Posted: 12 May 2008 06:48 pm
Post Subject: Re: TAX MYOPIA - Re: FairTax good for real estate Read Article
Way to go Karen - The first thing everyone should be asking themselves is why our senators and representatives would call a 30% sales tax a 23% inclusive tax. The reason is many people do not understand percentages, do not know the difference between markup and margin and do not realize the difference between tax bracket percentages and effective tax rate percentages.
(12) TAXABLE EMPLOYER.—‘ (A) IN GENERAL.—The term ‘taxable employer’ includes— (i)any household employing domestic servants, and any government except for government enterprises (as defined in section 704).
This is a definition out of bill s1025 that was introduced in the senate and calls for the fair tax. The reason the above exists is because the homeowner becomes liable for the 23% of the payment to the gardener, domestic servants etc.
Now the bill also makes our state comptroller responsible for WEEKLY collection of the tax from businesses owing more than 100,000 per year in the tax and also must make WEEKLY remittances to the federal govt.
Texas will also responsible for auditing and enforcement. Now suppose you hire 'handyman harry' to build a deck for you and you pay 3000.00. Harry gives you a receipt for 3900.00 for 3003.00 for the deck and 897 for the 23% of the 3900.00. Problem is that Harry doesn't have a license.
Your neighbor, who hates your guts, sends in a letter to the state suggesting your deck was built by one of those 'illegal aliens' everyone complains about. The state routinely sends you a letter asking for a copy of the receipt showing you paid the tax. You comply. They check and cannot find a business license or a sales tax permit for good ole Harry. You are now responsible for the 897.00 (again) and by the way the bill gives the state the right to garnish your wages or to put a lien on your back account or other property; kinda like the IRS use to. What this bill will do is get rid of ONE IRS and create FIFTY MINI IRS DIVISIONS..
In addition to creating a bookkeeping nightmare for businesses the bill requires all businesses doing more than about 350,000 in annual sales to deposit up to $100,000 security deposit. Some states will audit more efficently than others and our state will surely have to hire more people to comply with another UNFUNDED federal mandate.
THIS BILL IS AVAILABLE OVER THE INTERNET AND CAN BE DOWNLOADED IN PDF FORMAT. Please read it! Don't rely on the special interests who are setting up the FAIR TAX SPIN SITES..
Posted: 13 May 2008 03:25 pm
Post Subject: Re: TAX MYOPIA - Re: FairTax good for real estate
Bill, what you are neglecting to point out here is that if you hire Harry the Handyman now, what you pay him should be declared as income and taxed when he files his taxes at the end of the year. He is already supposed to be charging you enough to pay his income taxes and both sides of his payroll taxes. If he is not licensed, you are breaking several other laws to hire him to build your deck. If Harry is operating as a business but not paying the tax on his income under the current system, than he is indeed one of the cheats for whom the proposal has been written. How can you oppose the FairTax legislation on the grounds that it is more likely to catch the people who are scamming the current system?
What you have pointed to is another flaw in the current system that is substantially corrected under the FairTax. Under our current regulations, it only takes one person to cheat—each individual filer. Under the FairTax it will require a conspiracy of two—the buyer and the seller.
The FairTax does have a de minimus (sp) provision that states that a person only has to call herself a business and collect the tax if she makes more than $500 in the enterprise in a calendar year. Nobody is going to care under either system if you throw a few hundred dollars to your neighbor for helping you build the deck, but if you hire a legitimate company to do the work, the transaction is part of what keeps the economy moving. If you weren’t taxed on the income you earned with which you are building a deck, and if you have the means to afford such a deck and you make the choice to spend your excess cash in that manner why would you not expect to contribute 23% of the cost of the deck?
In your example, the moment you produce a receipt showing that you paid the sales tax for your deck, you are absolutely not liable for the $897 any longer. I disagree with the tactic of many FairTaxers who use as a selling point, “You won’t have to keep records any more!” for exactly that reason.
If on the other hand, you have hired Harry as your full time handyman, than you are both the consumer and the entity responsible for collecting and remitting the sales tax on his salary. This provision in the bill that you quoted is specifically included to address another way a wealthy household may be able to game the system to avoid the FairTax.
The greater point here you are not seeing is that somewhere around 90% of the retail sales in this country are handled by about a hundred major corporations who would have no incentive to try to conspire with the buyer to help the buyer evade the tax. Even if we have zero compliance from every small business in America, it still represents only 10% of the revenue.
Finally, I firmly believe that if small business owners have an inherent belief that the system of taxation is fair and equitable, they will be far more likely to comply willingly than currently. Everyone knows that everyone else fudges their income tax forms as much as they think they can get away with, and that leads to a general sense of validation in doing so. That will not be true under the FairTax.
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