The Fair Tax Act, Part LIV
Moving on to Chapter 9 which covers a wide assortment of miscellany:
`(a) Intangible Property Antiavoidance Rule- Notwithstanding section 2(a)(14)(a)(i), the sale of a copyright or trademark shall be treated as the sale of taxable services (within the meaning of section 101(a)) if the substance of the sales of copyright or trademark constituted the sale of the services that produced the copyrighted material or the trademark.
This apparently means that when you sell copyrights or trademarks you get taxed unless you stand to gain no substantive use of them.
`(b) De Minimis Payments- Up to $400 of gross payments per calendar year shall be exempt from the tax imposed by section 101 if–
`(1) made by a person not in connection with a trade or business at any time during such calendar year prior to making said gross payments, and
`(2) made to purchase any taxable property or service which is imported into the United States by such person for use or consumption by such person in the United States.
This creates a allowance of tax-free spending on imports for personal use.
`(c) De Minimis Sales- Up to $1,200 per calendar year of gross payments shall be exempt from the tax imposed by section 101 if received–
`(1) by a person not in connection with a trade or business during such calendar year prior to the receipt of said gross payments; and
`(2) in connection with a casual or isolated sale.
This protects small sales scenarios like garage sales from being taxed.
`(d) De Minimis Sale of Financial Intermediation Services- Up to $10,000 per calendar year of gross payments received by a person from the sale of financial intermediation services (as determined in accordance with section 801) shall be exempt from the tax imposed by section 101. The exemption provided by this subsection is in addition to other exemptions afforded by this chapter. The exemption provided by this subsection shall not be available to large sellers (as defined in section 501(e)(3)).
I believe this is intended to protect smaller lenders or those businesses getting their foot into the finance industry.
`(e) Proxy Buying Taxable- If a registered person provides taxable property or services to a person either as a gift, prize, reward, or as remuneration for employment, and such taxable property or services were not previously subject to tax pursuant to section 101, then the provision of such taxable property or services by the registered person shall be deemed the conversion of such taxable property or services to personal use subject to tax pursuant to section 103(c) at the tax inclusive fair market value of such taxable property or services.
This section is clearly to prevent proxy evasion, and would certainly affect some evasion examples presented here and by others on some boards.
I will finish the rest of this section next time! Questions?
Reviewing some info found on another site and reading the AFFT’s “Plain English Summary” of the FairTax, it appears the “proxy buying” in Sec. 901 applies to employers purchasing health insurance for their employees. ( The Plain English Summary states: “The purchase of insurance by a business for its employees is taxable. The business owes the tax. See SEC. 901. ADDITIONAL MATTERS.”)
Considering employer purchased health insurance is current tax deductible, this is a significant new cost of employment. The potential savings in other areas (SS/M) are reduced by this new cost. The Bureau of Labor Statistics shows health insurance as 7.1% of employment costs. A 30% tax on employer purchased health insurance would be 2.1% increase over current employment costs.
This new cost needs to be factored into any “price reduction” calculations.
That’s a very good point and clearly one of the many things the pro-FairTaxer folks like to keep buried. Not only are medical services taxable under the FairTax, but health insurance is as well.
Many employees today have at least a portion of their health insurance paid by their employers, who get a tax break for providing health insurance. But since health insurance will no longer be deductable for the employer under the FairTax, and, in fact, the employer would get TAXED for providing health insurance, it is a given that the employers are going to push the cost of health insurance directly to their employees, who will now need to pay for 100% of the cost of their health insurance, PLUS the FairTax on the premiums, co-payment charges, and any unreimbursed medical expenses.
What people need to realize is that, on a microeconomic level, there will be no aggregate nominal price decrease that is not offset by aggregate nominal income decrease. If the FairTax is truly revenue neutral, the government is taking the same amount of taxes and there is no business “cost” that is not someone else’s “income.” If someone reduces costs, someone else has their income reduced. “Real” prices (nominal prices in relation to nominal income) will not change. Purchasing power will remain the same.
Even Kotlikoff’s studies show this (real income is level or declines very slightly). The gains in his studies are on a macroeconomic level - they take time to occur. And, frankly, I don’t trust any macroeconomic estimates. The economy is too complex to predict - it’s like predicting the weather. It’s futile.
That’s what I’ve been saying on this blog and elsewhere for quite some time: that most folks would have at best, a very slight tax break (less than 2% difference) and at worst, a very small tax increase (again around 1-2%). There is no free lunch, but this is not a a scam either.
I sort of like the idea that it taxes health care on business as I don’t like the current setup where business gets it tax free but the individual has to pay tax. Both should be treated equally. Either tax it for both or don’t.
If I understand correctly what this section supposedly says, an added tax of 30% would be added to a companies cost for health care. The first thing I would do do as benefits manager is to cancel health insurance plans and increase employee wages by an equal amount. I then don’t have to pay the 30% tax and my employees get the same amount of money to use for their health care coverage.
Perhaps, health care would be better managed by by individuals if it came directly from their pockets instead of “the insurance company is paying so it doesn’t matter how much it costs.” Perhaps, we as a nation should devote more attention to wellness instead of treating problems caused by our poor nutrition habits. Excess weight is at the base of most of our health problems and poor nutrition results in excess weight.