The Dolphins Make Me Cry.com - Forums

IS THIS WHY SALES OF THE FAIRTAX BOOK HAVE SPIKED?

Several listeners alerted me to this bit that appeared on Kiplinger.com written by Knight Kiplinger, the editor of the Kiplinger Personal Finance magazine. In the article Kiplinger is proposing fixes for some of our current financial problems. This section dealt with tax reform:

    Reform the tax code. The best thing Washington could do to supercharge private savings would be to tax consumption rather than income. The Byzantine U.S. tax code (all 60,000 pages of it) should be scrapped. All present federal taxes -- on personal and corporate income, capital gains, estates, even payroll taxes (FICA) -- should be gradually replaced by a new, national consumer sales tax, collected by the states at the point of purchase and forwarded to Washington.

    At every income level, big spenders would pay a lot of taxes, super savers much less. Poor people would get all their sales taxes rebated. (For more information on one version of a consumption tax, visit www.fairtax.org.)

There is absolutely no doubt that enactment of the FairTax would be the greatest boost to the American economy in our lifetimes. As I've said, the problem here is that (1) The FairTax act was introduced by a Republican; and, (2) it would constitute the most massive transfer of power from the government back to the people in the history of our Republic. The thinking in Washington is that our economic problems can only be solved through the enhancement of government power.

Apologies for the novel.

There are three major problems I have with the "fair tax":

1) It puts everyone in the US on a form of "welfare;" everyone will be expecting the reimbursement check in the mail each month, and that's a pretty big stick for the gov't to wield.  Imagine the person who takes up an unpopular political position (e.g. an anti-war demonstrator) ... it would be a shame if his monthly check started having some paperwork problems, wouldn't it?

2) The "fair tax" would inevitably result in a huge explosion in the black market.  If you're paying 23%* sales tax, that's a pretty big incentive to start buying things under the table.  This, of course, means that the disappearance of the IRS would be accompanied by an explosion in the FBI (to try to eliminate all the tax-free black market goods).  Given the choice between IRS accountants and audits, or armed FBI agents busting down doors and hauling people off for suspected black marketeering, I'll take the former.

3) The gov't will have yet another reason to take away more of your privacy.  I don't like the idea of having every item I purchase logged and tracked in some database, to be used for whatever purposes the gov't deems fit at any later date.  You might say, "Well, there's sales tax already, right?"  The difference is, under current sales tax, businesses are responsible for reporting sales tax, whereas under the "fair tax," you (the individual) are.  That means that every item you buy will be logged and tracked to you.  If you get dragged in for suspicion of a kidnapping, do you want to have to explain why you bought a roll of duct tape 3 months ago?

Additionally, this would likely lead to cash purchases being frowned on (at the very least), as cash would be the tool of the black market.  You know the looks you would get if you tried to buy a house with cash?  Imagine that same look coming anytime you tried to pay with cash, period.

I don't mean to sound like an anti-government nut, but my privacy is already being trampled by laws like the USA PATRIOT Act.  I don't need to give the gov't yet another excuse to need-to-know every detail of my life.

Also, keep in mind that in order to eliminate income tax, the 16th amendment would need to be repealed.  Amendments cannot be repealed by an H.R. bill; you need to pass a new amendment to remove an old one, and passing amendments isn't exactly a walk in the park.  If this bill were to pass, the most likely scenario would be a momentary shutdown of the IRS, followed by a reinstatement of the IRS in an "emergency situation" (like, say, a never-ending worldwide war on terror), in which case we'll be getting double taxed.

And speaking of double taxation, keep in mind that any savings you currently have WILL be double taxed.  This is an especially harsh blow to retirees.

*note:  The "23%" sales tax is misleading.  Right now, if you buy an item for $1.00 with 7% sales tax, you pay $1.07.  Under a "23% fair tax," you would pay $1.30 (23% of $1.30 is 30 cents).  Based on the way that we are accustomed to calculating sales tax, it would be less misleading to just call it a 30% sales tax.

1) It puts everyone in the US on a form of "welfare;" everyone will be expecting the reimbursement check in the mail each month, and that's a pretty big stick for the gov't to wield.

Imagine the person who takes up an unpopular political position (e.g. an anti-war demonstrator) ... it would be a shame if his monthly check started having some paperwork problems, wouldn't it?

2) The "fair tax" would inevitably result in a huge explosion in the black market.  If you're paying 23%* sales tax, that's a pretty big incentive to start buying things under the table.

