The Real Problem Behind the Budget

[GasBandit]

The fair tax is actually closer to 30% to equalize with current revenue streams. A sales tax of that kind drives a lot of business underground (which is almost never mentioned in arguments for such a huge consumption tax). I think a balance of income tax and sales tax is just fine.

The fair tax, by removing the embedded taxes, does not increase the actual, final purchase price. Moreover, no, it's been found that the magic number is 23%, not 30%.

And how would you collect sales tax from companies outside of the country? Wouldn't it just push internet companies into Canada and Mexico? Shipping from those countries would probably still be cheaper than paying a 25% tax on almost everything.

The fair tax, by removing the embedded taxes, does not increase the actual, final purchase price! To say nothing of the business incentives of eliminating payroll, corporate, capital gains, etc taxes. As with most anything else, the states are little test laboratories for what we can do on a national/global scale. We've seen lately which states businesses would rather function in - there are several states that finance themselves with sales taxes instead of income taxes, and they have weathered the recession better. One of the major aims of the fair tax is to make the US a lot more enticing to business.

There is no way i can tackle the number of assumptions made in that mess. Congratulations, you win by me not caring to spend all day refuting every assumption you made.

That's your answer for everything these days.

 

[Adam]

The fair tax, by removing the embedded taxes, does not increase the actual, final purchase price. Moreover, no, it's been found that the magic number is 23%, not 30%

It may be a matter of perspective but I find this deliberately misleading that Fair Tax advocates quote the 23% number at all.

The 23% rate quoted is only valid if it's understood as an inclusive tax, much like Income Tax is calculated. IE if the total tax you pay is $25 on a $100 item, the inclusive tax rate would be considered $25/$125 or 20%.

Obviously in a sales tax environment, that is absolutely not the case. If the total tax you pay on a $100 item is $25, your sales tax is 25%. This is an exclusive tax.

Fair Tax advocates like to obfuscate the actual rate by saying that they're trying to compare the Fair Tax rate against Income tax, which it would be replacing - which is fair enough. But it misleads consumers into thinking that they'll only be paying an extra 23% at the till, which is obviously not the case.

As for 'removing the embedded taxes', I can point to the GST and HST in Canada (And other Sales Taxes across the world) as 'real world' counter-examples to your 'possible' outcome.

 

[GasBandit]

It may be a matter of perspective but I find this deliberately misleading that Fair Tax advocates quote the 23% number at all.

The 23% rate quoted is only valid if it's understood as an inclusive tax, much like Income Tax is calculated. IE if the total tax you pay is $25 on a $100 item, the inclusive tax rate would be considered $25/$125 or 20%.

Obviously in a sales tax environment, that is absolutely not the case. If the total tax you pay on a $100 item is $25, your sales tax is 25%. This is an exclusive tax.

Fair Tax advocates like to obfuscate the actual rate by saying that they're trying to compare the Fair Tax rate against Income tax, which it would be replacing - which is fair enough. But it misleads consumers into thinking that they'll only be paying an extra 23% at the till, which is obviously not the case.

As for 'removing the embedded taxes', I can point to the GST and HST in Canada (And other Sales Taxes across the world) as counter-examples to your 'possible' outcome.

Last I had heard, Canada had not eliminated its income taxes. Also those are an example of a VAT tax. Different animal.

But looking into it, you're right, it's a terminology argument - translating between tax-inclusive rates and tax exclusive rates.

 

[Adam]

Last I had heard, Canada had not eliminated its income taxes. Also those are an example of a VAT tax. Different animal.

HST was an attempt to replace hidden taxes that were introduced in the PST/GST combo that were a pain in the ass for Canadian businesses.

http://www.rev.gov.on.ca/en/taxchange/hst.html

Calling it a VAT, once again, is just a difference in terminology. The end result is the same - a simplification of the tax structure in order to avoid embedded and hidden taxes from being levied at various points during a production process.

 

[GasBandit]

HST was an attempt to replace hidden taxes that were introduced in the PST/GST combo that were a pain in the ass for Canadian businesses.

http://www.rev.gov.on.ca/en/taxchange/hst.html

Calling it a VAT, once again, is just a difference in terminology. The end result is the same - a simplification of the tax structure in order to avoid embedded and hidden taxes from being levied at various points during a production process.

The difference is, the FairTax is a single-rate, federal retail sales tax collected only once, at the final point of purchase of new goods and services for personal consumption. Business-to-business purchases for the production of goods and services are not taxed. Thus it avoids the traps of VAT type taxes.

 

[Adam]

The difference is, the FairTax is a single-rate, federal retail sales tax collected only once, at the final point of purchase of new goods and services for personal consumption. Business-to-business purchases for the production of goods and services are not taxed. Thus it avoids the traps of VAT type taxes.

Just like the HST.

 

[Espy]

I've had way to many test margaritas to understand what the HELL you guys are talking about.

 

[Krisken]

That's your answer for everything these days.

Yup. These are all things we've argued about before. I see no reason to tread over the same ground again. And again. And again.

 

[Eriol]

HST was an attempt to replace hidden taxes that were introduced in the PST/GST combo that were a pain in the ass for Canadian businesses.

By my understanding, it was an attempt to get MORE taxes out of people in those provinces, because of the difference in what was taxed under each PST or GST. By combining them, they get the full sum number from the inclusive combination of what each taxed. So it's a tax grab, even if it is a bit easier on businesses.

The point above about internet purchases is valid, but probably easily addressable in a similar way to how tariffs are applied right now. It's basically the same thing in that the companies from outside of the country don't need to apply/collect the tax, the shipping company when negotiating the import would be charging the 23% (or whatever). So the effect there is the same, and there'd be no loophole, because your (and my, I'm in Canada) system is already set up to handle things like that. It's not even new, just applied to more things.

 

[Adam]

By my understanding, it was an attempt to get MORE taxes out of people in those provinces, because of the difference in what was taxed under each PST or GST. By combining them, they get the full sum number from the inclusive combination of what each taxed. So it's a tax grab, even if it is a bit easier on businesses.

Oh believe me, I agree. I was mucho pissed when I went to buy a used vehicle and found out that the full HST applied to used cars purchased privately, versus only the PST before.

 

[Azurephoenix]

Oh believe me, I agree. I was mucho pissed when I went to buy a used vehicle and found out that the full HST applied to used cars purchased privately, versus only the PST before.

That's only in some provinces (like B.C.). In Alberta... there's no bullshit taxes on buying a used vehicle.

 

[Adam]

That's only in some provinces (like B.C.). In Alberta... there's no bullshit taxes on buying a used vehicle.

Unless you live in BC and try to purchase a used vehicle in Alberta. Then when you register it here, you have to pay the taxes on it.

 

[AmazingP]

You are right. This nation is doomed if you want the cake and eat it too. If we want something to happen, we must be willing to sacrifice some things. I could not really fully fathom people who are demanding less budget but at the same demanding more services to be offered to them.

We have lost the sense of fairness and balance a long time ago.

 

[Krisken]

You mean like tax cuts for the rich that were implemented over 10 years ago that could expire but people refuse to be adults about it?

 

[GasBandit]

You mean like tax cuts for the rich that were implemented over 10 years ago that could expire but people refuse to be adults about it?

Possibly. Or, perhaps it also could mean the absolute refusal for any government entity or program to be told they can't have any more money than they were given last year. Which itself was more than the year before that... which was more than the year before that... which was...