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Final-Fan on 07 January 2008
Eomund said:
Final-Fan said:
Eomund said:
Final-Fan said:
"Why is/isn't this happening now at the rate of what you expect it to be under the FairTax?"

Perhaps because the current sales tax is a mere fraction of the FairTax?

I will agree with that. I was asking the question to get this type of answer. However if prices decrease so much as that the FairTax will keep them at the current levels, people will not notice much, if any, difference in their budgets. Since this size of a sales tax has never been tried before at a national level, we do not know the effective evasion rate, whether good, bad, or indifferent. An underground economy could pop up, but I don't know how many people would want to deal with it. Perhaps everyone will, perhaps not many will, I don't know. I can find the research that American's For Fair Taxation did and come up with an answer, and I will post that too, but we simply do not know how the economy will respond. I predict it will respond favorably though.

1. See my posts above regarding the VAT in Europe. It's not nearly as big as the FairTax would be, but it's the best example I know of of large sales tax implementation. And keep in mind that, again, VATs are to the best of my knowledge more tax-evasion-resistant than a retail sales tax.

2. I think you're thinking that people will be choosing, "hmm... do I go and buy it legally or do I go and buy the tax-evading product?" I'm sure that will happen, but there is also the issue of businesses doing it to pocket the difference and the customer never knowing anything was different (or maybe just thinking he got a really good deal).


Alright I have come across someone who has answered these questions, excellently if I may add. Here are the sources. http://www.fairtaxblog.com/20050828/evasion-potential-with-the-fairtax-vs-the-vat-tax/ and http://www.fairtaxblog.com/20050824/evasion-potential-of-the-fairtax/.

Both are articles and responses to a FairTax critic. He makes completely valid and rational arguments. He says that the VAT is not any more enforceable than the FairTax is. The FairTax requires all businesses to file sales to the "Sales Tax Authority" just as the VAT does. When conducting a Business to Business transaction, the selling business would need to have the buyer's tax exemption form on file, and if they do not have it on file, they would be required to tax them. The buyer would then claim a refund with the "STA."

Any experience with history of a NST lacks the current technology and tracking ability we currently have. Software that we have or can have is or will be extremely robust in ability to track statistics and patterns. If businesses start to claim unusual damaged or stolen goods numbers from the normal industry, we can flag them to be checked. The software could have extra routines that can be run to check for collusion between two businesses or between a business and an individual. If online poker sites can check for things like this, then why can't the "STA"?

His two articles answer a nagging question that I haven't been able to answer. Read them for yourself. The two above paragraphs are a very brief synopsys of the answer to this evasion question.


I would dispute that retail sales taxes are just as secure as VATs, but I don't need to. Let's suppose that VATs and RSTs are equally secure -- your source makes that assertion, so I presume you agree.

Now, RSTs and VATs are equally secure. As your source points out, "evasion of the VATs in Europe are also rampant." Is this not a problem? Modern technology has not managed to curb the problem across the Atlantic.

[edit: And even supposing the VAT and the RST are equally secure, there is still much, much more incentive to cheat a big tax that is collected all in one place than than to cheat a lot of little taxes up and down the supply chain.]

P.S. And as much as I don't want to get into discussing specific tax-evasion schemes, I didn't see anything in that article that could stop Kasz216's dastardly plan.



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Final-Fan on 07 January 2008

Hey, I never even thought of THIS objection!

"And then there's the fact that quite a lot of our consumer products—the TVs mentioned previously, for example—are made outside of this country. A reduction in payroll taxes on US companies isn't going to do much to bring down the price of a Japanese-made TV. But the price of that TV will still go up by 23%."
http://qando.net/details.aspx?Entry=2443

What about that? [edit: Actually, now that I think about it, if the "wages and prices both rise" option was taken -- and I think it's the most likely outcome -- then this would not become a problem.]



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My advice to fanboys: Brag about stuff that's true, not about stuff that's false. Predict stuff that's likely, not stuff that's unlikely. You will be happier, and we will be happier.

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Kasz216 on 07 January 2008
Eomund said:
Kasz216 said:
Eomund said:
Kasz216 said:

I've worked for peopel who have avoided sales tax before. It's actually quite easy from what I can tell.

This is espiecally easy if you get your products overseas as you can always just pay for a certain number of products on the record at an inflated cost and have them ship more to you. These additional items just never being recorded in the sales logs with the extra profits pocketed.