This, of course, means that the disappearance of the IRS would be accompanied by an explosion in the FBI (to try to eliminate all the tax-free black market goods).

3) The gov't will have yet another reason to take away more of your privacy.  I don't like the idea of having every item I purchase logged and tracked in some database, to be used for whatever purposes the gov't deems fit at any later date.

You might say, "Well, there's sales tax already, right?"  The difference is, under current sales tax, businesses are responsible for reporting sales tax, whereas under the "fair tax," you (the individual) are.

Additionally, this would likely lead to cash purchases being frowned on (at the very least), as cash would be the tool of the black market.

You know the looks you would get if you tried to buy a house with cash?  Imagine that same look coming anytime you tried to pay with cash, period.

I don't mean to sound like an anti-government nut,

but my privacy is already being trampled by laws like the USA PATRIOT Act.  I don't need to give the gov't yet another excuse to need-to-know every detail of my life.

Also, keep in mind that in order to eliminate income tax, the 16th amendment would need to be repealed.  Amendments cannot be repealed by an H.R. bill; you need to pass a new amendment to remove an old one, and passing amendments isn't exactly a walk in the park.

If this bill were to pass, the most likely scenario would be a momentary shutdown of the IRS, followed by a reinstatement of the IRS in an "emergency situation" (like, say, a never-ending worldwide war on terror), in which case we'll be getting double taxed.

And speaking of double taxation, keep in mind that any savings you currently have WILL be double taxed.

It puts everyone in the US on a form of "welfare;" everyone will be expecting the reimbursement check in the mail each month, and that's a pretty big stick for the gov't to wield.  Imagine the person who takes up an unpopular political position (e.g. an anti-war demonstrator) ... it would be a shame if his monthly check started having some paperwork problems, wouldn't it?

The "fair tax" would inevitably result in a huge explosion in the black market.  If you're paying 23%* sales tax, that's a pretty big incentive to start buying things under the table.  This, of course, means that the disappearance of the IRS would be accompanied by an explosion in the FBI (to try to eliminate all the tax-free black market goods).  Given the choice between IRS accountants and audits, or armed FBI agents busting down doors and hauling people off for suspected black marketeering, I'll take the former.

The gov't will have yet another reason to take away more of your privacy.  I don't like the idea of having every item I purchase logged and tracked in some database, to be used for whatever purposes the gov't deems fit at any later date.  You might say, "Well, there's sales tax already, right?"  The difference is, under current sales tax, businesses are responsible for reporting sales tax, whereas under the "fair tax," you (the individual) are.  That means that every item you buy will be logged and tracked to you.  If you get dragged in for suspicion of a kidnapping, do you want to have to explain why you bought a roll of duct tape 3 months ago?

Additionally, this would likely lead to cash purchases being frowned on (at the very least), as cash would be the tool of the black market.  You know the looks you would get if you tried to buy a house with cash?  Imagine that same look coming anytime you tried to pay with cash, period.

Also, keep in mind that in order to eliminate income tax, the 16th amendment would need to be repealed.  Amendments cannot be repealed by an H.R. bill; you need to pass a new amendment to remove an old one, and passing amendments isn't exactly a walk in the park.  If this bill were to pass, the most likely scenario would be a momentary shutdown of the IRS, followed by a reinstatement of the IRS in an "emergency situation" (like, say, a never-ending worldwide war on terror), in which case we'll be getting double taxed.

And speaking of double taxation, keep in mind that any savings you currently have WILL be double taxed.  This is an especially harsh blow to retirees.

*note:  The "23%" sales tax is misleading.  Right now, if you buy an item for $1.00 with 7% sales tax, you pay $1.07.  Under a "23% fair tax," you would pay $1.30 (23% of $1.30 is 30 cents).  Based on the way that we are accustomed to calculating sales tax, it would be less misleading to just call it a 30% sales tax..

So?  Instead of reporting income now we're reporting sales?  In my state we already have to log our sales tax to deduct it from our income tax.  Of course, for those of us without records or too lazy to keep track, there's a standard deduction we can take.  The Fair Tax probably won't be any diferent.   

My favorite thing about my post is the part when I linked to a 3-year old thread where this subject was already discussed in detail.

Given that taxpayers are currently paying $700bn to bail out corrupt corporations,

you don't need to repeal the 16th amendment to do away with the income tax

the 16th only allows the income tax .. it doesn't mandate the income tax .. you could do away with the entire IRS with a bill from congress

The "fair tax" is not new, is not novel, and has no chance whatsoever of being passed... particularly in the current political environment.

