What's the solution for deterring tax evasion under the Fair Tax?

[dullard]

how does it at all make sense to compare a tax rate with a fully financed federal budget to a tax rate on a debt-supported federal budget?.

Valid point (how often do you hear that on P&N?). The current system is unsustainable and tax rates must go up for a better comparison. Also, I didn't explicitly tell people to include payroll taxes.

Although, I also didn't explicitly tell people to consider their first part of the income that is lower tax rates either. So, in one way I biased the argument and then in another way I biased the argument in the reverse direction. Everyone needs to look at their personal situation, and I can't post all that detail online for them.

that's bullshit and you know it.

Payroll taxes somehow are ignored by most people on this forum.

 

[Whoozyerdaddy]

The Fair Tax sounds awesome, but I'm wondering what they can do to stop tax evasion in black markets and the like.

How do they do it now? It's not like there isn't a black market or tax dodgers now.

 

[BlahBlahYouToo]

How do they do it now? It's not like there isn't a black market or tax dodgers now.

Sales tax is at most 10% now.
When it hits 30%, it's going to be a lot more widespread.

 

[StageLeft]

I still think that the fairtax is a fantasy. Beyond the fact it obviously will never take root, I mean. It simplifies April 15 but not much else without a wild redistribution of money among the populous as the lower and middle either end up paying less or more. I know that some FT people seem to think it will magically create money out of nowhere, though.

Black markets are bad now with a sales tax in the few percent.

Where?

 

[Vic]

There is no solution for deterring tax evasion under ANY tax plan.

 

[Zorkorist]

Our Government is already authorized to take taxes by force.

I am not sure what MORE can be done to avoid tax evasion.

-John

 

[dullard]

Where?

Hmm, lets say there is this country called Canada. It has a thriving black market for items with high taxes. http://www.globalpost.com/dispatch/canada/091201/cigarettes-smuggling

The black market in cigarettes is believed to be a $1.5 billion industry in Canada. The Ontario government estimates that half of all cigarettes sold in the province are illegal. In neighboring Quebec, that number is 40 percent. Contraband smokes cost the federal and provincial governments more than $2 billion in lost taxes.

In the 1990s, tobacco companies were accused of aiding and abetting the smuggling. In 2008, Imperial Tobacco Canada Ltd. and Rothmans, Benson & Hedges pleaded guilty to helping people sell or possess illegal cigarettes during the previous decade. They paid a total of $1.15 billion to the federal government and 10 provincial governments in fines and settlements.

This time around, tobacco companies have their hands clean. The source of the smuggling, say Canadian police officials, are Indian-owned cigarette manufacturers on reserves in Ontario and Quebec. But the most important source, they add, is the Mohawk community of St. Regis on the New York state side of Akwesasne.

This also exists in the US of course.

 

[Craig234]

The Fair Tax sounds awesome, but I'm wondering what they can do to stop tax evasion in black markets and the like.

A tax on consumption is about the worst, most regressive tax there is, but it's nice for the rich. That's the important thing, not black markets.

 

[Genx87]

Sales tax is at most 10% now.
When it hits 30%, it's going to be a lot more widespread.

Is there a huge underground black market for labor in this country? Income tax hits that high but I dont see a whole lot of people who are legal flocking to underground labor markets.

While I agree higher sales tax will lead to more black market activity. Most legal items should remain out in the open. People will still buy from their big box retailer and the tax will be collected upon sale. Just like it is today.

 

[Craig234]

It should also be noted that the rich may not necessarily pay less. It is a use system, if you buy a $10 million yacht, you will pay taxes on it. Likewise, an expensive house will cost more than an inexpensive one. Rich people spend more money, in general.

The only rich people it helps are the little old lady's with millions in the bank that live in a $100,000 house and spend almost nothing.

It should also be noted that under the current system, if you are rich, you are probably paying a fraction of what you should. These people can afford accountants and bankers that can easily lower your taxable income. Business owners all do it to a certain degree, using the company to buy a car or paying distributions instead of getting hit with payroll taxes. These are all ways to reduce your tax load while increasing your personal financial benefit. It may be a percent here or there, but it definitely adds up.

This thread is filled with ignroance and disinformation from people who have fallen for the arguments for this tax, but to single your post out for an example, every single point you make is wrong.

You need to stop making facts up and get ahold of the real ones. Go look at the actual *percent* of income spent on consumption broken down by income bracket. It's virtually all rich people spending less.

While your superficial point that the many of the rich get away with murder on tax evasion is correct, it pales in comparison to the benefits to the rich of this tax scheme.

But this tax scheme is highly marketable to the ignroant. I was considering a response and thinking about making the point that people wrongly like it because it seems like it gives them choice over their taxation, while they don't notice the huge tax shift from the rich, and sure enough I read some posts and saw someone making that claim. It's a very misleading tax scheme.

People should get less caught up in the basis for the tax and look at the tax distribution. Do you prefer a tax where you pay $1,000 for a basis you like, consumption, over a tax where you pay $500 for your income?

Go look up the arguments against the fair tax before you by into this scheme.

 

[dullard]

People will still buy from their big box retailer and the tax will be collected upon sale. Just like it is today.