The FairTax does not tax inventory, it doesn't even tax the number of units sold. Think of it as taxing the total sales @ retail. So having a few extra untis not accounted for in your warehouse means very little. If you were to sell them on the side and not record them in any sales log, that is a definate discrepancy in profit in the bank account and would be traceable. If they went another step further and were depositing that side money into a private account, it could go undected for a while, but eventually things surface and questions will be raised.

Having one point of sales just makes it easier because they can do it on a smaller level and reap the same amount of profits if not more.

If they were to do that it is not just a FairTax issue, but a blackmart type issue and could be prosecuted as a bigger criminal act.

Other commonly done practices include marking some units as either stolen, damaged during shipping or replaced with defects. Considering the large number of products that can be destroyed in some places this can be quite effective.

This is a very valid point. One that could be managed by requiring all DOA or Shipping Damaged goods to be returned to the vendor and counted, then reported to the State for cross-referencing. As far as stolen goods go, a company that did that would face similar issues as above.

For example, some distributors mark products as damaged, that were, the cans dented, boxes slightly ripped. (this hapens A LOT) and then turn around and sell these products to the workers at the plant/store to stores for cheaper goods or just to other people they know. (Or just pocketed themselves.)

There would be a much greater reason to "accidentally" rip the packaging on these items, or even just mark them as such like above.

The way this stuff is done, a looking over of the books or a manifesto isn't going to work, and even hands on inspections are pretty impossible to nail someone on.


I will answer above. You raised very good questions. But for now we rely on honesty in business already, and what would make the FairTax any different? I understand your concerns, but these things are, for the most part, enforceable and checkable.


You miss the point of the Above.

(1)Say I have Clocks I get from China, I buy 10 for 10 dollars and sell them for 30. Instead I can buy "10" for 20, get 20. Then I sell them each for 30, not having to pay the tax on those extra 10. Instant profit. You can say it's traceable, but it hasn't stopped these companies before.

(2)As for the Damaged goods... once again... what if these are from overseas. There would be no Sales tax on these in the first place. These are just some of the smaller "every day" exploits that go on. It'd be scary to see what they would be like if the sales tax was higher.

(3)These are black market issues but it's the kind of things that happen every day and would continue to even on a higher scale with the fair tax, the evasion rate might even end up higher then the more complicated current rate. This stuff even happens in the "bigger" stores. It would also likely up how much the bigger stores get taken advantge of instead of lessing it.


(1) If you mean that you would not have to pay the FairTax on the extra 10, I am going to assume that you would sell these extra 10 outside normal POS, say with cash. If this is the case, not much we can do about it. Why is/isn't this happening now at the rate of what you expect it to be under the FairTax?

(2) All items sold at POS within US borders, no matter where the items originated from, will have the FairTax placed on it. I say that because it sounds like you are saying that overseas items bought by private individuals or businesses will not have the FairTax attached to them. If a business buys something to resell, they will not pay the FairTax as we have discussed. Their product will be taxed @ POS. If an individual buys product online or by phone or by mail the FairTax would be collected when it was imported and went through Customs.

(3) Even IF evasion is rampant under the FairTax, the only thing that means is that the Federal Government will not be able to spend that money. What is wrong with smaller Federal Discretionary Spending? I am all for smaller government, though the cost of breaking the law to do so is not exactly what I have in mind for that.

This probably won't answer your questions, but maybe we can get to a more definate question with a more definate answer.

 

1) A higher salestax = higher evasion.

2) Or atleast what is listed at customs. Since it's all sales tax, there is noone keeping tabs on how much savings you have to my knoweledge of the law. So who's to say you don't use a thing like Paypal(Or an overseas version) to buy a product overseas for 30 dollars. Yet when shipped over they say you only payed 10 for it. Making it cheaper, or just say it's used. Lots of ways for the individual to beat this sales tax, most of which involving doing buisness overseas or to canada. Instead of helping american buisnesses this may hurt them.

3) What's to stop the government from deficit spending. Nothing stops them now. Now if there is something in the law that suddenly makes it illegal for the government to spend more money they take in. Yeah sure.

Otherwise, on good years they'll likely raise the budget on their pet projects, then on bad years instead of cut sending they'll just deficit spend. 



Eomund on 07 January 2008
Final-Fan said:
Hey, I never even thought of THIS objection!

"And then there's the fact that quite a lot of our consumer products—the TVs mentioned previously, for example—are made outside of this country. A reduction in payroll taxes on US companies isn't going to do much to bring down the price of a Japanese-made TV. But the price of that TV will still go up by 23%."
http://qando.net/details.aspx?Entry=2443

What about that?

You buy American.

