The Fair Tax has its moment in the sun. Could there be more to come?

Those who say that the Fair Tax rate will have to be much higher than 30%/23% … are all assuming that Congress will never levy the tax on things like medical services, food, houses, etc.

Are you sure about that? According to Bartlett, to get to the 30%/23% rate they count revenue from the government taxing itself on its own purchases, which is a rather transparent shell game. Also, as I understand it, the number makes no allowance for changes in behavior to say nothing of fraud. E.g. if new homes are taxed 30% and resold homes are not taxed then obviously there will be a lot less construction of new houses and more renovation of previously marginal old homes. If cars and other big ticket items are taxed at 30% why not take a trip to Canada and buy them there instead? And so on. On the fraud side, as I understand it, the way it is structured is a positive invitation to fraud compared to a value added taxes used elsewhere (e.g. Europe or Canada).

I would agree that there would be incentives to fraud and tax shifting. There already are in the current tax code, but they might be more dramatic under a national sales tax.

As for the government taxing itself, Larry Kotlikoff and a bunch of people from Suffolk University attempted to address this and other criticisms in a paper (pdf) in 2006. An excerpt (which I’ll admit that, after several readings, I still don’t fully understand):
The FairTax redistributes real purchasing power from state and local governments to their state and local income-tax taxpayers. It does so by reducing factor prices relative to consumer prices and, thereby, reducing the real value (measured at consumer prices) of state and local income tax payments, which are assessed on factor incomes (namely, factor supplies times factor prices). Gale (2005) and the Tax Panel (2005) recognized this loss in real state and local government revenues in claiming that these governments need to be compensated for having to pay the FairTax. But what they apparently missed is that this loss to these governments is exactly offset by a gain to their taxpayers. Were state and local governments to maintain their real income tax collections – the assumption made here – by increasing their tax rates appropriately, their taxpayers’ real tax burdens would remain unchanged and there would be no need for the federal government to compensate state and local governments for having to pay the FairTax on their purchases. The second is that H.R. 25 does not preclude state and local governments from levying their sales taxes on the FairTax-inclusive price of consumer goods and services. This produces significantly more revenue compared to levying their sales taxes on producer prices.

I’d add that the progressive tax system used now also attempts to account for greater use of the commons by those who have greater resources.

A “Fair Tax” doesn’t seem to do that.

Also, it would seem to me that a higher sales tax would tend to discourage purchases (even with a rebate for the poor-who’d still have to pay the tax). As our economy is driven by consumption, this could potentially crash it all. To me, this “Fair Tax” looks like a reframed supply-sider’s wet dream.

Lindbeck also argues that with the payroll tax gone, low-income workers would stand a much better chance of saving up money and rising out of poverty.

Huh? According to Bartlett, the FairTax compared to the current income tax would increase the burden on the bottom four quintiles and decrease it on the top quintile (see Table 5). No surprise there. The game the FairTaxers play to pretend otherwise is to pretend that everyone spends 100% of their income. But that’s hokum (see the BLS numbers in Table 3): people making $1 million a year spend a much smaller percentage than people making $10,000 a year.

As for the talk of G5′s and Bentleys, that makes about as much sense as Huckabee’s talk about a “magic wand” (shall we call it the FairyTax?). And I’m not sure in what alternative universe “consumption is wealth”. Run up your credit card bills to make yourself richer? What’s next, the Sun goes round the Earth?

Justin, thanks for the reply. I don’t fully understand that quote either. Kotlikoff et al seem to be saying that prices will go down by the amount of the FairTax and so it will be a wash. I’d better watch out: apparently, my inflation-lined treasuries are going to have a roughly negative 30% return when Huckabee waves his magic wand.

As for my second comment (currently in moderation), looking at Bartlett’s Table 5 again I’m confused. It appears not to take into account payroll taxes. On the other hand, it shows the FairTax raising exactly the same amount as the income tax whereas I thought it was supposed to replace both.

Federal employees pay the income tax today, is that a shell game?

The Fair Taxers mean to replace both income and payroll tax, so that Table 5 of Bartlett’s, which compares the Fair Tax burden to the income tax burden, is a non sequitur. My impression is that the Fair Tax would reduce overall federal taxes on the bottom couple of quintiles and the top 5% or so, and increase them for everybody else (which doesn’t strike me as the kind of thing that would be a winner at the ballot box, but what do I know). Bartlett does make the good point that a consumption tax would weigh heavily on the young, who are borrowing to buy houses, cars, etc. But he seems to mix some seemingly unfair criticisms in with his valid ones.

Sorry Crust. Our comments passed each other in the night. I’ll see if I can get in touch with Bartlett and figure out that discrepancy.

F the fair tax and F Huckabee

I would agree that there would be incentives to fraud and tax shifting. There already are in the current tax code, but they might be more dramatic under a national sales tax.

Note that we are comparing current actual receipts with projected receipts under a changed tax regime. So while it’s of course true that fraud and tax shifting already exist, that doesn’t really address the issue that the FairTaxers are coming up with an artificially low rate by ignoring this. Also, these are I think likely to more dramatic under a FairTax as I argued above.

I think the fair tax has about as much chance of happening as stopping illegal immigration (pronounced “none”).

As with the illegal invasion, the current tax system is supported fully by both parties and both the right and the left in the real Washington. It provides the perfect combination of obfuscation and trickery to provide the right with juicy esoteric corporate tax breaks and the left with a bottomless bureaucracy to rule.

And for both sides it creates a perfect power base from which they can control and manipulate American citizens instead of the other way around.

The lobbies of lawyers, accountants, businesses and government bureaucracies that reap huge gains from the current, intentionally indecipherable tax system are lined up on both sides of the Potomac to immediately discredit any possible alternative to the madness.

Yes, the current abominable system needs to be completely scrapped. No, it isn’t going to happen until the public DEMANDS it. Change can only be driven from the grass roots. It won’t come from any public servant.

Steve Forbes’s flat tax is a much better idea by the way. But I doubt any of us will live to see that, or any other real tax changes happen. It is as elusive as Detroit’s “green” concept cars…touted for decades, but never actually produced.

Turd:
Federal employees pay the income tax today, is that a shell game?

In a word, no.

If they eliminate the income tax on federal employees that will be genuinely lost revenue (unless e.g. they cut government salaries by an amount equal to the lost revenue). If they introduce a sales tax and the government charges itself then the sales tax paid by government increases both revenue and expenditure by an equal amount, hence the shell game (assuming prices are unchanged). Per Justin’s reply to me above, apparently proponents try to address this by saying that prices will go down. But that would require 30% deflation, which is a virtual impossibility.

Justin, thanks for all the replies and thanks for covering this issue in the first place. (Not sure if this is in response to my request or not. But either way, thanks.)

Ah, I couldn’t remember who had written that comment a couple of weeks ago asking me to look into it. That was indeed what got me to start paying more attention.

What would all the tax attorneys and accountants do for a living?

How many people is that?

How would that upheaval be managed?

Longer term it would be great to have (presumably) smart segment of the population producing something other than 1099s and court briefs, but the consequences of the transition bears thought.

——-
Do any states use such a system?
Are their rates of growth better? Unemployment?
If this is the wonder proclaimed, there should be empirical evidence.

The fair tax claims to “fairness” has many loopholes. For example claiming that the poor would have an opportunity to save more by voluntarily restricting their consumption : the reason the poor are called poor is precisely because they already restrict their consumption to the bare minimum. If they could make the same small income and live in Thailand, they’d be rich. If they could travel in time and take their little money to 1950s USA they’d be rich. They’re poor not because they don’t have a lot of dollars, but because their place in society puts the burden of the rat race for scarce but vital resources (housing, energy, food, health care) predominently on their shoulders. In other words, inflation (starting with the 30% increase in the price of everything, and compounded by the checks that the poor would get from the government under the fair tax system) would take care of any saving margin that the poor would have.

I like the principle of the current progressive income tax system because it allows to create specific incentives through tax deductions and tax breaks to steer the decisions of those that really have choices about what to do with their money. You can have individuals make a choice about whether they would prefer to contribute to the common good through giving their money to the government or directly through the effects of their own initiatives when these bring deductions and tax credits. You can shape society in the long term by enticing people to save for their own retirement, health expenses, or to become homeowners. You can offset the costs of having children and maintain healthy demographics. With tax breaks you can put real checks in peoples’ hand, while it’s very difficult to lower a sales tax and have observable effects on the cheap.

Oh and by the way what are the flat tax/sales tax countries ? Socialist countries. In France there is a 20% sales tax and a 12% flat payroll tax. On the other hand half of the households are exempt from income tax and the nominal income tax rates are effectively similar to the US ones. So if you think of flat taxing as a the American way of doing things, maybe you should think again.

I’m not sure I agree with the economic sense of the FairTax or not. However, of this I’m sure. The squeeling of 50,000 unemployed lobbyists would be heard round the world. Call me a cynic, but we’ve got a better chance of a really slick bob-sled run in hell.

I for one am willing to go to war to prevent a national VAT tax. It is the most regressive of all taxes. I believe that the French invented them, they at least make great use of them, but of course their economy is more fair and prosperous than ours. VAT taxes in my opinion are extremely immoral they hurt the weakest among us the most.

emanon, Joseph Bertozzi: Oh, don’t worry. I suspect the lobbyists and tax attorneys (certainly the corporate ones) would continue to be very well employed under the FairyTax.

I’m not sure about states, but there are countries that are using a flat tax system with great success.

Can’t name one off the top of my head, but I know at least one or two are in Eastern Europe.

emanon you are correct in that point. One of the many serious problems with the current system is the brain drain it causes. How many billions of man hours are spent by some brilliant attorneys and accountants figuring out ways to navigate and bypass the tax system that could be so much better spent on a useful endeavor that might actually add some *real* benefit to society?

Not to mention the billions of hours the public is forced to needlessly spend on their taxes each year.

The cost just in these terms is immense. It’s shameful!

It is all unnecessary. The same amount of taxes could be raised with a system that requires practically no time for the average citizen at all.

Not that I am agreeing that the current level of tax collections is appropriate! It is far to high in my view. But that is a separate discussion.

The current tax system generates a load of income for entire segments. People are asking how this would affect tax preparers, accountants and lawyers? Don’t forget all those 401k’s 403b’s IRA’s and other programs we all participate in to avoid taxes presumably those would not be needed either. I simply can’t see our government doing anything that would eliminate this sector of our economy. Governments build bureaucracy, not remove it, this is a simple fact of life that will not change. Removing all the confusing tax rules and setting a flat or otherwise “fair” tax also removes much of Washington’s ability to affect the economy. Fraud and tax evasion will become the new national pastime.

The so-called “Fair Tax” is just a back door for a flat tax. A flat tax, by nature, even a back-door flat tax like a national sales tax, will impose more or less the same tax rate regardless of income level. To keep current revenue levels, that means the rich will pay a lot less than they currently do, and the poor will pay a lot more. That is, of course, why the rich, and their corporate stooges at Time Magazine, love to talk it up, while uncritically calling it a “fair” tax. But it’s a laughably unworkable idea.

I dont get the comment that the Fair Tax promotes tax evasion. Isn’t that already a national passtime?

What percent of the population gets paid “under the table” and pays no tax (think illegals)? What percent of the population fudges their tax deductions? What percent of the population pays contracts cash to get some discount (I am sure they report it . What percent of cash businesses report their full income? on, and on, and on.

Yes some people will still do these things, but there is a HUGE amount of untaxed money under the current system that hides. Under the fair tax, a lot of that would go away.

Would the current tax cheats find ways to cheat under the fair tax? Sure. More, less, the same? I have no idea. But, under the current system you have to try to catch each and every person that is cheating. That is nearly impossible. The fair tax puts the burden on the business doing the sale. Now you just have to try to catch them when they cheat. Still hard, but more managable.

It’s about time the Fair-Tax is getting time in the mainstream media!

The country would benefit GREATLY from it’s implementation.

Checkout http://www.fairtax.org and look up Neal Boortz’s book on the Fair tax. It’s a great read and explains it completely.

Boortz has a new Fair Tax book coming out next month that responds to all criticisims of the plan.

I hope that eveyone who is bagging on this concept will take the time to get educated before tearing it apart! Be intellectually honest!!

A group of rich Houston businessmen got together to make the world a better place? Wanna bet? Yeah, for themselves and their spawn. Every idea new tax idea, flat tax, fair tax, is intended to end the progressive tax. They’re not satisified with their capital gains tax rate or their exclusion from the regressive social security tax. They don’t want to pay any tax and they work full time to buffalo the masses to have their way. Is all money transferred out of the country going to be considered spent, so when they buy a yacht in the Bahamas, they’ll pay US tax on it? Will they be paying a 30% tax on every stock they purchase? Wow, maybe this will work.

I would support the fair tax completely only with two additions. One: keep the estate tax. No one deserves to inherit hundreds of millions of dollars. Two: Add an additional luxury tax to it for goods that are obviously outside of the realm of normal human purchases, for example, $200K sports cars, $20K watches, etc. Without those two additions there is no way you are going to raise enough money at 30% to fund the government without dramatic cuts in military, social security and Medicare.

in a hypothetical situation lets say you make $100,000 a year and since your rich you decide to save $40,000 of that and only spend $60,000. You would end up paying only $14,8000 in taxes. A mere 14.8 percent.

Now lets say you make $20,000 a year and since your poor you have to spend $20,000 of it to live, you end up paying $4,600.. what do you know its 23%.

This is suppose to help the poor? I dont think so. Fraud will be rampant.

This system benefits the rich and lets their millions in untaxed income pile up in a bank while they spend a fraction of it on bentlys and rolex watches.

>I’d add that the progressive tax system used now also attempts to account for greater use of the commons by those who have greater resources.

Do people use common resources in proportion to their income or in proportion to their consumption? My guess is it is closer to consumption, making the fair tax fairer than an income tax.

I like the idea in general. However, no one seems to discuss a glaring problem. Most every responsible adult in this country has managed to save some amount of money over their lifetimes, and they’ve already been burdened with the income tax when accruing those savings. Now if they go to start spending that money in the latter half of their lives, after the shift to the Fair Tax, they’ve just been hit with a dramatic double-whammy. Is anyone talking about a solution to this?

I would agree that a tax system like this would have to be paired with something to deal with the fact that some of us have no choice but to spend nearly all our money on necessities, while others do have a choice. Someone mentioned the estate tax, and I think I agree with that. It is funny how on-its-head this would be. I think it might be a nice compliment to reducing green house emissions…

It’s interesting though – with a rebate, for the poor, they won’t be paying a lower NET tax rate, but it sure will feel like it all year long – I guess you’d have to stipulate that the tax rebate would have to be paid out in, say, monthly installments.

>Do people use common resources in proportion to their income or in proportion to their consumption? My guess is it is closer to consumption, making the fair tax fairer than an income tax. …David.

Starting with national defense, do foreign countries want to attack America to take my 200K house or Microsoft. I think the Army is protecting Bill Gates much more than me.

Do the courts mull over my arguments or Bill Gates decisions; I’d say his.

Does having an educated populace help Bill Gates more or me? I think him.

Is the state dept. working more to ensure the products I produce can be sold around the world, or Microsoft’s.

Are the highways used more by people going to work to produce wealth for me, or for Bill Gates?

It’s pretty obvious that the more you have, the larger you live and your benefits from the “commons” increases exponentially.

“I don’t know many poor people that buy a G5, and I don’t know that many that buy a Bentley. The best indicator of people’s well-being is what they spend and how they spend it”

This is an irresponsible statement, and a falacious simplification that diverts from the reality of the situation.

Statistically, richer Americans devote a high proportion of their income and assets in investments because they aren’t living paycheck to paycheck like much of the middle and lower classes. This means that the fair tax gives richer Americans a MASSIVE tax cut, even if they might buy a Bentley with the income left after investments.

Looking at the fair tax proposals logically. If the richest quintile of the nation generates 80% of the personal income tax revenue and you slash their taxes considerably, then you end up completely eliminating corporate income tax which generate $100′s of billions annually, then where does Uncle Sam make up the difference? Let’s not kid ourselves, someone is going to make up the lost revenue. If we examine the fair tax closely, we can see that the “someone” is the middle-class American who will pay a substantially higher portion of their income to taxes than the super-rich or big business will.

The “fair tax” is simply a sleazy euphamism for shifting the bulk of the tax burden away from big business and the very rich and onto the middle class.

All I see a ‘fair tax’ doing is creating a huge black market for goods in this country. How about the rich buying things in other countries.
Will the internet be taxed. What is the incentive to
buy a house with a sales tax and no interest or property tax deduction. You think the current housing market is bad? Home prices would drop like a stone destroying millions of peoples largest investment

Folks, if I could recommend, don’t expect to understand what they are trying to do with out reading the book. Fair Tax by Neal Boortz. A lot of your comments are answered in the book on how things are proposed to work. Here is the link.

http://www.amazon.com/Fair-Tax-Book-Saying-Goodbye/dp/B000UENRO2/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1199495501&sr=8-1

Why don’t we just simplify the tax system we have now to eliminate unfairness and fraud? Make the forms simpler to common people can declare the things they should without paying consultants. Make the forms transparent so the IRS can catch fraud.

Better yet, the government already knows most things about you. Why not have computers store this data and send you a mostly complete form? You would be welcome to do your own with its aid or toss it in the trash or fill in the rest.

I do not see how the fair tax would do anything but damage to the economy. April is a headache for many, but it comes once a year. A 30% tax every time you shop will easily halt consumption.

How are sales taxes easily avoided is demonstrated in California. A Caifornian buys a yacht in California but takes delivery of it in Mexico or other foreign clime. He keeps it out of the U.S. period for a minimum time, which I think is 90 days. He then brings it home, -SAlES TAX FREE! Perfectly legal. No, lobbyists will not be out of work.

David wrote: “Do people use common resources in proportion to their income or in proportion to their consumption? My guess is it is closer to consumption, making the fair tax fairer than an income tax.”

To respond to your last sentence: no.

Who uses the legal system more?
Who uses roads more?
Who uses the banking and financial systems more?

These are all commons owned collectively by society.

Maybe some of these folks need to read up more on this tax.Look at all the tax money the goverment is loosing now.All the illegals sending that money home not taxed at all.All the money from drugs dealer sales.With fair tax no matter who you are you will pay taxes.The imagrants that buy stuff to live while they are here will pay now.The drug dealer who goes out and buys bling and cars will pay now.Even the hookers on the street will pay taxes.The underground economy to Mexico is in the billions hell lets get something out of them.As far as the accountants and IRS workers retrain them like the textile and furniture workers are they any different the goverment is this nations largest employer.If nothing else let them serve in the military for a spell.

The “Fair Tax” is inherently unfair, and will raise taxes for everyone except the wealthiest people in America. Its supporters want us to think that it will match the revenue of current taxes yet cause virtually everyone to pay less, which is quite obviously impossible.

More extensive analysis from Bartlett.

That “more extensive” Bartlett analysis is already linked to, discussed, and to some extent picked apart in the comments above. And as best I can tell, this national retail sales tax (I’m gonna stop calling it the Fair Tax because the name is so loaded) would reduce taxes for the poor and the very rich and raise taxes for everyone in between.

Whaddaya mean the poor will carry an unfair burden?! The poor would get a leg up from the FairTax because they’ll take home a bigger paycheck (no more federal withholding or payroll taxes taken out), plus they’ll get monthly rebates to offset the cost of compliance with the FairTax.

