Re: Re: Avoid a VAT


"Shyster1040" <Shyster1040@xxxxxxxxxxxxxxxxx> wrote in message news:968a98ff42bc88a9bd4b321289921a80@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 
Fuck adding in prior posts - if you want to see what I'm replying to, go
look it up yourself.

But that's the whole point, isn't it. You asked me a direct question, I gave a direct answer specifically to that question, and then you take my reply and apply it to a question to which it was not an answer. Here, let me replay it for you so that even you can figure it out.


You: "Second point: How do you envision administering a credit or rebate system against a sales tax? You're going to have to have exactly the sort of administrative structure you have currently for the income tax, to monitor eligibility rules and compliance issues (e.g., who's going to make sure that I'm really reporting the real amount of my expenses for necessaries?)."

Me: "How do you come to that conclusion? Every consumer is entitled to the rebate. Nothing need be submitted except a name, address, SSN, and that's basically it as far as I can think. No proof of income, no proof of purchases, not proof of anything other than existence. Application comes in, check is written and sent. Sure, there'll have to be some sort of random compliance auditing, but it'll be one heck of a lot simpler than what's now required with the income tax system."

You:  "So how does that help to address inequities in the system that effect
different people differently?"


OK? I'm not saying that you need to repost my replies as any favor to me. I'm saying that your posting style simply allows you to mislead and avoid.



1) You have never adequately addressed the issue of how you would address
the inequities imposed by a sales tax.  Your primary "argument" being that
since the income tax is incorporated into the prices of goods & services,
that everyone already bears an equal portion of the income tax, so a sales
tax would just replicate that.

That's one of my arguments, but it's you who have never been specific about what inequities you're talking about. I've asked you to tell me, but you just keep asserting there are some. So I'll ask again......to which so-called inequities do you refer?



By doing this you have confused the general with the particular.  First,
let's assume that all income taxes paid  are ipso facto incorporated into
the prices of goods & services sold in the same year in which the income
tax is paid (a dubious proposition, but let's assume arguendo), and
further assume that this economic burden is spread around sufficiently so
that it all averages out, so that for every $1 of price, a given
percentage, say 25 cents, can be assumed to go into the government's
coffers as taxes, with the result that, instead of looking at what each
person actually pays in income taxes, you look merely to the sum of their
gross expenditures for the year, multiply that by 25%, and you arrive at
their actual economic tax burden.  Is that sufficiently close to your
basic assumption?


I'll not split hairs with you unless I need to in the future.


What you fail to discuss is how this assumed burden relates to a common
yard-stick to be used to evaluate the degree to which this burden is
shared.


So says you.

Let's try using annual gross income as the measure of the distribution of
the tax burden.  It is not the case that everyone has gross expenditures
proportionate to their gross income; some people spend most of their
income and others save most of their income.  Thus, the person who spends
more bears more of this averaged tax burden than does the person who
saves.  For example, assume the averaged tax rate is 25%, and assume that
A and B each earn $40,000 in gross income, further assume that A spends
$30,000 but B spends only $10,000.  A thus pays $7,500 in taxes whereas B
pays only $2,500 in taxes (remember, we're ignoring the income tax
actually paid by each, because that burden has been mixed into the global
average - to do otherwise is to double-count).

The result is that, as a function of annual gross income, A "pays" 18.75%
of his gross income in taxes whereas B "pays" 6.25% of his gross income in
taxes.  Thus, even if we make the (dubious) assumption that the economic
burden of an income tax is incorporated into the cost of all goods &
services, and averaged out so that each person bears the tax in proportion
to his expenditures, we find that the tax burden is unequally distributed
when measured against annual gross income.

But it's you who simply fails to understand a basic premise. You've assumed that it's written somewhere in stone that the only valid yardstick for measuring equity in any tax system is income. I completely reject that notion. The degree to which someone should be required to pay taxes is not the degree to which they generate wealth, but the degree to which they destroy (consume) it. If the Bill Gates wants to live my simple lifestyle and leave the rest of his wealth in the economy, then why should he, or the economy, have it taken from him and us simply because it's there? There's no logical argument for that. However, if he decides to live a very ostentatious lifestyle and consume billions per year on himself, then that's when he should be taxed (or punished) for it. In short, penalize people for what they destroy, and not what they create.

And there's another point your missing which, had you not gotten so pissy just because you can't make your case, we could've been able to discuss more rationally, is that all the wealth which even a Bill Gates creates and accumulates will eventually be consumed either by him, or his heirs. so it's not like any of it is exempt from taxation, it's just that it'll be taxed when it's removed from the economy and used for personal comfort.



As far as an income tax is concerned, this isn't looking too good;
however, the conclusions are only as good as the assumptions on which they
rest.

