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Post by el Gusano on Mar 24, 2007 15:37:07 GMT -5
You don't think an unjust income tax like we have now in which the successful are punished forces people into a black-market economy?
Try visiting Canada and locking your keys in your car. You will be offered two rates, depending upon whether you need a receipt or not. And they are widely different rates.
I was terminated from a former employer because I refused to commit a felony and endanger my own well-being by violating serious OSHA regulations. My income was cut in half. My income taxes reduced to almost nothing and my child support cut in half.
I took home the same amount that I did before.
That just highlighted the unjustness in our current system.
Now, what could be more just than requiring everyone to pay the exact same rate on everything they spend above the amount for necessities?
Why would it be more fair to make the person earning $1 million per year pay a higher rate than the person who is making $100,000 per year who is paying a much higher rate than the I am?
BTW, the FairTax is very similar to a VAT in that both are passed on to the consumer. But, the VAT is added before the POS. (Perhaps the Fair Tax could be added before the POS as well.)
Oh, and in the flawed example that you keep bringing up, as has been pointed out, the demo would still be subject to the Fair Tax, it would just be a great discount on the price.
A better example of a flaw would be to ask what would happen if someone got a business license and bought a lot of business related items that really weren't. Much like they do now.
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Post by legaltender on Mar 25, 2007 11:10:38 GMT -5
If people can find a way to avoid a sales tax that size, they will. Swap meets, farmer's markets, gun shows and garage sales will become the prime market for underground marketing. Unless they're banned outright as havens for the new anti-sales tax criminals!
And there's nothing in HR25 that can't and won't be modified. How do you enshrine a tax rate and prevent modifying it for something other than specified? Let's say Congress or some powerful regulatory agency decides that fatty foods or sugar or potato chips are bad for you - bam! Suddenly there's a 200 percent tax on those items. Government won't have to ban firearms; they'll just place a 500% sales tax on them. Social tinkering and exemptions would have to be constitutionally foreclosed. That's not even remotely plausible.
Think about the possibility of a blow to the economy from a terror event or a deep recession. How do we mitigate or weather such crises only controlling one side of the equation - consumption? There is a menu of variables to a recovery. We'd always want and need targeting flexibilty in fiscal policy.
Declaring tips or not? My pole dancing career was insanely profitable.
The FairTax simply creates new tax collectors. We'e talking doctors, lawyers, garbage collectors and tree trimmers - multitudes of individuals and businesses that never collected taxes before will be turned into tax collectors for the federal government. Will teenage baby-sitters and the kid mowing lawns be required to collect the FairTax from their neighbors? As I read this, you, not the seller, are liable for the sales tax.
And if there are no exemptions and no exceptions, will churches and other non-profits will be forced to pay a national sales tax on every purchase? Why exempt Internet access services and tuition? That was mentioned in the evangel.
I was wrong about the demo car example. Full stop. But no matter how“pure” a national sales tax is initially, it will soon become complex, punitive, and manipulative in a society as diverse and unchaste as ours.
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Post by daworm on Mar 26, 2007 12:44:26 GMT -5
You say you cannot possibly defend the current income tax as a better system, but then you say this, that you won't support a better system even if flawed. Well then, Mr. Naysayer, what would you propose to do, then? It would seem the only alternative left is sucking on a pistol.
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Post by legaltender on Mar 26, 2007 16:15:51 GMT -5
Oh, then it's a "better system."
End of debate.
