Re: [MLUG - DISCUSSION] Flat Tax

[Mike Miller <EMAIL:PROTECTED>]

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

> Mike Miller wrote:
>
> > 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.
> Two problems here Mike.  The first is that people have been doing that 
> forever.  I mean, duh.  I would say that the majority of private vehicle 
> sales are fraudulently undervalued when taxed and licensed.

Private vehicle sales don't seem to be a problem for your proposal because 
the private sale will be of a used vehicle.


> Also, there is no luxury tax or special tax...  the amount is 23%... 
> flat.. for everything.

You hope it will be 23%.  There is no guarantee of that.  It will have to 
be increased if it isn't high enough.  The value of 40% was suggested by 
in the book review.


> You've also misread my earlier post so there are even additional problems.
> 1.  You and the dealer would not be taxed on the vehicle I believe.  I 
> believe the taxes have already been paid at a lower level if you will.
> 2. In a private sale of a previously owned vehicle, you would not be paying 
> tax on the sale since there would be no double taxation.

This will massively increase the selling price of used cars because new 
cars will be overpriced due to the new tax.  That will be interesting.


> > 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.
>
> Yes only to new homes.. It doesn't matter if it's a roll of toilet paper 
> or a luxury business jet... the tax rate is 23% and no taxes would be 
> paid on it by the purchaser.  The tax has already been extracted on the 
> component pieces.  Again.. if I'm understanding this correctly.

The massive boost to the price of new homes will make the price of used 
homes go up too, but not as much.  People will avoid buying new homes 
because of the tax.

There are so many implications of this kind of enormous rewrite of tax law 
that it is an extremely risky proposition.  Be wary of anyone who claims 
to know for certain that it is a good idea.  They are gambling with our 
futures.

Mike

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