Given that taxpayers are currently paying $700bn to bail out corrupt corporations, the idea of passing a new law that is rife with potential for corporate tax evasion (and CEO tax evasion in particular) is not likely to be well-received, to put it charitably.

you don't need to repeal the 16th amendment to do away with the income tax

the 16th only allows the income tax .. it doesn't mandate the income tax .. you could do away with the entire IRS with a bill from congress

But if you didn't repeal it, if the fairtax was put into place, a greedy government could come in, and put the income tax back into place on top of the fairtax.

If only the side calling for MORE oversite and regulation had been listened to.  *sigh*

Which side was that?

Kind of hard to play the "I wanted more regulation in 2003" card when you are on the record saying "we need less regulation" in 2008.

Which side was that?

Kind of hard to play the "I wanted more regulation in 2003" card when you are on the record saying "we need less regulation" in 2008.

There will be no elimination of the IRS, nor reduction in tax lawyers, because business-to-business transactions are untaxed.  And who do you suppose will be the government entity in charge of determining who is and is not legitimately conducting untaxable transactions?

It's a shell game, pure and simple.

It was government regulation that caused the problem when Carter passed the Community Restoration Act.

Then Clinton piled on in 1998.

From 2001 on the other side warned about what was coming.

One of us isn't grasping the simplicity of "business-to-business transactions are untaxed".  I admit, it could be me.

Let's say that I'm the CEO of MegaCorp.  Instead of the $5 million salary I currently receive ($3.25m after taxes), I'll elect to receive 3 million in salary and 2 million in "company benefits."  So the company can buy me a company house, a company car, a company yacht and vacation house, all tax-free because it's all business-to-business transactions.  Then I get my 3 million.

Oh, and if I should ever decide to leave the company but I really like my house/car/whatever, no worries... it's all used now, so the company can sell it to me with no tax applied; after all, used items are also tax-exempt.  Whee.

Someone might make the objection here, "Well, obviously the government won't allow companies to get away with that sort of cheating."  This immediately raises two questions:

1) Which gov't entity is going to stop them?  The IRS version 2.0?

2) If there is some IRS 2.0 out there auditing for legitimate and non-legitimate business-to-business transactions, then won't businesses be stuck with the same cadres of tax lawyers they already have?  So where's the supposed savings from tax code abolishment?

I'm sorry, was there some massive real estate bubble from 1977 to 1997 that I'm unaware of?

Putting this on Jimmy Carter is beyond a reach, but when there have only been two Dem presidents in the last 30 years, I guess you takes what you can gets.

And by "piled on," you mean, "failed to veto a bill that the majority Republican Congress wrote and passed."  Got it.

From 2000-2006, who was in control of both houses of Congress and the Presidency?  My memory must be fuzzy, or something.

It is you.

With interest rates around 18%, it wasn't actually a "bubble" during the Carter admin.  The Community Restoration Act was the first step down the slippery slope.

As for Clinton, no need to take my word for it - click the link and listen to Clinton's HUD Secretary.

Good point on the Republican Congress (did you watch the C-span link regarding the partisan 2004 hearings?)... which conveniently brings us to current the Democratic Congress.

This is like blaming the FDR administration for the SEC's failures of today.

This is like blaming the FDR administration for the SEC's failures of today.

Kind of like giving ancient Greece credit for defending/saving the democratic form of government that we enjoy today.

  Let's see, an archaic, outdated, early 20th century tax code that nobody understands, and is also run by an organization riddled with corruption known as the IRS.  Or a simple tax that's paid at the point of consumption, and you get a rebate check every month.  Gee, that's a tough one.

P.S. The "fair tax" would be simple if it were applied to all transactions equally, but since some transactions are taxable while others are not, that claimed benefit is not realistic.

In practice, it would not be simple at all, as everyone would be trying to find loopholes so that they can buy stuff under the business-to-business exemption, or the used-goods exemption.

  If this law were passed, what's to stop me from starting a corporation tomorrow and buying everything I need under the company's name, tax free?  It's not like I'm going to be audited, right?

This is why this scheme fails.  You are creating a new system rife with potential for fraud at the same time you are doing away with the entity tasked with preventing tax fraud.  It's nonsensical.

No expert here, but I would think a business license would have to be involved on both parties account.