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Post by Justin Thyme on Mar 26, 2007 19:26:14 GMT -5
You haven't defended the income tax at all to me...I don't think you can. I don't intend to and I couldn't if I tried. You're countering with IRS censure applause lines. The FairTax is a deeply-flawed alternative. I fully agree that there are flaws in the FairTax but is it more flawed than what we have now? Is it better than the other alternatives that have been proffered? I don't think so. We have an underground economy now that was estimated at around 9% of the GDP and growing in 2000 *. I don't see that changing much with the imposition of the FairTax. Larry from Lawrenceville has never bought a new car in his life. I've always bought used and always paid the state sales tax required on the purchase. My decision to purchase used cars has never been due to tax considerations. I don't see that changing. I've also never bought a new house, again for reasons other than tax considerations. However, just about everything else is purchased new and I don't see that changing much, if any, should the FairTax become law. And all six of those countries imposed those large sales taxes while also keeping an income tax in place. Nothing like FairTax has ever been implemented by any country before however there has been talk about it in one of the South American countries. It depends on what you mean by better off. Personally I would look at the FairTax as having made me better off even if I paid 2-3% more in taxes just to keep from having to be shackled by all the book keeping involved in paying an income tax. No. If I'm making $100,000 then my companies payroll expenses on me are $107,500 when you consider the portion they pay for my SS taxes and Medicare Taxes. Add on top of that the fact that they are no longer paying their income tax on profits they make and their savings are even more. Now consider the embedded taxes in the products they purchase from their suppliers and you see their material costs are suddenly lowered and pretty soon I can count about a 12-15% savings which will be passed along to the consumer due to competitive pressures. Subtract the embedded taxes in retail items and then add back in the FairTax and it's pretty much a wash. However, I now have exports that have had all embedded taxes removed from them and no FairTax added back into them and suddenly I'm more competitive with overseas competition. Imports are going to rise in prices due to the fact that their embedded taxes are still there and the FairTax is added to their retail price so consumption of domestic goods should increase. Foreign investment into US manufacturing should then increase due to the fact that that's the only way for foreign companies to get the embedded taxes out of their goods bound for the US and it just makes sense to make capital investments into countries where you pay no taxes. So do I think I'm overselling the FairTax? Absolutely not but I do think that you are selling it short.
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Post by legaltender on Mar 26, 2007 22:19:30 GMT -5
That includes illegal drug smuggling, however, as the site you linked stipulates. That's not going to go away. I'm astonished at the FairTaxers' naivete in assuming there will be little black marketeering. Even if the price of items is 20 or 25 percent lower than today (a claim that I doubt) people will still want - and go after - their 25 percent black-market discount. Are you ready to ban cash purchases?
Which forces us to carry U.S. companies on our backs – even when they're less efficient, less innovative, or produce poorer goods. Competition from overseas has often forced American manufacturers to improve their products. Companies become complacent and sloppy without competition.
I take it you're "personally" self-employed. Sorry about that. I would NOT send Uncle Sam an extra 2-3% to save a $175 preparation fee.
I'm no fan of the scores of subsidy and reward programs under the current tax code. A mistrust in the fairness of the tax system undermines voluntary compliance. Complicated transactions such as tax shelters and tax-oriented financial products are anathema. However, a stand-alone retail sales tax presents at least as bad a bookkeeping regimen, may be less equitable and more intrusive.
In a FairTax world, the approximately $11 trillion in tax-deferred savings plans such as IRA, 401k, etc., would be withdrawn *tax-free.* That's a $3 trillion hit to the government that would be only made up through retail sales. You do understand they're more risk-averse. Retirees don't spend lavishly on furniture, electronics and home additions, so how much revenue non-neutrality might this represent?
The tendency of legislators to create more and more exceptions and loopholes is not going to die. Legislative erosion is not really debatable. I say again, social tinkering and exemptions would have to be constitutionally foreclosed. That's not remotely plausible. Politicians are not going to give up their main source of power.
As though the income tax were the ONLY tax the government uses to make our goods more expensive. We live in a managed economy. Always will. There might be a federal program dedicated to designing - and eternally re-designing forge-resistant store receipts, which private businesses would be forced to adopt under penalty of law. New federal crimes would be needed for receipt forgers or possession of forged receipts.
There are upsides to Linder-Boortz, I grant you. It would be politically much more difficult for lawmakers to raise any national sales tax rate, once enacted. The impetus for pet projects would be throttled back.
