What does that have to do with anything? In 1913 the average US worker made barely enough wages to rent a crappy place to live and feed his family. His hour of labor might buy a loaf of bread. Does a loaf of bread still cost an hour of labor?
I completely agree bribes would be driven underground, but in that case the bribes would be illegal and participants would be subject to prosecution. Even still, it would probably be hard to actually win those cases against powerful defendants. At the very least, it would be nice to shine some light on the cockroaches even if we can't squish them every time It really irks me to see how candidates are so obviously influenced by their big contributors. I'm surprised they don't have company names embroidered suits like Nascar. I guess a big sign saying "cockroach" would be a little too easy for the sleeping American to decipher. I see what you're saying about reduction.
What do you mean "set aside"? Do you think things happen in a vacuum? What do you imagine the other nations might do when the US imposes unfair trade rules on goods they export?
1. I got ahead of myself there. "Decide upon" 2. WWIII. Kidding. I'll admit a bad idea when I have one. Maybe if more companies operated without retaining all profit to the top of the chain of command by taking a more evenly distributed approach (doesn't have to be completely even), then millions more in the workforce could afford to buy products from completely domestic companies and most likely would rather buy those products if they were aware of the overall benefit a domestic purchase has. Loyalty could make up for the disadvantage. The main reason so many buy the cheapest is because that's all they can afford it's not necessarily out of preference. Take jobs away, create poverty, and watch the sales go to the cheapest merchant... that viscous cycle is a huge drain. Too much under cutting is driving the people into the dirt.
To address item 2 it argues for the elimination of income taxes/payroll taxes and replacing them with a consumption tax (with prebates). The elimination of embedded taxation and the corresponding adminstrative costs imposed on enterprise would reduce the cost of US produced goods by an estimated 20% giving US goods a huge marketing advantage internationally. This marketing advantage would increase exports and add manufacturing jobs in the United States. At the sametime imported goods would be subjected to the identical taxation in the United States as domestically produced goods. This is not an import tax or tariff as all products would be subject to the consumption (sales) tax at the retail level. The United States has the highest productivity in the world and we can compete but need a level playing field. It is our tax structure which imposes such a huge cost on the production of US goods that creates the uneven playing field.
Unfortunately the US Constitution is not a document of the People and the People cannot alter it. Only the Congress or a Constitutional Convention of the States can propose amendments and all amendments are subject to ratification by 3/4ths of the States. The People have no say in Constitutional amendments because it is a contract between the States.
You can still fire it off to your senators, representatives, & governor. What does that last sentence of Section 2 mean? "Goods and services previously subjected to income taxation will not be taxed agian by the consumption tax."
I have some problems with the vague wording in this proposal that maybe you could clear up for me. For example there is no definition of services. Is it wise to leave that to the Congress? Also the exemption of services previously taxed through the income tax is very confusing and seems to eliminate the paying of this new tax for all who gain their income, and paid income tax on it, by providing a service, from stock brokers to hairdressers. About the only services I can see that would be taxable under this proposal would be public services. Is this not the case?
There is a transitional phase related to bringing goods and services to the retail level because of the embedded corporate taxation. For example a corporation must pay the payroll taxes to produce their product whether they sell it wholesale or retail. These taxes go to pay for Social Security/Medicare and those taxes have already been collected. With the ending of income taxes and the imposition of the consumption tax the same product would be double-taxed because the Payroll taxes were collected during a year under the income taxes in one year and, unless excluded, would also be collected under the consumption tax in the following year. It is the elimination of double taxation which is being addressed and the Congress would have two years in which to address this double taxation. Services really aren't effected by this as services are provided at a specific time without the long delay in bringing them to the retail level. There is a minor overlap but it isn't nearly as long as products that might take a year or more to make it through the supply chain to the retail level.
