Goodbye Infernal Revenue Service

Originally posted by Ambient Sound
Still don't see the downside.

Momma always said "If something looks too good to be true, it probably is."

The simplicity of the system will have a dynamic and complicated effect on the economy. There is something that doesn't sit right with me, but I can't seem to put my finger on it.

Originally posted by Thorfinn Skullsplitter
If you start taxing something, you make it legal. You can't have something illegal and tax it at the same time...

[edit on 30-11-2004 by Thorfinn Skullsplitter]

Actually, you can. Despite Marijuana being illegal, many states require sales of marijuana to be taxed. If someone is busted for selling, and they weren't applying tax stickers to their product, they can be charged for that as well as the selling.

While this may seem a good idea on the surface in reality it won't work. Firstly this proposed tax system would destroy the middle class. They would carry the meat of the tax burden and would not qualify for low income assistance. In fact in a lot of cases families would be better off making less money and relying on the government for assistance.

Secondly the rich simply don't spend money. Everyone likes to think they live like Trump and go beserk with their checkbooks but the fact is they save and invest and grow their wealth. They would be the huge winners under this system. The rich get richer, the poor stay the same and the middle class becomes lower class.

Thirdly how is the govt. going to collect a 23% sales tax from small businesses who make up the majority of the US economy?? If I own a small business that 23% on any cash sale goes straight into my back pocket. In turn the black market will grow exponentially. The govt. would have to spend trillions to try and track everything down.

So what is the solution? Unfortunately there is no simple answer. The US economy and social problems are infinately complex and as such call for a complex and imperfect tax system.....which is exactly what we have right now.

I think it's a wonderful idea because finally everyone can pay the same amount. This tax bracket crap is silly... my boss decided at the beginning of this month to give me a $1,000 bonus for the year. As a result, I owe an extra $1,500 in taxes at the end of the year- I was breaking even before! how on earth is a system that does something like that fair?!?

ever?

At $10/hour- I used to take home $299/week. If I didn't get income taxes and took home $400/week then paid 25% sales tax when I made purchases, how is this any different? The only difference is that people don't get singled out and screwed- everyone bares the same amount of burdon representing what they personally do. We are all getting the same services from the government, why should it cost more to some?

Originally posted by MrNice

They are going to send a monthly check to all low income families to compensate for the rise in basic necessities. No filing each month, just a one time proof that you make under X amount (with X being debated now) then they send you a check each month.

One is that � of all Federal workers are scheduled to retire in the next 4 years. That�s right�one-half. So there will be plenty of vacancies to move displaced IRS workers into.

I guess that federal record keeping for the people who will receive these checks would help to employ some of those federal employees.

Yes, the consumer would have to pay the tax at time of purchase. This would be hard for low and middle income families.

Purchase of services....any of you who live in states with sales tax know that there are ways around not paying/not reporting the tax. So that would take some investigation to keep employees busy. Auditing....

Someone has mentioned leaving the country to buy big ticket items. Wouldn't customs collect tax on entry into US?

please understand that the American people truly hate the IRS and all that it stands for. If the Republicans can make this change and remove the constitutional amendment that the IRS uses for an excuse to actually attempt to enforce income tax then we might actually be able to work out of this horrible set of economic policies.

Thank you for your post. You have raised some answers which do make me think that this could happen.

This is a topic that's been hashed and rehashed over the years, and it'll probably still come up every so often for the rest of human civilization.

If we instituted a National Sales Tax, it would not mean the abolishment of the IRS. Someone would still have to be around to manage and control the flow of the income from this new form of taxation. This duty falls quite well under the IRS's purview. They are, after all, the Internal Revenue Service, not the Income-tax Receiving Service.

The main reason that I oppose a NST is that it is, at base, a regressive tax. It's burden falls more heavily on the poor segments of society because they, as a rule, spend more of their income on purchases. That doesn't mean that they'll necessarily be paying more money to the tax, but that a greater percentage of their income will be spent on the tax. For example:

Say somone making $20,000 a year spends $15,000 on goods and services per year (rent, food, phone, etc). With a NST of 27%, they'll pay roughly $4000 on the tax, or 20% of their income.
On the other hand, if we take someone who makes $200,000 a year, and who spends roughly $75,000 on goods and services, while their overall tax expenditure will be higher in dollar ammounts ($20250), they're only spending about 10% of their income on the tax.