Are the President's Tax Advisory Panel members wrong telling us that "middle income Americans would bear more of the federal tax burden under a retail sales tax with a prebate?"
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Post by el Gusano on Mar 27, 2007 0:59:38 GMT -5
And just what, pray tell, do you think they are going to do with the money when they withdraw it?
I would suspect they are going to spend it.
If they don't, then their heirs will spend it.
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Post by daworm on Mar 27, 2007 8:34:15 GMT -5
There you go again... Tell me once more (actually, tell me once, as you haven't yet) how EVERYONE TAXED AT EXACTLY THE SAME RATE is less equitable?
Under the Fair Tax, taxes are only applied to the final goods sold, not the components that make up those goods. So, if you are a company building computers, when you buy ram chips, CPUs, power supplies, etc, you no longer pay any form of tax on those items (including the price markup to cover the income tax of the seller), thus paying less for your supplies, and when you sell that computer to me, the tax I pay is based on the lower cost of goods that you paid. Hence the wash in the final price from one system compared to the other.
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Post by legaltender on Mar 27, 2007 9:07:10 GMT -5
Get a little place in Puerto Vallarta?
A substantial part of the $3 trillion in revenue would be long-deferred or lost.
Roth IRA contributions are made only from earned income that has already been taxed (and is not tax deductible), but withdrawals up to the total of contributions are federal income tax free. If a consumption tax is implemented, how do you avoid double taxation on Roth IRAs? On regular savings accounts or CDs? How many times should the same dollar be taxed?
Wait. My bad. You'd recover all that eliminating embedded taxes along the production line.
True enough, if you think "equitable" means someone buying Iowa corn has to pay the same tax as someone who buys French wine. For one thing, the “rebate” isn't similar to the earned income tax credit because it's intended to go, month after month, to every American household. As the Bush Tax Council costs this: "The top 20 percent of American taxpayers would see their tax burden fall by approximately $250 billion per year, while the lower 80% of American families would pay 34.9 percent of all federal retail sales taxes, more than double the 15.8 percent of federal income taxes they pay today."
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Post by traveler on Mar 27, 2007 11:33:26 GMT -5
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Post by daworm on Mar 27, 2007 14:23:34 GMT -5
I've read this three times, and I still don't see where you've answered my question. Who cares if it is Iowa corn or French Wine, it all gets taxed at XX percent, whatever that is (24?). And what part of the rebate (or prebate, as it were) going to each and every single American household isn't fair? You seem to think Warren Buffet and Bill Gates are somehow less deserving of this than Joe Shmoe, just because they are rich? How is that equitable? And we've gone over once before how you cannot base the fairness of the Fair Tax on how it changes the distribution from the current model. The current model is inherently flawed, and fixing those flaws means that some people will be taxed more than they were previously, and some people will be taxed less than they were previously. It just so happens that the rich were taxed far more than anyone else under the old system, and it is understandable that under a fair system they will no longer be shouldering an unequal share of the burden. And that's what bothers you the most, isn't it?
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Post by legaltender on Mar 27, 2007 17:56:25 GMT -5
No. Would losing the EITC excite you the most?
How exciting is a system putting every American on the dole? Without the prebate, the poorer you are, the more you pay, proportional to your income. If the intent was really to avoid taxing essential spending to place less burden on the poor, you could simply not levy the sales tax on stable items like food, medicine, school supplies, or clothing.
Why force churches and non-profit groups to pay a sales tax on every purchase and exempt Internet access and tuition? Would we continue to escalate using a national sales tax as a social engineering tool or stop there?
A typical married couple at the bottom 25th percentile of the income distribution earns $39,300 per year and would pay $7,997 in net federal taxes after subtracting the Prebate of $6,694. Right now, they would pay $5,625 dollars in federal taxes for 2006. The FairTax would boost their federal taxes by $2,372, or 42%, according to the Bush tax reform panel, citing Treasury figures.