The FairTax will also enjoy a much broader tax base than the current income tax would. Criminals, illegal immigrants, tourists and anyone else spending time and money in the U.S. would become taxpayers. Also, the FairTax is calculated as tax-inclusive, meaning it is already included in the sticker price. Prices will stay pretty much the same.

I’ve never been one to sympathize with the rich. But if I’m going to be part of the middle class, the demographic that carries the greatest tax burden, then I want a tax plan that will work for me. As for the poor, the FairTax is the first tax plan that totally de-taxes the poor. With an income tax, the rich get away with evasion in so many ways, while the poor and middle class make up the difference. The IRS and Social Security Administration are plagued with internal corruption and incompetence. You’d be surprised how many federal employees are selling our Social Security numbers out the back door to identity theft rings!

To those who are opposed to the FairTax plan: Read the FairTax bill and the FairTax Book so you will better understand what you’re opposing. I’d also like to see you come up with a better idea to replace a tax system that is old, confusing, unfair to everyone and impossible to enforce.

Heather…it’s clear you aren’t reading comments or are a bot.

A Bortz bot. lol

Neither businesses nor government agencies would pay taxes on any goods or services they purchase.

No shell game there, just a misunderstanding.

Anyone interested in learning more, check out: http://www.fairtax.org

It spells out how the fair tax really works.

Wow. Joe’s really dumb.

And a bunch of shills have arrived. I count at least three.

People are saying that there is problems in that the fair tax is a bad idea because it can be cheated and what not.

Get a clue people rich people already are cheating the tax system! So give this system at least a reasonable thinking over before you condemn it.

Chris Latimer, interested in facing reality?, read a Harvard Economics professor’s evaulation of this national sales tax, which is Bartlett (cited many times above). I’ve read the “fair tax” website with fancy charts which would be laughable if so many people weren’t swallowing that hooey. Amazing how the charts show people of every income level paying less but it’s revenue neutral. If you can believe that, then tell us all what Santa brought you for Christmas this year.

@Jason

“I would support the fair tax completely only with two additions. One: keep the estate tax. No one deserves to inherit hundreds of millions of dollars.”

And what makes you think the government has the “right” to take that money? And how would you feel if you worked all your life to raise enough money to be passed onto your children and the govt’ then took 40% of it? It is scary how easy it is for you to make such an assertion.

Only idiots, accountants, and IRS employees (all of which I’m certain comprise the majority of the naysayers here) would be against a flat tax. To argue that it would “benefit the very wealthy” is quite simply ridiuclous. The closing of the loopholes in the current tax sytem would easily offset any “cheating” that would take place under the fair tax. What scares the politicians the most about this system is the fact that everyone will “take home” their full paychecks. The only way this bloated government has been able to tax it’s citizens to the brink is through the “magic” of withholding taxes! That is your Fairy Tax! Once the average Joe sees how much Uncle Sam is really taking out of his pocket (if you don’t believe this is true, ask someone what they REALLY make; I guarantee you over 2/3′s of those people will only be able to accurately quote their “take-home pay) the proverbial “jig” is up! Watch how many tax increases get through then.

Rich people really do spend all of their money: Most rich people don’t take their earnings and keep it in cash, they invest it. This in turn gets spent by their recipients on capital goods (which are subject to sales tax), services and employees who in turn will spend most of their money. Corporate tax isn’t gone as long as corporations need to spend to function.

Deductions do not benefit the poor: The total federal tax rates for each quitile (2005) are: 4.3, 9.9, 14.1, 17.3, 25.2. The income tax portion of this is negative in the bottom 2 quintiles because of EITC, a negative tax structured similarly to the fair-tax prebate.

The government could continue to do social engineering through the tax code (like making fresh food or medical care tax free). This would be an improvement, as the rebate would occur at the point of purchase instead of the following May.

As a side note: I think this tax system would be improved by the addition of a capital tax (structured like a property tax). The government function of protecting property rights benefits people with the most property; so the burden should fall on them.

Expenditures on capital goods would not be subject to the national sales tax (at least not the one in the “Fair Tax” plan).

it makes ABSOLUTELY NO SENSE to exempt certain goods or services, since the current tax code mercilessly attacks ALL [on-the-books] income. our “income” tax should have always been a “wage” tax, so that a single father with 2 kids working 3 jobs and earning $80,000 a year (but with an avg hourly wage of only $15 an hour), pays significantly less in taxes than the owner of a company who hires a general manager to do all his work for him while he golfs all day, or someone who wins the lottery and logs NO work hours. With a consumption tax, it should be obvious that items like Bentlys and yachts (and cigarettes) should have a higher sales tax rate, while groceries and medical expenses and single family residences should have the lowest rates, so we’re effectively keeping the tiered system, but on the goods, not the income

…

All things taxed is fine. Now I will not have to spend 3 weeks each year figuring out my taxes. I will take a vacation now.

All people taxed it fine. Rich and poor alike should pay taxes. This country benefits them both with police, nice roads, public schools, clean air and water. Take pride in paying taxes as they support OUR GOVERNMENT! If you want less taxes then make government smaller, not tax certain people because you have less. Their investments allow me to buy old houses and fix them. This profit pays for my family.

Those of you complaining that the rich won’t have to pay as much.. get over it. They are now paying people to tell them how to avoid taxes as is. The poor can not afford this.

Let me spend my three weeks not worrying about taxes and instead with my wife.

From what I gather, many of the Fair Tax doubters here are under the false impression that the tax would be “added” onto the retail price of goods. The whole point of the Fair Tax is that it is an inclusive sales tax in that it replaces the embedded taxes that are already priced into the cost of the products that we purchase (payroll taxes, employee withholding, corporate taxes, etc). In other words the price we as consumers pay for a product is unchanged. There really would not be any economic incentive for someone to circumvent the tax by purchasing big ticket items abroad (or anything else for that matter).

Many of the commentors have already hit on most of the problems with the “fair tax.” Here’s one that is even bigger: it will be virtually impossible to enforce compliance. Eliminate the IRS? Try increasing its size tenfold and still not being able to control fraud. I am a criminal investigator for a state revenue agency and I can tell you first hand that only about 50 percent of the sales tax due the state is ever collected. Most small businesses, and especially those that deal in cash, such as restaurants, bars, convenience stores, etc., report far less sales tax than they actually collect and keep the difference for themselves. On a national level, our tax gap, the difference between the tax owed and the tax paid, will grow from about 15 percent to 50 percent or greater. People who say the IRS could be eliminated are either stupid or they are being dishonest. Either way, I would not place any faith in them.

Further, if you study comparative tax systems, you find that a distinguishing factor between third-world countries and the developed nations is the reliance on regressive taxes like sales taxes by third-world countries and a lack of diversification in their tax structures. This builds in structural deficits in the tax systems that prevent the country from ever creating a stable and adequate stream of revenue. We need to fix the tax system we have and maintain the diversification in our current system of taxation or risk creating these same structural problems that third-world countries cannot seem to escape. We could simply eliminate all deductions and lower the income tax rate to something really small, exempt the poor completely, and suddenly, the income tax would not be such a big issue anymore. Of course there are vested interests that prefer to retain the complexity, so this will be difficult to achieve, but no more so than scrapping the entire system and moving to a regressive tax like the “fair tax.”

quote:
“in a hypothetical situation lets say you make $100,000 a year and since your rich you decide to save $40,000 of that and only spend $60,000. You would end up paying only $14,8000 in taxes. A mere 14.8 percent.”

Are you suggesting that money will never, ever be spent? It will be taxed when the savings is withdrawn and spent. If you are saying the money will never be spent then you are saying that in this case putting money in the bank or stock market is equivalent to putting it in the trash can.

It’s clear that there is a great deal of misunderstanding about The FairTax. Absent in large part is information about the “pre-bate” (not a rebate)and a full misunderstanding of how the embedded taxes of about 22% would go away. In that way it is a wash or almost because you would only pay $1 more on a $100 item at a sales tax rate of 23%. The notion that you would pay 30% tax on an item is simply not true. You can get definitive information at http://www.fairtax.org or by reading the book entitled “The FairTax”. There are far more benefits than are mentioned here. And if you think about it, is there any reason at all for taxes to be tied to income? I think not. Everyone who visits or lives in this wonderful country should share the costs of goods and services for which taxes are collected.

It appears that most of you have not read The FairTax Book. Just a couple of comments from me though.

First, to Andrew, in your example you forgot to account for the tax prebate to the $20000 earner. He pays no tax whatsoever. The $40000 saved by the $100000 earner will be taxed if it is ever spent.

As for the government paying taxes. The government no longer has to pay the employer portion of SS (I believe there is SS on FERS employees, but I am not sure) or Medicare. Furthermore, it the government lets a contract, that contractor will no longer have to include the employer paid SS or Medicare for all its employees. Also, missing from the contract to the government is all the contractor’s expenses in preparing and maintaining all the tax related documents. Why should the government get a free ride?

Has anyone considered how much the FairTax will impact the tourism industry? An extra 30% tax on U.S. hotels, restaurants, and shopping will encourage a lot of vacationers (both US and foreign tourists) to go elsewhere.

At the extreme end, if I’m a rich person looking to buy a vacation home, it suddenly becomes a lot more affordable to buy it in Europe or Dubai compared to the U.S. And that goes for both rich Americans and rich foreigners.

“Only the poor pay taxes” Leona Helmsly.

And the Fair Tax is the realization of Leona Helmsly tax theory.

Lets call it the “Leona Tax”.

A note: My understanding is that corporations would still be taxed. They are not excluded from the sales tax and every manufacturer, restaurant and even offices have expenses (raw materials, supplies, even desk chairs and computers) that would be taxed.

The idea that the fair tax is (at least) near price neutral has not been explained well on here. Corporations currently pay tax on their profits, payroll/SS/Fica taxes, etc. This includes mfgs/wal-mart, etc. They obviously pass on these costs to consumers in terms of higher prices. These would all be gone. Now to argue that prices would increase by 23/30% is ludicrous. Arguing they will not change may be a bit hopeful, but a modest increase at most is all that could be expected.

Also, someone figured the rate for a person making $20K and spending 20K. They failed to deduct the pre-bate from that tax (approx $2,600). This would make their taxes only $2,000 a year or 10%, a bit lower than than the new rate for the $100K individual with the pre-bate (12.2%).

Finally, the increasing tax base (illegals immigrants negligible consumption, but more so cash business and the black market) would now pay more in taxes.

A note to Mike in CoMo:

Cash businesses would not pay more in taxes. They have the ability to hide their actual sales and tax collected. The end result is that they collect the tax but they do not remit it. We see it all the time in state government. Business collects $50,000 in revenue and $3,500 in sales tax. They send in a return reporting they made $10,000 in revenue and remit $700 in sales tax. They keep the other $2,800 in sales taxes as additional profit. Do not underestimate how much tax can be stolen in this manner. Businesses and their accountants quickly learn that as long as they file a return on time and pay “something,” they stay below the radar and get away with it. Compliance enforcement efforts cannot keep up because the fraud is so rampant. And even when they are audited or investigated for criminal charges, the cash basis businesses rarely keep the records needed to prove how much they actually collected. I have seen relatively small businesses steal more than $3 million in sales tax in just a couple of years.

A national sales tax would be a nightmare and might just plunge the US into third-world status. The danger of this proposition cannot be underestimated.

There is a whole industry currently dedicated to hiding income and diverting it to things to minimize taxes (accountants and tax lawyers). I am sure there are plenty of business owners currently diverting loads of money to off shore accounts and investments to not pay taxes. Is there any credible academic article that compares the losses (or estimated losses) from the two systems?

So they talk about a rebate for everyone to account for necessities of life, based upon the HHS poverty guidelines. Has anyone looked at these guidelines? They clearly weren’t created by a person living on that amount of money.

Yes Mike, there are many academic, peer-reviewed articles analyzing tax fraud and evasion for every type of tax in existence. Each type of taxation has specific enforcement problems, but income taxes are generally the most difficult to evade because of the tax reporting structures in place. With the income tax, the greatest opportunity to evade goes to the wealthy who can take advantage of loopholes and offshore structures. But the vast majority of the income tax is paid by those who earn a salary. Try not reporting the income your employer reports on your W-2 or 1099 and see how quickly you get a bill from the IRS. The key there is that the employer has nothing to gain by not reporting the income. They get a tax deduction for wages paid. With sales tax, they have a lot to gain by underreporting the tax collected, because they get to keep whatever they do not report. At the state level, businesses can add an additional 4 to 7 percent to the bottom line by not remitting all the sales tax they collect. Imagine the temptation when the amount added to the bottom line is not only 4 to 7 percent at the state level, but an additional 23 percent at the federal level.

In my state, we estimate that sales tax not remitted amounts to 60 percent of the tax collected by small businesses. Large corporations tend to remit the full amount and abide by the rules, but most of the revenue and sales tax collections are generated by small businesses. I am currently doing a detailed calculation of the sales tax stolen within a single industry in our state, and its amounting to hundreds of millions of dollars so far. This particular industry is one where the amount of tax collected can be determined by reference to filings with other state agencies. By comparing the reports we can finitely determine the amount of tax stolen. The amazing thing is that businesses in an industry where the amount of sales tax collected can be verified are still stealing taxes to that magnitude. In industries where the amount of sales tax collected cannot be verified, the amount of sales tax theft is off the charts. We have done detailed estimates of theft in those cases based on purchases. For example, convenience stores that purchase $50,000 worth of cigarettes and beer every month but never report more than $15,000 of gross sales. You would not believe how common that is.

If you have access to a college library, start searching through some of the peer-reviewed journals in the fields of public administration, political science, and economics and you will find plenty of empirical analysis related to these issues.

There is no question that our current tax system is in need of simplification and reform, but the “fair tax” is definitely not the answer.

I then seems that we would be better off by increasing each of the marginal rates by say 3% and getting rid of the other taxes and closing loopholes. One of the very attractive things about the fair tax is the incentive to save that is created in a country where some studies state we have a negative savings rate. As a student who recently graduated with a degree in economics, it is a common principle that savings and investment are the one big way to propel an economy forward at the macro level. If there is the least loss in an income tax system then it seems better to do as Romney suggests and getting rid of capital gains and savings taxes and then also generally simplifying the system. The problem with simplifaction is that it can be undone very easily by the next congress. Getting rid of a loophole is useless if it is quietly opened back up the next year.

Another big attraction of the fair tax (especially for those with a libertarian bent such as myself) seems to be the realization of people to how much they are paying in taxes. This underscores the previous posts on the only reason we have the current system is because it comes out before we get our paychecks. I do not believe that people would be very happy if they had to write a check to the federal gov’t every month for what is taken out of their paycheck. Most people would not see the federal gov’t as worth the cost.

Outside of Romney and Huckabee (Fair Tax), no one seems to have an actual plan to simplify the tax code. Everyone talks about it (at least republicans), but outside of closing loopholes there is little consensus of how to fix the whole system (and few will even say what loopholes to close). The true to God reason the fair tax is attractive is it makes the tax bill clear, it seems even on its face, and it is an alternative to a system that is currently failing us.

As a lower middle class person coming from parents who were very poor and myself teetering just barely above “the poor”, I’m 100% for getting rid of the income tax, and having this sort of national sales tax instead. We could easily transition to such a tax by doing it over time … phase out in the income tax over a 10 year period, while phasing in the sales tax at the same time. That would smooth the transition, and allow the government to adjust if needed to ensure that the shift is revenue neutral. It would also decrease the resistance from the accountants and tax lawyers who profit from the current system, as well as the rich who have used loopholes, tax shelters and offshore accounts to bring their tax way below what the rest of us pay, by giving them time to adjust from the change.

Also, to assuage concerns over disproportionately hurting the poor, the tax could easy exempt basic food, basic clothing, and medical expenses, just as our state sales tax currently does. The poor are not poor (as ElCabri foolishly suggest) because we restrict our spending, but rather because we make so little income. But getting rid of the income tax means that we poor and middle class folk get to keep more of our income, which we can then use to pay down Visa debt instead of buying the latest flat-panel TV.

Yes, a national sales tax is not perfect … nothing ever is. But it’s certainly better than the current nightmare of the income tax. Getting rid of the income tax will encourage saving and investment, discourage reckless consumption, and allow those of us who are poor to get out of a mountain of debt. Paying this national sales tax would be as easy and efficient as paying the states sales tax we currently do anytime we are at a store. It would also improve economic efficiency, as we would no longer need an IRS, plus the army of tax lawyers and accountants who help people hide their income, thus getting the government out of our pocketbooks and bank accounts. So everyone wins … well, except accountants, tax lawyers and IRS employees.

Actually, the fair tax is not a simple system. By its nature, taxes will compound unless there are rules to exempt from taxation inputs into the manufacturing and other value-added processes. So businesses that add value to the products they buy before the sale must be exempt from the tax on their purchases that go into the production of other products. That is a very complex process, particularly when the chain of production runs through many levels before a final consumable product is created. Also, when Congress starts implementing this tax, there will be political pressure to exempt medical care, food, etc. Then when the poor and middle class realize they are paying tax on purchases they make with their credit cards, there will be an exemption for that. Pay tax on houses? Are you crazy? A poor family finally saves enough to be able to buy a $100,000 house and finds out they owe $30,000 in tax? The extra tax means they cannot qualify for the mortgage anymore. Another exemption. Before you know it, the “fair tax” is not so simple anymore. Face it: any tax can and will be made complex by the political process.

If you want to see how complex sales tax can become, take a look at the Value Added Tax in place in most of the rest of the world. Look at how South American countries struggle with the VAT because they rely on it as their primary source of revenue. Look at how all the other developed nations use the VAT as a supplement for the income tax rather than the primary source of revenue. Even so, the VAT is superior to the “fair tax” because it has built in rebate mechanisms that make cheating on the VAT not worth the effort. Cheating on the “fair tax” is definitely worth the effort. In fact, dollars to be earned by cheating on the “fair tax” will almost always exceed the company’s normal profit margin. Massive fraud will mean the rate cannot be anywhere near 23 percent. If the tax gap increases to 50 percent, the rate would have to be hiked to 46 percent, and research will tell you that will lead to greater evasion and a need for even higher rates to raise minimum revenue. We will find ourselves in a spiral of the government not having even the minimum amount of revenue it needs while corruption grows to intolerable levels, fueled by the easy ability to steal dollars from the government.

If the political will exists, the income tax can be made to be far fairer than the “fair tax.” Simply eliminate ALL deductions and lower the graduated rates to single digits. Exempt the poor, everybody else pays a low rate. Stop using the income tax as a tool to implement public policy. Treat it simply as a method to raise the revenue the government needs. The problem is that the income tax has been used to grant incentives, to pay political debts, to curry favor, to adjust economic realities, and for everything else under the sun but what it was meant to do. Don’t think for a minute that the “fair tax” cannot be used and abused in the same fashion.

If you think the income tax is currently failing us, just hope you don’t ever have to live with the “fair tax.”

The Fair Tax presents such as an easy way to avoid all taxes alltogether. I build houses in the $200,000 range. If Fair Tax were to come about to the purchaser for some nominal sum instead of collecting the $60,000 for the Fair Tax. The federal government would collect virtuanlly nothing.

Comment to Chris:

You will not be able to get rid of the IRS. The sales tax is far easier to evade (see previous posts). The tax gap between the tax due and tax actually collected is between 40 and 60 percent with sales tax while it is only about 17 percent with income tax. It is also more difficult to audit and much more difficult to prove criminal tax evasion. Far from getting rid of the IRS, the size of the IRS would have to grow tenfold to properly enforce a national sales tax.

