End Of Irs?

[tommyedison]

But it is far easier simply to evade sales taxes than to elect tax-reducing legislators. And one of the great virtues of the Internet is that evading sales taxes is just a click away. Sales tax avoidance is already a big problem for the states.  When the tax rate soars to 30, 40 or 50 percent, the number of evaders will increase proportionately.

Unless Bush wants to commit political suicide, sales tax rate will never rise to 30%. I even doubt 25%.

[Tom Robinson]

Actually I thought the resistence to tax evasion was one of the key strongpoints of a national sales tax (if indeed you really consider it a moral problem). The number of federal tax returns will decrease dramatically because only businesses will fill them out. Not only does that mean lower overhead cost, but it also means the government has a greater chance of catching evaders.

You still have not answered my earlier point: there is no reason to suppose reforming taxation will have any influence on spending. The fact that the public doesn't like high taxes means only that there will be pressure on politicians to cut taxes, not spending. That is precisely what occurred in Dubya's first term.

As for the Bartlett-Walby debate, we have two groups of economists, one claiming that the national sales tax rate will have to be on the order of 60% to equal current revenues, the other insisting that it will remain at 23%. In all probability, the truth lies somewhere in between. I’m skeptical of the “Fair” Taxers’ claims for two reasons: 1) those arguing for a new government policy typically overrate its advantages and de-emphasize its costs, and 2) nobody in the “Fair” Tax organization seems to have given any serious thought to the question of tax evasion, which is certain to boom when the sales tax quadruples for most Americans. The higher the rate of evasion, the greater the burden on those who comply and the greater the pressure on politicians to increase the rate to cover shortfalls. And any increase in the rate will only drive more consumers to the black market, thus completing the vicious cycle.

Personally, I would be delighted if the “Fair” Tax blows up in the government’s face and encourages more people to break the law by participating in the “black” a.k.a. free market. However, in the long run I expect that the government will simply bring back the income tax and still hold on to the “Fair” Tax.

Unless Bush wants to commit political suicide, sales tax rate will never rise to 30%. I even doubt 25%.

But, tommyedison, a 30% rate is exactly what the "Fair" Taxers themselves are proposing. They state they only want 23% but the tax is calculated on 23% of the total sale price of the product or service. Since the sale price is inclusive of the tax, an item that costs say $1.00, will have its grand total marked up to $1.30, not $1.23. You can read an explanation here

[Oakes]

You still have not answered my earlier point:

I was answering your tax evasion argument.

there is no reason to suppose reforming taxation will have any influence on spending.

I'll just copy/paste this time:

"While the FairTax plan does not cut government, it is important to understand that two factors will encourage efficient government. First, the rate will fall because of an improved economy. Second, Americans will be better equipped to determine if a tax cut is needed when they can see for the first time how much they really pay. By removing hidden taxes imposed upstream, eliminating withholding on income and making federal taxes visible on each sales receipt, taxpayers might exert downward pressure on the government. One of the reasons why taxes are at record levels in the U.S. today (and even during a period when legislators claim they have lowered taxes) is because many taxes are not visible to the consumer."

In all probability, the truth lies somewhere in between.

1) those arguing for a new government policy typically overrate its advantages and de-emphasize its costs,

Maybe, but an argument based on probabilities and what is typical is not in itself valid.

2) nobody in the “Fair” Tax organization seems to have given any serious thought to the question of tax evasion,

Have you read any of their PDF brochures? They talk about tax evasion a lot. They offer the same argument I've given you, which I don't think you responded to.

However, in the long run I expect that the government will simply bring back the income tax and still hold on to the “Fair” Tax.

You mean after the 16th Amendment has been repealed? Not likely.

[Tom Robinson]

I was answering your tax evasion argument.

In post number 23 you wrote, “Apparently you didn't read my first post in this thread. It answers your objection in its entirety.” But that first post did not in fact address cutting spending because, as I have shown, government spending and the rate of taxation are independently determined.

I'll just copy/paste this time:

"While the FairTax plan does not cut government, it is important to understand that two factors will encourage efficient government. First, the rate will fall because of an improved economy. Second, Americans will be better equipped to determine if a tax cut is needed when they can see for the first time how much they really pay. By removing hidden taxes imposed upstream, eliminating withholding on income and making federal taxes visible on each sales receipt, taxpayers might exert downward pressure on the government. One of the reasons why taxes are at record levels in the U.S. today (and even during a period when legislators claim they have lowered taxes) is because many taxes are not visible to the consumer."

Fine. Now show why Congress, under pressure to reduce taxes, will reduce spending too and not just taxes. In other words, show why a future Congress will be under any incentive to behave differently than the present Congress.

