediatly causes
> inflation and lowers the buying power of savings.

Oh boy, here we go again. First - very little of the fuel for
consumption comes from savings and even less from after-tax (retaxed?)
savings. And in my government, there is no such thing as double tax.

Part 2 - demand stays constant. It has to. Its the law. And I'm not
joking. Because NST is required to be revenue neutral, there is NO
change in the ability of the consumer to afford his basket of goods -
even if you subscribe to the otehr notion of effect, eh AllYou?

Part 3 - NST is not inflation - it is a shift in how taxes are
collected - the amount collected stays the same.

> >>>> Why then does the price of lumber etc. go up after a hurricane and
> >>>>later falls some? Demand of precious resources will drive the price
> >>>>up. Later, less demand will drive prices down some.
> >>>
> >>>
> >>>I never claimed that supply and demand doesn't affect prices. I'm
> >>>simply saying that's not the whole story, and that there's a whole other
> >>>phenomenon at work in the economy. Assuming a given relationship
> >>>between price and demand, that other factor is the equilibrium between
> >>>profit motive and competition.
> >
> >
> > Oh, now that was way way too funny.
>
> Look carefully, that isn't from my post. I believe in supply and demand.

And once again, it was deserving of a rejoinder and I posted it.

> You're getting so confused that you are arguing with the person who
> agrees with you now instead of me.

In case you haven't noticed, I don't agree with AllYou on a number of
aspects of NST implementation. We do agree on one thing, the
simplicity and equity of NST. He doesn't see the effects the way I do
- and he isn't a classically trained economist.

> >
> >
> >>>Profit motive is an upward pressure on
> >>>price,
> >
> >
> > Profit is hardly an upward pressure on price. In fact, the efficient
> > market (that is one with no barriers to entry as an example) would
> > predict that higher profits increase supply, reducing prices, and
> > having spot economic profits eliminated in faqvor of normal profits.
> >
> >
> >>and competition is a downward pressure on price,
> >
> >
> > Competition is a euphemism for supply. So increased supply results in
> > decreased prices under the efficient market hypothesis.
> >
> >
> >>and the price
> >>
> >>>seeks it's own level when these two pressures equalize in the economy.
> >
> >
> > Nope - price finds its level based on supply and demand - nothing more
> > and nothing less. Now, granted, there are lots and lots of market
> > imperfections, but the efficient market hypothesis assumes a certain
> > level of "perfection".
> >
> >
> >>>That's the phenomenon that'll drive prices down once the income tax is
> >>>removed from the economy.
> >
> >
> > I still don't think it will. There is still no reason for the market
> > to behave this way. There is no benefit to the market to undertake the
> > huge effort to adjust prices and costs to re-establish an equilibrium.
> > It is much easier for the market to make small adjustments based on the
> > existing equilibrium. Now, if consumer behavior changes due to changes
> > in perceived purchase power, it could be interesting.
>
>
> Well, we certainly agree here, that's what I've been trying to say.

All I have heard from you is some diatribe about how NST is bad and it
hurts the lower middle class.

> >
> >
> >>>>>>One of the arguments for this tax from the fair tax people was that
> >>>>>>drug dealers who don't their income will not have to pay sales tax.
> >>>>>>True, but they forgot about the drug dealer selling drugs without
> >>>>>>collecting a sales tax.
> >>>>>
> >>>>>
> >>>>>
> >>>>>No. The argument is not that drug dealers would charge a sales tax
> >>>>>on the drugs they sell, it's that because they'll be paying the sales
> >>>>>tax.when they spend the profits from their drug sales on consumer
> >>>>>products. Try to think this stuff through before posting. It'll
> >>>>>save us both some time.
> >>>>
> >>>>
> >>>>But the people who buy the drugs will be buying them with tax free
> >>>>dollars now. They won't pay income taxes and they won't pay sales
> >>>>taxes on their drugs either. Try to keep up.
> >>>
> >>>
> >>>I know that, slow poke, and I even said that. But what you fail to see
> >>>through the fog in your brain is that no one ever said differently.
> >>>*You* raised this issue because you think that the NST proponents have
> >>>said such a thing, and I'm simply pointing out that's not what they
> >>>said.
> >>
> >>They say right on their web site 'fairtax.org' that the drug dealers who
> >>haven't paid income taxes will not have to pay sales tax. They don't
> >>mention the buyers buying with pretax dollars and not paying sales tax
> >>on their drugs.
> >
> >
> > So instead of millions of dollars of illicit drugs, the drug dealers
> > have millions of dollars. Bling Bling sales up or down?
>
> Sales taxes from the dealers up, income taxes, social security, and
> medicare taxes from the users down.

Go figure. Actually, income taxes, social security and medicare taxes
eliminated for users.

> The millions of dollars that the
> dealers make will not all turn in to product consumption,

Bling Bling buddy, Bling Bling.

> some will be
> savings etc.

Huh? If there's one part of the population who won't increase savings,
I'd bet its these guys. But please remember, savings grows the economy
- and as such, is considered by many to be one of the hallmarks of the
long term success of NST - if in fact it eliminates capital gains taxes
as I proposed.

> Meanwhile you have lost the sales tax on all these
> millions of dollars when the users bought them. Some drug users earn
> quite a bit of money.

Not in most neighborhoods and usually not for very long. Or is this
one of those trick things - you use the term "some" to mean three out
of 2.8 million?

