Letters to the Web Editor

David Nelson · Joined: 12 May 2008 12:27 pm Posts: 27

Bill, what you are neglecting to point out here is that if you hire Harry the Handyman now, what you pay him should be declared as income and taxed when he files his taxes at the end of the year. He is already supposed to be charging you enough to pay his income taxes and both sides of his payroll taxes. If he is not licensed, you are breaking several other laws to hire him to build your deck. If Harry is operating as a business but not paying the tax on his income under the current system, than he is indeed one of the cheats for whom the proposal has been written. How can you oppose the FairTax legislation on the grounds that it is more likely to catch the people who are scamming the current system?

What you have pointed to is another flaw in the current system that is substantially corrected under the FairTax. Under our current regulations, it only takes one person to cheat�each individual filer. Under the FairTax it will require a conspiracy of two�the buyer and the seller.

The FairTax does have a de minimus (sp) provision that states that a person only has to call herself a business and collect the tax if she makes more than $500 in the enterprise in a calendar year. Nobody is going to care under either system if you throw a few hundred dollars to your neighbor for helping you build the deck, but if you hire a legitimate company to do the work, the transaction is part of what keeps the economy moving. If you weren�t taxed on the income you earned with which you are building a deck, and if you have the means to afford such a deck and you make the choice to spend your excess cash in that manner why would you not expect to contribute 23% of the cost of the deck?

In your example, the moment you produce a receipt showing that you paid the sales tax for your deck, you are absolutely not liable for the $897 any longer. I disagree with the tactic of many FairTaxers who use as a selling point, �You won�t have to keep records any more!� for exactly that reason.

If on the other hand, you have hired Harry as your full time handyman, than you are both the consumer and the entity responsible for collecting and remitting the sales tax on his salary. This provision in the bill that you quoted is specifically included to address another way a wealthy household may be able to game the system to avoid the FairTax.

The greater point here you are not seeing is that somewhere around 90% of the retail sales in this country are handled by about a hundred major corporations who would have no incentive to try to conspire with the buyer to help the buyer evade the tax. Even if we have zero compliance from every small business in America, it still represents only 10% of the revenue.

Finally, I firmly believe that if small business owners have an inherent belief that the system of taxation is fair and equitable, they will be far more likely to comply willingly than currently. Everyone knows that everyone else fudges their income tax forms as much as they think they can get away with, and that leads to a general sense of validation in doing so. That will not be true under the FairTax.

Bill Pelland · Joined: 25 Feb 2008 07:34 am Posts: 320

Here is an excerpt from s1025, the bill before the US Senate that enacts the FAIR TAX.

[quote](12) TAXABLE EMPLOYER.�
(A) IN GENERAL.�The term �taxable employer� includes�
(i)any household employing domestic servants, and any government except for government enterprises (as defined in section 704). [/quote]

Let me clarify my thoughts. s1025 passes collection duties to the State Sales Tax people for collection. They will have the authority under this bill to garnish wages, put liens on property, and assess penalties for non payment.

The Taxable Employer is responsible for the 23% inclusive tax unless the seller has a sales tax license. This means if you hire a handyman, gardener, maid, nanny, whatever, you are responsible for verifying their license or you are liable for the tax.

I have been trying to encourage you who support this FAIR TAX idea to read what the actual bill says. The bill spells it out; not the research and not the supporters website.

Neal Boortz, argues that 22 percent of the price of a consumer good is really a �hidden tax.� Get rid of corporate and social security taxes, Boortz argues, and consumer good prices would drop by 22 percent.

[quote]we cite 22% as the average amount of those embedded taxes. Does this 22% include the income and payroll taxes that are paid by employees? Yes, it does. So ... what does this mean to your paycheck after the FairTax becomes law?

When the FairTax is implemented, and when business and personal income and payroll taxes disappear, your employer is going to have to make a decision. He will either take some or the entire amount he had been withholding for federal income and payroll taxes and add it to your weekly check, or he will readjust your pay figures so that your entire paycheck will be equal to what you used to call "take home pay" before the FairTax. [/quote]

Neal Boortz and Congressman wrote the book on the Fair Tax. In the paper back version he corrected some points about the fair tax. Quote above is one of those points. The bold typeface I added.

Note that the employer is under no obligation to pass any of the savings for payroll taxes to you or for that matter what was being withheld for income tax.

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Bill Pelland
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David Nelson · Joined: 12 May 2008 12:27 pm Posts: 27

Bill,
S1025 makes the distinction between paying a company to do work for your houshold and hiring an employee to do work for your household. The reason that section is in the FairTax bill is to prevent wealthy households from hiring an employee to do the stuff in order to circumvent the tax. I am fine with this. Why do you have a problem with it? Your post doesn't really say why it is a bad thing. Is it just the enforcement aspect?

DavidFL10

David Nelson · Joined: 12 May 2008 12:27 pm Posts: 27

Bill, you didn't address my position that when you hire someone for a job under the current system, you are supposed to be charged enough for that person to pay personal income tax and payroll tax (both sides) on what you pay them. Do you dispute this?
Are you OK with the knowledge that you can hire an unlicensed handyman cheaper than you can a licensed one because the unlicensed guy isn't paying any income tax? I'm not. That is precisely one of the reasons I want the FairTax to become law. Our current system punishes honesty and rewards people willing to do things they know are unlawful.

DavidFL10

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Letters to the Web Editor