Maybe, but an argument based on probabilities and what is typical is not in itself valid.

That would mean people who refuse to take cruises during the hurricane season are fools.

Have you read any of their PDF brochures? They talk about tax evasion a lot. They offer the same argument I've given you, which I don't think you responded to.

I have not seen any literature that satisfactorily addresses the black market that would be created by a 30% national sales tax. Your point about evasion was that “The number of federal tax returns will decrease dramatically because only businesses will fill them out.” But how would this have any bearing on the sales tax-free black market? The fact that there are fewer tax returns being filled out does not mean that fewer goods will be sold without a tax being collected.

You mean after the 16th Amendment has been repealed? Not likely.

Read the Fair Tax Bill (H.R. 25). It calls for repeal of “title 26 of the Internal Revenue Code of 1986 (relating to income taxes and self-employment taxes).” It does not require that Amendment 16 to the Constitution be repealed before the “Fair” Tax is implemented, nor does it address the bulk of the current Internal Revenue Code.

[Oakes]

In post number 23 you wrote, “Apparently you didn't read my first post in this thread. It answers your objection in its entirety.” But that first post did not in fact address cutting spending because, as I have shown, government spending and the rate of taxation are independently determined.

Being independently determined doesn't mean one can't affect the other.

Fine. Now show why Congress, under pressure to reduce taxes, will reduce spending too and not just taxes. In other words, show why a future Congress will be under any incentive to behave differently than the present Congress.

You mean, show why the Congress won't continue spending imaginary money that inflates the deficit? Because they're under pressure for that, too.

That would mean people who refuse to take cruises during the hurricane season are fools.

Only if you ignore the context of what I said. Previous hurricanes can tell you a lot about an upcoming one, but previous tax plans tell you nothing of the one about to be proposed.

I have not seen any literature that satisfactorily addresses the black market that would be created by a 30% national sales tax. Your point about evasion was that “The number of federal tax returns will decrease dramatically because only businesses will fill them out.” But how would this have any bearing on the sales tax-free black market? The fact that there are fewer tax returns being filled out does not mean that fewer goods will be sold without a tax being collected.

I assume the fairtax plan also includes taxes on internet sales, but I'm not positive.

Read the Fair Tax Bill (H.R. 25). It calls for repeal of “title 26 of the Internal Revenue Code of 1986 (relating to income taxes and self-employment taxes).” It does not require that Amendment 16 to the Constitution be repealed before the “Fair” Tax is implemented, nor does it address the bulk of the current Internal Revenue Code.

Everything I've read in their literature says they call for a repeal of the 16th Amendment.

[Tom Robinson]

Being independently determined doesn't mean one can't affect the other.

You said in post number 17 that “reforming the tax system can lead to” cutting spending. So far, you've offered no proof of this.

You mean, show why the Congress won't continue spending imaginary money that inflates the deficit? Because they're under pressure for that, too.

I see. The same pressures to reduce spending that are in effect on our current Congress -- which has actually increased spending -- will be in effect on future Congresses. Wow, some pressure!

Only if you ignore the context of what I said. Previous hurricanes can tell you a lot about an upcoming one, but previous tax plans tell you nothing of the one about to be proposed.

The common practice of promoters of new policies is to understate their costs. And this has proven to be precisely the case with the “Fair” Tax people, who propagandize about a 23% rate but whose bill H.R. 25 would actually deliver a 30% rate. The bill in Section 101 B 1 states, “FOR 2005- In the calendar year 2005, the rate of tax is 23 percent of the gross payments for the taxable property or service.” (bold added) Note the phrase “of the gross payment.” So you buy a comic book for a total price, including tax, of $1.30. One dollar of that price pays for the magazine, $.30 goes to the federal government. The ballyhooed 23% rate, which the public naturally thinks is 23% of the merchandise, is a sick joke.

I assume the fairtax plan also includes taxes on internet sales, but I'm not positive.

Of course, it would. But the problem is that the individual states are themselves losing billions in sales taxes to hidden Internet purchases. A sharp rise in the total sales tax rate can only exacerbate the problem.

Everything I've read in their literature says they call for a repeal of the 16th Amendment.

Look, do yourself a favor and become familiar with the legislation you are so enthusiastically promoting. Read H.R. 25. It says nothing about the 16th Amendment’s repeal being a pre-requisite for implementing the “Fair” Tax.

[Oakes]

You said in post number 17 that “reforming the tax system can lead to” cutting spending. So far, you've offered no proof of this.