Most illicit drug users do not earn quite a bit of money - at least not
for long.

Most, unfortunately earn no money and many resort to criminal
activities to support their habit. I remember one statistic that half
of all inmates are their because of drugs in one way or another.

> >>What they *did* say, and what you've totally misunderstood, is
> >>
> >>>that the profits from drug dealing, which are not taxed now, would be
> >>>taxed under a NST because those profits will intimately be spent on
> >>>consumer goods. Sheesh! Focus! You tend to loose track of these
> >>>arguments mid stream. Take notes if you must, but try to keep track.
> >>
> >>Certainly I know that, that was not the point I was making. Stop
> >>twisting things.
> >
> >
> > Let's see - currently, all drug users are earning money, paying taxes,
> > and then buying drugs...interesting concept.
> >
> >
> >>>>>>>>>>6. People may have to prove that they paid sales tax and be
> >>>>>>>>>>audited.
> >>>>>>>>>
> >>>>>>>>>
> >>>>>>>>>
> >>>>>>>>>
> >>>>>>>>>
> >>>>>>>>>Why?
> >>>>>>>>
> >>>>>>>>
> >>>>>>>>
> >>>>>>>>
> >>>>>>>>To try to catch cheaters, just like income tax audits today.
> >>>>>>>
> >>>>>>>
> >>>>>>>
> >>>>>>>
> >>>>>>>But the only cheaters will be businesses.
> >>>>>>
> >>>>>>
> >>>>>>
> >>>>>>What if the business decides not to collect the tax, you don't think
> >>>>>>they would also go after the buyer?
> >>>>>
> >>>>>
> >>>>>
> >>>>>No. Why go after them when the problem is so easily solved by going
> >>>>>after the business?
> >>>>
> >>>>
> >>>>How about the guy who is in business for himself and doesn't write
> >>>>sales slips for some items? Sometimes they may not know who is
> >>>>cheating and who isn't and just decide to do random audits like they
> >>>>do now.
> >>>
> >>>
> >>>I'm sure they'll do random audits on businesses, but once again, you
> >>>lost track of your own argument. You said that the government would go
> >>>after the buyer, and I'm simply pointing out that there's no reason to
> >>>do that.
> >>
> >>
> >>You don't know that.
> >
> >
> > There's no reason - we know that.Same reason why the government doesn't
> > go after corporations because one of their employees didn't pay all his
> > taxes.
> >
> > Of course, if the employer conspires with the employee...that's another
> > story.
> >
> >
> >>>>>>>>>>7. After the first year, the tax rate will be set higher and
> >>>>>>>>>>higher.
> >>>
> >>>
> >>>>>>>>>Why?
> >>>
> >>>
> >>>>>>>>Because the government spends more and more money.
> >>>
> >>>
> >>>>>>>But again, to argue that one system is to be favored over another
> >>>>>>>because of an issue that is common to both is silly. Not only
> >>>>>>>that, but in this case, the issue has nothing to do with the
> >>>>>>>collection of revenue.
> >>>
> >>>
> >>>>>>No my argument was that the rate will go higher and higher. Not
> >>>>>>silly.
> >>>>>
> >>>>>
> >>>>>
> >>>>>I know that's your argument, and it's silly to say that this is a
> >>>>>flaw of the NST when it's common to all tax systems. Furthermore,
> >>>>>it's not really a flaw to any tax system. A tax system is a means of
> >>>>>collecting revenue, and the amount of money required to be collected
> >>>>>has nothing at all to do with the relative merit of the tax system
> >>>>>which collects that money. It's not your claim that's silly, it's
> >>>>>the use of it in the context of a discussion about the relative
> >>>>>merits of differing tax systems. Focus.
> >>>>
> >>>>
> >>>>It will go up and up because the govt keeps spending and people won't
> >>>>pay as much attention to the sales tax as they do the W2 at the end of
> >>>>the year.
> >>>
> >>>
> >>>That's just stupid. With a sales tax, every time a consumer makes any
> >>>purchase, he'll have to dig into his pocket to come up with the
> >>>difference between what the price tag said and what the cashier told him
> >>>was due. That's a real pain with every purchase. But with a W2, he
> >>>never had that money in his pocket, and so it's just a number on a page.
> >>>
> >>>Besides, although that's a worthwhile debate to have, you advertised
> >>>this point as a flaw, and as I've already pointed out, the rising cost
> >>>of government is not indicative of a *flaw* with the NST or any tax system.
> >>>
> >>>
> >>>
> >>>
> >>>> If it gets too high, the govt. might just make it invisible like that
> >>>>have the gasoline tax and a lot of people really won't know what they
> >>>>are paying.
> >>>
> >>>
> >>>
> >>>And although that's not a flaw, it's the best argument against a NST.
> >>>There's no doubt that if it's made inclusive in the price of everything,
> >>>then most of the reasons for it disappear. that's why it's got to be
> >>>visible, and I've already told you why it will be.
> >>
> >>Well, the gasoline tax started out as a visible tax too.
> >
> >
> > That would have been an excise tax? Or the state motor fuel tax? Or
> > the sales tax?
> >
> > But then again, it's just an administrative issue, not a real problem.
>
> Not if the tax becomes invisible.

And that is exactly something that needs to be avoided at all costs.
Accountability at the cash register is the key component to get
consumers engaged in the decisions of government spending.

js

.

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