Now some people will propose changes to the NST in order to make exemptions for "necessary" goods and services: food, shelter, water, etc. There are two problems that are commonly brought up with this: The first is that when you start exempting items from the NST, you must perforce raise the rate of taxation to account for the missing income from exempted items. I've generally seen a 35%-45% NST rate when basic needs items are exempted. That means that while you won't be paying any tax on your house or food, that modest $12,000 car you're thinking of buying all of a sudden becomes a $16,000 to $18,000 car.

The second argument is that by allowing exemptions at all, you open the system up to abuse. By taking a (relatively) simple tax plan such as the NST, and adding in modifying rules about what is and what is not taxed, it becomes more and more like the labrynthine system we currently have in place. I'd imagine that if you gave a NST with exemptions plan the 9 decades of tinkering that our current system has gone through, it'd be just as confusing to the layperson.

Now, I'm not saying that our current system is perfect. In my opinion, it sucks. It just doesn't suck as much as some of the alternatives

Originally posted by ShadowHasNoSource
It appears they would tax "personal expenditures". This would be any misc. items you really wouldn't want someone knowing about. The only way they could possibly be able to do that is if they knew exactly how much money you have and how much you spent.

Unless you are paying cash under the table for something you are already paying tax on that item, and the government knows it's being purchased, now you're just going to pay more.

f you go to the ATM and take out money you will have to pay taxes on it. That means they will need access to watch your bank account. This looks like a trojan horse.

You're joking right? What on earth gave you that idea? This is nowhere in the bill that I read. I mean, I only read about 60 out of 125 pages; but the premise of this tax is to tax consumption of goods and services a single time -- not to tax trips to the ATM. Please think before you post.

Originally posted by dawnstar
"They are going to send a monthly check to all low income families to compensate for the rise in basic necessities. No filing each month, just a one time proof that you make under X amount (with X being debated now) then they send you a check each month."

Yes, but are they going to have to pay the tax, before they can get the rebate?

Why not just make those essentials non-taxable to begin with?
Hey, I could actually get out of this without paying any tax, since our income never seems to meet the essentials, we don't buy those nonessential items, like clothing, warm winter coats and boots, ect.....

The problem with doing that leads us back down the road of an intricate tax code, which is why we are having problems. Lobbies will attempt to get their product labeled �essential� or �special� and loopholes will turn the sales tax into wormwood.

The pain felt by the lower income bracket will, at most, be 30-60 days. This could be overcome by sending the checks FIRST (during a �no tax month�?) and then implementing the national sales tax.

Originally posted by titian

Originally posted by ShadowHasNoSource
It appears they would tax "personal expenditures". This would be any misc. items you really wouldn't want someone knowing about. The only way they could possibly be able to do that is if they knew exactly how much money you have and how much you spent.

Unless you are paying cash under the table for something you are already paying tax on that item, and the government knows it's being purchased, now you're just going to pay more.

f you go to the ATM and take out money you will have to pay taxes on it. That means they will need access to watch your bank account. This looks like a trojan horse.

You're joking right? What on earth gave you that idea? This is nowhere in the bill that I read. I mean, I only read about 60 out of 125 pages; but the premise of this tax is to tax consumption of goods and services a single time -- not to tax trips to the ATM. Please think before you post.

Why must people say "think before you post" as if they know everything? Do you require that much of an ego boost you have to do it online? Anyway.

I was referring to items that you can't directly tax. If I take $100 and go by some drugs how are they going to know I spent that?

Granted, I may not be thinking of something but keep the lame comments away from my posts. I cannot assist with your ego stroking.

