How Herman Cain Will Destroy Our Economy

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“...New Mexico’s state and local business tax system imposes the greatest burden of any state, resulting from factors such as a corporate income apportionment system that makes a large portion of the income from new investments taxable, an above average corporate tax rate and the imposition of a gross receipts tax on virtually all business activities….”

Those who support a “Fair Tax” are delusional.

Herman Cain is a remarkable person.   The Pink Flamingo could easily support him – except for this idiotic fair tax thing.

Mediaite

The Pink Flamingo has a tremendous amount of respect for him, and what he has done in life – but when it comes to the “Fair Tax”, the poor man is pathetic.

Umm….

“…Indeed, a Government Accountability Office study in 2008 indicated that more than half of American companies pay no federal income tax, and when benefits such as energy and agricultural subsidies are factored in, some companies are actually getting paid by the government to do business. Then there are the myriad loopholes and gimmicks—all legal within the labyrinthine tax code—that allow companies to pay significantly less, in many cases closer to 20 percent than to the stated higher rates. Even that, however, is considerably higher than elsewhere in the world….”

Put 23% with what is going on in New Mexico, and it is a recipe for abject and complete disaster.

New Mexico Watchdog

“...The Flat 30% Sales Tax (i.e. the FairTax) is a REGRESSIVE tax. It raises taxes from spending. Not income. All sales taxes are REGRESSIVE (meaning: as income decreases, tax as a percentage of income increases. The 30% Sales Tax proponents will try to tell you it is not REGRESSIVE due to a prebate, but it is still REGRESSIVE. The prebate is merely what amounts to a deduction that everyone gets. As with any deduction, it merely shifts the starting point at which income starts to get taxed. That is, your first $8K of income (for a single person due to a $2400 prebate) or $19.7K (for a family of 4 due to a $5902 prebate) would effectively not be taxed. That still does not remove the REGRESSIVE nature of any flat sales tax. Most people consider REGRESSIVE taxes unfair (and rightfully so). Also, the 23% FairTax.org plan is actually a 30% Sales Tax. The 23% FairTax.org plan calculates the 23% from a percentage of the tax plus the sale prices (e.g. 23% = [TAX / (TAX + PRICE)]). For example, under the FairTax.org plan, the tax on a $100 dollar purchase is $30 which is 30% of the $100 price. The 23% is derived from $30/$130. This is a bit misleading. And it fools people. People are used to calculating sales tax as a percentage of the price. So the FairTax.org plan is actually a whopping 30% sales tax. Many people prefer the opposite of a REGRESSIVE tax, a PROGRESSIVE tax system in which income tax increases as income increases)….”

The Fair Tax people want to do away with income tax, etc. and instigate a 23% National Sales Tax. I guess they never bothered checking into what happens when you put punitive taxes on things. People stop buying goods and services.

“…It turns out that the group’s purported 23 percent tax rate is misleading and hypothetical. It came up with that number by dividing the sales tax by the cost of a purchase plus the tax. So if the tax on a $100 purchase is $30, the group prefers to call it a 23 percent “tax inclusive rate” ($30 divided by $130). Ever hear of computing a sales tax like that?

The fact that the group’s sales tax, even by its own figures, entails a 30 percent tax rate is only the beginning of the math problems. The group’s backup materials also assert that almost a third of its projected sales-tax revenue is supposed to come from taxes the Government will pay to itself. Build a road, pay yourself a tax. Buy some planes for the Air Force, pay yourself some more. And so on.

Unfortunately, that shell game won’t work. Without these phantom governmental tax payments, the sales tax rate would have to jump to 42 percent to break even.

A bit more digging reveals that a quarter of the remaining sales taxes are supposed to be paid on things like church services, free care at veterans hospitals and a variety of hard-to-tax financial services like free checking accounts. If we discount the taxes on these items, the sales tax rate would have to climb to an astronomical 56 percent to break even.

Apparently, the millions of dollars that Americans for Fair Taxation says it has spent on focus groups and polling have taught it an important lesson: giving people the real facts about a national sales tax is politically disastrous for its proponents. So the group is trying the only other available route: cooking the numbers….”

I guess people don’t understand that we are a nation of consumers. No one is going to go out and buy something when it is going to cost at least 23% more.

“…Con: The sales tax would have to be pretty high to stay revenue neutral, i.e. bring in the same revenue for government as the current system. The bill that is currently in Congress is at 30% and independent groups have said the number is probably closer to 34%. This is a pretty large amount of money added to each thing we buy. This is especially true when you think of big ticket items. A $20,000 car suddenly cost $26,000. For somebody who has been saving under the current tax code, this would be a hard hit….”

A “fair tax” of a high percentage is immoral. It is theft.

“…(06) The Flat 30% Sales Tax will fuel the politics of envy and jealousy, because it is inherently unfair, and therefore, it is immoral. It will increase class-warfare. A government which robs Peter to pay Paul can always depend on the support of Paul.

PROOF that ALL Flat Sales Taxes (with prebate or not) Are REGRESSIVE:
Let’s say the prebate is $2400 (as in the FairTax.org’s example on their web-site for a single person).
That $2400 is essentially the 30% sales tax on $8K, so you could say that the first $8K of income was not taxed. However, a $2400 prebate does not mean the single recipient has $8K to spend. That’s vastly different than simply not taxing income below the poverty level at all as in the 17% Income Tax Plan in the left column.

However, under the Flat 17% Income Tax, income below the poverty level (e.g. $8K or even higher) also would not be taxed. So both tax systems essentially do not tax the first $8K of income.

And even under the current tax system (which is ridiculously complex, abused, and REGRESSIVE due to thousands of tax loopholes), the personal deduction is about $3300 ($6600 for a married couple).

So, all three of those tax systems have what amounts to a deduction.

The charts to the left demonstrate how REGRESSIVE the FairTax.org’s 30% National Sales Tax plan could be in reality, in which the income tax rate increases as income decreases.

The ONLY way that any flat sales tax can not be REGRESSIVE is if everyone spends ALL of their income OR the same percentage of their income. What are the chances of that actually happening. Look at the two graphs to the left and ask your self who will love that the FairTax.org’s 30% National Sales Tax the most? Which one do you thing is more fair?

Also, while the Fair Tax.org’s 30% Tax Plan will not collect income taxes, the real costs won’t just disappear from companies’ costs. In the short run, prices will have to increase, and wages and salaries may not go down, but will stagnate while the economy grows. This may not be a simple adjustment to make. Also, not all states have sales taxes, and they will have to convert to a sales tax system. And there are billions of sales transactions per day as compared to hundreds of incomes per year. Which do you think is easier to implement, track, and enforce?

After the prebate of the FairTax.org’s 30% Sales Tax Plan runs out, it is nothing more than a sales tax.

All sales taxes are REGRESSIVE unless everyone spends ALL of their income OR the same percentage of their income.

Taxing sales can NOT tax income equally as a percentage of income. What do you think will happen if there is suddenly no taxation on capital gains, interest income, investment income, and inheritance? Who do you think will absolutely love that? Who do you think will then end up paying the largest share of taxes (as a percentage of their income)? The middle income group will get hammered. See the strange bump in the FairTax.org’s 30% National Sales Tax Example. Clever, eh?…”

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2 thoughts on “How Herman Cain Will Destroy Our Economy

  1. I guess one way to avoid paying taxes would be not to spend. People would resort to barter and black market activities. I wish I could be more impressed with Cain.

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