How many people do you actually think would go to that extreme?  A few I'm sure.

However, I would think guidelines in what is considered a business.  Like a building to do business.

There will always be fraud, just as there is fraud today.  Some people will always cheat.  That is what gets some people off.

Generally speaking, everyone that I buy brand new goods from is already a business, so no problem there.  I go form a new corporation for a couple hundred bucks, and I'm tax-free.

If incorporating yourself = you pay no taxes, I think "a few" is a drastic understatement.

I already live in a building, so that works out just fine..

Unless you're saying that small businesses without a separate brick-and-mortar don't count as businesses?

Yes, but today, we have a sizable gov't organization dedicated to catching those who commit tax fraud.  You propose to do away with this organization.  It is inconceivable that this will reduce attempts to defraud the gov't of taxes.

So you think.  What are you selling?  What service are you providing?  Proof of jobs?

A few in comparison to the millions of people who cheat on their taxes, illegal trade etc....

Do you live their alone?  Is the building licensed for a business?

You are throwing crap up against the wall to see if it will stick.  Read the damn books, then come back here & tell us what your concerns still are.

As I have said.  There will always be fraud.   No system will stop it.  That sizeable Gov. org. is not doing a decent job, much less a good job,plus we are spending millions to just prepare our taxes.

You have yet to address this question.  What is the motivation of the seller to help you cheat on the purchase of an item?

Uh, I'm not sure if you know this, but you can form a business today for any reason or no reason.  Many of my friends that work in the IT consultant industry have formed their own business (with a payroll of 1) specifically so that they can get paid corp-to-corp (where, surprise, taxes aren't taken out when you get paid!).

Uh, I'm not sure if you know this, but you can form a business today for any reason or no reason.  Many of my friends that work in the IT consultant industry have formed their own business (with a payroll of 1) specifically so that they can get paid corp-to-corp (where, surprise, taxes aren't taken out when you get paid!).."

Again, if your argument is that tax fraud is rampant, eliminating the IRS cannot be a serious suggestion.

You don't need to live in a building "licensed for a business" now!  So unless you are saying that this new, "simple" tax code will also have wide-ranging changes to how businesses are defined... .

Why don't you read the books?  You're the one promoting this radical change, yet apparently you don't know a damn thing about the details.  The only answer you have is, "well it obviously won't work like that but read the books and they'll probably answer it."

If YOU are the one for this change, don't you think that YOU should have done your homework?."

I want to buy an item from you.  Business-to-business sales are untaxed.  I have formed a business in accordance with federal, state, and local laws.  I give you my valid business license number when I purchase the item.  You are no longer legally entitled to collect tax for this purchase.  Period.

This isn't the potential fraud part... it's the loophole that's built into the "fair tax" BY DESIGN!  The potential fraud part is (for example) all the people who simply elect not to collect tax because they know there is no IRS to breathe down your neck..

You can go buy a new TV from that guy for $500+$60 tax, or you can buy it from me for $520 and I pocket the difference.  Who's going to stop me?

Your statement is inaccurate.  Many consultants/contractors (myself being one of them) do not have business licenses; I contract through a third-party company who pays me via W2.  However, for many consulting gigs (especially at the higher end), one has the option whether to receive payment via W2 or via corp-to-corp.

You are correct in stating that payment type is not the sole reason to incorporate oneself, but it is a significant benefit.

readthebooksreadthebooksreadt hebooks

So basically, after having already read the books, you still have no answer to any of my objections, but you take it on faith that they will not be a problem.

Sorry, that's not enough for me.  The idea is so drastically and glaringly broken that it screams trouble.  Any plan that seriously advocates the removal of the department that enforces tax compliance is almost necessarily fatally flawed.

If you consider the complete lack of any tax enforcement arm of the government to be a "minor detail," then good luck to you.

You act as if this is a fresh, new idea; it is not.  I researched the "fair tax" years ago during the original thread, and you have provided no new information to the discussion.  Seems to me that a proponent of such a drastic and overwhelming change might be concerned about the potential problems with it, but I guess not.

Because sales taxes are the Proud Way of The American Patriot, while income taxes are the Insidious Tool of the Red Menace, right?

The days of winning arguments simply by calling the opposing position "communist" are long-dead.