Originally posted by Whiskey Jack
Say somone making $20,000 a year spends $15,000 on goods and services per year (rent, food, phone, etc). With a NST of 27%, they'll pay roughly $4000 on the tax, or 20% of their income.
On the other hand, if we take someone who makes $200,000 a year, and who spends roughly $75,000 on goods and services, while their overall tax expenditure will be higher in dollar ammounts ($20250), they're only spending about 10% of their income on the tax.

Do you really think that someone who makes 200,000 a year saves 125,000 a year? That's 62.5% of gross income. A high percentage for savings is 25%. Which would be $150,000 in consumption and $40,500 in Taxes paid. Which on the surface, is 20.25% taxed income. Which is comparable to the 20% figure you calculated.

But, lets say you are correct in your numbers, you failed to take into account the family consumption allowance. Say each were a familiy of three, each would receive an annul refund of $5,014 (paid monthly). Which, would mean the 20k per year would receive more money back than paid, while the 200k would still be paying 7.6%.

Originally posted by ShadowHasNoSource
I was referring to items that you can't directly tax. If I take $100 and go by some drugs how are they going to know I spent that?

They won't worry about it. They will get their taxes on that money when your dealer (who has $0 income reported to the IRS) uses it to buy his bling bling.

Originally posted by I_AM_that_I_AM
Hmm....

...can anyone explain to me how the IRS(Internal Revenue Service) would somehow not become the NSRS(National Sales Revenue Service)?

OR "Who else would make certain that people actually paided the correct sales tax?"

Sales tax collection would be the responsibility of the states, which already have an infrastructure for sales tax collection and enforcement.




[edit on 1-12-2004 by Raphael_UO]

[edit on 1-12-2004 by Raphael_UO]

I'm totally against what I see as a "fair" alternative, at least the way it looks now. I agree with Bleys: right now I don't pay anywhere near the 23%, it's probably less than 13% after deductions. And what happens to all the property tax and state sales tax I now pay? So, almost doubling my frederal tax burden will help me HOW????
I've seen a chart that explains that folks would still be getting an annual deduction, and a monthly and/or annual rebate. So, how will this simplify paperwork?
Why should food and shelter be taaxed? Will utiliites, already very expensive, be taxed? What about large purchses, for cars and homes? Won't that totally discourage people from these purchases? (Think about it: on a $100,00 home the tax would be $23,000 How would they compute this: add it to your monthly payment/rent? Would they tax this monthly amount, becoming a tax on a tax? Yikes, we may need even more CPAs!!!!!) Would services be taxed--things like medical appointments that are already expensive?

Here's some links about national sales tax. Although some articles are a few years old, I think they are still relevant.
www.cato.org...
www.fairtax.org...
www.ctj.org...
thomas.loc.gov...:H.R.25:
www.geocities.com...
www.scrapthecode.com...
www.taxreform.com...



[edit on 1-12-2004 by DontTreadOnMe]

Originally posted by DontTreadOnMe
And what happens to all the property tax and state sales tax I now pay? So, almost doubling my frederal tax burden will help me HOW????

Property and salaes tax would remain. Doubling your tax burden would depend on what you buy, so I cannot address this directly.

I've seen a chart that explains that folks would still be getting an annual deduction, and a monthly and/or annual rebate. So, how will this simplify paperwork?

Names of household members and social security numbers on a piece of paper as compared to everything that is used today. (Which includes those same names and SSNs and more)

Why should food and shelter be taaxed? Will utiliites, already very expensive, be taxed? What about large purchses, for cars and homes? Won't that totally discourage people from these purchases?

If you think about it, your money is already being taxed for food, shelter, medical care, and utilities. After all, you pay these things with taxed income.

Discourage people from purchasing? Perhaps. But more than likely, it just means that you may buy a $15000 car instead of a $25000 car or a used car instead of a new car. (same with houses)

The idea is that by decreasing the provider's income tax burden (which is passed on to the consumer anyway) the prices of the goods and services can be decreased. Which means when demand for a new car decreases because less people are willing to pay for them, the company is in a viable positition to lower prices to generate additional demand.

