Re: [MLUG - DISCUSSION] Flat Tax

[Mike Miller <EMAIL:PROTECTED>]

On Thu, 4 Jan 2007, Christian M. Cepel wrote:

> You seem to fail to remember that many countries (and states in the US) 
> have enacted similar programs by way of a VAT (value added tax) to great 
> success.

Has another country eliminated income taxes and used VAT instead?  What 
will this plan to do import tariffs?  Obviously they have to increase. 
How will that affect trade agreements?  There is a lot that I don't know.


> ... but the goal here is not just to simplify and change, but to abolish 
> the IRS.

Of course it would be an advantage to abolish a federal agency, but to 
what degree will new agencies be needed to oversee the new program?  It 
sounds like one bureaucracy will end, but another will be created.

One major problem will be to make sure that item sales are documented 
accurately.  Suppose there is a 40% tax and someone is selling a car for 
$20,000.  The seller could tell the buyer that he'll write it up as a 
$10,000 sale to save $4,000 in taxes and split that savings with the 
buyer.  How will we stop them from doing this?  We can't stop all income 
tax fraud, but we do have a government agency investigating it.  We will 
need a new agency to investigate the new kinds of fraud that arise with a 
new tax system.


> Neither of you have mentioned one of the greatest attractions the 
> fair-tax provides.... No DOUBLE TAXATION or triple or whatever.  When a 
> _new_ item is purchased it is taxed.  When it is resold ( a car is a 
> great example), that sale is not taxed a second time.  How stupid is it 
> that we have to keep paying taxes over and over on an item that's 
> already been taxed?

Well, given that it is a *sales* tax and not an *item* tax, I guess tax on 
selling makes sense.  What is wrong with that?  I don't see why it is 
stupid.

Will the massive tax apply to home purchases?  Only to new homes and not 
to used homes?  New cars but not used cars?  How will "new" be defined? 
Again, you need rules and investigative bodies to deal with "newness" 
fraud.  If I build a house, then "live in it" (however that is defined) 
for a week before selling it, is it "new" or "used"?  When Ford sells a 
new car, can they call it used if the lend it to an employee for a week 
before selling it?  How will you deal with these kinds of problems.  Of 
course you will need a large federal government bureaucracy with thousands 
of hated investigators snooping all over the place.

Mike

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