If you look at my post just before yours, ask yourself this: would you dislike the income tax if your tax liability were zero? If you are poor you should pay nothing. Again, just eliminate ALL deductions, lower the graduated rates to single digits, and exempt the poor. Very simple, very effective, and very fair.

The reason Justin is confused about the “23%/30% thing” is that he should go back and study his high school algebra. Let’s assume a 50% sales tax. According to Justin’s math, a $100 purchase would have $50 of tax on a $50 item. Of course it is immediately obvious that that is a 100% tax. A 50% tax would only be $25, not $50. Therefore his 30% tax assumption for a 23% tax rate is uneducated.

Hold on a second Math Student:

If you buy an object that costs $100 before tax and the rate is 50%, the tax is $50. The total is $150. If you buy something that costs $100 including the tax, and the tax rate is 50%, the item cost is $66.67 and the tax is $33.33. But this is all obfuscation. No one looks at tax rates that way. Items are not valued inclusive of tax. If you go into a store today in a state that has sales tax, say Florida, and you want to buy an item that costs $100, you know the $100 does not include tax. It never does. In fact, states make it illegal to include the tax in the price. It must be added on to the retail price. At a 6% state tax rate, the item is going to cost $106. Prices for products are not going to be magically recalculated to include the tax. The item is going to have a price and the tax is going to be added. Therefore, the rate is going to be 30 percent, not 23%. 30 percent is the amount of tax added to the retail price without tax. To say that this 30 percent is really just 23 percent of the total of the retail price plus the tax is just silly manipulation of numbers, to wit:

Retail price = $100
Tax at 30% = $30

Total retail price plus tax = $130
$30 tax divided by total retail plus tax of $130 = 23%

Let’s also not forget the dictum of all business and pricing strategy…charge what the market will bear.

That means prices will not go down in the event of a national sales tax because people will already have demonstrated they will pay for a product at the current price. Moreover, pricing strategies DO NOT take income taxes into consideration. Anyone who says prices will come down as a result is a fool who’s never been in business.

Additionally, a consumption tax will reduce consumption. This will depress our economy severely.

Reformer, By the same logic, my income tax on $100 of income is not 28%. The government gets $28, I get$72. So they get 39% income tax. Also Corey, companies ablsoulutely figure their tax burden into their pricing in every step of the way to the consumer, which is why prices WILL go down about as much as the tax. The competative marketplace will see to that. This is a no brainer. My loaf of bread or gallon of milk will cost the same to me, I’ll just have my entire paycheck to use to pay for it, and the leftover $’s to save or invest.

@Justin Fox: sorry for the redundant link, but you don’t need to get snippy about it. I only saw the WSJ piece linked in your post, and links in comments are difficult to pick up. Maybe you can change the code to make linked words easier to pick up in the comments.

Tim:

The tax on your income of $100 is $28. That’s 28%, not 39%. You calculate it by multiplying the 28% rate by the gross income. Sales taxes work the same way. If the rate is 23%, the tax on $100 would be $23. But the tax is actually $30 since the “fair tax” people are saying the tax is computed based on $30 divided by $130. It’s an obfuscation plain and simple. Yes, in your example the government gets $28 and you get $72. The government gets 28% ($28 divided by $100) and you get 72% (72 divided by $100). You don’t subtract the tax from the gross then divide the tax by the net to get the rate.

If you think prices are going to go down, then I can understand why the math confuses you. There is nothing in the “fair tax” proposals that will make the cost of production go down. If the cost to produce does not go down, then the price cannot go down either. Corey is exactly right on this point. The amount of taxes included in corporate cost might even INCREASE under the “fair tax” if the implementation does not appropriatly take care of the issues of tiered taxes at multiple levels of production. “Fair tax” proponents are making this proposal sound far simpler than it actually is and are attempting to disingenuously sell it through oversimplification and playing with the calculation of the rate.

Reformer, you are really a status quoer.

1). Your complaint about the difficulty of enforcement.

Sure people can lie about what they take in, but with the state being paid a small fee to do the collections within their own provenance, and businesses required to register and keep sales records, it will hardly be the nightmare you’d like us to believe. Simply put, if you don’t keep records, the government will simply impute the revenues using other similar businesses located near you.

2). Your complaint about the difficulty of deciding what purchases to exempt for suppliers and manufacturers.

If you buy something which you use to create or manufacture your product, you are exempt from paying the sales tax on it by the simple expediency of presenting your sales certificate. That is exactly how it works now, and has worked for decades. No smoke and mirrors, just a record with a signature which is kept with the rest of the sellers legitimate business records.

The other more pertinent place that hidden taxes get removed from the ‘new’ price of goods is that the employer will no longer have to pay the matching withholdings for his employees, since there will be no withholdings to match.

3). Just to be clear.

The above means that the price of a loaf of bread will drop by about 23%. Now along comes the Fairtax and gets added to the price and bam, the price is back to what it was. So it’s a wash, right? Wrong for two reasons. The first is that the tax is now at the bottom of your receipt, not included in the price as you suggest(more on that in a minute), and two, you van now choose(except for necessities) whether you wish to buy the item at that price, ad whether it is the shopkeeper that has set the price too high, or the tax that pushes it past your purchasing limit.

The big bonus in seeing the tax at the bottom of the receipt and not buried by bits and pieces within the item’s price is that you can see how much the government is taking away from you WITHOUT HAVING TO GUESS. This sticker shock among taxpayers/consumers is EXACTLY what guys like you are so deathly afraid of.

4). This inclusive/exclusive thing y’all love to confuse people with.

The item will have a price. The Fairtax will be calculated on it. You will pay the price plus the tax and they will be listed separately on your receipt.

The reason the fairtax is described as inclusive is because that’s how it is compared to the existing income tax, not because that’s how it will be in the store.

For example, if you make $40,000 and pay 25% in taxes that’s $10,000 dollars right? Only if you use the INCLUSIVE model or rather by saying that 10,000 is 25% of 40,000. This is how the IRS quotes the rate now. However once this is pointed out, most people quickly figure out that 10,000 is not 25% of the 30,000 one takes home. The exclusive rate is, as you point out when bashing the Fairtax, something over 33%.

It is not the Fairtax proponents doing the smoke and mirror thing, it is the current tax establishment. The Fairtax is quoted INCLUSIVELY simply so as not to be accused of using a different methodology to compare the two; i.e. the current tax, and the Fairtax.

5). To all who think the flat tax model is a good one I want to point out that we currently have a tax system that started out as a flat tax, and has simply gone through some minor modifications to beneift special interests. Now having said that, I want to point out that the same thing can happen to any tax system, and we will have to be vigilant, BUT BUT BUT seeing the total tax at the bottom of your receipt for every purchase and knowing that there are no other taxes hidden in the price will be an exceptional tool for making sure the powers that be don’t get crazed again. Furthermore, it will be a real impetus for the common man to get involved in voting for people who will reduce government spending. If 23% seems too high, well then vote for people who will reduce that number by reducing pork. Very straightforward indeed.

6). Somebody else made a very good point about savings being taxed under the current IRS and then being taxed as it is spent.

Money gets recycled and taxed at every exchange under the current system. Buy a car and you pay tax on it even though the previous three owners have already done the same. It gets complex quick, especially when you talk about the government being taxed, but it’s all prestidigitation. If you buy a loaf of bread with that saved money today, you pay nearly 25% in hidden taxes already. Under the Fairtax, that number simply gets moved out of the price of the goods and onto the bottom of your receipt. Again, that’s a complete wash, except that now you get to see how much the governments share of it is that you are paying without all the obfuscation.

7). All the talk of the rich, the poor, and the burdened is again obfuscation, and an especially entertaining variety when one talks about companies and corporations paying tax. A simple question shows the folly. Ready?

Who do you think pays the difference in price when a company’s tax liability goes up? Give up?

You do. Every time you buy one of its products AFTER they’ve raised the price to make up for the revenue lost to the higher tax.

8). To whoever said the rich buy a boat in Cal. and accept delivery in Mexico.

Are you saying that Mexico doesn’t tax them or (more likely) insist on bribes that amount to almost as much? Nonsense. There may be other reasons for the methodology, but saving money isn’t one of them. Someone’s getting their pound of flesh. And the idea that it’s somehow legal and all above board is beneath discussion. It’s not.

9). There won’t be any more deductions for interest on your mortgage, but then again

a). New houses will cost less before the Fairtax is added at the bottom of the receipt, just like bread.

b). Used houses will not be taxed a second time as they are now, and the market will set their value so that the reseller of a home they purchased new, will recover the amount they paid in tax originally. Once again, almost no appreciable change in the cost to the consumer.

10). Someone said people will spend less and the economy will suffer, not to mention government revenues.

Well duh! It’s called saving, and I defy anyone to say that it will devastate the economy short term or that it will not ENORMOUSLY benefit the economy in the long run. Savings is how people build their own businesses. You don’t put money away so that you can throw it at an emergency someday. You save it so that when you are ready you can invest it in either your own business or in other’s businesses which are good investments and whose model you have studied and understand. Savings, self-growth, and wise investment. Yup, sounds like a real loser to me.

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All in all, I hope I’ve convinced at least one person here to look up your own information and not trust the so-called and self-proclaimed “experts” here or anywhere else. Those who have an agenda are very persuasive. Their livelihoods depend on things staying as they are. Who you ask? People dependent on the IRS and the complex and contradictory current tax code. Agents, lobbyists, tax preparers, wealthy people who depend on loopholes their highly paid (did I mention) LAWYERS use to get them deductions small businesses and individuals can only dream of. They’re slick. They’re smart. They’re informed. They’re liars and they’re out to confuse you as much as they can so you will not get involved.

You can make a change. You can understand all this if you try.

Don’t take my word for it either. Go to Fairtax.org and after you understand what they’re saying, find as many different opinions as you can both for and against.

The Fairtax book is an easy read and an exceptionally clear explanation to get started with. Then when the status quo guys start calling supporters “fanatics” you will be in a position to see through their misdirection for yourselves.

Thank you to our host for carrying this conversation and for being open and informed on the subject.

Let me explain it another way. I earn $100 and want to spend it all. Under the income tax formula I will be able to purchase $72 worth of goods. But if you add in the 13% taken out for SSI I will have $59 to spend on goods. Under the Fair Tax, if I spend the entire $100 (which I will get from my employer) I will be able to purchase $77 worth of goods. Obfuscation is certaily occuring, it’s just the Fair Tax proponents doing it. Call it 30% if you like (23/77). 30% of the amount you spent for the goods. But be fair and call the income and SSI 69% (41/59) The dollar amount the goverment got in relation to the value of goods you were able to purchase.

@anon: Sorry for being a snip. You’re right that links have gotten hard to see in comments lately. I’ll talk to my teams of crack technologists on Monday. (It’d be nice if I could just fix it myself but they don’t seem to want to give me that kind of power.)

As for everybody else, thanks for the very informative (and for the most part wonderfully civil) discussion.

THe Fair tax doesnt even slow down at stupid. It goes directly to insane. First, its not 23% — that figure was very optimistic – even to replace income tax alone. But now, its morphed to replace ALL taxes, therefore it has to be much higher % to cover those too — about double.

SO the Fair tax would be more like 50%. And remember — its on sale of new houses — and on government itself. How the hell can you spend an extra 50% on buying your next house. Its also on the medical cost, cars, everything. So your 50K knee operation will hae to pay 75000.

And if thats not insane enough — Fair Tax applies sales tax on government spending – on everything. SO absurd as it sounds — the military would pay that same 50% higher on all buys — uniforms, jets, everything/

Actually Johns43, I’m not a status quoer at all. Quite the opposite. I hate the tax system as it currently exists and believe that it must be changed. But as I noted previously, I am a criminal tax fraud investigator with a state government that has no income tax (that narrows it down a bit). I know first hand that sales tax is unstable from a revenue standpoint and tremendously difficult to enforce. I can tell you the tax gap will increase from 17 percent to around 50 percent and there won’t be much you can do about it except hire more enforcement personnel and keep raising the rate to try to get enough revenue from it. Kid yourself if you must. From my standpoint, I stand to gain from a national sales tax. I assure you there will be no end to the need for criminal tax fraud investigators with knowledge of sales tax issues.

As far as your statement that the government will simply impute revenues for those businesses that do not maintain records, you will have entire industries that do not maintain records. I could give you several examples from task force cases we are working right now. Furthermore, simply imputing revenue for a large number of businesses is not as simple as you make it sound. Who is going to be watching and determining which businesses you need to impute revenue for? Businesses who understate their revenues but file on time and report something that on its face looks reasonable will be difficult to nail. Who will decide that, sight unseen, business A should be reporting $25 million per year instead of $10 million? You need a lot of boots on the ground to make that determination. Who will make the determination that the amounts imputed are appropriate? What if the business decides to fight the imputation? Who will handle that fight for the government? Remember, the IRS is gone, so you guys say.

With respect to using the resale certificate: ever hear of fraudulent use of resale certificates? Happens all the time and will continue to happen on a grand scale with a national sales tax.

When you say prices will drop, you are assuming that the business making and selling that bread you speak of are paying 23% in taxes. They usually are paying far less than that, if anything at all. Business taxes in this country are really quite low, so prices are not going to drop 23 percent up front. You’re living in a dream world.

The inclusive thing is a fixture of “fair tax” proponents, not those of us against it. If you guys want to stop confusing the issue, I’m all for that. If I buy something that has a retail price of $100, the “fair tax” is going to be $30. Don’t try to make it seem like that is 23 percent. It’s not. If you want to compare the “fair tax” to the income tax, there are ways to do it, but manipulating the rate is not the way. The average “man on the street” is going to be confused and misled by that. But then again, that is the whole point.

A couple of things. First, since corporations DO NOT & Never have paid Taxes, they simply pass them on to the customers & stock holders, the price of goods & services will come down aprox. 23%, because they will lose the burdon of the imbedded taxes . Does that sound like a number you have heard in this disscussion before? Most things will cost pretty much the same as they do now , after taxes.
Second thing, & the most important, since most of the folks never read the Bill or the Book, a new book : “FairTax, The Truth: Answering the Critics” The book debuts on Tuesday, February 12th. This should cear it up for all the Folks that never took the time to understand the Bill. This “FAIR TAX” will be the Biggest Boost to the US economy since Capitalism.

hmmmm, lessee, a 30%sales tax, nationally. that would mean that a squillionaire buying a $10 pack of toilet paper would pay 3 bucks (out of income they made in 0.003 seconds, and a person with a 14 thousand dollar yearly income pays the same 3 bucks for a necessity?
Yeah, WOW, fair or flat it’s still the same F* the worker, feed the fat mentality.
Nope, it ain’t flyin’

The foolishness of almost every poster on this site is unbelievable. The number of people filled with envy for those making more than them is sickening. You all are missing the whole point. Scrap the income tax and DON’T replace it. Cut the size of gov’t so that it only does what is constitutionally mandated. A Fair Tax is a HUGE step in the right direction. Cutting the income tax (and the size of gov’t) and NOT replacing that income is about 1,000 steps in the right direction. Let each person keep their money and decide for themselves how to best spend it.

The only “fair” way to tax is to take the cost of gov’t in a year and divide that by the number of (adult?) residents and send them each a bill for the same amount. Each person pays the same amount regardless of income. Why not? Each adult has the same chance to use the roads, parks, libraries, etc. Only when it comes to gov’t do the freeloaders want the “rich” to pay their “fair” share which is whatever the pols (and their idiot voters) deem is right. If a rich person and a poor person go to McDonalds and get a #3 they each pay $5. If they each get a gallon of gas they each pay $3. If they each go to Disneyworld they each pay $55. This makes sense because they are both getting the same good. Nobody aside from the gov’t charges you on what you make. McDonalds doesn’t care if that #3 cost you 1 hour of labor or 1 minute. They only want the $5. Disney doesn’t care if it took you all day to get that $55 or 10 minutes. That is fair. You want it, you pay for it. Today our society is full of people who want others (the rich) to provide for them since they don’t have the ambition to get for themselves. Hiring politicians to take from others and give to you is nothing more than theft.

Something is seriously wrong with a system where someone like Bill Gates or Warren Buffett could pay billions of $ in taxes in a given year and still be arrested for tax evasion while deadbeats who pay nothing in taxes yet suck of large quantities of taxpayer resources aren’t liable for ANYTHING.

Wanting to keep your own money is greed, wanting others money is need, and compassion is when government arranges the transfer.

One last example, imagine you and 9 of your friends order a 10 piece pizza that costs $10. You all eat 1 piece. What is each person’s share of the bill?

The correct answer is $1. It is not Joe pays $0.50 since he’s a fast food worker, and John owes $0 since he’s unemployed … and so on and finally Tom owes $5 since he’s a professional athlete. No, it’s not that way ANYWHERE except in the area of taxation. It is all about envy.

This will be all caps…I apologize but it seems some people are blind.

TO ANYONE WHO SAYS PRICES OF GOODS AND SERVICE WILL FALL AFTER A NATIONAL SALES TAX IS IMPLEMENTED.

YOU ARE WRONG…WRONG…WRONG.

PRICES WILL NOT COME DOWN AS A RESULT OF ANY NATIONAL SALES TAX!

GO READ MY POST WHERE I ADDRESS THIS ISSUE.

ADDRESS MY POINTS OR BE CALLED OUT FOR WHAT YOU ARE.

@Justin…

Do you see any flaws in my argument?

Okay, one last time. I’m not arguing philosophy here. The “fair tax” simply WILL NOT WORK. Dream that it will all you want. It’s not like there are no tax systems on earth that you can study to learn what happens with a sales tax. They’re all over the place and they have been studied. They are fraught with fraud and the rate is going to have to be so high that it will be an economic disaster.

One last thing: it would be nice if the business world were this nice, neat little place where prices were determined by the adding up the cost of the product and adding a small margin. It doesn’t work that way. Prices are set at what the market will bear. Do you think the price of the IPhone was set at $599 because it cost $560 to build? Get real. Prices are not going to go down.

What about transition? If you own a house and you are renting it out, are you going to reduce your rent by 30% or 23% when this law comes out? No, because your mortgage and real estate taxes will still be the same. But you will have to collect the tax, so the renter will be paying more. American car companies haven’t paid a dime of federal tax in ages, so how are the prices of cars going to drop 30%? But the dealers will still have to collect the tax.

There are so many issues, problems, and opportunities for fraud that the whole idea makes no sense whatsoever unless your goal is to destroy the government. If that is the case, just come out and say so and stop trying to do it through the back door.

We need a constitutional amendment as to how much of a person’s income or worth the government can confiscate. That needs to be just ONE number for ALL Americans. If it’s 15% of income or 25% or whatever it’s for ALL Americans.

Corporations should pay no taxes – they can’t vote. Taxation without representation… or did some of you forget about that?

Can’t pay your fair share? No problem, the government comes in and eBays items it believes you don’t need and garnishes your wages. Why should the Tax Man be behind the Child Support Man?

To have it any other way is to decide that some Americans don’t have to pay their fair share and others need to pick up their slack. Show me where in our founding documents that the founders of this great Republic felt that free-loaders were to be part of our great experiment in freedom?

The Fair tax is the only fair tax. It will tax the underground economy. No more cheats. All other income / capital gains and taxes based on income MUST BE ABOLISHED!