(Think about it: on a $100,00 home the tax would be $23,000

How would they compute this: add it to your monthly payment/rent? Would they tax this monthly amount, becoming a tax on a tax? Yikes, we may need even more CPAs!!!!!)

The filing of the taxes would be the responsibility of the people providing the goods or services. So, yea, the tax would be added to the rent. Not quite sure what you mean about a tax on a tax, because "the little folks" will not have to report anything (except family composition for the refund).

Originally posted by ShadowHasNoSource

Why must people say "think before you post" as if they know everything? Do you require that much of an ego boost you have to do it online? Anyway.

I was referring to items that you can't directly tax. If I take $100 and go by some drugs how are they going to know I spent that?

Granted, I may not be thinking of something but keep the lame comments away from my posts. I cannot assist with your ego stroking.

Typical. Issue a challenge and get a redirecting response. Nowhere in your response do you address the need for ATM withdrawal monitoring. If I were purchasing illicit drugs I'd frankly worry more about being charged with possession than whether the government knows if I paid sales tax on said purchase. Did you think you'd get a rebate on that purchase? I guess you could ask the dealer for a receipt....

No income taxes?? hey man, I understand not likein g being taxed, but i think most people like having certain government services, like a military, roads, public water supply, schools, hospitals, you know, the luxuries in life.

What does anyone care if an american company is profitable and employing lots of people if the rest of society has been set back a hundred years around them?

Originally posted by titian

Originally posted by ShadowHasNoSource

Why must people say "think before you post" as if they know everything? Do you require that much of an ego boost you have to do it online? Anyway.

I was referring to items that you can't directly tax. If I take $100 and go by some drugs how are they going to know I spent that?

Granted, I may not be thinking of something but keep the lame comments away from my posts. I cannot assist with your ego stroking.

Typical. Issue a challenge and get a redirecting response. Nowhere in your response do you address the need for ATM withdrawal monitoring. If I were purchasing illicit drugs I'd frankly worry more about being charged with possession than whether the government knows if I paid sales tax on said purchase. Did you think you'd get a rebate on that purchase? I guess you could ask the dealer for a receipt....

" That means they will need access to watch your bank account."

How else are they going to know what you buy? Since the topics brought up in the article (drugs, porn, illegal labor) cause you to misdirect with a statement on the criminality of said topics I will use a different example.

Let's say you take out money from your bank and go to some guy down the road that grows food. He doesn't charge tax. How will they track this?

Is that simple enough to understand?

The "fair" tax has a multitude of problems:

1. The tax is actually 30 percent to start. The tax is calculated as a 23-cent component of a 1-dollar purchase. It's 23 percent of the total purchase, but it's actually a 29.8 percent tax on what you currently pay for the same item, 77 cents. Your costs will rise 29.8 percent, not 23 percent.

2. Secondly, the tax does not address the current or future budget deficit problems. In order to balance the current budget, a sales of 36 percent would be needed since the government spends at least 20 percent more than it takes in. This smells like an attempt by the Republicans to avoid addressing the budget shortfall while the current tax system is in place, especially since the higher income brackets are likely to be hit most as that's where the money is.

3. Bush is proposing a partial privatization of Social Security that's to be funded by additional borrowing of 100 to 200 billion dollars per year. In another 10 years, under the present system, Social Security will no longer be giving off 225 billion dollars per year of surplus cash to offset the deficits in the rest of the federal budget. In order to offset these shortfalls and any new spending programs Bush has in his pocket, the sales tax would have to rise further.

4. Given the high level of the sales tax, I think it will give rise to a much larger underground economy than exists under the current tax system.

5. There's no transition period between the current income tax systems and the "fair" tax. People, who are recently retired or soon to retire, will be taxed twice on much of their savings. How would you like to pay a 31 percent tax rate on your income for the last 25 years, and then all of a sudden, incur another 30 percent annual tax on that money that's left over?

