Myth Buster #3: The Fair Tax will force businesses to become Tax Collectors.
On the JPFO.org website, a respondent to the opinion article “The FAIRTAX: A TROJAN HORSE FOR AMERICA?” stated:
“Although the IRS may be abolished, the Fair Tax legislation creates a new internal revenue collection agency and would actually increase the number of tax gathers beyond businesses which are to collect the tax, expanding the federal governments reach over tax gatherers to include individual tradesmen and service people, entrepreneurs, and, even ordinary working people engaged in self employment, forcing them to “register” with folks in government in order to pursue a livelihood [see SEC. 502. REGISTRATION]. In short, the FT proposal would require these poor souls to become a modern-day regiment of enlisted tax gathers for government, increasing the number of tax gathers throughout the United States to an all time high, and compel them to maintain burdensome and inquisitorial records and reports under a penalty of perjury to satisfy the wants and fancies of tyrants in government___ all the above to be implemented under the pretext of the “Fair Tax” proposed reform which promises to abolish the IRS and income taxation, but in substance and truth both are empty promises!”
The respondent proposes that the self-employed will be forced to register and become Tax Collectors. Under current legislation, these individuals already are tax collectors who pay self-employment and income taxes or they are felons guilty of tax evasion. Some tradesmen may need to register with the new sales tax agency, but many already are registered. Currently, a self-employed plumber who charges $150 to install a replacement $75 faucet already must be registered to collect and pay sales tax on the faucet.
The respondent may argue that under the current system tradesmen are paying their own self-employment and income taxes, not acting as a public tax collector. Tradesmen provide services. All associated expenses, including taxes, and desired profit are bundled into the service fees. The consumer is providing the cash to pay the tradesmen self-employment and income taxes. Therefore, the tradesmen are already collecting cash from the public and sending it to the government, that sounds like a public tax collector already.
If the respondent is still opposed to collecting “sales tax”, the Fair Tax can just as easily be imposed as a “business licensing tax.” In exchange for the opportunity to conduct retail services, the tradesman must pay 23% of gross receipts to the government. However, transparency is an important aspect of the Fair Tax legislation, consumers are clearly told that they carry the burden of paying taxes. It is simply the honest way to frame the proposal.
The self-employed tradesmen are already tax collectors. The Fair Tax does not change that fact. It does, however, simplify the tax collection process.
With regard to intrusiveness, under the current tax code, the government demands reporting of total gross sales, total expenses, and details regarding the exact purpose and classification of the expenses. The self-employed know this as Form 1040, Schedule C. This form requires 30 different classifications for operating expenses plus detailed accounting of cost of goods sold. Once that is done, the business profits are determined and Schedule SE for self-employment tax can be completed. These forms are attached to Form 1040 and the package is signed under penalty of perjury—under current tax law.
Under the Fair Tax, a new item is sold and tax is collected at a fixed rate. The tax due is clearly known at the time of retail sale. Retail sales figures and the required tax payments would be reported on modified state sales tax reports that exist in most states today. It’s time to wake up and read the existing tax code. If there is any Trojan Tax Horse in America, it is the current tax code. The Fair Tax will not force businesses to BECOME tax collectors, they already are tax collectors. The Fair Tax will just make administration of that job easier and actually decreases level of government intrusion. The Fair Tax is the solution to the current Trojan Tax Horse.
Thanks for a reply to at least this one part of the JPFO’s assault on the FairTax. About a year ago I googled FairTax HR25 and found the JPFO write up. I still haven’t read the whole thing. But it’s good to see that no stone is being left unturned.
I have been in business for 35 years and I have been a tax collector for 35 years for the State of New York and the IRS. NYS Sales Tax, Social Security Tax, Income witholding tax and a slue of others. Myth .... BUSTED!
The current tax system is a joke and everyone with any sense at all knows this. Under current law the self employed are as a former blogger mentioned required to fill out a schedule c and a schedule se this usualy requires help from a tax preparer and I for one payed mine $250.00 this year just to file my year end tax return. I keep all the records in the course of the year as she used to charge me $1500.00 a year for that service as well oh by the way I have averaged 35,000.00 for the last twelve years. The only people that don’t want a fair across the board tax system are the excedingly rich as for the rest of us poor tradesmen well,”bring it on”.
Agreed. The current tax system is a joke.
But no one seems to willing to try anything unless it’s perfect. (Even though it would be better than the current system.)
I know fair tax isn’t perfect. (People always find a way to beat the system.) But it sounds like it’s not as bad as some would have us believe either.