PerryM…you clearly don’t have an understanding of law or practical matters in the US.

1) Corporations are persons under the law as per a Supreme Court ruling

2) Corporations sure as hell have a vote…they buy politicians all the time…

Peter Hoover…you’re a bot. Go away.

Iowa caucus
I loved this one. I saw the classrooms, hospitals, churches being used definitely for a good cause. I do not want to talk about politics, as I am a lecturer in the economics, finance and management. However, the classrooms. I loved these. Wish I could have the years to go back and sit in those classrooms, throw the pieces chalks at the teacher, and pretend I was reading the comic book on the president to come here like 1984. I liked the classrooms. Politics. No. I am sorry I did not get that. I liked the classrooms. In addition, voting here. I love the classrooms. Obama here? Clinton here? I love these classrooms. For that matter, I love the janitors who keep the classes so clean. I love these classrooms.
Say, am I going bananas?
I thank you
Firozali A Mulla MBA PhD
P.O.Box 6044
Dar-Es-Salaam
Tanzania
East Africa

@Reformer: thanks for your reasoned explanations. What better way to speed this country’s descent to third world status than this hair brained invitation to rampant corruption. So we’re going to abolish the IRS and rely on all retail transactions being honestly recorded, the money collected and dutifully remitted to the government.

The price of goods and services most certainly will to go down. Competitive forces will demand it. The only time a business will not pass along lower production costs is when that lower production cost is unique to that particular business entity (and that is exceptional rare).

Since the Fair Tax would lower the cost of production across the board, businesses would either lower their retail prices or lose market share. A good example would be the price of PC’s. When they first came out, they cost about $3,000 and up. Due to lower production costs, you can now buy a PC that’s 20X more powerful priced in the hundreds of dollars. Same is true for laser printers, when they first came out they started north of $10 grand. Same can also be said for LCD/plasma TV’s, pocket calculators, digital watches…. the list can go on and on.

The bottom line is that when business have to compete, they have to pass on lower costs to their customers or they lose them to business next door that will. The person that fails to recognize this fact is the one who’s never been in business.

to those of you who have condemned the fairtax without doing your homework on it. there is a 5 year provision in the bill for the fairtax it’s basically a 5 year trial period, if it doesn’t work, it gets scrapped and we then return to the enslavement of the income tax. IMHO i don’t think that any average american that experiences the freedom of not having 30% or more of their paycheck hijacked every week by the government not to mention every employer having to pay 7.5% payroll tax to pay their employees will ever want to go back to an income tax, there would be a public uproar.

Reformer.

Everything you say about enforcement and collections boils down to: The government’s incompetent at getting their money, and people are so much smarter than enforcement officials that we may as well stick with the status quo because nothing else can possibly work.

Your arguments are ridiculous. Even if they were based on a shred of reality, one would have to assume that rampant cheating is already taking place. Personally I think that’s probably true, but to suggest that it would get worse suggests to me that you are not in the profession you claim to be in. Otherwise you would know that the Free Market System extends to revenue collection just the same as any other endeavor. Specifically, people like you who can’t accomplish the job will be replaced by those who can.

And your claim to be a reformer is as laughable as your excuses for not thinking reform will work. I’m sure you really are a professional because your crap foo is pretty slick, but I think that’s because you’re a lobbyist of some sort, not a tax professional.

————————–
Reformer said:
One last thing: it would be nice if the business world were this nice, neat little place where prices were determined by the adding up the cost of the product and adding a small margin. It doesn’t work that way. Prices are set at what the market will bear. Do you think the price of the IPhone was set at $599 because it cost $560 to build? Get real. Prices are not going to go down.
————————-
As to this little miracle of disingenuous tripe:
The Free Market System guarantees that prices will come down in a free market place because, as you point out, the price will be what the market will bear. But your inference that the market will bear a price which is inclusive of an offensive profit is ridiculous on the face of it. If we’re both selling widgets, and my price is lower, people will buy mine. If I can lower my price beneath yours and still make a profit, I will. Then you will do the same. We will go back and forth until one of us makes our product different than the other’s or until we are both at the lowest price we can reasonably sell for.

The fact that you keep trying to sell a rotten bill of goods about the Fairtax says everything anyone needs to know about your motivations.

———————————
As to your feeble attempt to once again obfuscate the inclusive/exclusive nature of describing a tax methodology:

I have laid out the difference between inclusive and exclusive very clearly in my initial post. The one thing I want to reiterate is that the Fairtax is quoted in exactly the same way as the income tax is quoted today to avoid exactly what you are trying to do; namely, say that they are measured differently. It is an untrue accusation, and they are quoted identically so as to be directly comparable.

The one thing this really points out, and which should come as no surprise to anybody, is that the income tax has been quoted this way from its inception for the express purpose of making it sound like less money being taken from your paycheck, when in fact it is the same amount no matter which method you use.

BTW, in either methodology, the Fairtax is designed to exactly match the amount that is being gathered by the federal government now, and that is as clear as it gets.

The one thing that is intolerable are the posts from people who have no understanding of economics and rely on opinions from economists who work for politicians.
Politicians prey on your feelings to convert you one way or the other. “Tax the rich more because they don’t pay their fare share.” Do you know the effect this would have on the economy? “Let’s have a high federal tax on cigarettes.” Do you know which income class this would affect the most? “The greedy oil corporations are making too much money off of the people and we need to take their profits.” Do you know the economic decisions that government made to enable the record breaking profits?
Stop letting the politicians play on your fears and feelings. Go buy a book on economics 101. Buy a book on micro and macro economics. Learn what the government is really saying to you. Then post your thoughts based on what you have learned not what the politicians are saying. You’ll also see how truly ridiculous some posts are on the fair tax subject.

Johns43:

It’s not that government is incompetent. If you study the literature you will find that the only thing preventing rampant evasion is the reporting structure in place on wages. Just think about the sales tax for minute. It’s entirely voluntary. There are more than 600,000 businesses in my state. With no third party verification in place to provide information on the amount of sales taxes collected, it is up to the individual companies to be honest about reporting what they have collected. You simply cannot hire enough people to individually police 600,000 businesses. In my region we have 6 criminal investigators to cover 250,000 businesses.

If you are a tax administrator, and you receive a sales tax return from business reporting $100,000 in sales for the month and $6,000 tax collected, and the return is accompanied by a check for $6,000. What is there that tells you this might not be correct? What if the amounts seem perfectly reasonable for a business in that industry and in that location? You have no way of knowing. I had a case in 2004 where a car dealer reported about $7 million dollars in sales and $250,000 plus in sales tax collected over a two-year period. It seemed reasonable based on other car dealers to the people in collections. They got a return every month with a check. What could be better? Turns out he had stolen $2.34 million. His sales were actually $48 million, not $7 million. Happens all the time. The release on the arrest is at

http://dor.myflorida.com/dor/news/news082404.html

I believe your ideology is getting in the way of common sense. Most people will see it for what it is, so I’m not going to worry about it anymore. I’ve done my part by providing the warning.

@Corey: I agree that it’s nonsense to say that prices will magically drop 23%. I don’t think it’s nonsense to say that, overall, it will all be a wash (because take-home incomes will be higher, prices for some things will go down, etc.). What it decidedly won’t be is a wash for every individual; some will be much better off, some will be much worse off.

And I for one am finding Reformer’s first-hand account of the difficulties of sales tax enforcement fascinating. Clearly it’s not a slam dunk that there’d be less evasion under a national sales tax than under the current system.

The level of arrogance is unbelievable. The consistent theme in these posts is that the working poor just will not control themselves and the federal government needs to step in and legislate behavior through our current tax code…..It is a fact that the rich will continue to spend (chip doesn’t care if he is spending $100,000 on his Porsche turbo or $123,000) For the folks that read these posts that are undecided about the FAIRTAX please don’t fall for the politics of envy. Ask yourself under which system am I better off the system that has confidence in me and my ability to be responsible and not spend beyond my means or the system that is going to punish me if I try to break into the next income level. I will concede that if you are the type of person who spends beyond your means then you maybe better off with the big brother system where daddy is going to cover for stupid financial decisions by taking from someone else. This does not take into consideration the complete level of incompetence (see post office/ airport TSA) of the federal government that has been given the responsibility to administer a system that would be difficult for a group of efficient employees to administer. No I am not rich I do live this joke of a tax system we have in place I bust my a** working overtime just to have that bump me into a bracket that gives this crew of clowns a bigger portion of MY labor. You would have to be a complete fool to be against the FAIRTAX.

To: Crust, January 4, 2008

“Are you sure about that? According to Bartlett, to get to the 30%/23% rate they count revenue from the government taxing itself on its own purchases, which is a rather transparent shell game. ”

We already have that “shell game”. Don’t forget that business passes on their corporate income taxes to the consumer. Last figures I saw was 22% to 25% of the price is someone elses tax passed on. So Gov’t already pays this “shell game” now. By tagging it on at the end sale we, remain revenue neutral.
Ashford Schwall

To the naysayers….Thanks for pointing out problems in the FairTax. Deficiencies need to be corrected.
But, the present system is so bad and wastes so much money and compliance time, we really need a completely new system. (and of course we need to stop foolish spending and unnecessary government agencies). So, if you don’t like the FairTax or the Flat Tax…..then lets hear some better plans.
At least there is now discussion about this!

To Andrew:
“in a hypothetical situation lets say you make $100,000 a year and since your rich you decide to save $40,000 of that and only spend $60,000. You would end up paying only $14,8000 in taxes. A mere 14.8 percent.

Now lets say you make $20,000 a year and since your poor you have to spend $20,000 of it to live, you end up paying $4,600.. what do you know its 23%.This is suppose to help the poor?

First of all when did $100 k become “rich”? Rich is those who don’t have to get up in the morning to pay their bills.
Any how, you left out something in your calculation. Remember only NEW items are taxed under the Fair Tax.
So lets compare the “rich” to the lower income.
Tax comparison for normal spending vs. high spending under the Fair Tax Act
Tax comparison for normal spending vs. high spending under the Fair Tax Act
Low used Grand Marqius 06 $16,499.00=$0.00 tax vs. “rich guy” NEW Lincoln navigator 08 $50,000.00 $11,500 tax
mcodnalds coffee.99 $0.99 $0.23 tax vs. rich guy starbucks coffe $4.00 $0.92 tax
hamburger $7.00 $1.61 tax vs. rich guy filet mignon $15.00 $3.45 tax
used laptop $70.00 $0 tax vs rich guy high end pc $1,800.00 $414.00
existing house $250,000.00 $0.00 tax vs. rich guy bigger NEW house $800,000.00 $184,000.00 tax
coach class to London $700.00 $161.00 tax vs, rich guy Biz class to London $5,000.00 $1,150.00 tax

Who Pays More Tax?
Ashford Schwall

After truly understanding the FAIRTAX:

The only people who hate it are the “income tax profiteers”.
Included are career politicians, lobbyists, tax lawyers, tax accountants, the non working rich, IRS agents, illegal aliens and rhe underground economy. Get ready for even more distortions and lies by those who profit from the income tax system.

You guys still have not addressed the enforcement issues, and probably never will. Fact is, I suspect you don’t want the law enforced.

I would much rather have an income tax with no deductions, a 5 to 8 percent rate, cut spending to the bone, and know that we’re at least going to collect the 5 to 8 percent. Ignoring the enforcement problems of a sales tax makes you guys lose all credibility. There’s nothing new about sales taxes, so there is plenty of compliance and enforcement data to study.

I am absolutely against leaving the income tax the way it is, but you people can’t see beyond your ideology long enough to address the real issues. You need to understand that until you come to grips with that, no one with any brains is going to take you seriously.

How about you idiots just wipe out the IRS and leave it with nothing.

Taxes are evil, period.

Shifting the buck does not cause you to pay less taxes.

And, knowing washington and congress, they will take the fairtax and screw it up further so that we will be in worse shape.

Lets start on the premise that taxes are a necessary evil with that in mind what is the best possible system I think we can all agree that our current system is not the best system it is in fact the worst system so would a system that does not allow the federal government conduct their social engineering experiments on us and continue to divide us by using the tactic that a working man needs to be more concerned about how much tax the rich guy pays rather then to be concerned that he/she becomes the rich guy. The best system that I have seen that allows the citizen control his/her own destiny is the FAIRTAX putting aside who pays more if we just examine under which system can we control our own destiny.

Johnny boy, you have to be concerned with not only controlling your own destiny, but with being able to actually collect whatever tax their is. We have to have military, police, fire, roads, etc. even if we can do without all the pork crap. We need a simple tax that can be collected that does not propogate fraud. That’s NOT the fair tax. Have you even read all the posts before?

Well, I’ve wasted enough time with this. Peace to you all and good luck.

@Justin,

Real costs of goods and services will go up. Overall, the base costs will not drop in proportion to the new sales tax–that means the amount of money paid in any transaction at tje consumer level will increase.

A national sales tax is bad for consumers and bad for the economy.

No matter how many times you repeat that the tax rate would be 30%, it will never be true. HR 25, the legislation in congress specifically says that the tax rate will be 23%. You will never see a product advertised for $77 and pay $100. You will see it advertised as $100, you will pay $100, and your reciept will say that you paid $23 of tax.

But that is such a minor issue. The Fair Tax is about simplifying paying tax for everyone, and treating everyone equally. Everyone pays no income tax, everyone gets the prebate, everyone pays the same rate.

All you need to sell this idea is think about your life under the Fair Tax. You will receive your entire paycheck, you will never have to file taxes or keep receipts, or give the govt your private financial information. You will not be taxed on savings or investments, or used items, even houses and cars. You will be able to CHOOSE to pay taxes, or express dissatisfaction with the govt by NOT buying stuff.

Wow. 111 comments and may of them quality comments. I especially recommend Reformer’s comments.

To correct something I said above a couple of times: As e.g. Justin noted above, to hypothetically offset a 30% sales tax (quoted the usual way not the FairTax way), prices would need to fall 23% (not 30%). Still highly implausible of course. (For anyone who doesn’t get it, the algebra is 1.3*(1-0.23) = 1 approximately.)

Corey, you stated “Real costs of goods and services will go up. Overall, the base costs will not drop in proportion to the new sales tax–that means the amount of money paid in any transaction a the consumer level will increase. A national sales tax is bad for consumers and bad for the economy.”

Somewhere, you have missed the big picture it. The FairTax will be very good for consumers and a boom to the economy. Quite often we fall down the rat hole of picking apart end prices without looking tat the dynamic affects to the economy. Look at all sides of the equation. I had trouble at first too. We have been stuck with the income tax so long it is hard to imagine anything else. See what the top economists say.
• $200-$500 billion in compliance costs saved
• 12 million illegal aliens and the underground market pay taxes
• 5.8b hours complying with the tax code saved.
• U.S. becomes the world’s largest tax haven.
• Protects the poor and beginning workers with the prebate
• Increased savings.
• Increased foreign cash investment.
• $11 trillion in “hidden” off shore dollars return to the U.S.
• Interest rates will drop 22-25%.
• Housing boom (because of above).
• Retail boom (because of above).
• Prices drop 12-25%.
• Economy will grow 10% in the first year.
• U.S. exports more competitive.
• More jobs and higher wages.
• Simplicity- simple sales tax, no filing.
• Visibility- tax paid is visible on sales receipt.
• Fairness- no loopholes.
• Keep your whole paycheck.

The Underground Economy under the FairTax

For those who don’t know about the FairTax, a little background:
The FairTax Plan is a comprehensive proposal that replaces all federal income and payroll taxes with an integrated approach including a progressive national retail sales tax on new items only, a rebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue replacement, and, through companion legislation, repeal of the 16th Amendment. This nonpartisan legislation (HR 25/S 25) abolishes all federal personal, gift, estate, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes and replaces them with one simple, visible, federal retail sales tax – collected by existing state sales tax authorities. The FairTax taxes us only on what we choose to spend, not on what we earn. It does not raise any more or less revenue; it is designed to be revenue neutral. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system. More details can be found at http://www.fairtax.org

Would the Underground Economy Be a Problem under the FairTax ?

The underground economy is everything from Wendy Waitress not reporting all of her tips to Mr. Cash Money, the drug dealer.

Let’s play a little game.
Let’s look at both under the income tax and under the FairTax.

We will start with a look into the life Mr. Cash Money under the income tax.
Mr. Cash Money sells “medicinal items” for cash on the street and takes a “commission” from working ladies.
He even provides a “protection service”!
Do we think Mr. Cash Money files a tax return every year? Any year?
Don’t hold your breath.

Poof, now we are in FairTax land.

Mr. Cash Money needs a new suit.
Nothing used for this guy! Bam, FairTax paid.
Mr. Cash Money needs some groceries, Bam, FairTax paid.
Mr. Cash Money needs to pay his rent, Bam, FairTax paid.
Mr. Cash Money needs to………..you get the picture, Bam, FairTax paid.
Do you think Mr. Cash Money will expose himself to the Gov’t by applying for the prebate?
Again, Don’t hold your breath.

Now let’s look at Wendy Waitress under the income tax.
She has been good and filed her taxes, just did not report all of her tips. A bad tax plan made a technical criminal out of a good person. She has worked hard but was never able to get ahead. Her overtime is even taxed at a higher rate.

Poof, now we are FairTax land.

Wendy applies for and gets the prebate. She now takes all her tips and put them into savings which are no longer taxed. Her overtime is not taxed. She is frugal and buys used items where possible which are not taxed. She takes a night course which is not taxed. She gets a better job which is not taxed. Now she is able to buy that new car, dress, shoes or whatever she has always wanted, and yes, it is taxed. But so what, thanks to the FairTax, Wendy has been able to get over that hump of sustenance to success.

So in the grand scheme of things…….. No, the Underground Economy would not be a problem.

Perhaps taxing “income tax” can not be more fair. Is taxing income the answer?

Where is “written” that income must be taxed to fund our collective gov’t needs? It has been that way since 1913. Prior to that, various excise taxes were used.
Why must we tax income? Some how point number two of the “Ten points of communism” found in the Communist Manifesto has become the norm. (see below)
Why would we want to?
What are we taxing when we tax income?
We tax work.
We tax prosperity.
We tax upward mobility.
We tax success.
Many economists believe that if you tax something more, you get less of it.
Do we really want less work, less prosperity, less upward mobility, less productivity and less success?

Ashford Schwall

The Fair Tax will limit big purchases. Exsample: I need in my small company to buy 4 new pick up trucks at $40,000.00 each with state sales tax rate at 7% or $2,800.00. Now we add the additional amount of 23% tax on that purchase of $9,200.00. Now you pay $2,800.00 state + Federal $9,200.00 = $12,000.00 added to each vehicle’s price. Now x by 4 vehicale’s = $48,000.00 in taxes. You will shut down the auto industry. Also, it will cut jobs.

If the design is for individual purchases this may work, but not for companies on large purchases it will not work. Second, what if I sell my house? You would have to re-address the hole tax code at a huge cost.