6. The "fair" tax implements a monthly rebate, called the consumption rebate, in an attempt to insulate the poor from the effects of the tax. This system is going to lead to a lot of abuse and fraud, as was the case with the earned income credit for many years. I could see a lot of abuse being perpetrated by immigrants who cross the border, apply for a tax id's, and set up temporary residences for the purpose of collecting these checks. I don't see how they'll police these when there are so many homes and apartments here in the Washington DC area occupied by several unrrelated adults and their households. I also don't think it'd be fair to reward these cost-sharing arrangements in the same manner as a regular household.

7. The "fair" tax unfairly penalizes those households who incur a large number of major purchases at the same time. An example would be a family that incurs an uninsured loss on their possessions due to fire, flood, or other catastrophe. They would incur a heavy tax burden to replace a car, furniture, draperies, etc... Another example would be those recent college graduates who marry and move into a new home that requires that they pay a large amount of tax because they just started out.

8. The "fair" tax taxes new goods but exempts used goods. This would be open to abuse, and it would also unfairly tax only the costs incurred to produce new goods. What about the cost to refurbish, repackage, and market these used goods? It seems that this would be patently unfair as many of the processes used to sell used goods, such as cars, often duplicate that of new items.

9. The "fair" tax exempts some organizations and individuals from paying the tax. Again, this would be open to abuse and expands the potential for a blackmarket in trafficking in untaxed goods. How are we track these products that have slipped through the system? What if a household has members that are exempt from paying such tax? Should the other members still be eligible for a consumption rebate? How do we make sure they're not cheating the system?

Could go on and on, but this system is so full of holes.

Discourage people from purchasing? Perhaps. But more than likely, it just means that you may buy a $15000 car instead of a $25000 car or a used car instead of a new car. (same with houses)

The idea is that by decreasing the provider's income tax burden (which is passed on to the consumer anyway) the prices of the goods and services can be decreased. Which means when demand for a new car decreases because less people are willing to pay for them, the company is in a viable positition to lower prices to generate additional demand.

But Ford and GM make their profits from servicing car loans and originating mortgages (see Ditech). I can't see them saving much more than the employer portion of the FICA tax on the labor component of the car.

I don't believe the IRS is going anywhere, they bring in far too
much money to be abolished, or restructured.

As for accountants losing jobs, no way they are big lobbyist.

"Accountancy firms are significant members of the big
international lobby groups which shape global economic and political policy."

Originally posted by lchoro
The "fair" tax has a multitude of problems:

2. Secondly, the tax does not address the current or future budget deficit problems. In order to balance the current budget, a sales of 36 percent would be needed since the government spends at least 20 percent more than it takes in. This smells like an attempt by the Republicans to avoid addressing the budget shortfall while the current tax system is in place, especially since the higher income brackets are likely to be hit most as that's where the money is.

This is probably the biggest reason I hate NST. It does absolutely nothing to reduce spending. Tax me up front, tax me at the end of the year - does it really matter - the Feds are still wasting billions of dollars each year.

At least with the current system I have the ability to reduce my taxes - NST gives me no option to do that.

Excellent examples BTW - I'd like to see some actual numbers on them, if you have a site, post it.

B.

Excellent examples BTW - I'd like to see some actual numbers on them, if you have a site, post it.

The estimate for the private Social Security reform plan comes from the recent news that the administration plans to finance it with an increase in borrowing of $ 100 billion. As a consequence, they upped the debt limit request by $ 800 billion increase instead of the original $ 690 billion. Here's the most recent article related to the reform plan (an increase in debt by $ 4.7 trillion over 30 years).

www.reuters.com.../domesticNews

I think the plan would make sense if the rest of the federal budget were actually running a surplus and was expected to remain in surplus. However, it currently runs a deficit of $ 640 billion when one excludes the positive yearly cash flow from Social Security of $ 225 billion. That cash flow won't be there in 10-15 years.

Here's the article about the government implementing a national catastrophic insurance plan which would allow companies to offload medical costs.

www.crainsdetroit.com...

In addition, Frist proposed requiring all "rich" taxpayers, those who make $ 50,000 or more, provide proof of health insurance coverage in order to qualify the individual exemption on the tax return.