These assumptions were: (a) the entire income tax burden for any given
year is fully incorporated into the prices of goods & services purchased
during that same year, and (b) this tax burden is averaged out so that
every dollar of price bears the same amount of tax.

There are several flaws in these assumptions:

(a) the income tax burden for any given year is not known until the end of
the year; absent such knowledge it is impossible for any given provider of
goods or services to set prices to completely reflect the tax that will
eventually arise;

<sigh> You just do not get it. The employer knows full well what the gross pay to the employee will be, and it's that cost which finds its way into the price of all goods and services. and that total gross pay INCLUDES the income tax. I'm surprised you missed that.

(b) not all expenditures, either business or personal, are deductible in
determining net income, it is therefore possible for a person to owe taxes
for a given year in excess of their gross annual income for such year
after other expenditures are made.  As a result, the excess of such tax
must be paid either out of savings (in which case the economic effect of
the tax burden is shifted to prior years) or out of borrowed funds, which
will be repaid in future years (in which case the economic effect of the
tax burden is shifted to future years).  Therefore, you cannot assume that
the income tax burden attributable to any given year is, in fact, fully
incorporated into the prices of goods & services for that same year;


You're the one who wanted to set the limits of a given year, not me.


(c) in order to average the total tax burden out evenly amongst the price
of every good or service purchased, you have to assume that everyone is
capable of shifting the same percentage of any tax payment that is
directly imposed on them; i.e., if the government imposes a payment
obligation on person A of $100 and on person B of $200, you must assume
that both A and B are equally capable of shifting the same percentage, say
x%, of that payment burden to others by incorporating it into the price
they charge for the goods or services they sell.

Not at all. I'm not quite sure of your point here because inherent in most of your arguments is an assumption that we agree upon a certain premise.

Two points:

1) The cost of all taxes is already buried in the price of all goods and services, and income earners do not pay any taxes. We've covered that, so if you want to debate it, then fine. But for you to premise your argument as though we agree that this is not the case is dishonest.

2) To the extent to which you disagree with (a), I do not that a shift to a NST would be revenue neutral for every individual. some people will gain slightly from the switch, and some will lose.

So one thing is for sure. There'll be no need for the convoluted tax shifting you're calling for. Essentially, for the purposes of keeping this simple for now, all pay rates will revert to net incomes, the reductions from gross pay to net pay will result in cost savings to producers, and those savings will find their way into the price of all purchases. Now to be sure, the transition will be complex and we can get into that. But in the end, the above is what will occur.


 This is also a dubious
proposition.  The ability of any given supplier to shift a marginal cost
to the buyer will depend, in part, on the elasticity of demand of the
given subset of purchasers who buy from that provider, as well as the
degree to which the goods or services provided are fungible.  If the goods
or services are highly fungible and the relevant (sub)market highly
elastic, the provider will be unable to shift any appreciable portion of
his payment obligation; alternatively, if the goods or services are
one-of-a-kind, and the relevant (sub)market is inelastic, then the
provider will be able to shift most if not all of his payment obligation
onto the buyers.  This result will hold both between different types of
goods & services, as well as between different (sub)markets for the same
type of good or service.

This is pure folly. It's not any more complicated than this..........eliminate all taxes, and take the sum total of those taxes, divide it by the total of goods and service sold, and there's your tax rate. Whereas people work for their net pay, and not the gross pay.......well, see the above.

For example, a Mercedes dealer in New York City is (a) much more able to
shift the burden of any payment obligation imposed on him than the minimum
wage janitor employed by such dealer (same market, different goods and
services), and (b) much more able to shift the burden of any payment
obligation imposed on him than is a Mercedes dealer in Mishawaka, IN (same
good, different markets).

There is no overt act required by anyone to shift any burden to anyone. Eliminate all other taxes, institute a sales tax, and the burdens shift themselves. Only a demigod would believe that he can control such burden shifting by decree.



(d) People often either use their savings or borrow in order to make
current purchases.  In the first instance, they shift the economic burden
of this year's taxes into prior years; in the second the burden is shifted
into future years (when the loan must be repaid from future earnings).

From the foregoing it should be obvious that the simple assumption that
all income taxes imposed for any given year are economically borne pro
rata by every person in accordance with their expenditures is a flawed
assumption.

And from the foregoing, it should be obvious that your assumptions are totally invalid. People use savings and loans all the time now in order to fund tax payments. That has nothing to do with when the tax is levied. I'm not sure what your fascination is with keeping all tax burdens so strictly in the same year as they're incurred, but that's a red-herring on its face. you've given quite a case study as to the fact that some people may push or pull some limited amount of the tax burden from the past or to the future, but there's nothing inherently wrong or invalid about it.


 Since the assumption is flawed, so are the conclusions.  It
follows, therefore, that you cannot compare the distribution of the
economic burden of an income tax with that of a sales tax merely on the
assumptions you've been making, and without that assumption you have no
guarantee that the sales tax would be less inequitable than the income
tax.