Ashford wrote:

Somewhere, you have missed the big picture it. The FairTax will be very good for consumers and a boom to the economy. Quite often we fall down the rat hole of picking apart end prices without looking tat the dynamic affects to the economy. Look at all sides of the equation. I had trouble at first too. We have been stuck with the income tax so long it is hard to imagine anything else. See what the top economists say.
• $200-$500 billion in compliance costs saved
• 12 million illegal aliens and the underground market pay taxes
• 5.8b hours complying with the tax code saved.
• U.S. becomes the world’s largest tax haven.
• Protects the poor and beginning workers with the prebate
• Increased savings.
• Increased foreign cash investment.
• $11 trillion in “hidden” off shore dollars return to the U.S.
• Interest rates will drop 22-25%. [Corey's Note: this is absurd on its face]
• Housing boom (because of above).
• Retail boom (because of above). [Corey's Note: Also absurd...see my arguments]
• Prices drop 12-25%. [Corey's Note: this is patently absurd based on my arguments]
• Economy will grow 10% in the first year.
• U.S. exports more competitive.
• More jobs and higher wages.
• Simplicity- simple sales tax, no filing.
• Visibility- tax paid is visible on sales receipt.
• Fairness- no loopholes.
• Keep your whole paycheck

Ashford, you’re the one missing the big picture–probably because you have no training in the actual cognitive processes that go into decision-making.

Lookit. The US economy is primarily driven by consumer spending. That means we need to understand how people will behave in order to predict the effect of a national sales tax.

People generally respond to stimuli that are most salient (i.e., at the forefront of their thoughts) in the environment. That means the “prebate” will not factor into purchasing behavior because prices at the register will be far more salient to consumers–the most obvious conclusion is that will drive down purchases.

Secondly, I’ve already addressed why prices will not go down and you’ve not given a counter argument to that. Prices at the register will rise and people will notice that (it’ll be hard not to). Spending will drop no matter regardless of a prebate (this will be especially true in the middle class who will not receive the prebate).

Reformer addresses the facetious of your reduction in compliance costs points.

One could also say that illegal aliens and underground markets already are indirected taxed. They have to buy things. They buy things from businesses-those businesses pay taxes on their income. Part of that income came from underground markets and illegal aliens. QED, those two are taxed (albeit not directly).

—————————
Reformer said;

You guys still have not addressed the enforcement issues, and probably never will. Fact is, I suspect you don’t want the law enforced.
—————————

That’s because the premise is laughable. You contend that the level of cheating is not only enormous, but not the fault of incompetence.

First, if someone’s job is specifically to catch people who are cheating, and still there is this enormous group whom they know about but can’t detect or control, that is the very definition of incompetent.

Second, you make an example of a guy who got away with cheating for millions of dollars but was finally caught. OK. How was he caught? Why can’t that process be repeated?

Nonsense.

It will, in fact, be much easier to enforce a simple sales tax when the army of tax agents now working for the IRS is repurposed to watching the demographics of a region instead of having to track down individual cheaters by taking their word as you describe. If you have a system which is focused on markets and regions rather than individuals, it will be very easy to notice when one business stands out from others. There would have to be very secret, very widespread collusion between thousands of people to skew statistical data state or region wide. Not possible.

So we’re back to your basic premise, that incompetence among state tax enforcement officials is rampant. As I said, when people such as you are suddenly exposed by a system which is suddenly paying attention nationwide, you will become competent, or you will become an accountant.

The other thing that will be “Salient” is they are being abused by their by the Tax code that is why the goverment made it convient for us by taking taxes right out of our paychecks (another one of those guys that is 1/2 as smart as he thinks he is)……..Jackass

Ashford- That really sums it up. The only argument against the FairTax on these posts is the politics of envy which I’m sure are not sincere if you could look at their back round you would find that they have some kind of connection to our bloated out of control tax system (CPA/IRS/Tax attorney etc). Or the ridicules post that changed direction and expressed concern with the FairTax not being able to be generate enough money or a system that will “propagate fraud” again our current system really does a great job keeping people honest……NOT see Ashford’s post. CPA/Tax Attorney may help you Propagate fraud (if you have the $$ to find the Loop holes another spin on politics of envy??) to feed the Federal government (the picture of efficacy right??) Both arguments are equally ridicules. FYI police and fire are local issues as are a big chunk of roads.

Ashford- That really sums it up. The only argument against the FairTax on these posts is the politics of envy which I’m sure are not sincere if you could look at their back round you would find that they have some kind of connection to our bloated out of control tax system (CPA/IRS/Tax attorney etc). Or the ridicules post that changed direction and expressed concern with the FairTax not being able to be generate enough money or a system that will “propagate fraud” again our current system really does a great job keeping people honest……NOT see Ashford’s post. CPA/Tax Attorney may help you Propagate fraud (if you have the $$ to find the Loop holes another spin on politics of envy??) to feed the Federal government (the picture of efficacy right??) Both arguments are equally ridicules. FYI police and fire are local issues as are a big chunk of roads.

Jay P wrote:
[blockquote]The other thing that will be “Salient” is they are being abused by their by the Tax code that is why the goverment made it convient for us by taking taxes right out of our paychecks (another one of those guys that is 1/2 as smart as he thinks he is)……..Jackass
[/blockquote]

Could you perhaps explain the point of your comments? For example, it appears you are engaging in a patently offensive ad hom against me at which I take great umbrage.

Johnny P wrote: [blockquote]The only argument against the FairTax on these posts is the politics of envy which I’m sure are not sincere if you could look at their back round you would find that they have some kind of connection to our bloated out of control tax system (CPA/IRS/Tax attorney etc). [/blockquote]

Ah…Johnny P meets logical fallacy…logical fallacy meet Johnny P.

You don’t address their points. Maybe they do have ulterior motives but that doesn’t invalidate their arguments. I could say your points are invalid because you didn’t use proper grammar or syntax.

Also…I’m an experimental social psychologist working in market and consumer research.

I come from a country with 20% VAT on all sales. I hope Americans will not be THAT stupid to support a VAT system. This is really an UNFAIR tax, people who called it “fair tax” obviously had a nice sense for black humor.
To me the whole idea is just another attempt to make the middle class pay for the lifestyle of the rich.
If you want America to become a third world country – go ahead and implement the VAT. Destroy your middle class completly.
Or simplify your current tax system – drop ALL deductions and make poor pay 0% tax, middle class 10%, the rich 20%.

Fairtax is not a VAT look it up………Please

For me, the fact that wealthy Texans conjured up the flat tax should be enough by itself to raise concerns for middle class America. The last time a wealthy Texan got to play with our national finances, he nearly doubled our deficit.

I will come out an say the sacriligous – wealthy people should pay more if you believe we are more than jungle animals. Compassion should be what separates us from bears and that ilk. And that compassion takes the place in some income redistribution. Not socilalism, but a simple understanding that we all are our brothers’ keeper.

Whats the point? It is absolutely absurd to believe that the wealthy will not benefit from a flat tax at the expense of the lower four quintiles.

All of the flat tax apologists, please quit directing to an internet website with an elaborate hypothesis and simply use some common sense. This is simply a way to reduce overall tax receipts and to increase the proportion of taxes on the less wealthy all while doing nothing to reduce expenses.

In other words a new wealthy Texan way to increase our deficit.

Thomas, under the Fair Tax, your business will pay no tax on the purchase of those vehicles. In addition, with the embeded taxes gone away, those vehicles will be cheaper. If your small biz goes to the local dealer, and the sticker price is $40,000, you pay $40,000. The dealer pays no tax on that sale. On the other hand, if you buy it for personal use, you pay $40,000, and the dealers send 23% to the govt. This means the dealer can lower the price for you to $30,800 and make the same profit. Of course he could keep it at 40k, but then you could go to his competitor who is charging less, and then he lowers his prices, etc until it stabilizes. Which is how prices fall, fyi. Furthermore, as you can imagine, the effect would be an increase in buying autos and more jobs.

All this complaining about rich people being able to save more money and not pay taxes could be a good thing. They could use that money to grow their businesses which in turn would hire more employees.
If I ever get to a point where I have that much income, I’d be really upset to have someone tell me that now I have to pay more in taxes. Where’s the incentive to strive for more pay, higher degree’s, etc???
I don’t understand the fact that people can argue for the fact that just because you worked hard your entire life and made something of yourself, that now all of a sudden you have the responsibility to help people who choose to sit around and wait for free hand-outs.
Another thing that really hasn’t been brought up on this discussion board is the fact that many other foreign businesses would come to the states because of the no corporate taxes imposed, along with many US companies coming back home instead of going to India/China.

Johns43:

You either haven’t really read a thing I’ve said or you just don’t understand. You say the IRS will be retasked to catch fraud? I thought the IRS was going away? Are you guys changing your mind now about that?

You said:

“It will, in fact, be much easier to enforce a simple sales tax when the army of tax agents now working for the IRS is repurposed to watching the demographics of a region instead of having to track down individual cheaters by taking their word as you describe.”

So you are keeping them around? Make up your minds please. My complaint is that you can’t enforce the sales tax without enforcement capabilities. The capabilities you guys say you’re going to COMPLETELY eliminate.

Further, you ignored the little fact I gave you that we have 6 criminal investigators to police more than 265,000 businesses in this region. We don’t HAVE an army to go after them with. We do watch demographics, and trends, and gather information from other agencies, and generally always look for ways to leverage the few people we have to do more. That’s why we are as successful as we are. Come down and spend a week with me on the job and I will show you the difficulties firsthand. If none of what I’ve told you makes any sense, then you guys obviously have not done your groundwork. You’re depending on theory alone and you’re going to be more than unpleasantly surprised when the realities hit you.

A few questions that haven’t been addressed. Under the Fair Tax, is there anything stopping someone who lives in Detroit from running across the border and buying goods and services in Canada. (Don’t bother with the “we’ll just search your vehicle” argument. Trust me: you can smuggle just about anything across the border) Also, couldn’t I just jump on line and buy stuff from someone living in Canada? It just seems to me that it’s a great way to buy many products and the shipping and handling charges would be no where near the 23-30% extra cost of buying it in America.
Has anyone done a comparison between the income the country earned through all taxes in 2006, and then calculating what that figure would be if the Fair Tax had been implemented during that year? Simply put, with our current spending habits in this country, we cannot afford to have less income. The national debt is approaching 9 trillion dollars. Would the Fair Tax decrease, increase or keep this figure the same? Before you start in with the tired “we have to slash government spending!” tirade; Drop it. We’re fighting the endless war on terrorism that is chewing up hundreds of billions of dollars each year; and there’s no end in sight. Unless you can show me with real statistics that the Fair Tax will generate more guaranteed revenue for the country, your arguments will have a problem.
Finally, say someone is earning about $23,000 a year and is renting an apartment for $500.00 a month. Would that rent increase to $615.00 under a 23% Fair Tax code? If that is the case, then the question is, are all of there taxes that would be eliminated on the renter(payroll, Social Security, etc) more or less than $115.00? (I don’t know what percentages are taken out for each tax. Hopefully someone has those figures) If it’s more, than the Fair Tax has a shot with me, if it is less than $115.00, then the Fair Tax is truly the shell game for the rich to pay less taxes that many people who have posted here believe it is.

TO Anonymous: “Fair”Tax or VAT – if they tax the consumption and not the income – it’s unfair and dangerous. This leads to corruption and anarchy. Are you so stupid and arrogant you can’t get that?

I thought I had logged onto a site that was intelligently discussing the value of the FairTax. I am now thinking I clicked on a link to the Bruce Bartlett Fan Club. Justin Fox has done a pretty dang good job on this one. Thanks Justin

Jon wrote: “Of course he could keep it at 40k, but then you could go to his competitor who is charging less, and then he lowers his prices, etc until it stabilizes.”

That only happens in the wet dreams of the free marketers. In reality, business effectively collude in keeping prices that same without actually colluding. Witness the prices for gas–within local areas the prices are amazingly similar being off by merely pennies. Granted gas is a commodity, but the prices are all similar.

I took a look at the Fairtax.org website.

I am a bit perplexed as to how most everyone ends up paying less in taxes under this plan, yet it also revenue neutral.

Assuming that taxes=revenue, if everyone pays less taxas, doesn’t the revenue go down?

Calling a consumption tax a “fair” tax is disingeneous at best, but more likely it is simply dishonest. More on this in a moment.

Before spending some time trashing the idea of a consumption tax, I thought it might be better to first point out how utterly badly your country has managed its government finances in recent years and how completely inane the discourse about such an important topic has sunk to in your mainstream media. Your country and your people are deeply in debt and going the wrong way in this regard and yet the only thing any politician dares to do in the US is clamour for further tax cuts and thus larger deficits. Hasn’t your dollar fallen enough in the last year or two or would you rather see it on par with the peso? Don’t you people get it? Sooner or later you will have to behave in a fiscally responsible fashion and the sooner you wake up the better.

Now back to consumption taxes. Apart from a head tax (tried by Thatcher in the UK and look what happened to her shortly afterwards!) there is no more socially regressive tax then a consumption tax. Any economist who is not a liar (unfortunately there’s lots of those) can confirm this. A second undesireable quality of consumption taxes (particularly the value-added variety) is that they are comparatively expensive to comply with – dozens to hundreds of tax transactions can be related to the sale of something as simple as a single tube of toothpaste. This might be why the accounting industry is thrilled about consumption taxation – it is a field day for their business. Finally, comsumption taxes are much more prone to fraud and evasion, in no small part due to their complexity. We have learned about this in Canada the hard way.

The only rational basis for taxation is the ability to pay. Any other formulation is pure politics and can be counted on to rob Peter (the poor) to pay Paul (the wealthy).

Taxes are already fair. Why are people trying to change the system? Those who feel that the current system is wrong feel that any tax is wrong. These people should not be listened to. Leave taxes the way they are and go on with life.

The key is that “everyone” will NOT be paying less taxes. Right now Corporations, Organized Crime, Workers being paid Cash Under the Table, Prostitutes, Illegal Immigrants etc all currently either pay a much lower tax proportionate to their income/revenues or they pay no income tax, or are under paying their taxes by not reporting income.

Now “everyone” currently paying into the tax system would see some tax relief under the Fair Tax BUT those mentioned above would now start paying taxes on anything they purchased. This is estimated at approx $400 Billion in “lost” revenue that would now be regained by the Fair Tax.

n a hypothetical situation lets say you make $100,000 a year and since your rich you decide to save $40,000 of that and only spend $60,000. You would end up paying only $14,800 in taxes. A mere 14.8 percent.

Yes but from studies that have been done,a person spends almost all of their money over the course of their lifetime.So if you look at it over a span of a lifetime,that person that only spends 14,000 in that year,or 14.8% will end up paying paying their paying their fair share.It’s kinda like deferring paying now with retirement plans,you will pay one way or ther other..now or later.

I look at other countries that have very similar plans to this “Fairtax” and they have been pretty successful with it.If something has been done numerous times and fairly successful,then I certainly think why not at least give it try.

What certainly helps is that americans love to spend,they are rapid consumers,I honestly don’t think it will change people,You are what you are.

Even if in the long run,if it doesn’t save me any more on taxes I pay than current system,the idea of the simplicity of it,just to me reaps huge benefits.The idea of no hours spent doing IRS forms,or new complex tax rules to read,or dealing with filing taxes.

tax saving maybe the same who knows….
but countless hours and headaches saved in terms of taxes forms and filing etc..to me might well be worth it.

Scott, could you enlighten us which countries you have in mind?
I used to live in a country where the biggest chunk of revenue was comming from VAT and this country is nearly destroyed in social aspect now.
I find the current American tax system MUCH more fair. What is needed here is just simplification of the system and closing of the loopholes that are used by the rich people for tax evasion.

Corey, thanks for responding….. agian look at the big picture..”Secondly, I’ve already addressed why prices will not go down and you’ve not given a counter argument to that.”

I am glad to help you understand.

How prices and foreign competition are affected by the FairTax

A simplified example

We are off to the shoe store to buy a new pair of all purpose hunting /hiking /work boots. The store has many styles and the one we like is made by AmeriBoot model Brown 3 and sells for $100.00. Next to it is a “knock-off” version from ChinaBoot model BRIII at $77.00

Our desire and sense of duty says “buy American made!”…but our wallet says “save money, by the China-Boot”.
Now let’s put in some numbers here. ChinaBoot sells 10,000 pairs a year of BRIII and AmeriBoot sells 2,000 pairs of Brown 3. AmeriBoot has enough brand loyalty to overcome the higher price.
Under our current tax system, the income tax, American products have somewhere between 20 to 30 % of their product price as embedded corporate taxes and compliance costs. Foreign products do not. 23% is the working average (see:Taxing Sales under the FairTax – What Rate Works? footnote below)

Now we leave Income Tax land and step into FairTax land.

Remember, under the FairTax plan H.R. 25, we remove all income taxes and compliance costs (23% inclusive) from the production side and add it back to the consumption side of the equation (30% exclusive)
The income tax equation is income- taxes-compliance dollars = spending
The Fair Tax equation is income = spending + taxes+ compliance dollars, so here we are taxed as we spend and keep the compliance costs

AmeriBoot can now remove 23% from its price structure ($100-23) and are now able to bring its product to retail at $77.00 ChinaBoot never had that 23% in their price so they can’t do anything. So now AmeriBoot is the same price as ChinaBoot. ($77.00 + the 30% exclusive tax), both are now $100.00

What do you think Americans will do now?
You guessed it, switch to AmeriBoot. In fact let’s say AmeriBoot takes half of ChinaBoot’s market share.
Sales now: AmeriBoot 7000 vs. China boot 5000. AmeriBoot has so much new business, it has to expand the factory (capital outlay) and /or add another shift ( labor outlay).
Great for everyone but ChinaBoot !

Wait, wait, wait, No way, some say! Those fat-cat American corporate executives won’t drop the price. They will just keep the same price and take the savings in profits and higher bonuses. Believe it not, that is what many of the FairTax nay-sayers cry. They don’t understand the invisible hand of market forces.

So let’s play devil’s advocate and pretend that is true.
AmeriBoot decides it will keep the removed 23% cost and apply it to profits. They are sure that brand loyalty will keep their sales constant. So now we add the 30% FairTax exclusive rate to AmeriBoots’s $100 price and to ChinaBoot’s $77 price and now we have $130 vs. $100.
Still a $30 spread and both prices are higher. Consumers are now faced with higher prices and the ChinaBoot is still cheaper.
AmeriBoot is wrong. Since both prices are now higher, AmeriBoot ends up losing half its market share to ChinaBoot. Sales now: AmeriBoot 1,000 pairs, ChinaBoot 11,000.
AmeriBoot is now faced with lower sales and has to shut down a machine or layoff workers. Not good.

There is hope. This scenario can only last for a while until market forces step in.
This is a dynamic economy. Remember that 23% comes off of all industries, including banks. There are now banks willing to loan money at lower costs now.
A handful of folks come together with a business plan and a loan. Perhaps even ex-employees of AmeriBoot. They start a company called TexasBoot and come up with their own version Brown3 called Rocky8. They can bring their product to market at $77 and promote the American made label.
That makes 3 brands on the shelf with an end retail price and tax of, AB at $130, CB at $100 and TB at $100
TexasBoot sales soar. They take half of the market share from each AmeriBoot and ChinaBoot.
Sales now TexasBoot 6000, ChinaBoot 5500 and AmeriBoot now at 500.

TexasBoot, being new, was able to invest in newer and more efficient machinery than AmeriBoot ever had. They even hire away some of AmeriBoot’s workers. The new plant and equipment is so efficient that they can now bring their boot to market for $60.00!
Wow, now we have a no brainer!
TexasBoot at $60 x 1.30 = $78.00
ChinaBoot at $77 x1.30 = $100.00
AmeriBoot at $100.00 x 1.30 = $130.00
What do you think will happen to market share now? Your guess is as good as mine but I guarantee you it won’t be good for ChinaBoot and AmeriBoot.

