Sunday, October 2, 2011

Herman Cain Bill O'Reilly Wrong Side of National Sales Tax

by Ronnie Spangler

Herman Cain and Bill O'Reilly have both proposed adding a National Sales Tax onto the backs of American consumers. This is a bad idea that only the wealthiest Americans can afford. Both men have the idea that Congress can simply eliminate the Federal income tax and install the National Sales Tax with a simple bill written by Congress and signed into law by the President. Life, politics and our Constitution are not that simple. Both men say they could restrict future Congresses from raising the amount consumers paid by requiring future Congresses to pass any new increase with a two thirds majority vote. This cannot happen. No current President or Congress can completely tie the hands of future Presidents or Congresses. At the beginning of every new House and Senate term the rules are written and decided by the majority. If a new Congress decides a simple majority will be enough to pass any bill, including one that would raise the rates of a National Sales Tax, then the rates will be raised.

It was the 16th Amendment that gave us the Federal Income Tax and it will take another amendment to replace or repeal that amendment. It is true Congress can raise or lower the rates but even Congress is limited on how far they can actually go.

Herman Cain's idea of 999 will not eliminate the federal income tax, at best it would be lowered but add the consumption tax on top of it and all he has done is increased taxes onto consumers. Basically its political talk for fuzzy math. Some of the candidates are calling for lowering the income tax by rewriting the tax rules and charging everyone a fair tax of between 18% to 30%. By lowering the income tax to 9% and adding a 9% consumption tax Mr Cain has done nothing more than increased the taxes on lower income folks to 18% and lowered taxes on the wealthy to 18%.

Wealthy Americans like Bill O'Reilly, that have corporations or businesses, will not pay sales tax on most of the big ticket items they purchase. Unlike the average consumer they have the advantage of purchasing items through their business and avoid paying state sales tax, I would expect the national sales tax would be no different.

If supporters of a national sales tax or consumption tax are serious then the first step would be to write an amendment that would replace the income tax with a consumption. The consumption tax could only be imposed after the income tax was eliminated. With all of the other taxes, fees, surcharges and hidden taxes the average American consumer has to pay we cannot afford another new tax.

Take a look at your state. Look at all of the taxes, fees, penalties, surcharges you are paying. Now look at all of the hidden taxes in your electric, gas, water, transportation and property you are forced to pay. Some states and local governments call them fees for services, some counties have an additional school tax on top of sales and property. Some others have excise or wheel taxes. After adding every tax, fee, or surcharge in your state ask yourself if you can afford another tax on everything you consume.

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  1. While the thought of additional taxes never thrills me, I initially thought that a national sales tax might be an answer to collect something from those who pay no federal income tax for any number of reasons. But, I usually don't see all the angles. While talking with a friend of mine recently, he gave me a very good reason why a national sales tax would not be a good thing. He pointed to his own situation (a family of 4) vs. his parents. He, on the one hand, buys far more consumer products because of his two children. Furniture, school supplies, clothing, cars, etc. etc. to accommodate his family's needs. On the other hand, his parents buy far less consumer products because they're settled, don't need to buy new furniture, school supplies, etc. etc. It all made sense. I personally hate the idea of tax credits which are in excess of a person's federal income tax. There's just no easy solution, is there?

  2. You are right,there are no easy answers however at a time when we are facing slow but increasing inflation rates and transportation cost this is not the time to add a national sales tax.

    Most economist predict it will not be much better in 2013 than it is now. If this is true then consumers will be forced to cut back even more. Retail sales will be reduced to even lower numbers and every employer will be forced to reduce their production by reducing the number of employees, the result will be higher unemployment.

    The only way we can turn this economy around is to create a business friendly environment and allow business to expand thereby putting more people back to work. The more people work the more consumers will spend and economy will rebound. Putting more pressure, by increasing the cost of goods and services on a limited number of consumers, is not the answer.

