Comments on: Fix the Tax Code Friday: National Sales Tax

By: Doug

Doug — Sat, 21 Nov 2009 19:31:29 +0000

Rainer;

One of the stipulations in the Fair Tax Act is that it only goes into effect on Janurary 1 after the 16th ammendment is repealed, thus depriving the congress of the power to levy direct taxes, of which the income tax is one.

By: Rainer

Rainer — Sat, 21 Nov 2009 12:33:00 +0000

The real danger of adding a new mode of taxation is that it will not replace the existing modes, but instead will simply create a new pathway for government to collect additional money from the people. The only rational way to implement a national sales tax would be to abolish, completely and utterly, the income tax. And that will never happen.

By: Doug

Doug — Mon, 06 Apr 2009 15:36:45 +0000

Because greater minds than mine (and I suspect yours) did the hard work.

By: Doug

Doug — Mon, 06 Apr 2009 15:25:34 +0000

Vinny

You are correct in believing that the “powers that be” are unwilling to turn loose of the control available through the income tax system. They are even more unwilling to lose the job when they get voted out of office. This is truly a grassroots effort. Only when enought people are willing to vote for the candidate that supports the FairTax Act will the change occur.

As to the “dual tax”issue, language in HB25 repeals the portions of the income tax code that provide for collection of payroll taxes (income taxes, FICA, and others). Another provision sunsets the NRST if the 16th ammendment (authorizes direct, or income, taxes) is not repealed.

By: jon hickman

jon hickman — Mon, 06 Apr 2009 15:17:34 +0000

Because you’re not going to be doing any thinking for yourself?

By: Doug

Doug — Mon, 06 Apr 2009 15:15:00 +0000

JBruce

There are at least two flaws in your missive.

1. Again, I do not disagree that the tax can be quoted as 30%. If you do so, then to be consistent you must quote the income tax rate using the same basis. This method then increases the 25% tax bracket to something approaching 35%. If you quote the NRST using the same basis as the income tax, it is 23%. You choose, I don’t care. (see http://www.fairtax.org/site/News2?news_iv_ctrl=1541&page=NewsArticle&id=8248 for a more indepth discussion)

2. You neglect to account for the decrease in the price of goods due to the decreased cost of doing business. Studies indicate that at least a 22% of the cost of goods is currently due to corporate income tax that is passed down through the manufacturing/distribution chain. If these costs are eliminated, the quest for increased market share will cause those involved in the chain to lower prices, or lose market share, thus lose profit. Once you figure this into the equation, and then add the NRST, the cost at the register (or dealer, or title company) is essentially the same.

Congratulation on your academic achievements and your long and what I am sure is a very prosperous career, although I’m not sure what bearing this has on the facts of the matter. The information I have was generated over the course of many years, at considerable cost (more than 20 million dollars) bysome of the most prestigious institutions in the country. If you disagree with what I say, then you should take it up with those that developed the information.

By: Vinny

Vinny — Mon, 06 Apr 2009 13:52:46 +0000

The real elephant in the room in this discussion is the inherent power attached to formulating tax policy. I don’t see either party of Congress being willing to give up the power to use income tax as a force for directing public policy, or granting favors, or fomenting social change.

What I suspect we would more likely wind up with is some sort of hybrid, or perhaps even two full taxes (income and national sales tax) at the federal level.

By: JBruce

JBruce — Mon, 06 Apr 2009 04:26:31 +0000

Well, I did a little research on the NRST.
(1) The tax is 23% of the TOTAL PAYMENT made for whatever you buy. In other words, if you buy something and pay $100 for it, $23 of that goes to the tax. Which means that the seller gets $77 and the government gets $23. Which means, as far as the seller is concerned, you bought something “worth” $77, and then paid a tax of $23. $23 is 29.9% of $77, so this “23%” tax is really a 30% tax.
Or, put another way, let’s say I sell coats in my store. I sell them, for $100 each. Now, along comes the NRST at a supposed 23%. How much must I inrease my price so as to still get $100 for the coat? The answer is I must raise my price 30% to $130; 23% of $130 is $29.90, which leaves me with $100.10.
(2) the NRST would raise the price of everything, not just new goods. Example: a middling Toyota Camry now costs about $25,000. A one-year old Camry is worth about $20,000. However, with the NRST, the price of the new Camry goes up to $32,468. (So that, after 23% of that ($7,468) is taken in tax, the dealer still has his $25,000 left.) So, would a one-year old Camry still command only $20,000 — i.e., would the owner of a one-year old Camry now be willing to take a $12,468 bath to sell his one-year old car? That’s depreciation of over 38%, compared to the 25% depreciation, and practically nobody would be willing to undergo that. No, they’d ask a higher price than $20,000 for it, and, after some bargaining and give and take, the market would arrive at a price considerably higher than $20,000. Keep in mind that a lot of people seeing a price tag of almost $32,500 for the car would say, well, let’s get a used one. Demand for the used car would rise, and up goes the market price.
It would be the same for housing. The pre-NRST $250,000 house would cost $325,000 after the NRST. Sellers of existing homes would ask higher prices for their homes, since the alternative (a new one) had now become much more expensive.
This same sort of effect would exist in markets for most used items.
So, one effect of the NRST would be to raise the price of everything, new or used. It also would provide a one-time windfall profit for sellers of used items. The Camruy I paid $25,000 for a year ago might now bring even more than I npaid for it, when a post NRST new Camry now costs $32,500.
If you don’t get this, just think about it. Or take my word for it: I have a PhD in economics and a 40-year career as a Professor of finance.

By: jon hickman

jon hickman — Mon, 06 Apr 2009 00:20:16 +0000

I guess we’ll have to agree to disagree. I don’t think you can honestly do an examination of a national sales tax without discussing the combination of the national with local sales taxes, which would be quite burdensome. It’s very relevant to a lot of people that a national sales tax would add to a local sales tax. And honestly, I think it’s also relevant because one big possibility of a massive tax at the till would be a big increase in barter, and that’s even more likely if I am suddenly paying half again for a product because of a sales tax approaching 50%.

By: Doug

Doug — Sun, 05 Apr 2009 23:33:51 +0000

For purposes of this discussion, you must leave out the state sales tax. The state taxes are not affected one way or the other by the federal tax collection method. You still pay the same state taxes what ever method is used. While state taxes are definatly a topic that should be examined and discussed, they are not relevant to the worth of the NRST.