Bureaucracies never simply disappear. The managed economy we have now would not be magically eviscerated by Boortz-Linder. And difficulties involving coordination with existing state sales taxes are not explained.
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Post by daworm on Mar 27, 2007 20:11:18 GMT -5
Something I've heard about sales taxes forever. But if you don't spend the money, it does you no good. If you do, you are taxed. If you wait a while, and make a little off of it on the market, then spend it, you'll pay more taxes than if you had spent it immediately, and if you don't spend what you make, again what good does it do you?
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Post by Justin Thyme on Mar 27, 2007 20:49:10 GMT -5
That's going to happen regardless of whether there is a prebate or not. That is going to happen whether we tax income or retail sales. That's going to happen because the poor are poor. It's a great incentive to earn more money and the FairTax doesn't get in the way of that. The income tax does.
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Post by el Gusano on Mar 27, 2007 23:19:05 GMT -5
So, in your world, should we charge people different rates for their property taxes?
After all, the poor pay more proportional to their income.
Do we change it so that the property tax rate is based on the value of the property or based on the income of the owners?
If it's based on the income of the owners, imagine what that will do to rent rates! Boy the poor sure will be in trouble then, as well.
When exempting staple items, what about designer clothing? Should we change the rate based on the cost of the clothing or based upon some bureaucrat's idea of "necessity"? Caviar? Other food items that the poor might not buy?
You still have not shown why it is not more fair for everyone to pay the exact same rate.
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Post by legaltender on Mar 28, 2007 0:35:26 GMT -5
Asked and answered. How many "typical married couples at the bottom 25th percentile of the income distribution" examples does it take? The working class pays the sales tax, purchases made for business/trade purposes are exempt from the sales tax. But retailers facing a high retail sales tax might fail to tax goods that should be taxed or collect the tax from customers, but keep the money rather than remit it to the government.
Because buying with cash will make it easier to evade the sales tax, taxing authorities might quickly conclude that buying with cash is an indicator of criminal activity.
You trust the government too much if you think we wouldn't end up with both a national sales tax and an income tax after our first "emergency." Some of the reasons for abolishing the income tax - the intrusion of government into our private lives and the continuation of the social welfare state are implicitly perpetuated by the FairTax. The government-by-administrative-agency nonsense continues.
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Post by daworm on Mar 28, 2007 8:59:02 GMT -5
And for the third time, comparing a flawed by design disproportionate income tax to the Fair Tax isn't, well, fair. Everyone knows the current income tax is on a graduated scale, where the less you make the less tax you pay (as a percentage). It doesn't take a rocket scientist to see that that goes away when everyone is paying the same rate. But that doesn't make it unfair, as you are implying. It makes what was unfair, fair.
Everyone pays the sales tax, not just the working class.
Every state in the nation has a sales tax of some form or another. Does this happen to any significant degree now? And since cost of goods will go down to roughly the same level as the tax increases point of sale price, you can't say a 24% increase in price will force retailers into this just to get customers to buy something. There will be no sticker shock, at least on domestic goods. Sticker shock on foreign goods might very well be a good thing. If some do try it, they will be caught eventually, and made an example of.
Sure, like it is now. Try withdrawing 10 grand from the bank today, and see if you aren't reported to the government. Try getting pulled over on the interstate with 20 grand in cash and see if you are allowed to leave with it.
So we should be expecting the addition of a national sales tax at the next "emergency"? 9/11 Didn't do it, what would it take?
Where's the intrusion into our private lives? And the Fair Tax does nothing to eliminate the welfare state, and is designed so far to provide the same level of funding we currently have, which to me says it will continue to pay for those social welfare programs.
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Post by legaltender on Mar 28, 2007 10:55:14 GMT -5
You demanded the comparison. Make up your mind. There's no way anyone can anticipate, much less quantify all variables of a stand-alone retail sales tax. We have analysis from a retired dentist and a talk radio populist and more recent and arguably more solid data from bi-partisan panels and CBO.