As for your incessant chant of "read the book": no, I did not put money in Neal Boortz's pocket for doing me the favor of detailing a broken plan.  I read reviews and criticisms of his book (and the "fairtax" in general), which pointed out the myriad flaws free of charge

Again, it's telling that you, a proponent of this plan, do not understand enough about it (after reading the book!) to be able to refute my claims, insisting that I should buy this book and rebut my own arguments.  Thanks for the offer, but I'll have to pass.  My time and money are more valuable than to give them away to every nutjob who claims that he has The Next Great Solution... if I just buy his book.

So you let someone else give you your opinion.  Ok.  That fine.  Question on the person giving you your opinion.  Was this an unbiased opinion or someone who had something to lose by getting off the income tax?   Follow the money & you will find where the opinion comes from.

  Just saying its in the top 10 of the communist manifesto.

Of course, the same logic does not apply to Mr. Boortz "giving you your opinion," and we must not follow the money as to who wishes to implement the "fair tax" system.

I want to say "wtf, there is no top 10 in the communist manifesto. It's a long, rambling, semi-coherent text."

  I read his book & liked what I read.  I could have not liked it.

You simply read the opinion of someone who did not like it.  Slight difference.  There was not anyway you were going to like it, since the only opinion you have read is a negative opinion.

How could it be possible that the only opinion I have read is a negative one when this thread itself was started by YOUR positive opinion?  You have posted nothing but positive opinions from the start!

I heard about the fair tax.  I decided to read more about it.  I read both positive and negative opinions of it (the VERY FIRST opinions I read were positive, on this very forum!).  I came to the conclusion that the negative points raised outweighed the positive ones.

Allow me to act like Boortz for a moment. Boortz has the annoying habit, anytime someone brings up some false statement about the plan, wildly exclaiming “Sir, you don’t understand the plan.” I hate it, because it sounds so much like what a snake oil salesman would say. But I’ve got to do it:

Dale, you don’t understand the plan. :-)

First, let me explain the two main evasion methods that I can see. The first is sellers of goods and services just simply not reporting their sales, and thus not paying their taxes. The second is buyers who have “business exemptions” going into a store, flashing their “exemption certificate”, and thus not being charged the tax.

What makes either of these possible is the idea that the taxes are tracked only at the final retail level of sale. I.e. that business-to-business (B2B) transactions are never even reported to the tax agency. Thus, there is no way to detect at the final point whether this has been paid.

And that is where it is false. I refer at several points in this section to the FairTax Act of 2003. I recommend occasionally referencing the sections that I mention if you’d like to fact-check me.

First, the possibility of just flashing your exemption card and not paying tax. In the FairTax bill (sec 509), for a business to sell goods without collecting the tax, they must have the companies exemption certificate on file, and must keep complete records of all transactions for a period of 6 years. Purchasers must keep a record of all taxable goods bought for a period of 7 years. Thus, for a business to sell you goods without charging you tax, they need to have complete information on your business on file, and they need to report (sec 501.a.2) every month on those sales. This will limit most companies willing to sell you anything without charging you the tax mainly to B2B transactions.

This means that for most of what we consider “retail” transactions, the tax will always be charged. You can’t walk into Walmart, flash a card, and not pay the tax. When you do pay, then, the cashier will give you a reciept (sec 510) that contains all the necessary information for you to claim a refund of that tax when you file your monthly reports. This means that if you sell goods or services, and you don’t report that to the government, I wouldn’t suggest trying to get the refund for the goods you purchased. I think that will toss up a major red flag in their system.

Under the FairTax, any seller of taxable goods and services is required to report all sales at every step to the tax administration agency. This means that if I am a primarily B2B seller, I need to report the sale and that the tax was not charged to my customer. It works exactly like a VAT in the reporting stage. For example, I work for a company which makes computer equipment, and 99% of our revenue is B2B transactions. Thus, for any of our major customers, we’ll have their exemption certificates on file. For any new customers, just as we may have different credit terms, we will be forced to charge the tax and provide a proper receipt. Even though we’re almost exclusively B2B (and it wouldn’t matter if we were exclusively B2B), it is required that we take note of whether our customers are or are not tax exempt. And frankly, we’re not going to put our butts on the line to save them from their taxes.

But please, keep jumping through hoops to explain why your opinion is reasonable and valid while my opinion is ignorant and flawed.  I find it interesting that you have no interest in "following the money" when it comes to promoting this tax change, yet you insist that the money must be followed for those who support the status quo.

So what's this "tax administration agency" business about?  We have one of those now: it's called the IRS, and the "fair tax" proposes to eliminate it.