See the above.


Secondly, your only affirmative "solution" to inequities is to give a
rebate to everyone in the same amount, to cover "necessaries."  Since
different people spend different amounts for necessaries (e.g., because of
higher costs of living, different family arrangements, higher prices
because the merchant is in the position to shift more of his costs onto
the buyers, etc) it follows that such a rebate would not solve any
distributive inequities.  In fact, the simpler alternative of simply
lowering the sales tax rate or choosing not to impose it on so-called
"necessaries" would (a) accomplish the same result with less
administrative cost (no rebate checks to write) and (b) would be more
equitable than a rebate because the reduction in tax would go according to
expenditures, not as a flat rate.

If you believe that this would be simpler under a NST, I'll let you fly with it. I think it would be a nightmare to try to identify only those items which are basic necessities, and that, as I've shown but which you've not addressed, does not accomplish the goal anyway. the only point which you've raised which has any merit at all is that some areas of the country may well have higher costs of living than others, and that's easily solvable by adjusting the rebates accordingly. Other than that, different numbers of family members doesn't matter because each family member would be entitled to the rebate. and as to what merchants might do in terms of prices, free market forces will take care of that just fine.


For example, if the rebate amount were $750, and if A spends $5,000, which
is taxed at 10% - $500 in tax - whereas B spends $10,000 - $1,000 in tax -
A ends up with a net gain of $250 while B bears $250 worth of taxes;
however, if the tax rate is simply lowered to 2.5%, then A bears $12.50 of
tax and B bears $250 of tax - a more equitable result than the rebate,
which effectively shifted $250 from B to A (equitable in the absence of
any reason for wanting to redistribute wealth in that manner; since the
example was generic, so such reason applies).

More silliness. As I said, and which you ignored, we would establish a certain basic necessities expenditure level per person. IOW, what does it cost to purchase a typical market basket of basic necessities per person. If that basket is worth $15,000 per year, and the sales tax is set at 30%, the 15,000 AX ..30 = $4,500. that's the amount of the rebate. Now, let's even include your argument for differing costs of living per region, then in some areas, it would be $4,750, and in others, $4,250. I don't favor such a mechanism, but let's include it. Now, if A chooses to live on the cheap, and BE chooses to live on the hog, so what? Each got the same rebate against the cost of basic necessities. Case closed.


In short, your premises are flawed, and you have not, in fact, addressed
issues of interpersonal distributive equity.

Sure I have, see the above. You're simply try to socially engineer the shit out of the tax system where it's simply not required.


Finally, you did, in fact, completely miss the point I was making about
the EITC; your response was completely beside the point (and thus
irrelevant).  It goes without saying that, if there is no income tax, then
there would be no income tax credit of any sort; duh!  That was not my
point.

My point was that the EITC represents a social spending program
accomplished using the administrative mechanisms of the current income tax
on the (rather sensible) assumption that since such a spending program is
based on the same data used by the revenue-generating aspects of the
income tax code, and involves the same sort of transfer from government to
individual (i.e., a check drawn on the U.S. Treasury).

I got that point, and had you commented on it in context with my response, your claim here now would be shown to be untruthful. My response is three-fold. The first is that maintaining an inordinately complex tax system which is a total myth on many levels in order to provide a mechanism for social engineering is totally invalid on it's face. Any tax system must be as simple as it can, and must be honest. The current system is not.

The second is that you've never made the case why wealth redistribution is inherently fair or good. To take from those who are high creators of wealth and redistribute it to those who are low creators sounds great, but you've yet to make a case that it's inherently fair.

Third is that if we're going to have a wealth redistribution system, then let's not hide it a tax collection system. Rather, it should stand on it's own, and can easily stand on it's own. That way, the people of this society get a more direct voice as to the extent to which they favor such a redistribution program.

So don't ever claim that I've not addressed this issue, or that I've missed it. I've now addressed it numerous times, and it's time for you to respond directly.


Since the EITC is not primarily a tool for fine-tuning the revenue-raising
aspects of the income tax but is rather a social spending program, it will
not go away just because the income tax goes away.  Instead, it will be
moved to another program, run by another agency, and instead of being able
to leverage the administrative resources currently devoted to running the
income tax, will require its own separate set of adminsitrative resources,
thus increasing administrative costs.  Further, since the sales tax would
itself require administrative resources, the combined effect is most
likely that you will continue to have to pay for the IRS, but you will
also have to start paying for the EITC Agency, thereby increasing overall
administrative costs and increasing the government's need for tax revenues
rather than decreasing it.

Until you can adequately explain why that is not a reasonable concern, you
have not made the case that we should give up the devil we know for your
little pet devil.

I don't know why you're resorted to such hostility. You must be someone who makes his living from the existing tax code. 

.

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