A service is a charge for labor as opposed to a product. For example a yard service that mows someone's lawn is providing a service as it is expressly related to labor and a commodity does not change hands. There really isn't a question of definition for a service so it really isn't up to Congress to define. In many cases there is both a service and a product involved and both would be taxed at the same rate. For example a mechanic could work on my car to install a water pump. The labor to install the water pump and the sale of the retail sale of the water pump would both be bill and the tax would apply to both. It does not apply to income taxes per se as they are collected based upon the calender date. For example someone working on Dec 31 of the year where the transition takes place would pay the income tax but they would not pay the income tax on Jan 1st. Personal income taxes do not add to the cost of a product or service as those are payments for labor when expended. Yes, those that use stockbrokers and hairdressers that are providing a service and that service taxed. I don't know why there is an issue with this as it is accommodated by every state that has a sales tax. The only fundamental difference is the "prebate" to offset the tax on necessities so that all goods and services can be taxed. The "prebate" eliminates the need for necessities such as food to be exempt from the tax. Of note, some have asked if the consumption tax would impose the tax rate on something like the rent of an apartment and the truth is "partially" but only to the extent that the owners provide a service. For example the apartment probably has a manager and the serviced provided for the manager would be a taxable portion of the rent. For example a 40 unit apartment with a manager that earns $4000/mo would result in the consumption tax being applied to $100/mo of the rent as that is the cost of the service being provided by the manager. That could be increased if the apartment house was only half occupied. The apartment owner might choose to simply have the rent include a basic component to pay for the service and then pay the tax on the services provided by the manager for the tenants or could charge more than is required for the tax and then rebate the unused portion to the tenant. How this is actually accomplished could be defined by statutory law. Real estate sales would be basically exempt unless new construction is included and only the new construction would be taxed. Land is always "used" and would be exempt from taxation under a consumption tax. Of note federal, state, and local government would also pay the consumption taxes. They are already paying the embedded taxation when they purchase a product or service from the private sector and that would not change except for how the tax is collected. Instead of embedded payroll taxes and related overhead expenses related to it they would pay the consumption tax. BTW Walmart would hate a consumption tax because its applied to imported goods. Currently Walmart has found an advantage in sales because of the disparity between taxation imposed on imported goods as opposed to US produced goods. It wouldn't drive Walmart out of business but we would see more US produced goods on the Walmart shelves as the cost of US produced goods would be dramatically reduced by about 20% while their costs for imported goods would not change.
OK then, seeing as how this tax would be applied to the service of brokering trades in stocks and bonds and commodities it could raise significant revenues from these activities alone considering market volumes and the trading revenues of investment banks, fund managers, and other trade facilitators. It would be the single biggest source of revenue and would significantly lower the overall tax rate.
Only the service fees would be taxed and not the investments. Investments and revenue would be untaxed. For example a stock broker could charge 2% on a $100,000 investment transaction (total cost to the investor $102,000) and $2000 would be subject to a consumption tax but not the $100,000.
Exactly, and that would raise a pile of money considering that the volume of trades at the New York Stock Exchange alone is some 7Billion shares a day. Even at an average price of $1 and 1% commissions it would generate $70million a day with a 10% tax rate. At an average share price of $10 and an average commission of 2% a 10% tax could generate over $400Billion a year just from the NYSE.
Perhaps but many stock transactions are done for a fixed rate regardless of the number of shares being traded or the value of the shares. This would certainly be the case with large transactions so I seriously doubt that it would raise the revenues mentioned. For example Scott Trade offers unlimited trades for a $7/transaction regardless of the number of shares or the value of those shares. http://www.scottrade.com/?&sctr=mc:a8a8ae4e72f2c5441012f56324d642a1f:i5129149468:te&
That was just the NYSE but it would still be a substantial amount of money once you include the Nasdaq and other equity exchanges, commodity markets, derivative markets, hedge fund management, IPOs, leveraged buyouts, mergers, interbank transfers, etc. There is a lot of money changing hands in those activities and a lot of fees collected. It is the biggest source of income for investment banks, not even to mention all those corporate law firms which subsist only on fees for service. The financial services industry would likely be the single biggest tax paying sector under your plan, not a bad thing really.
Ok, I was just looking at some GDP numbers. Personal consumption of goods is about $3.5Trillion and of services around $7Trillion, $800Billion on financial services. Gross Domestic Purchases, including government is about $15Trillion. A 20% tax rate would seem to be in order for a $3Trillion Federal Budget. $160Billions from personal financial services alone.