The above is an example with just two original competitors. Think how quickly prices will change with multiple competitors.
Ashford Schwall

Yadgyu said” Taxes are already fair. Why are people trying to change the system? Those who feel that the current system is wrong feel that any tax is wrong.”
Yadgyu, do you really think it is “fair” to hold workers back from becoming wealthy? Is it Fair to tax overtime a higher rate? I s it fair to tax a second job at a higher rate? Is it fair to punish work? Think about it.
• WHY DO WE PENALIZE LABOR AND PRODUCTION WITH THE INCOME TAX?
• WHY DO WE PENALIZE WORKING AMERICANS FOR WORKING?
• WHY DO WE PENALIZE WORKING AMERICANS BY TAXING OVERTIME?
• WHY DO WE PENALIZE WORKING AMERICANS BY TAXING SAVINGS?
• WHY DO WE PENALIZE WORKING AMERICANS BY TAXING SAVINGS?
• WHY DO WE PENALIZE WORKING AMERICANS FOR BUILDING WEALTH?
• WHY DO WE PENALIZE WORKING AMERICANS BY PASSING ON BIZ TAXES AND COMPLIANCE COSTS EMBEDED IN THE PRICE OF A PRODUCT?
• WHY CAN’T WE SET WORKING AMERICANS FREE BY PASSING THE FAIR TAX ACT?
• WHY CAN’T WE SET WORKING AMERICANS FREE BY PASSING THE FAIR TAX ACT?
Ashford Schwall

1. The taxpaying base on consumption is far larger than the base on earnings (illegal immigrants, the underground economy). Most people will pay less because so many more people will be paying into the system.

2. The prebate eliminates all federal taxes on those below the poverty line and a diminishing amount of taxes the further one is from poverty. Some tax burden calculations, above, fail to account for the positive effects of the prebate on middle class tax burdens.

3. Wealth creation at all income levels is no longer taxed under this proposal.

4. Existing wealth is taxed when spent.

5. The income tax has 67,500 pages of regulations.

6. The FICA tax is highly regressive and works against upward mobility. Low and moderate income Americans pay far more in FICA taxes than income taxes.

7. By eliminating corporate taxes and capital gains taxes the United States becomes the most attractive investment location in the world. Jobs start coming here instead of the opposite.

8. Income tax defenders–like Bruce Bartlett–will say anything to derail a tax system that does not allow lobbyists (53% of all lobby dollar last year were spent on the tax code).

9. The annual compliance costs for the income tax system is $265 billion.

10. The federal government comes up $350 billion short annually (want to talk about evasion?) right now under the income tax system.

11. Even if not perfect the FairTax is 100 times better than the power and profit-driven income tax system.

12. The Flat Tax keeps the lobbyists.

13. The President’s Tax Panel scored a flawed consumption tax they created internally (with exemptions and a continued role for lobbyists) and said they scored the FairTax (a lie).

14. Skeptics who say it can’t be done have a point. It won’t get done unless there is another tax revolution that drowns out the voices of the vested self-interests–you know, like the Royalists were at the beginning of the nation.

15. The FairTax shifts the power over taxes from the federal government to indivduals; takes the tax code out of business decisions and politics out of the tax code.

It’s worth trying–and I have not heard Crusty or the other tax lobbyist friends of Bruce Bartlett suggest something better. They like things just as they are. Bratlett was quoted as saying the tax code just needs a little “tweaking”. Yeah right.

Anonymous said “Assuming that taxes=revenue, if everyone pays less taxas, doesn’t the revenue go down?”

One would think so but the FairTax increases the tax base by over 15 million taxpayers and saves wasted costs of compliance with the old tax code. Further, the dynamic revenue feedback increases from a booming economy.

I have managed to go through all of these posts – there is quite of bit of information available. Johns43 had the best description of the advantages of the Fair Tax while Reformer makes some good points about compliance enforcement. I would only ask Reformer, “Why do we need to have compliance enforcement?”

When the income tax was originally introduced, virtually all American citizens felt it was fair and did not cheat on their tax payments. Now we have a Federal government (not even including the state & local governments) that comprises – depending on whose figures you want to use – anywhere from 25% to 40% of the Gross Domestic Product (GDP) of this country, currently at over $2 trillion dollars.

This is what is unfair and this is why compliance enforcement is necessary. IF and I realize this is a BIG IF, the Federal government was reduced in size to say 10% of the GDP, most honest Americans (and I believe that most Americans are honest) would be willing to pay a fair amount, say 10% of their income or their consumption either one without trying to cheat. However, when we look at the corruption in our government and our politicians (from all parties), we have no motivation to be honest, especially when OUR MONEY is being wasted. Notice, I said OUR MONEY – it is not the government’s money, it is OUR MONEY for which we have worked hard.

It is also patently absurd to be punished for succeeding which is what our current tax system does – the more you make, the more you pay using the progressive tax system. The Fair Tax addresses this and encourages individuals to improve their lot by saving instead of consuming.

The Fair Tax also makes it very clear just how much money, the government is taking instead of hiding it as “withholding taxes”. This was a clever mechanism created by the government to “obfuscate” just how much they would take. It was proclaimed as easy on the taxpayer because it would be done before they received their money – but it’s real purpose was to allow virtually unlimited growth by the Federal government (and subsequently state and local governments) without the taxpayer really being aware of how much they were paying.

In summary, our tax system and government spending is way out of hand. If the Fair Tax helps to reign in the out of control spending that we currently have by bringing this issue to light, then it IS the RIGHT THING TO DO.

I’m not an economist or tax professional, so don’t bother telling me how uninformed I am. I am an engineer, though, and I’m absolutely fascinated by macro econ. It was certainly my favorite non-major class I took in college. So that’s my background. Oh yeah, and I’ll take a tax-and-spend democrat over a borrow-and-spend republican any day. I also seem to remember a simple experiment we tried in high school (over a decade ago, so I don’t remember the details), showing US states that used sales tax had higher revenue per capita than income tax states, because people spend more. Our govt is almost broke, and I’m all about paying down deficits, so I like this idea, but I’ll address some of my other thoughts below, good and bad.

That being said, I like the idea of the national sales tax because of its simplicity. Reformer makes me wonder about improving collection and preventing fraudulent reportings. Is it possible? Is there a quick fix? A technological fix perhaps? That’s worth pondering. Another thing I wonder about is how hard it would be to create fraudulent pre-bates. Maybe difficult, but we have people who do this stuff as a profession, so maybe we’ll need national ID’s (like SS#’s), and a lot of privacy advocates won’t go for that. I don’t have as much of a problem, though. I haven’t seen it consistently reported if services are taxed? Like my cobbler or dry-cleaners?

The idea of used items being tax-free is interesting. That would be a huge benefit to the services industries to refurbish perfectly good goods, instead of throwing them away and buying new cheap crap from China-Mart. So that side makes me think we’d slow consumption. Which I’m okay with. I don’t know how much longer borrow-and-spenders think we can keep juicing the economy for double digit gains, but sooner or later, we’re going to have to even out our business cycle, or else our current president will leave the next one in a big recession when we run out of juice (see it coming over the hill?). Back to slowing consumption: of course, with more money in pocket, I think people might initially spend more, which would… JUICE the economy up. It might take a little while to slow back down after people realize how much they spend, but the initial spending worries me with higher potential inflation.

My personal thoughts on how to clarify/improve this “Fair Tax” are as follows:
- stocks, bonds, securities are taxed at purchase (because it’s a good, it just happens to grow in value)
- luxury rate for expensive goods (i don’t like the idea of the uber-rich with a lot more spending power [arguable whether they have it now and use it], plus everyone else spending more, and creating higher inflation. that scares me a lot). maybe 20% sales tax on necessities, 30% sales tax on every thing else, and 40% sales tax on luxury items (ie: cars 50% higher than average cost). and from a gut feeling, if you got rich off the system, and you can afford way nice things, you can also put back into the system to help someone else get there too, it doesn’t hurt you as much. but that feel-good reason pales in comparison to my inflation-reasoning.
- death/estate taxed at appropriate rate, like any other transaction in this system (isn’t that why it’s fair?) I realize “this” version is only on new goods, but maybe we should consider a smaller % that applies to EVERY transaction? If you didn’t get rich from the system we have in place, then do you really deserve what you didn’t work for, Paris Hilton? I know I know, gramps is giving 97% away to charity, so she’ll eventually have to get a real job, maybe.

** I DO NOT like the idea of our spend-thrift society spending all this “new” money in consumption, and banks/lenders reaping the benefits of the new government program. Basically people would be taking out a loan (credit cards) to pay their taxes. That’s not right, I just have a moral problem with that. Now, if taxes had to be paid in cash, like lotto tickets, I could deal with that, but just charging up a new 30% national sales tax plus my already local 10% sales tax, that’s a government wind-fall for banks like they’ve never seen before, several times more beneficial to them than to other individuals and businesses. Sure, we all come out better, but BANKS come out WAYYYY better. Like I said, I have a moral problem with putting our national revenue into loans held by banks, which the citizens continue to pay annually, year after year that they don’t pay off their balance. Then, they will have effectively paid their taxes 7 times over. That’s just not right. Some people are too stupid to know better, but that doesn’t mean we let big business get away with taking advantage of them.

———————————–
Johns43:

You either haven’t really read a thing I’ve said or you just don’t understand.
———————————–
Wrong on both counts. I’ve read everything, including the part where you said you’d wasted enough time on this and were outta here. Welcome back.

———————————–
You say the IRS will be retasked to catch fraud?
I thought the IRS was going away?
———————————–
Do you think they’re all going to go pump gas? Of course the talents of trained people will be put to use. They may be assigned to the new oversight agency or they may find jobs with the states, who will, for the most part, the ones collecting and remitting the new tax.
Are you guys changing your mind now about that?
———————————–

You said:

“It will, in fact, be much easier to enforce a simple sales tax when the army of tax agents now working for the IRS is repurposed to watching the demographics of a region instead of having to track down individual cheaters by taking their word as you describe.”

So you are keeping them around?
———————————–
Same answer.

———————————–
Make up your minds please.
———————————–
So now you think I speak for all Fairtax proponents? You may be one of the crowd trying to undermine good and legitimate tax reform, but I am not part of any movement. I’m just an informed consumer who doesn’t like to see people like you confuse those who would most be helped by this.

———————————–
My complaint is that you can’t enforce the sales tax without enforcement capabilities. The capabilities you guys say you’re going to COMPLETELY eliminate.
———————————–
OK, I’ll pass on the “you guys”, but nobody is saying there will be no enforcement, just that the IRS structures will be removed. There will of course have to be “competent” officials overseeing the collection and remitting of taxes.

———————————–
Further, you ignored the little fact I gave you that we have 6 criminal investigators to police more than 265,000 businesses in this region. We don’t HAVE an army to go after them with. We do watch demographics, and trends, and gather information from other agencies, and generally always look for ways to leverage the few people we have to do more. That’s why we are as successful as we are.
———————————–
According to you. you’re not only unsuccessful, but completely swamped. Incompetence, either in your office or in the office of those who supervise you and your activities; probably both.

———————————–
Come down and spend a week with me on the job and I will show you the difficulties firsthand. If none of what I’ve told you makes any sense, then you guys obviously have not done your groundwork. You’re depending on theory alone and you’re going to be more than unpleasantly surprised when the realities hit you.
———————————–
There’s that “you guys” thing again. Why would I want to come down and spend a week learning how to make excuses. Actually, if you’d like to leave your real name and office location, I’ll be glad to contact those who are supposed to be supervising you and ask them to look into your “problems and difficulties”.

“Yadgyu, do you really think it is “fair” to hold workers back from becoming wealthy? Is it fair to tax overtime a higher rate? Is it fair to tax a second job at a higher rate? Is it fair to punish work? Think about it.” – Posted by Ashford Schwall

Yes, it is fair. Workers will never get wealthy. Even if workers paid no taxes, they would never get wealthy because they work for a living. People that become rich (without inheritance or lotto winnings) get there by investing money and making good returns. Workers would not invest more money if they were not taxed. They would consume more non-essential goods. Workers only know how to work to get money.

One can never become rich simply by just working and earning a higher income. One has to learn how to invest and be disciplined about investing. Most workers feel that since they are not rich, why waste money buying stocks? Most workers feel that it akes too much time and too much effort to get rich so why not just spend money now and have fun?

The investors and owners control the capital. The workers provide the work and the majority of their work is used to generate capital for investors and owners. The worker will always be inferior to the investors and owners.

Every one of you who thinks the current tax system is bad, but also thinks the FairTax is bad, where is your better idea? Where is your grass-roots support? Where is your research and documentation? If there is a better idea, why isn’t someone promoting it, instead of barking like a dog in the manger?

Ashford wrote: “Under our current tax system, the income tax, American products have somewhere between 20 to 30 % of their product price as embedded corporate taxes and compliance costs.”

*giggle*

That’s so untrue that I can’t help but laugh. Having working for a manufacturing company I can tell you that that is totally not that case. Being a market researcher I can also tell you that is not how prices are determined (look up Van Westendorf). Being a businessman, I can tell you taxes aren’t a concern-only what the market will bear.

Ashford wrote: “Wait, wait, wait, No way, some say! Those fat-cat American corporate executives won’t drop the price. They will just keep the same price and take the savings in profits and higher bonuses. Believe it not, that is what many of the FairTax nay-sayers cry. They don’t understand the invisible hand of market forces.”

Oh…you’re one of those. Hey guess what. There’s no such animal as a free market. All markets have costs and Adam Smith invisible hand is more like a fist. Costs will not drop to compensate for taxes–I can 100% guarantee it. That’s not how businesses work.

1) Manufacturing costs-what you have to pay the worker and for parts and materials plus maintenance.

There’s no taxes in there. That’s where cost of production comes from. That’s it. Then there’s what you can charge in the market.

-Corey…too tired to keep going

Responding to a portion of James’ post: there should be no tax on savings or investment, only on consumption. The tax should actually be a VAT, i.e, a tax on the increase in basis. For instance, when a house is resold, there should be a tax on the gain in basis after correcting for inflation. New homes would be taxed on the sales price minus the cost of materials, which would be then a tax on labor and profits.

James

Taxing “necessities” at a lower rate will have lobbyists plying their trade to get their “necessity” added to the official list. Everything needs to be at the same rate.

Why tax bonds, stocks, securities? Why not tax the money when it’s spent years later? Is taking 30% of your investment away up front helping anyone besides politicians?

Why is it your business or the gov’ts what someone does with their money at death? Tax it when Paris spends it. People getting rich on the system are cheats and pols and welfare queens. Businessmen who work harder than 98% of the population to get rich aren’t what I’d call “getting rich from the system”. Few things sicken me more than class envy. It’s none of your business what others do with their money or to whom they bequeath it.

I say eliminate the “pre-bate” altogether. That will eliminate the fraud problem and save more money. Why should anybody get to use the benefits of our tax dollars while not contributing ANYTHING? The sob story is that they can’t afford it (in your opinion). Well in my opinion they can afford it.

Why should ANYONE (the rich) pay more than anyone else to the gov’t? Each person (adult) should get a yearly bill for an equal amount for living in the United States. That is the fairest way there is. Everyone is benefitting from the military, the roads, etc. EVERYONE SHOULD CONTRIBUTE.

Corey,

What about corportate taxes? What about payroll taxes the company pays on the workers’ behalf? These taxes (and whatever others I’m missing) would drop from your manufacturing costs.

Your lack of intelligence/understanding coupled with your “knowledge” indicate you probably aren’t very good at business. Mix in a little thinking man.

OK cory, giggle away, gosh you got me,,,,,,,,

Seems you know more than Dr. Dale Jorgenson, chairman of the Economics Department at Harvard University.

Q: How are people going to afford products that cost 23% more?

A: Today, federal taxes and compliance costs are hidden in the prices of everything we buy–from clothing to healthcare. The FairTax eliminates all these hidden taxes and cuts tax compliance costs by roughly 90%. When those hidden costs are eliminated, the retail price consequences of a 23% federal sales tax are greatly reduced. Americans will pay about the same price for many goods and services as they do today, even when you include the sales tax. Dr. Dale Jorgenson, chairman of the Economics Department at Harvard University, projects a wholesale price reduction of 20 to 30 percent, depending on the product or service, after adoption of the FairTax. Today, a middle class worker must earn $155 to have enough left over after taxes to buy $100 worth of goods. And don’t forget that you’d have 100% of your paycheck or pension in your pocket-plus a monthly tax rebate.

This isn’t rocket science. If there is no change in federal spending or the amount of money collected, all the fair tax does is shift the pockets that the tax is coming out of. Do you really believe the Pubicans purpose is to shift more tax from the poor to the rich? One other thought. The fair tax removes tax from the cost of production. This means that our exports will have no imbedded tax. Possibly a better competitive answer but who makes up the US tax that the rest of the world has been funding these last 100+ years. Or is this another supply side fantasy that if we reduce tax to zero we will collect more in the long run.

Johns43:

I didn’t say we were having trouble with the sales tax. Our return on investigation cost is more than $300 to $1. Catching tax cheats is like shooting fish in a barrel. The problem is that we need more people shooting at those fish. That is my point. I keep hearing there will be no IRS and have heard nothing about any other enforcement function with the “fair tax.” That has been my complaint all along. Your statement is the first I have heard acknowledging any enforcement structure whatsoever. I know that fraud is rampant with sales taxes and that with no enforcement structure, it will not be controlled. You cannot just assume that everyone will be honest and we’ll all live happily ever after. Is there anybody here who would buy that argument? If it is not true that there would be NO enforcement effort, it should be stated up front. That is a very important point. Stop trumpeting getting rid of the IRS to gain emotional brownie points and state instead how enforcement would be changed for the better.

As far as my job is concerned, I’m not worried about it. I left the private sector after 23 years as a business and systems consultant to complete my career in public service. I took a salary that was about 1/3 my private sector salary to obtain firsthand governmental experience to validate the PhD I have been working toward and will have after I complete the dissertation I’m working on now. If I did not actually care about this country, my state and my community, I could just go back to the private sector and make more money. You should not judge and cast aspersions on people when you don’t know their situation. I think you will find the state wants to keep me as long as they can. All I hear is arrogance and a complete unwillingness to address legitimate concerns regarding enforcement in a straightforward manner. Look how long it has taken one of you to admit there will be some enforcement structure in place. You could have done that in the beginning and I really wouldn’t have had anything to say.

Reformer,

I am for getting rid of the income tax and NOT replacing it. Cut gov’t spending to what’s mandated in the Constitution. Then you won’t have any evasion issues.

If there’s a will there’s a way. There just isn’t sufficient will to stop the cheating. Life in prison or the death penalty for the business owner if his business is caught evading taxes. That will get their attention and cut down on cheaters…even if most find it over the top…in fact precisely BECAUSE it is severe.

Vulturegoblin:

You are right that there isn’t sufficient will. Politicians want to get the proceeds of taxation but they do not want to alienate taxpayers (at least those that might be important to their careers) by actually making sure they pay the tax. Perhaps if we got rid of all special interest money at the same time, things might fall into place.

People need to realize – used goods are not taxed at all under FairTax. Poor people have the opportunity to avoid paying the tax by purchasing second-hand goods. This will encourage recycling of more products, rather than throwing them away as we do now. Older homes also are not federally taxed.

There is an obsession with wealth in this country. Really, what business is it of yours or anyone else how much money somebody earns and decides to keep? For some reason, it has become everyone’s job to bash and financially punish the “super-rich”.