Two reasons: (1) It'll lead to a better economy by making our companies more competitive in the international market, and by eliminating the disincentive for work, savings, and investment, and (2) it'll encourage more pressure on Congress to cut taxes by being more visible.

I see. The same pressures to reduce spending that are in effect on our current Congress -- which has actually increased spending -- will be in effect on future Congresses. Wow, some pressure!

They're going to have to cut down on spending at some point. The president took a lot of heat for raising the deficit. And I suspect the pressure to cut spending would be far greater if taxes were more visible.

The common practice of promoters of new policies is to understate their costs. And this has proven to be precisely the case with the “Fair” Tax people, who propagandize about a 23% rate but whose bill H.R. 25 would actually deliver a 30% rate. The bill in Section 101 B 1 states, “FOR 2005- In the calendar year 2005, the rate of tax is 23 percent of the gross payments for the taxable property or service.” (bold added) Note the phrase “of the gross payment.” So you buy a comic book for a total price, including tax, of $1.30. One dollar of that price pays for the magazine, $.30 goes to the federal government. The ballyhooed 23% rate, which the public naturally thinks is 23% of the merchandise, is a sick joke.

I have no experience in this field, so I can only rely on the findings of the independent economists cited in the Bartlett rebuttal I linked to.

Of course, it would. But the problem is that the individual states are themselves losing billions in sales taxes to hidden Internet purchases. A sharp rise in the total sales tax rate can only exacerbate the problem.

From a moral standpoint, this is not a problem. From a practical standpoint, this is not a problem as long as enough taxes can be collected to run the government.

Look, do yourself a favor and become familiar with the legislation you are so enthusiastically promoting. Read H.R. 25. It says nothing about the 16th Amendment’s repeal being a pre-requisite for implementing the “Fair” Tax.

Who said I was promoting legislation? I like the national sales tax idea, but I have no idea what's in that bill.

[Tom Robinson]

Two reasons: (1) It'll lead to a better economy by making our companies more competitive in the international market, and by eliminating the disincentive for work, savings, and investment, and (2) it'll encourage more pressure on Congress to cut taxes by being more visible.

If the overall tax burden is the same, the economy will do no better under a sales tax than an income tax. If the prices of goods go up as a result of the national sales tax, there will be fewer products sold, and therefore less production and therefore fewer opportunities to invest capital. And you still have not shown why public pressure to reduce taxes will result in lower spending. Yet you keep repeating this claim as if it were a holy mantra.

They're going to have to cut down on spending at some point. The president took a lot of heat for raising the deficit. And I suspect the pressure to cut spending would be far greater if taxes were more visible.

In fact, they do not. There is no balanced budget amendment to the U.S. Constitution. Congress can go on spending and borrowing till Doomsday. And there is no reason to suppose that those constituents who enjoy their favorite federal program are going to surrender it without a fight. Thus the way of least resistance is to spend, spend, spend.

I have no experience in this field, so I can only rely on the findings of the independent economists cited in the Bartlett rebuttal I linked to.

Those economists did not question the fact that the “Fair” Tax would 23% of the gross, which means that it takes $1.30 to buy a $1.00 comic book. And no one in the “Fair” Tax organization is denying this. They are simply mentioning 23% and keeping quiet about the 30%. You can read H.R. 25, the “Fair” Tax bill, yourself. You’ll find links to it at http://www.fairtaxvolunteer.org/smart/index.html which is the same site that that you linked to earlier.

From a moral standpoint, this is not a problem. From a practical standpoint, this is not a problem as long as enough taxes can be collected to run the government.

Speaking as one who regards government as being many times its necessary size, any shortfall in government revenue should be celebrated. Unfortunately, shortfalls can simply be made up through borrowing.

Who said I was promoting legislation? I like the national sales tax idea, but I have no idea what's in that bill.

Uh, it’s the “Fair” Tax bill, the very bill that the “Fair” Tax organizations are hanging their hopes on. Of course, it’s possible that for all your talk you don’t really support the “Fair” Tax at all!

[Oakes]

If the overall tax burden is the same, the economy will do no better under a sales tax than an income tax. If the prices of goods go up as a result of the national sales tax, there will be fewer products sold, and therefore less production and therefore fewer opportunities to invest capital.

A sales tax will obviously raise the price of goods/services, but you have to remember that at the same time, all the hidden taxes throughout the production process will be eliminated, which raise prices by 20-30% according to a former Harvard Econ Dept Chairman the FairTaxers are quoting.

