Re: NRST - Many Pitfalls


"Bill Benson" <spamfree@xxxxxxxxx> wrote in message news:MXDqf.35179$7h7.1232@xxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Who has more credibility, sweetpants or Bruce Bartlett? Hmmmm....

Still giving hummers? Also, how funny is it that you can't think and debate the issue for yourself, so instead, you need to post the thoughts of others? Stupid is as stupid does, Forrest.



May 05, 2005, 8:38 a.m.
The Pitfalls of a National Retail Sales Tax
There are many.

According to columnist Robert Novak, House Majority Leader Tom DeLay (R.,
Tex.) is adamant about replacing the entire federal tax system - payroll and
income taxes - with a 30 percent national retail sales tax (NRST) collected
by the states, such as that in H.R. 25, sponsored by Rep. John Linder (R.,
Ga.). I have written many times before about what a dopy idea I think this
is. Following is an effort to summarize the key arguments against it that
appear over and over again in the scholarly literature.

1. People will still have to keep records, file income-tax returns, and get
audited as the states and some cities will continue to have income taxes.

Shear stupid speculation that states would continue with an inordinately complex income tax system if the Feds threw theirs out.But that besides the point anyway. The debate should be about which is the better system, and then when that's decided, let the states who still cling to the idiocy of the income tax fare for themselves.


There is no reason whatsoever to think that the states will get rid of their
income taxes if the federal income tax is abolished.

LOL! This guy is already showing that he's off his rocker. How could such a radical change in the tax code be undertaken if the vast majority of the taxpayers didn't go along with it, and how could many states still cling to the income tax if the vast majority of taxpayers wanted to thow it out?



Quite the contrary,
they are likely to view the federal government as co-opting their
traditional tax base - the general sales tax. Therefore, the states will
just take over the tax base being given up by the federal government - the
income tax - and abolish their state sales taxes, which would otherwise come
on top of the NRST.

So the taxpayers in any given state would want to throw out the Fed income tax, but keep the state one? This guy has lost track of reality. The Feds and the states are not separate entities in the way that he implies. The taxpayers who control what the states do are the same as those who control what the Feds do. What a moron.


The only way this can be prevented is if the federal government prohibits
the states from imposing income taxes at the same time it abolishes the
federal income tax, which is probably impossible constitutionally. And if
the states keep their sales taxes, the federal government will have to force
them to conform to its tax base. Right now, no two states have exactly the
same sales-tax systems and none come anywhere close to taxing sales as
broadly as contemplated by the NRST.


<snicker>


2. There is a very severe problem of taxing business inputs under a sales
tax. These must be exempt from tax in order to avoid cascading - taxes being
levied on taxes - which creates serious economic distortions. To avoid this
under a NRST, every business, no matter how small, would need some sort of
exemption certificate, which would create unlimited opportunities for
evasion, or businesses will have to be extensively audited in ways at least
as onerous as under the income tax.

More nonsense. What he fails to describe is that under the current system, every single tax-payer, in addition to every single business, must be monitored and tracked for compliance with over 70,000 pages of the tax code. Even the IRS only stands a 50-50 shot of answering any given question posed to them correctly, and that's just from the average taxpayer. Many companies spend millions on internal and external tax experts just to keep them in compliance, never mind all they spend in order to take every advantage of the code. And that's not an unlimited opportunity for evasion? How ridiculous is that?

B2B sales are very easy to track and audit, and even the lowly states with a sales tax manage to do it just fine. Moreover, imagine the oversight that could be applied to businesses if all the resources now employed to oversee regular taxpayers were no longer needed there? And especially to enforce such a simple code?




3. Services are by their nature much more difficult to tax than goods. For
this reason, no state makes any effort to tax more than a few of them. Yet
the NRST would tax 100 percent of services, including medical services and
government services. Every time you go to the hospital you will have to pay
30 percent on top to the federal government. And local governments will also
be taxed by the federal government on services they provide, which will
sharply raise property taxes.

The amount of taxes collected will remain the same. What this bonehead doesn't say is that everything the government now buys has the cost of all income taxes buried in it now. He buys into the concept of passing taxes along the production chain (see the above), so he must buy into the concept of businesses passing along the cost of all income taxes. IOW, the cost of everything that government must buy in order to deliver services, including employee income taxes, is passed along in property taxes right now. But does he say that? No. He's either a moron, or a liar.




4. In order to offset the regressivity of the NRST, it would establish a
massive new government entitlement program costing hundreds of billions of
dollars that would send rebate checks to every American on a monthly basis.
This system would be based on the poverty-level income established by the
Census Bureau. People would get 23 percent of this amount annually in 12
monthly installments based on their family status. Quite apart from the
massive complexity of this proposal, it would clearly require an enormous
enforcement mechanism to avoid fraud and would undoubtedly be manipulated by
politicians. It would be very tempting to change the formula to aid the poor
and penalize the rich, just as the current tax code does.


This is pure evangelism.  Where's the beef?

5. Every serious analysis has concluded that a NRST would bring about
massive evasion.


IOW, you say that he says what they say.  But where's the beef?


Taxing the spending of drug dealers and others not
currently paying income taxes will not come close to compensating for the
new evasion opportunities that will be created. Since it is not in the
interest of either retailers or consumers to pay the tax, and because all of
the revenue is collected at the point of final sale, it will be too easy for
tax-free deals to be made with producers and wholesalers.

Like hiring people *under the table* doesn't go on now? If every citizen is offered a reward for information leading to the conviction of any sales tax evader, how easy do you really think it'll be to simply evade the tax? And do you really think major retailers like WalMart would even take that chance?


Although evasion of state sales taxes is relatively small, 

BaddaBing!



this is only
because the rates are low enough that it is not worth the trouble. However,
where rates are high on things like tobacco, evasion is also high. A vast
amount of foreign experience indicates that retail sales taxes cannot be
collected much above 10 percent without breaking down.

If higher tax relates leads to a higher temptation to cheat, then this can only be so because increased dollars leads to increased temptation. So if every dollar carries a certain temptation to cheat, and this is a revenue neutral proposal, the it's a tax cheat neutral proposal too. What this Yahoo fails to show when comparing the difference in sales tax rates as the reason why cheating is low, is that there are so many other places where cheat can and does occur under the present code. He's using smoke and mirrors. His math just doesn't work.


.

Relevant Pages

  • Re: FairTax FAQ
    ... to the degree that prices decline (a proposition ... eliminating income taxes will provide sellers with the incentive to lower ... level because now there is an offsetting sales tax imposed. ...
    (misc.taxes)
  • Re: Sales Tax Algorithm
    ... invoice for the US and Canada ... I'm aware that there's a different sales %tax rate% for each US state, ... so that the total sales tax can range between 6.25% ... not allow either the State of California or the State of Massachusetts ...
    (comp.programming)
  • Re: My take on the flawed "Fair Tax" (repost)
    ... >> cares that consumption happened and the tax is collected the same time ... is not as efficient as you and has since dropped out of the market. ... >> efficient market hypothesis), supply decreases, prices rise. ... > sell for the same price plus the sales tax. ...
    (misc.taxes)
  • Re: HOw to say it idiomatically?
    ... required to collect the tax from the purchaser. ... discount the item so that the sales tax on the discounted price is ... Can I collect sales tax from my customer? ... If you include sales tax reimbursement in your prices, ...
    (alt.usage.english)
  • Re: Re: Flat tax vs. national sales tax
    ... >> Flat tax vs. national sales tax ... >> The flat tax is not the only solution that has been proposed to ... >> proposal under discussion is the national retail sales tax. ... which allows Washington to impose the income tax. ...
    (misc.taxes)
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