Wealthy people will not stop buying because of FairTax. If they wish to save more money, that’s fine too. This is America, isn’t it. Most likely they will reinvest that money into a system they believe in, to create more tax-free income and new jobs for others.

The current tax code is warped with lobbyist meddling, corporate wellfare, and political favors. The AMT is hitting ever lower income groups, and Congress is unwilling to update this cash cow. The consumption tax is the fairest alternative to the current mess we are in.

You can bet that every major corporation is now looking at how FairTax will affect their bottom line, and then we will see where their PAC dollars go.

It’s not surprising that people are looking for a new tax system given that our current so-called progressive tax system trickles our income up from the middle, upper middle, and lower classes to the upper class (8 million per year plus), thanks to a quarter century of tax cuts…which is why income inequality is at its greatest level since 1928. Yes, our progressive tax system is broken. But “FairTax” is the twisted sister of “Clear Skies” and “Healthy Forests” from Bush and company. FairTax is the opposite of the truth. Must we live in Bizarro World where everything is opposite? More of us need to know better. FairTax is not fair; and what is needed is a progressive tax where the rich pay their own way (who should also not be allowed to use foreign mailboxes to avoid US taxes among many other tricks.) One solution is that if we used public campaign financing for our elections, then those with large fortunes (corporations) could not so heavily finance those that get elected and therefore, the laws that get passed. Did you know that Greece flourished after dumping their flat tax and going with a progressive tax system based on one’s ability to pay? We need a progressive tax system where the rich actually pay.

Vulturegoblin:

Why so pessimistic? Is it so hard to see what necessities are? We can’t, as a nation, agree to draw the line somewhere? Food, shelter, water. Maybe healthcare, but that depends on how we proceed with that topic anyway.

“Why tax bonds, stocks, securities?”
Because, what I’m reading by proponents is that we should tax all transactions, except those that usually occur with the rich, securities and inheritance. That’s not fair, that’s “lobbyists” already carving out their part. If we are willing to tax a home/investment, why aren’t we willing to tax a security/investment? There’s a double standard. What taxing securities would do, is make sure people hold on to them longer, which would slow down day-trading, and create a more stable market. If we want to be fair, let’s be fair.

“Is taking 30% of your investment away up front helping anyone besides politicians?”
You sound like a cynical borrow-and-spend republican. It doesn’t help politicians if we cut spending and pay off our DEBT. And we stop cutting away at the value of the Dollar. I am NOT a weak-dollar proponent.

“Why is it your business or the gov’ts what someone does with their money at death?”
Because it’s a transaction, and we’re taxing those things, either simply, or through VAT’s, or however we decide. And do you think the Vanderbilts are still rich because they SPENT all that money from a century ago? No, they saved it, and it doesn’t get spent. It moves around in investments, which according to you, shouldn’t be taxed either. So you just created a huge non-taxed loophole. Fair or just “fair to workers.” I stated I like the idea of the national sales tax, and these were my issues with it, the descrepancies I saw.

“Businessmen who work harder than 98% of the population to get rich aren’t what I’d call “getting rich from the system”.”
Businessmen who have no real skill other than striking lucrative deals and creating middle-men to get a little money for themselves work harder than 98% of the population? Don’t give me that BS. I’m an engineer, I actually work FOR someone, and I have a skill. Businessmen aren’t the innovators who work hard (minus Google), the people they employ are. Businessmen have enough money already socked away to take advantage of someone else who doesn’t know how to start/run a business, and thus, take a cut from their proceeds. My new job pays me quite well, but my employer get a fat-cut of everything I earn. He doesn’t do his work, PLUS MINE. He does his, and acts as a middleman to the contract and me. I’m fine with that, but let’s call it what it is, he’s not working four-times as hard, he has four employees.

“Few things sicken me more than class envy.”
You imply I have class envy? I make good money, I am an entrepreneur on the side, and I have rental income. I don’t have class envy, but I’m also not afraid to pay my taxes or pay off our current government’s debts. That’s something the no-tax crowd could care less about. It’s not just about what the govt can do for you, it has to function and pay its bills, just like I do, and if we don’t, we get owned by other countries, and our currency goes further in the tank.

“The sob story is that they can’t afford it (in your opinion). Well in my opinion they can afford it.”
Where did I say anyone couldn’t afford the pre-bate? I said how do we prevent fraud. Whether or not to give one is up for debate. Frankly, I kind of thought it was an appeal to liberals to give the prebate, give it bi-partisan support. And that’s really not necessary. Especially if, like I said, “necessities” however we define it, are at a slightly less rate.

“Why should ANYONE (the rich) pay more than anyone else to the gov’t?”
I didn’t say they should. I said luxury items, which anyone who saves can afford, should have a higher rate.

“Everyone is benefitting from the military, the roads, etc.”
I have to disagree with that. Businesses (thus, businessmen) benefit from our infrastructure more than people. We use roads to get to work. It’s a subsidy to business. China-Mart uses roads to ship goods across the country. That sounds like s subsidy to me. Businesses are the direct beneficiaries of infrastructure. And I’m fine with that. I’m a civil engineer, I get it. I build infrastructure for businesses on the governments dollar. Sure, citizens use it, but not to the extent that businesses do. So, if businesses, which pass tax along to the customers, or, in this case, would pay no tax, benefit from it, and their owners benefit from them, and they DO pay taxes, then why shouldn’t the owners of businesses who benefit more from infrastructure, pay a little more for it. Or we could just go to a user tax on the roads. That would directly go back to the business’s bottom line rather than guessing and letting the owners pay.

Don’t mistake me as some bleeding-heart liberal. I’m ruthless and could care less about people who don’t pull their weight. However, that doesn’t mean that a house and an apple should be taxed the same. That doesn’t mean that the rich are allowed to carve out their niches and call it fair, just because they came up with it, and any deviation is terrible. Keep on borrowing, and we’ll all suffer.

PAY OFF THE DEBT!

James,
There is a difference between buying a new house and investing. First, only a new house is taxed under FairTax. That tax can then be partially or fully recovered on the subsequent sale of that house, depending on market value and market conditions. Furthermore, if homes would be correctly viewed primarily as shelter for people rather than speculative investment vehicles, we wouldn’t have the huge price runups and subsequent mortgage meltdown we have seen.

Needless to say, investments still need to be encouraged, as they are the cornerstones of a successful retirement plan these days. We have the lowest savings rate of any developed country in the world. Investments are not just for the rich, as you infer. Most working people are investors to different degrees, simply because they have to be. Unlike the past, there are very few company pension plans available. Slapping FairTax on investments would stiffle economic growth and hurt everyone.

Like it or not, FairTax is gaining a lot of traction now, and it’s about time.

Karen Rapp: “what is needed is a progressive tax where the rich pay their own way (who should also not be allowed to use foreign mailboxes to avoid US taxes among many other tricks.”

How exactly do you define “the rich”? And what would be their fair share ( which is how I interpreted “their own way”?

Did you know that the top 25% of income earners pay 86% of income taxes? Did you know that the top 1% of income earners pay 39% of income taxes (despite the fact that they earned only 20% of the income?)

Do you know that in 2005, to be int he top 20% of income earners a person ( or married filing jointly) had to earn just $79,000? WOuld you consider that rich?

To Karen Rapp:
A tax code should exist to procure the funds necessary for the operation of government, not to manipulate human or business behavior. Besides, the form of these “social and business incentives, benefits and disincentives” consist basically of tax credits or deductions
The Fair Tax and the Income should have the same goals. Fund the government’s needs in the most fair and efficient manner. Soccer and Hockey have the same goals, get the object of play in the opponents net but you can not officiate a Soccer game using Hockey rules. Likewise you can not evaluate a consumption tax using income tax rules. Under the income tax, make more pay more is progressive.

The FairTax is indeed progressive under consumption tax rules: spend more , pay more.
Ashford Schwall

reformer said:
I didn’t say we were having trouble with the sales tax. Our return on investigation cost is more than $300 to $1. Catching tax cheats is like shooting fish in a barrel. The problem is that we need more people shooting at those fish. That is my point. I keep hearing there will be no IRS and have heard nothing about any other enforcement function with the “fair tax.” That has been my complaint all along. Your statement is the first I have heard acknowledging any enforcement structure whatsoever.
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reply:
It has been the plan all along to have the states (for a small fee) be the collector/remitter of the Fairtax. My problem with you is that you seem to pick and choose your facts to support your position, and then use your fallaciously derived premises as your foundation for knocking the reform in generic and untrue ways. This claim that you’d never heard this before is disingenuous at best. Any one who truly understands the topic (PhD indeed) would have gone and looked to see why such an obviously necessary facet of a nationally touted tax reform plan would be nonexistent. He would then have found that it does exist, and wouldn’t have cried about it not existing.

Have you even read the damn book, or looked at the website for crying out loud? How can you so vociferously bash something you haven’t even bothered to study, and certainly don’t understand??
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reformer said:
I know that fraud is rampant with sales taxes and that with no enforcement structure, it will not be controlled. You cannot just assume that everyone will be honest and we’ll all live happily ever after. Is there anybody here who would buy that argument? If it is not true that there would be NO enforcement effort, it should be stated up front.
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reply:
It is stated up front. Read the literature.
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reformer said:
That is a very important point. Stop trumpeting getting rid of the IRS to gain emotional brownie points and state instead how enforcement would be changed for the better.
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reply:
The gutting of the IRS is not emotional brownie points. That’s simply the rhetoric people like you use as a straw man

As for how it will be changed for the better, that’s simple and already a matter of public record, although once again I have to assume, given your vast experience and work on your P h D, you already know this. The individual states will be the ones collecting and remitting the taxes from their constituents and citizens. The collection authorities will be local, versed in the much simpler set of rules, and well funded; not to mention competent.
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reformer said:
As far as my job is concerned, I’m not worried about it….All I hear is arrogance and a complete unwillingness to address legitimate concerns regarding enforcement in a straightforward manner.
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reply:
Yup, that’s exactly how I feel about you.
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reformer said:
Look how long it has taken one of you to admit there will be some enforcement structure in place. You could have done that in the beginning and I really wouldn’t have had anything to say.
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reply:
a). It was said from the beginning, you just couldn’t be bothered to look it up.

b). Once again, although it’s pretty obvious that you’re part of the group trying to sabotage good tax reform so you can keep your day job, I am just an informed consumer who doesn’t like guys like you confusing those who would most benefit from the Fairtax.

c). Since it WAS done in the beginning, you can claim to be incapable of doing research, or you can admit to a bias that precludes you searching for such evidence or including it in your debate position. You cannot claim to be informed and unbiased, and you cannot claim that nobody mentioned it.

Once again, stop being obstructionist, and go do the research one would expect a P h D capable of.

That goes for everybody. Don’t be afraid that you will be tricked by slick, slanted arguments. Anyone here capable of being part of this discussion is smart enough to know facts when they see them and lies as well. You will however, be utterly defenseless against liars and tricksters if you don’t read about it yourself.

John 43-Great post

Try not to be to hard on guys like “reformer”(what do you want to reform?) and guys like Corey both are your typical wanna-be intellectuals PhD candidate and a experimental social psychologist working in market and consumer research. Wow Wow Wee Woh (borat) ………..Yawn. That does not give either any type of credibility as a matter of fact if it is true it would discredit their posts. Neither has a true appreciation of what it truly like to WORK for a living trying to get ahead. Is reformer actually trying to make us think he is some type of honorable person by giving up his “high paying job” to go work for the IRS……what a joke you should really do some soul searching. It just indicates to me that he didn’t have what it takes to make it in the private sector. Most all of us for the fairtax will make it despite guys like you. While guys like you do research on lives like ours. In twenty years you’ll be bitchin bout how them damn rich don’t pay their fair share.

Enforcement will be much less of an issue when audits will only be needed to be done on retailers not millions of private citizens who under our current system may be forced to share their most personal information to possibly be used in a PhD dissertation. If the undecided about the FairTax aren’t outraged by this then you love our current joke of system and I really don’t know what you’re reading these posts for. Really what it boils down to is I don’t care what the rich guy pays I’m working hard to try to become one all I want is for the PhD candidates (IRS) and the “Social Psychologists” to study from afar and get the hell out of the way. Just as a side note both these highly successful guys sure have a lot of time on their hands posting these repetitive lengthy diatribes time well spent guys…….”giggle giggle”

Yeah, yeah, Johns43 and Heavy Hitter. First I don’t work for the IRS. I work for a state that has no income tax, so my day job does not depend on the income tax. In fact, the fair tax would be certainly better for me personally. In fact, in my state the transition would be very easy since we do not have the income tax. State’s that do rely on the income tax will have a more difficult time retooling.

Second, I have read a lot of the information on your website and will likely read much more of it as I have time. Too much of the stuff there reads like a sales pitch. A lot of the research is a bit dated and not really in line with most modern researchers views regarding tax evasion. There have been some major changes in view over the last five years regarding both the causes of evasion and the effectiveness of old ideas regarding enforcement. I find some of the stats are misleading, generally agreeing with those related to the income tax, but not so much with those related to sales tax. Some information given as gospel, such as the statement that 15% of the retailers collect 85% of the tax is not footnoted, so I cannot evaluate where that information came from. I know at least from the standpoint of many of the states I have studied that that statement is not correct. I will continue to read through the information on the site and come to understand your side of this issue as best I can. I’m interested or I wouldn’t be here.

Third, you are completely discounting the fact that I have a front row seat with respect to tax evasion related to the sales tax. I see this stuff everyday and have seen scams you simply would not believe. I believe fair tax proponents are doing themselves a disservice not to at least listen and independently look into some of these issues. If you can take criticism and make your product better, why wouldn’t you? I personally am involved in research to find ways to make the sales tax easier and less costly to enforce, so our goals are not that different from the standpoint of enforcement. We both have an interest in better enforcement at lower cost. But you have to acknowledge where the weaknesses are before you can address better enforcment.

Fourth, I post here because I am interested in the subject. I expect that by putting ideas out there I can get some good information back. And I have. But the large doses of attitude sour the experience, so I think my own research will be more productive.

Finally, Heavy Hitter, you have absolutely no idea what work I have done in my life. If you were really as bright as you obviously think you are, you would have something more constructive to add than infantile name calling. I have comfortably retired from the private sector and now do what I want with my life. Why do you find it necessary to crudely disrespect someone else’s desire to serve?

Corey,

If I were only 1/10th as smart as you think you are I’d be the smartest guy in the whole world.

Name calling game? Where exactly did I call you any names? Me thinks you can’t stand being told you’re not the brightest little boy. Mix in a little class. Yes, I think you are a fool and pretty immature (as evidenced by your response) but NOT because I think you are wrong. I think you are a fool because of your smug attitude.
You’d be a fool even if you were on the right side of the argument. I noticed how you also conveniently avoided the response by Ashford. Seriously dude, if an anonymous poster saying he thinks you are wrong and not very smart gets you into F-bomb throwing mode and hurling invectives you have some serious anger and pride issues.

Let me break it down for you and I’ll keep it simple since I’m a moron.

You are right when you say, “Current prices reflect what consumer and businesses will pay for goods and services.” I agree with you. There is, however, a huge difference between “cost” and “price” that is critical to understand. Price is dictated by what the consumer will pay. The COST of a product is the raw materials, labor, and overhead. To this the company adds the profit. The actual COST to the company of the materials (imbedded taxes) and the workers (taxes) to manufacture the widgets will drop as taxes are shifted to the Fair Tax. This is no different than if the cost of raw material were to suddenly drop by 25%. In my world this will result in a lower price. In your world the company will pocket the savings.

Let’s look at that for a minute with rough numbers.

Company X sells widgets for $10. The labor cost of each widget is $6 ($5 wage & $1 Payroll Taxes paid by Company X). Other overhead and raw materials cost $3 leaving the company a profit margin of 10% and a profit of $1.

The Fair Tax is now passed.

Company X continues to sell widgets for $10. The employee cost’s of each widget is now $5 (a $1 save on Payroll taxes). Other overhead is now $2 (as other embedded taxes are shifted) leaving the company a profit margin of 30% and a profit of $3.

Sounds great right. Profits just tripled!!! That would be great with a monopoly. But that’s not what we have. It wouldn’t be very long before Company Y would begin selling widgets for less than the 30% markup that Company X was enjoying in order to steal market share and make more money. Better to sell more at 20% or 25% markup than fewer at 30%. To maintain it’s market share Company X would have to lower its profit margin back to the 10% area. If they didn’t someone else would and have a virtual monopoly. This removal of cost by shifting taxes would result in a price reduction of 20+%. This is precisely why Fair Tax advocates say the price would fall, BECAUSE THE COST WOULD FALL BY THE SAME AMOUNT.

If you say the above paragraph is wrong, you are arguing the same thing that a friend of mine did. He refused to acknowledge that a business would pay me an extra 7.65% (employer 1/2 of payroll taxes) as a contractor instead of as employee. He still refused to admit it would happen EVEN AS I TOLD HIM WAS ALREADY HAPPENING!!! No one is as blind as he who refuses to see.

Now that I’ve thought it over again Corey, I guess you’re right. I guess our bean counters at work will be elated to find out that the costs imposed by taxes on our labor force don’t need to be figured into our pricing structure anymore when compiling a quote to win business. I’m sure that if GM heard that the price of sheetmetal had dropped by 25% that they wouldn’t try to come back to us and get a reduction based on that. People will not pay the old PRICE when they know that the COST just decreased significantly.

All of that to ask you 2 questions Corey.

1. Do you agree that removing taxes from the cost of labor would allow businesses to lower the PRICE of their goods (if they so chose) and still maintain the same profit margin and profits?

This is your quote from a previous post.

Oh…you’re one of those. Hey guess what. There’s no such animal as a free market. All markets have costs and Adam Smith invisible hand is more like a fist. Costs will not drop to compensate for taxes–I can 100% guarantee it. That’s not how businesses work.

2. Really? Then answer this. Why do prices ever go down? I agree that businesses want to keep the extra money but the free market dictates they can’t, at least not for long. Apparently you believe all companies will be able to just pocket the extra 30% and NOBODY will step up and start offering goods at a lower margin. If you really believe that then there’s probably nothing anyone can do for you. I sincerely hope you evaluate what you “know” to see if any of it might be in error. If you have a good counter let’s read it. Forgive me for now but I need a little more than a “Corey – I can 100% guarantee it” to convince me that may argument is flawed.

My guess is that our definitions of service would be vastly different. I’m every bit as bright as I think I am……..Look I’m not blindly for the FairTax I do know that anyone that has been out in the real world would know that the current system we have is not productive it does nothing but repress the will to work and to break into the next level….and maybe guys like you and Corey are there and are content with your station in life if that is the case then be happy about that ……Nothing you guys have said has caused me to second guess my opinion about the FairTax . It maybe something guys like you don’t understand at the risk of sounding dramatic I think we are trying to hold onto what America was based on that is a vision that anything is possible if you work hard enough and you aren’t hamstrung by your own government working against you the Fairtax is perfect but much closer then our current system) where you spend a huge amount of time trying to justify what you did the year before. There is no counter argument to this because it’s not tangible. (and no I’m not an anti government nut)

Reformer,

I have to admit that your issue of enforcement is the only plausible issue I’ve seen with the Fair Tax yet. I’ll give it some thought. As I’ve already said I think we should scrap it and NOT replace it. Cut the size of gov’t drastically. Thanks for your input.