Use taxes are in all states (that I know of) that have sales tax. Yet, I bet fewer than 1% of people actually pay the use tax on their internet purchases. People will still buy, but the tax will NOT be collected upon sale in many cases. The only change is that the stores will now just need to be located in another country instead of in another state.

There is no independant double check of sales data. A store could very easilly bend the rules here and there and the IRS would never be able to prove a thing. There isn't much incentive with 5% state sales taxes (I just used my state's number). Why would many stores risk fines and/or jail time over a measely 5%? But there is a tremendous incentive with 35% total sales taxes.

 

[Craig234]

Our Government is already authorized to take taxes by force.

I am not sure what MORE can be done to avoid tax evasion.

-John

Here's one thing: don't elect someone like Bush, who slashed IRS enforcement against the rich and increased enforcement for the poor. Obama's IRS is considering more enforcmeent of rich tax evasion.

 

[Craig234]

Use taxes are in all states (that I know of) that have sales tax. Yet, I bet fewer than 1% of people actually pay the use tax on their internet purchases. People will still buy, but the tax will NOT be collected upon sale in many cases. The only change is that the stores will now just need to be located in another country instead of in another state.

There is no independant double check of sales data. A store could very easilly bend the rules here and there and the IRS would never be able to prove a thing. There isn't much incentive with 5% state sales taxes (I just used my state's number). Why would many stores risk fines and/or jail time over a measely 5%? But there is a tremendous incentive with 35% total sales taxes.

I'm in that small group, because I sign that I followed the rules. But I'm angry to have so many avoid it - while I don't mind it if it's fairly enforced and doesn't encourage lying - and called my state Senator.

They tell me there are big efforts to enforce the tax coming, and I've been hearing about them. New York just passed a law making Amazon collect the tax for another example.

 

[fskimospy]

Is there a huge underground black market for labor in this country? Income tax hits that high but I dont see a whole lot of people who are legal flocking to underground labor markets.

While I agree higher sales tax will lead to more black market activity. Most legal items should remain out in the open. People will still buy from their big box retailer and the tax will be collected upon sale. Just like it is today.

Enforcement mechanisms are easier for labor than a lot of goods that are sold.

As a good example, while it varies widely from state to state, cigarettes end up with somewhere in the ballpark of 30% taxes levied on their sale. Correspoindingly from what I've read about 30% of cigarette sales are black market ones. Obviously it's easier to sell a carton of cigarettes sneakily than say, a refrigerator, but I think it's safe to say that the imposition of such a large sales tax will lead to large increases in black market activity.

 

[Fern]

-snip-
You need to stop making facts up and get ahold of the real ones. Go look at the actual *percent* of income spent on consumption broken down by income bracket. It's virtually all rich people spending less.

While your superficial point that the many of the rich get away with murder on tax evasion is correct, it pales in comparison to the benefits to the rich of this tax scheme.

But this tax scheme is highly marketable to the ignroant. I was considering a response and thinking about making the point that people wrongly like it because it seems like it gives them choice over their taxation, while they don't notice the huge tax shift from the rich, and sure enough I read some posts and saw someone making that claim. It's a very misleading tax scheme.

Yep, agreed.

Fern

 

[Fern]

Is there a huge underground black market for labor in this country? Income tax hits that high but I dont see a whole lot of people who are legal flocking to underground labor markets.

Black market labor is poor analogy. It's not easy to find employers who'll pay under the table for one simple reason: They can't deduct what they pay you, and that tax deduction is worth a lot to them. So, why would they care to pass that up so you, the employee, can save on your income tax and SS withholding?

OTOH, it's no skin off the retailer to keep your sales off his books. You get to avoid the sales and it gets to avoid the corporate income tax. Unlike black market labor, it's a 'win' for both sides.

While I agree higher sales tax will lead to more black market activity. Most legal items should remain out in the open. People will still buy from their big box retailer and the tax will be collected upon sale. Just like it is today.

-snip-
There is no independant double check of sales data. A store could very easilly bend the rules here and there and the IRS would never be able to prove a thing. There isn't much incentive with 5% state sales taxes (I just used my state's number). Why would many stores risk fines and/or jail time over a measely 5%? But there is a tremendous incentive with 35% total sales taxes.

States do perform sales tax audits. They'll get your cash register receipt tapes. They can also cross-reference to bank deposits and reports from CC companies etc.

VAT tax evasion won't occur at big box retailers etc. They have little to no incentive to do so. Their execs compensation, and the stock value etc that comes from rising sales receipts are too important to understate those numbers.

But there will be a powerful incentive among local retailers. The biggest incentive will for them to collect the 30% (or whatever), then underreport sales and pocket the 30% plus income tax savings.

I'll bet if a national tax passes we'll see a shift in the type of point-of-sale systems used (some are easier to manipulate than others).

Flea markets (where cash is the game) will explode. Flea markets aren't used goods much these days, most is new stuff and currently there is little enforcement in place other than maing sure sellers have sales tax ID #'s.

Fern

 

[irwincur]

Go look up the arguments against the fair tax before you by into this scheme.

Hey assfuck.

If you read my first post you would have noted that by no means am I sold on this tax scheme.

Piss off.

You too Fern for making the same stupid comment with even less knowledge of the stream of discussion. Fucking parrot.

 

[TruePaige]

Yep, agreed.

Fern

I'll second that.