I ran the numbers once and posted it but don't have the link handy. Remember that the prebates increase government spending and that must be accounted for. The GDP is a good number to go by because actually it's a bit low because of our trade deficit. We spend more than we produce. When I calculate it I set the "prebate" level at $20K, or about double the poverty rate, and imposed a tax of 25% (the prebate would be $5K at this rate and level). It provided more revenue than the income tax system while not raising the gross costs of goods and services based upon the assumed cost reductions from the elimination of embedded taxation and adminstrative costs estimated to be equal to 20% on US goods and services. It also increases income to the individual because there are no taxes withheld as FICA/Payroll/Income taxes are abolished. If a person earns a $1000 they get to keep all of that $1000. It did not take into account the expansion of exports, expansion of the economy and the increase in manufacturing jobs that would result from a reduction in costs by 20%. This was a simplistic analysis but provided some good insights as to how viable a consumption tax would be. It also has several very valuable attributes. First of all the tax becomes very transparent. There is only one tax rate and everyone knows what it is. If Congress wants to raise the rate then it increases the prebate (which is based upon tax rate and prebate level) and everyone pays the same rate and receives the same prebate. When Congress discusses a tax increase from say 25% to 27% everyone in the country will know about it and how it will effect them. No more embedded taxation that raises the costs of goods and that no one is aware of. Next it eliminates most corporate lobbying as most corporate lobbying is related to seeking favorable tax treatment. No more corporate taxes equals no reason for lobbying equals less influence of corporate America on our political system. The poor politicans will lose millions in corporate campaign contributions... and that's oh so sad. LOL
Is that $20K per household or per person? Per household it would be about 650Billion in foregone revenue. A 25% tax rate would bring in about $3.1Trillion. A 35% tax rate would be needed to bring in about $3.1Trillion if the prebate was per person, or about $2.240 trillion in foregone revenue. A 40,000 per household prebate level would require a 30% tax rate to bring in about $2.9Trillion. Since these levels of money to be prebated are quite significant it is important to know how exactly this money would be prebated, would it be distributed by the government, if so how and when? Would it be taken at the register? If so I suppose an easy way would be to just give everyone a card that carries the prebate and once the limit is reached it would be no good. This would require all monetary transactions to be tracked electronically. It would also likely spawn a secondary market in prebate trading which would defeat the purpose somewhat.
I would rep you but you went and got banned. You killed the topic so why is there 9 pages of blather after your post? Nothing more needs to be said you said it all.
For simplicity when I did my analysis I based it on income tax filings so it would include individual as well as joint returns. The prebate level would be different for families when compared to individuals just as the proverty level is different for families as well as individuals. The $20K I used was a simplistic approach to establishing it based upon 2X the poverty level. This is one place where I differ from the FairTax.org proposal which established their prebate level at the poverty level and I doubled that level. When I did my calculations I also limited it to replacing all federal government revenues and it did not cover all federal expendatures. This provided an accurate comparison because we cannot assume a consumption tax rate to meet expendatures when income taxes fail to meet expendatures. It would be comparing apples and oranges. Yes, to meet expendatures the rate would have to be much higher just like income taxes, including FICA/Payroll taxes, would have to be much higher to cover expendatures. The key is that because its a transparent tax the higher rates required would draw public feedback to reign in government spending to lower the tax rate. As I mentioned with a 25% tax rate the end item cost of a commodity does not change (i.e. a 20% reduction in the product cost with a 25% tax equals the same end item cost for the consumer) but at 35% it certainly would increase the cost of the commodity or service. The prebate would be paid directly to the household on a quarterly basis. In my example it would be $5000 (25% of $20K) and if we assume someone earning minimum wage this would actually be more money than the tax they would actually pay on new goods and services. Much of what they purchase, such as TV's and cars, would be used commodities and not subject to the consumption tax. This reflects the "progressive" nature of a consumption tax because it actually subsidizes low income individuals and families. It is fair because everyone, rich and poor alike, receives the same prebate and pays the same tax rate on new goods and services.