Social engineering and the people-tracking aspects of the national sales tax go together. Feds will have to police the sales tax compliance. Separate agencies will background check applicants for the rebate. Furthermore, to remain qualified, families must register annually (FairTax, Title II, Section 302(d)). The FairTax specifically excludes family members who are incarcerated, or will be incarcerated - interestingly. The NCIC database will be plugged into the system. Nice. Some breadwinner's 10 days in pre-trial might lose a family a year's subsidy, depending on yet-to-be-defined criteria. You must verify and re-verify marital status, number of eligible children and annual income. Yeah. It's fairly intrusive.
No. Because the income tax has been and can be repeatedly indexed, while a stand-alone sales tax (sans exemptions) has no such feature.
Not anyone declaring themselves a "business." Who is in charge of handing those exemption certificates? Individuals might create “paper” businesses solely to obtain business exemption certificates and avoid taxes on purchases for personal use. A related problem involves individuals with legitimate businesses using their business exemptions for personal purchases or for goods or services to give to employees in lieu of compensation.
State sales tax rates are a fraction of the tax rates required to replace the federal income tax. Among states that impose sales taxes, tax rates range from 3.5 percent in Virginia to 7.0 percent in Mississippi, Rhode Island, and Tennessee. Failure to effectively administer the tax requires a higher tax rate to compensate for lost revenue.
A plan to put every single American household on federal welfare can't be simple.
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Post by daworm on Mar 28, 2007 13:15:12 GMT -5
No, I asked why you thought the same rate for all wasn't fair. You responded by comparing it to the current system. This isn't what I asked for. The closest you came to that was another issue where you brought up the claim that a sales tax is a recessive tax. In other words, why isn't the Fair Tax truly fair, in terms of what the Fair Tax is and does on its own merits, not compared to a system that is by design unfair.
Businesses, not individuals.
Valid SSN, not in jail... <sarcasm>Very intrusive. Much more than detailed lists of every purchase made, charitable donation, and place and rate of employment that we supply now... </sarcasm>
A simple claim form, versus a 1040. Again, less intrusive than what we have now.
You aren't buying any goods in jail, therefore you have nothing to get the rebate for. What's wrong with that. The "will be" is easily explained, you may have been sentenced, but haven't yet reported to jail (happens a lot, look at Bernie Ebbers (sp?)).
What's a 1040 require you to show? Far less intrusive than that.
I'm not following your terminology. What do you mean by "indexed"? If you are referring to adjusting the tax rate, what does that have to do with the possibility of adding a national sales tax? If not, what exactly prevents adding a sales tax when we already have an income tax that would not prevent us from adding an income tax when we already have a sales tax?
So, you risk getting Capone'd, much like those who try to avoid paying the income tax now. People avoid the income tax all the time, and get caught at it all the time. You seem to think it will be so much easier under a Fair Tax to cheat. I believe a business will have to justify the tax exempt nature of all purchases, and thus there is a paper trail. It shouldn't be impossible, or even terribly difficult, to detect cheating "businesses". By declaring yourself as a "business", you open yourself up to a much larger level of scrutiny than for an individual. Is this extra scrutiny, and the possibility of jail time, worth evading the sales tax?
I assume you are calling the prebate "welfare". Personally, the prebate is one of the areas I think should be cleaned up. I'd rather see tax exemption on food, drug, clothing and housing up to certain limits (for example, food item purchases up to $10 per item untaxed, but those expensive steaks and caviar would be taxed, or new homes under $100K untaxed, but $3M mansions taxed), rather than a prebate. I think that would cover the majority of necessities, and since the amounts below the limits would be untaxed (that $3M home would be taxed at $2.9 million, the $100K cutoff amount untaxed), the "rich" would still get the equivalent of the prebate in tax savings, thus keeping things fair without burdening the poor, and without the rigamarole needed for validation of just who gets or doesn't get a prebate. Thats not the way the bill is written at present, though. I think the bill as written is better than the current income tax system, though, and still deserves some serious consideration.