  3. people are forgetting that there would be offsetting decreases in one's taxes (payroll, lower federal...). It is not correct to simply view this yet another tax when Cain's intent is to change the entire system of taxation (although I agree with Bachmann that the devil is in the details, and Cain may be over-simplifying). While I agree that adding yet another vehicle to collect taxes from the public is a slippery slope, if Congress is limited in how high they can raise federal tax rates, why would this not apply to the sales tax? Congress is limited in how high it can raise the total tax burden (term limits, Tea Party...). If the wealthy avoid taxes by making purchases through their companies, aren't the companies paying the 9% tax as well on purchases? I haven't heard of a corporate exemption (yet)...I am a fan of broadening the tax base so in that respect his 999 plan holds some appeal to me. I think the American people that support this are happy to see someone proposing a radical change instead of just tweaking the current system and making it even more complicated. No one plan will be perfect and I don't think 999 is enough to center a campaign around, but kudos to Cain for coming up with something radically different and standing by it. It is obviously resonating with many. If by "fair" tax you mean making sure that EVERYONE pays SOMETHING, I'm listening...

  4. You are forgetting that people on lower/fixed incomes do not pay withholding/payroll taxes so there would be no offsetting decreases in taxes for them. Examples of exempted incomes are Social Security, Veterans Benefits, unemployment and some pension plans. If you are talking about revamping the tax code so all of the current tax exemptions are no longer applicable then these folks would definitely be hurt. An automatic 9% reduction in incomes plus additional 9% sales tax.

    In my state our combined state and local sales tax equals 9.6% add 9% for Federal Sales Tax and I can guarantee consumer spending will go down in my state.

    As for Congress being limited on how high they can raise any tax, there is no limit. We may vote them out of office in the future but if they decide to raise our taxes there is nothing we can do to stop them. Remember no current Congress can restrict or deny a future Congress from enacting any rule or law they decide to act upon.

    As for companies paying sales tax even Cain would not propose that business be required to pay sales tax on purchases they deem necessary to do business. If business did pay sales tax it would simply be passed on to the consumer. You said you haven't heard of a corporate exemption but if you read the Fair Tax Act, deep within you will find business is still exempt from sales tax if the purchase is connected with or purchased by the business or corporation.

    Senator Barack Obama also had simple idealistic programs that would save our economy and make America prosperous once again. He found out that life and reality were a little more complicated than he thought. Depending on how you look at life, you may find that life itself is not and never has been fair or equal to every human being. It's the unforeseen consequences of government programs and actions that have done more harm to America than any corporation ever thought of doing and it was good intentioned politicians that sold the people back in 1913 on the 16th Amendment.

    After the Income Tax Amendment was ratified and the Federal government started withholding the tax, state after state and county after county began doing the same thing. Before we listen to politicians with good intentions maybe we should look back into the past and examine how well it worked out for us today.

  5. A couple of points to consider here:

    (1) 999 is will not be added to the current Federal Tax Code, it will Replace it.

    (2) State Sales taxes are deductable

    (3) States do not Tax all goods, many are exempt

    (4) Under 999 Used goods are exempt (which includes resale)

    (5) All US made Business Supplys are Exempt throught out the Production Process (No Value Added, or no Double Taxation)

    A quick note on Entitlement Zones, "Opportunity Zones" I find the Idea Revolting, if we are going to equalize opportunity, keep it equal.

  6. 1) Replacing the tax code is easier said than done. All 999 is doing is lower income and corporate tax plus adding a federal sales tax. The 2nd phase of 999 is the so-called Fair Tax which is dependent upon repeal of the 16th Amendment, not going to happen.

    2) Only a percentage of state sales tax is deductible not the total amount and then its only deductible if you can itemize. 999 is meant to simplify the tax code and eliminate itemizing of income therefore sales tax will no longer be deductible.

    3) Exemptions to state sales tax is a state by state decision. In my state everything including prepared or processed foods are subject to the state sales tax. When asked on CNN if food would be exempt from a national sales tax Cain replied , there are no exemptions.

    4) Is Cain now saying that if a store buys their products from a wholesaler or distributor then the product would be considered used and therefore not subject to sales tax when bought by the average consumer, I don't think so. The only way the consumer can get around the national sales tax is if he buys product that was previously owned by another individual i e used car, thrift store, flea market etc.

    5) Most businesses and government are exempt from paying sales tax on goods they purchase in the course of doing business now. Does 999 change this in the future, will federal government be required to pay state sales tax from businesses the feds buy products from?

    I like Herman Cain but 999 has more questions that need clarification.