I will concede, however, that in competition between a lone income tax and a lone sales tax, each will offset the other as long as they tax the same amount. Of course, today we have neither. We have a giant jumble of taxes -- some hidden, some not -- that make it imperative that we change the system. I think a sales tax is the way to go, for the other reasons I gave: A sales tax will make American companies more competitive, will substantially decrease overhead cost, will make taxation more visible, and will be easier to comply with. As for the question of encouraging spending cuts, I'll answer that next:

In fact, they do not. There is no balanced budget amendment to the U.S. Constitution. Congress can go on spending and borrowing till Doomsday. And there is no reason to suppose that those constituents who enjoy their favorite federal program are going to surrender it without a fight. Thus the way of least resistance is to spend, spend, spend.

I can't deny any of this, but the question is whether awareness of the problem would be more likely if taxes were more visible. You're right that so far all the pressure in the world hasn't stopped Congress from going hog-wild with spending, but I've reasoned that the pressure will be exponentially greater the more people want tax cuts. What else can we hope for?

And no one in the “Fair” Tax organization is denying this. They are simply mentioning 23% and keeping quiet about the 30%.

Not really. They are actually quite open about it in this FAQ:

http://www.fairtaxvolunteer.org/smart/faq-main.html#47

Uh, it’s the “Fair” Tax bill, the very bill that the “Fair” Tax organizations are hanging their hopes on. Of course, it’s possible that for all your talk you don’t really support the “Fair” Tax at all!

And according to this quote, neither would any other FairTax advocate:

"No current supporter of the FairTax would support the FairTax unless the entire income tax is repealed."

http://www.fairtaxvolunteer.org/smart/faq-main.html#38

[Tom Robinson]

Not really. They are actually quite open about it in this FAQ:

http://www.fairtaxvolunteer.org/smart/faq-main.html#47

I don't consider burying the admission in a long FAQ to be open. The "Fair" Tax brochures, ads and talk show shills never mention the actual rate of 30%.

And according to this quote, neither would any other FairTax advocate:

"No current supporter of the FairTax would support the FairTax unless the entire income tax is repealed."

http://www.fairtaxvolunteer.org/smart/faq-main.html#38

But it was not the income tax itself but the 16th Amendment that you said would have to be repealed before the "Fair" Tax goes into effect. In fact, it is only that part of the Internal Revenue Code that implements the income tax that is required by the Linder-Peterson "Fair" Tax bill, H.R. 25, to be repealed. Thus, the income tax could be restored by Congress without ratification of a new constitutional amendment.

Do a search of the fairtaxvolunteer.org site and you'll find no mention of repealing the 16th Amendment as a pre-requisite. Please point me to some "Fair" Tax literature that insists that the 16th Amendment will have to go before a national sales tax is installed.

[AisA]

If the overall tax burden is the same, the economy will do no better under a sales tax than an income tax.

This is not true. At present, the income tax system is an enormous obstacle to the formation of new, small businesses -- it effectively insulates existing businesses from new competitors.

Go here start at the top and scroll down the list of what a new business has to do to hire employees. It is a nightmare. It is the reason why temporary employment agencies have become so popular -- using temps eliminates this headache.

However, it causes its own headaches: higher labor costs, high turnover, little or no employee loyalty, etc. Many new businesses simply give up and go under. Unless you can afford to hire a tax lawyer, an accountant and an IT specialist the day you open your doors, you're in trouble.

Even if the total tax burden stayed the same, eliminating the IRS hurdle would result in far more competition -- and we know the benefits that would bring.

[Tom Robinson]

This is not true.  At present, the income tax system is an enormous obstacle to the formation of new, small businesses -- it effectively insulates existing businesses from new competitors.

I'll grant you this: a national sales tax would give an enormous boost to one kind of small business operator -- the black marketeer. Once the sales tax quadruples for most Americans, thousands of black market entrepreneurs will leap into this window of opportunity to provide cheaper, i.e. tax-free, goods. E-Bay, flea markets, peddlers operating out of car trunks -- that's where the smart buyer will go.

And this massive civil disobedience will be loudly cheered by those of us who believe that government revenue should come only from voluntary sources.

[Godless Capitalist]

Tom is right. This effect is quite visible in many high-tax countries. Something like 25% of Italy's economy is underground for example.

Even in Canada many companies will give you a cash discount for goods or services if you don't need a reciept. The transaction is off the books and thus the tax is never paid. And this is in a country where people are generally less anti-tax than Americans and the combined federal and provincial sales tax is only in the 10-20% range. A more extreme example is cigarette taxes. These were once extremely high in Canada, to the point where there was massive smuggling from the US. The government had to lower the tax because so much of the market was smuggled cigarettes that the overall tax revenue actually went down.