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Post by legaltender on Mar 28, 2007 18:36:33 GMT -5
Housing, eh? Say goodbye to simplicity and - probably - revenue neutrality.
"Assuming low rates of evasion, the Treasury Department calculated that the tax rate required to replace the federal income tax with a retail sales tax would be 22 percent on a tax-exclusive basis. This tax rate, however, does not include a [Prebate] program designed to ease the burden of the tax on lower-income Americans. Moreover, unless the states repealed their existing sales taxes, most consumers would pay both federal and state sales tax on many goods. The weighted average state and local sales tax rate is approximately 6.5 percent on a tax-exclusive basis. Thus, for sales subject to both federal retail sales tax and state and local sales taxes, the weighted average combined tax-exclusive sales tax rate would be 28.5%.
The Treasury Department concluded that using the retail sales tax to replace only the income tax and provide a cash grant would require at least a 34 percent tax-exclusive rate." - Bush Tax Reform Panel (2006)
Exempting housing costs along with food, clothing and drugs would blow a hole in the FairTax bulkhead.
So do others. Even with products 20% cheaper, people would still want to find a way to save a tax that size. You're asking retailers, for example, to determine whether a buyer will use a computer for entertainment at home (taxable) or to run a business (exempt).
A failure to index deductions and tax brackets for inflation means an increasing share of earned income is taxed at the top marginal rate, amounting to a ‘stealth tax increase’ on the wealthy. Indexing relieves that imbalance. A stand-alone sales tax such as we're considering has one across-the-board rate which could not be as targeted, having no deductions and exemptions to index. One pressure valve, not four or five, is not preferable in an emergency.
Standard reductionist logic. "Incarcerated" for ten days awaiting a hearing should not cost a family breadwinner a full year's subsidy. The language of the rule is incomprehensible.
In fact, the language of HR25 is pretty much incomprehensible. It creates the nation's largest entitlement program without solving administrative and compliance issues.
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Post by Justin Thyme on Mar 28, 2007 20:54:36 GMT -5
Are income tax refund checks a part of an entitlement program?
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Post by legaltender on Mar 28, 2007 21:22:47 GMT -5
Twelve Prebate checks a year - once every month - for everyone with a Social Security number, working or not? This creates universal dependence on a government check and sets a precedent for further growth in the size and scope of the federal government. The income tax refund has no such dimension.
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Post by Justin Thyme on Mar 28, 2007 21:37:11 GMT -5
I know quite a few people that talk like it does. They are dependent upon that refund check to pay off bills or to make certain purchases. Federal Income Tax refund checks are averaging around $2400 these days. That's about half of what the annual prebate would be for a married couple with two children.
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Post by el Gusano on Mar 28, 2007 22:17:44 GMT -5
I still stand by my belief that if the government didn't sneak out a little every paycheck and made you pay your tax bill monthly or annually, there would be rioting in the streets to change something.
Which leads me to an observation on this statement:
That right there should prove to you that our current system is flawed. Why should the government be permitted to extort that much money from us through the income tax?
The FairTax would at least permit the consumer to choose how much tax to pay and when.
Worm, made the following statement:
We don't.
Our borough has a 2% (or maybe it's 2.5%) sales tax. Homer adds 4% to that. (Our total is 6.5% and I don't remember which is which.)
When we go to Anchorage, we buy $1000 worth of groceries at a time just so we don't pay any sales tax.
However, it's not worth the trip just to save the sales tax because the sales tax is capped at $500 worth of goods in a single purchase.
IOW, if you buy a $500 car or you buy a $50,000 car, you pay $32.50 in sales tax.
Senior citizens are even exempted from property taxes on up to $150,000 or so in their property.
If illegal and unconstitutional spending were eliminated, there would be no need to impose a 20+% national sales tax. Keep it around 10% and people will more likely voluntarily pay it. (Maybe the Bible had something when it imposed a tithe.)
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Post by traveler on Apr 4, 2007 9:25:12 GMT -5
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