[edit: 100th POST! ]



I want my WHOLE paycheck! I support the Fair Tax!

http://www.fairtax.org/

DKII on 07 January 2008
Eomund said:
Final-Fan said:
Hey, I never even thought of THIS objection!

"And then there's the fact that quite a lot of our consumer products—the TVs mentioned previously, for example—are made outside of this country. A reduction in payroll taxes on US companies isn't going to do much to bring down the price of a Japanese-made TV. But the price of that TV will still go up by 23%."
http://qando.net/details.aspx?Entry=2443

What about that?

You buy American.

[edit: 100th POST! ]


Yeah for better or worse there are factions that would pounce on that as a good thing in terms of helping the local manufacturing industry.  New cars would be an even better example.



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ripper on 07 January 2008

Yep, the payroll taxes put American goods at a disadvantage! Fair tax would help right this wrong.

also, i am a little worried about phasing in any new taxes. I am always worried that the big spenders in congress would find new crappy programs to spend our money. SO i say OVERHAUL THE SYSTEM NOW!! BOSTON TEA PARTY 08



Kasz216 on 07 January 2008
DKII said:
Eomund said:
Final-Fan said:
Hey, I never even thought of THIS objection!

"And then there's the fact that quite a lot of our consumer products—the TVs mentioned previously, for example—are made outside of this country. A reduction in payroll taxes on US companies isn't going to do much to bring down the price of a Japanese-made TV. But the price of that TV will still go up by 23%."
http://qando.net/details.aspx?Entry=2443

What about that?

You buy American.

[edit: 100th POST! ]


Yeah for better or worse there are factions that would pounce on that as a good thing in terms of helping the local manufacturing industry. New cars would be an even better example.

 Of course that would hurt overseas trades however, as whenever the US tries to even push a minor tarrif other countries cause a LOT of static.  I can only imagine how the rest of the world would react to this.

Final-Fan on 07 January 2008

So now the FairTax is isolationist policy too? OBJECTION! [edit: Actually, now that I think about it, if the "wages and prices both rise" option was taken -- and I think it's the most likely outcome -- then this would not become a problem.]



Tag (courtesy of fkusumot): "Please feel free -- nay, I encourage you -- to offer rebuttal."
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My advice to fanboys: Brag about stuff that's true, not about stuff that's false. Predict stuff that's likely, not stuff that's unlikely. You will be happier, and we will be happier.

"Everyone is entitled to his own opinion, but not his own facts." - Sen. Pat Moynihan
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Myahon on 07 January 2008

Fairtax has gained a LOT of popularity since my politics teacher told me about it years ago.

Used to be only Ron Paul supported it now A handful of republicans and democrats support it and some hint at it.

For reference Rome had a flat tax of 10% and Japan has a "fair tax" of 6% but analysts say they might have to raise it to 10%

If it were done in America it would be about 23% Which considering I'd be axed 23% (we are taxed pretty high, it's cause we have 4 times the military budget of any other country to upkeep our foreign bases) of what I SPEND as compared to right now me below the poverty line even when i make under $10,000 a year I still get taxed 30% of ALL my income right now. So it would benefit me, but business owners (like my mother the fatcat) wouldn't get to write off expenses.

But the reason those businesses would still support it is because it means everyone on the very first paycheck they get after this gets what they percieve as a massive raise and goes spending. Besides Rich guys who get out of taxes because they can hire accountants are screwed, and the Technically unconstitutional IRS is abolished.

One thing that absolutely needs to be done befor OR after this, is we need to list the price of the product AFTER tax on it's price label. America is the only country IN THE WORLD that doesn't list price after tax befor it's bought.

I'm not gonna pretend I can predict how this would end up, all i know for sure is po' folks like me get a tax break and people who live below poverty could even be given a tax exempt card which would be swiped like a food stamp card to simply remove the taxes from their purchases (churches already have that) It's not as insane as it sounds but it is risky.

I'm not sure it'll work but I won't fight it either.



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Final-Fan on 07 January 2008

"right now me below the poverty line even when i make under $10,000 a year I still get taxed 30% of ALL my income right now."

You make $10,000 per year and pay $3,000 in taxes??? Where the hell do you live? That should NOT happen. What taxes are you talking about?



Tag (courtesy of fkusumot): "Please feel free -- nay, I encourage you -- to offer rebuttal."
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My advice to fanboys: Brag about stuff that's true, not about stuff that's false. Predict stuff that's likely, not stuff that's unlikely. You will be happier, and we will be happier.

"Everyone is entitled to his own opinion, but not his own facts." - Sen. Pat Moynihan
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