James, Thanks for your thoughts. I’ll keep it brief.

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Vulturegoblin:

Why so pessimistic? Is it so hard to see what necessities are? We can’t, as a nation, agree to draw the line somewhere? Food, shelter, water. Maybe healthcare, but that depends on how we proceed with that topic anyway.
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Not pessimistic but realistic. 66,000+ and counting pages of the tax code & K-Street tell me the list will be growing before the ink is even dry on the original one. Reasonable people could agree but we are talking about pols.
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“Why tax bonds, stocks, securities?”
Because, what I’m reading by proponents is that we should tax all transactions, except those that usually occur with the rich, securities and inheritance. That’s not fair, that’s “lobbyists” already carving out their part. If we are willing to tax a home/investment, why aren’t we willing to tax a security/investment? There’s a double standard. What taxing securities would do, is make sure people hold on to them longer, which would slow down day-trading, and create a more stable market. If we want to be fair, let’s be fair.
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I don’t want to tax ANY transactions. Taxing investments will prevent middle and lower class people from rising since you’ll be taking 30% of their investment right off the top on day 1 and then when they cash it out and spend it you’ll be taxing it again.
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“Is taking 30% of your investment away up front helping anyone besides politicians?”
You sound like a cynical borrow-and-spend republican. It doesn’t help politicians if we cut spending and pay off our DEBT. And we stop cutting away at the value of the Dollar. I am NOT a weak-dollar proponent.
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I’m not a republican. Pols are the reason we have the DEBT, they and the idiot voters who want something for nothing. I want a strong dollar too. Quit printing and borrowing money. Cut spending. Pols will almost always run a deficit.
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“Why is it your business or the gov’ts what someone does with their money at death?”
Because it’s a transaction, and we’re taxing those things, either simply, or through VAT’s, or however we decide. And do you think the Vanderbilts are still rich because they SPENT all that money from a century ago? No, they saved it, and it doesn’t get spent. It moves around in investments, which according to you, shouldn’t be taxed either. So you just created a huge non-taxed loophole. Fair or just “fair to workers.” I stated I like the idea of the national sales tax, and these were my issues with it, the descrepancies I saw.
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Death is a transaction? Maybe we shouldn’t be taxing all of these things. Again, why does gov’t need all of this money? Every time I send a tax dollar away I am essentially giving a chunk of my life to gov’t since I had to trade a chunk of my life to earn that dollar. Maybe just maybe my money should (to the greatest extent possible) go for my well being and not the politicians’ stupid programs. Why do you care what the Vanderbilts did with their money or how rich they are? (This smells like envy?) It’s none of your business how others spend their money.
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“Businessmen who work harder than 98% of the population to get rich aren’t what I’d call “getting rich from the system”.”
Businessmen who have no real skill other than striking lucrative deals and creating middle-men to get a little money for themselves work harder than 98% of the population? Don’t give me that BS. I’m an engineer, I actually work FOR someone, and I have a skill. Businessmen aren’t the innovators who work hard (minus Google), the people they employ are. Businessmen have enough money already socked away to take advantage of someone else who doesn’t know how to start/run a business, and thus, take a cut from their proceeds. My new job pays me quite well, but my employer get a fat-cut of everything I earn. He doesn’t do his work, PLUS MINE. He does his, and acts as a middleman to the contract and me. I’m fine with that, but let’s call it what it is, he’s not working four-times as hard, he has four employees.
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There is SO much in the preceding paragraph this I disagree with that I won’t even comment other than to say I think you are almost totally wrong. I think this indicates fundamental misunderstandings on your part.
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“Few things sicken me more than class envy.”
You imply I have class envy? I make good money, I am an entrepreneur on the side, and I have rental income. I don’t have class envy, but I’m also not afraid to pay my taxes or pay off our current government’s debts. That’s something the no-tax crowd could care less about. It’s not just about what the govt can do for you, it has to function and pay its bills, just like I do, and if we don’t, we get owned by other countries, and our currency goes further in the tank.
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I wasn’t referring directly to you but whenever I see anything about “the rich” and them paying their “fair share” and a progressive tax I find its always rooted on class warfare and envy of those who have more. I’d be a lot more passe about paying taxes if a good 35-50% of them weren’t flat out wasted. Its criminal what’s taking place with our tax dollars/lives.
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“The sob story is that they can’t afford it (in your opinion). Well in my opinion they can afford it.”
Where did I say anyone couldn’t afford the pre-bate? I said how do we prevent fraud. Whether or not to give one is up for debate. Frankly, I kind of thought it was an appeal to liberals to give the prebate, give it bi-partisan support. And that’s really not necessary. Especially if, like I said, “necessities” however we define it, are at a slightly less rate.
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This wasn’t directed at you but a pre-emptive strike on the typical nonsensical liberal bilge.
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“Why should ANYONE (the rich) pay more than anyone else to the gov’t?”
I didn’t say they should. I said luxury items, which anyone who saves can afford, should have a higher rate.
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Why? Again, who decides what is luxury? Why does gov’t need all this money more than those who actually earned it? Why should some goods be taxed at a higher rate?
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“Everyone is benefitting from the military, the roads, etc.”
I have to disagree with that. Businesses (thus, businessmen) benefit from our infrastructure more than people. We use roads to get to work. It’s a subsidy to business. China-Mart uses roads to ship goods across the country. That sounds like s subsidy to me. Businesses are the direct beneficiaries of infrastructure. And I’m fine with that. I’m a civil engineer, I get it. I build infrastructure for businesses on the governments dollar. Sure, citizens use it, but not to the extent that businesses do. So, if businesses, which pass tax along to the customers, or, in this case, would pay no tax, benefit from it, and their owners benefit from them, and they DO pay taxes, then why shouldn’t the owners of businesses who benefit more from infrastructure, pay a little more for it. Or we could just go to a user tax on the roads. That would directly go back to the business’s bottom line rather than guessing and letting the owners pay.

Don’t mistake me as some bleeding-heart liberal. I’m ruthless and could care less about people who don’t pull their weight. However, that doesn’t mean that a house and an apple should be taxed the same. That doesn’t mean that the rich are allowed to carve out their niches and call it fair, just because they came up with it, and any deviation is terrible. Keep on borrowing, and we’ll all suffer.

PAY OFF THE DEBT!

Vulturegoblin wrote: “There is, however, a huge difference between “cost” and “price” that is critical to understand. Price is dictated by what the consumer will pay. The COST of a product is the raw materials, labor, and overhead. To this the company adds the profit. The actual COST to the company of the materials (imbedded taxes) and the workers (taxes) to manufacture the widgets will drop as taxes are shifted to the Fair Tax. This is no different than if the cost of raw material were to suddenly drop by 25%. In my world this will result in a lower price. In your world the company will pocket the savings.”

I can agree to the operational definitions for cost and price, but you’re mistaken about what will happen to price. I worked for the company that owned Papermate and Sharpie. In my time there, both product lines had the production moved to places where it was cheaper to produce them (Mexico & Memphis, respectively). So, costs dropped overall (even with transport figured in), but prices didn’t. Perhaps you could explain to me why that was if it wasn’t to improve the profit margin?

BTW, as of 2005, it costs 6 cents to produce a Sharpie but it sold for a dollar. Explain to me how removing FICA would make it cheaper.

“People will not pay the old PRICE when they know that the COST just decreased significantly.”

Apples and oranges-there’s a difference between what businesses can do and individuals can do. Knowing costs really only matters when you have negotiating power. An individual has little negotiating power–that’s why there are labor unions. Businesses have more power to negotiate costs.

“He refused to acknowledge that a business would pay me an extra 7.65% (employer 1/2 of payroll taxes) as a contractor instead of as employee.”

As an aside, both you and your friend are correct. Businesses won’t pay you more out of the kindness of their hearts, but you can ask for more. Again…I do a little bit of freelance work outside my employed field (noncompete and all that) so I do know a little about that…more than I want to know really.

“1. Do you agree that removing taxes from the cost of labor would allow businesses to lower the PRICE of their goods (if they so chose) and still maintain the same profit margin and profits?”

Could != Will or Do.

“2. Really? Then answer this. Why do prices ever go down? I agree that businesses want to keep the extra money but the free market dictates they can’t, at least not for long.”

There can be four reasons. A company is forced to take a hit on their margins. Walmart in fact does this to its suppliers-only P&G and Newell Rubbermaid have any negotiating power at all…and that’s because they sell so many things.

Or…you reduce manufacturing costs by getting better equipment or moving someplace where you can pay labor less.

Or a product becomes superseded by others.

Or a product loses its exclusivity.

…and if you think the market is so free, please go try to start a phone company, a cable company, a bank, or a dry goods store next to a Walmart.

A subsequent post when I have time will look at the CPI, comparing the index’s increases across years with, without, and increased FICA.

I took a look at the CPI (a measure of the prices paid for certain goods and services). To account for random yearly variations I decided to use a 5-year rolling percentage change (it will probably be more stable). Keeping in mind on a yearly basis, the CPI for a given year reflects changes in price from the prior year (I think…correct me if I’m wrong).

Assumptions: if payroll taxes are incorporated into prices paid at the register, then CPI increases year-over-year should reflect those increases.

Data:
FICA Passed-1936.
Tax started 1-37.
The 5 Year Percentage Change in 1937 was a 10.77% increase.
In 1938, the 5-Year Percentage Change was 5.22%.

In 1984 (the year the trust fund began collecting–I think), the 5-year percentage change was 25%.
In 1985, it was 18%.
Granted those years are inclusive of the rampant inflation in 79 & 80. Dropping those years however, has no effect on the directionality of the rolling change percentages (13% in 84 vs 11% in 85).

For the sake of fairness, I will note that Medicare was introduced in 67 (taxes started). The 5-year rolling change in 67 was 9.15%. In 68, it was 12.26. In other words, Medicare may have affect prices a little, but FICA may not.

I will note caveats–these numbers are rough estimates only and do not partial out other economic effects nor do they constitute anything beyond case studies.

It is worthwhile to note that an increase in the rolling CPI percent change followed a major program’s introduction (Medicare) in the previous year. However, the introduction of and changes to FICA do not show increases in the rolling percent change the following year.

reformer said:
…In fact, the fair tax would be certainly better for me personally. In fact, in my state the transition would be very easy since we do not have the income tax. State’s that do rely on the income tax will have a more difficult time retooling.
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reply:
So you think it is probably a good idea except for some technical aspects of implementation? Then we have some good common ground to start with.
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reformer said:
Second, I have read a lot of the information on your website and will likely read much more of it as I have time.
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reply:
I’ll just keep repeating, I’m not part of anybody’s group. The Fairtax.org site is the best place to start unless you are willing to buy and read the book. But I not only don’t ask anyone to take those two as Gospel, I actively encourage them not to. Everyone must inform themselves of both sides of this debate and that means hearing even the most rabid uninformed opponent’s objections. I only recommend starting with a clear understanding of the sponsors’ intentions, and that one question any and everything that doesn’t ring true from both sides.

To put this in context here, all I want is for people, such as you seem to be, to admit that although they are informed on the general issues, they have not studied the specifics closely enough to have the last word.

My work motto is, If I don’t know the answer to your question, I will find out what it is; not make it up.
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reformer said:
Too much of the stuff there reads like a sales pitch…
…I will continue to read through the information on the site and come to understand your side of this issue as best I can. I’m interested or I wouldn’t be here.
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reply:
I understand and can sympathize with the “sales pitch” feeling. My response is that any group of facts when properly organized ad presented, will sound as if the presenter has an agenda they’d like to sell you. That is a result of nearly a century of Madison ave. types taking the best debate/presentation methodologies and using them with unending 24/7 monotony. Even the better posts in this debate sound like advertising for that reason. Intelligent debate came first but the analogous appearance cant be helped. If the information presented is truly informative and useful then ‘caveat emptor’.
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reformer said:
Third, you are completely discounting the fact that I have a front row seat with respect to tax evasion …
…But you have to acknowledge where the weaknesses are before you can address better enforcment.
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reply:
I’m not discounting nor disbelieving your testimony, simply questioning whether what you have seen has any bearing on the new paradigm.

There will always be cheats, (and I’d love to spend an afternoon listening to war stories), but probably the biggest part of the enforcement problem, at the moment, is the lack of focus on the area. Your most pertinent objection is the relative size of the group tasked with uncovering and preventing it. I would venture to add my guess that there is a corresponding lack of determination involved at the level above yours, or above that one, which causes the paucity of personnel and resources. Perhaps those resources are aimed at income tax evaders instead, but I don’t want to digress in that direction.

The short answer is that with the state handling collection/remittance for the national government, there will be a much greater focus on manpower, and methodology. Bet money on it; bet a lot of money on it.
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reformer said:
Fourth, I post here because I am interested in the subject. I expect that by putting ideas out there I can get some good information back. And I have. But the large doses of attitude sour the experience, so I think my own research will be more productive.
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reply:
And I’m glad to encounter someone who is actually willing to give and take to the point of stipulating another’s points. As for the attitude, my hackles get raised when it seems to me that someone is using their expertise in one area to give the impression that they are experts in areas they are not. In this case I was annoyed that you kept hitting on the lack of enforcement, thereby giving the impression that the Fairtax didn’t address the issue, when in fact, you simply hadn’t researched the explanation. And I’m not talking about deep statistics. I’m only talking about the very top layer in the generic plan.

Read on MacDuff.

Question: how are prices going to fall by 30% for manufactured goods, based on the theory that the cost of production will decrease by that much, when so much of what’s consumed in this country is manufactured overseas and not subject to the claimed embedded tax burden?

Next: For those proponents that want a fair alternative to this federal sales tax, I propose a flat tax……..on personal property. Simple as it gets. Add up every thing you own at the end of the year that’s worth more than $1000 and calculate a ridicuously low percentage of it and send a check to the government. Everybody. Those truely poor might have a $6000 car and a $1700 big screen TV. $7700 at 1% = $77. Not much of a penalty. Bill Gates pays $400M. There’s no tracking every transaction throughout the year. All the major assets, cars, houses, businesses, and property are already well known by the government. Probably be hard to collect on all those big screen tVs, but losing out on that wouldn’t cost the governement much.

Right now, we’re not even taxing your increase in wealth, just your income. There is no fair justification for taxing your income in a year, verses what you own. The government defends personal property rights, internally and externally, not “income rights”. With a personal property tax, that tax would be closer to a user’s fee, which everyone thinks could be fair. If you own half of New Mexico, like Ted Turner, you’re getting a huge benefit by having the governement protecting your ownership of it. The military, the police, the courts, and just about every branch of government is there to protect your personal property.

Justin,

You were *incorrect* when you said that the FairTax is not as progressive than the taxes it replaces. According to our analysis, it is actually more progressive. It is a tax cut for the poor and the middle class. The only people who pay more than they do now are the rich. There are three factors that you must consider when judging its progressivity:

1. It replaces the payroll taxes as well as the personal income tax and the payroll taxes are extremely regressive.

2. It is a tax on consumption and thus falls especially on those rich people who are consuming their capital.

3. Those who save do not escape paying the tax forever. In the future when they consume their savings and the income that those savings produce, they will be paying tax on that income.

Howard Richman

@Howard Richman: Please see my other post on the topic of the FairTax’s progressivity or lack thereof (and the comments to it). I agree that the FairTax looks a lot better when you think in terms of lifetime incomes rather than single-year, but I’m not so sure that’s always the best way to look at it.

Corey: “I can agree to the operational definitions for cost and price, but you’re mistaken about what will happen to price. I worked for the company that owned Papermate and Sharpie. In my time there, both product lines had the production moved to places where it was cheaper to produce them (Mexico & Memphis, respectively). So, costs dropped overall (even with transport figured in), but prices didn’t. Perhaps you could explain to me why that was if it wasn’t to improve the profit margin?”

This is not really a relative example. This is due to the fact that a single company in a given industry made chnages to its production costs. In that case, they would be free of market pressure to lower the price until its competitors iniatied the same cost saving mechanisms(and subsequently lowered costs).

A more relavant example is the price of gasoline. The cost of the oil is widely pubilized, and when it goes down, the price of the ned product at all of your local gas stations goes down. When it goes up, the prices of gas go up. This is becuase all of the businesses have the same cost, and there iwll always be someone who is willing to reduce the profit on a single item in order to increase sales (and total generated profits).

If we were to apply your thinking to this industry, then every time oil prices drop, then all of the companies would leave the gasoline prices static and reap the benefits of the higher prices with lower costs – this does not happen!

James:

Apples and oranges my friend. The discussion centered on manufacturing costs. Crude oil is a commodity and not manufactured.

But it does lead to the question…why do all gas stations (inter-company) charge basically the same price?

The answer…collusion in effect (if not reality). That also puts lie to the idea of a free market.

Vulturegoblin said:
As I’ve already said I think we should scrap it and NOT replace it. Cut the size of gov’t drastically. Thanks for your input.
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reply:
Reduction of government spending is the long term goal of the Fairtax. Everything cannot be done at once. The attempt to do so makes opposition to the whole agenda too easy. All the opponents have to do is tie up the whole pkg. by objecting to one point.

Here’s the plan. We get the amount that the government is collecting in taxes out of the cost of the product where it is currently hidden. We put it at the bottom of the receipt where you can see it every time you make a purchase. The first thing that will happen is that everyone will want to know why the amount is so high. That’s the first step in our ‘hidden agenda’; namely to get people to understand just how much they’ve been paying all this time.

The next step is to get them to ask, “Where the hell is all this money going to”?

Logically following that is to get them to understand that specific politicians have been responsible for those expenditures, and those politicians are begging to be sent home on a rail.

There is a prerequisite to this agenda. We must not allow the politicians to start introducing exemptions. Not for certain groups; not for specific items or classes of items. Not for anything. THAT IS HOW THE FLAT TAX WE STARTED WITH THIS TIME BECAME THE SPECIAL INTEREST MESS WE HAVE NOW!!!

If we are foolish enough to let them start the back room wheeling and dealing again, we deserve what we will end up with… again.

Positing all that, what we will end up with is an informed electorate who are involved in selecting the politicians who are spending the money, and who will not stand for the pork and waste that is so deeply hidden from their view right now.

To put it another way:
Once everyone, no matter their education or interests, can clearly see that government is costing them 23%/30%(whichever way you wish to calculate it) they will begin to ask why it should cost so much, instead of thinking that the return of their money after they beg for it on April 15th is some sort of found-money windfall.

The next obvious step is that, having learned where that money is going, they will vote people into office who will be more careful and frugal with it, and vote out of office the scum who keep themselves reelected by selling their office to special interest money, by way of special interest legislation and spending.

Net end result? Reduced government spending due to increased voter involvement.

Corey: “The answer…collusion in effect (if not reality). That also puts lie to the idea of a free market.”

Commodity, manuafacturing expenses, insurance, it all adds into the COST. The point I was making is that whne all companies in a given industry have the same change on a common portion of their costs, the PRICE will eventually come down.

As to collusion – maybe it is actually due to government intervention. In some states ( WI for sure) gas stations are not allowed by law to offer significantly lower prices than their competitors.

Corey & James,

I think the fact that gas prices ARE so close tends to prove the free market idea. Many/Most gas stations make far more money on stuff in their convenience stores than on gasoline sales. The gas is only to draw in the customers. One station by my house is always at least 10-15 cents more than everywhere else yet it is always packed. The reason is his location. Gas stations use gas as a loss leader to draw customers in. The reason they price so similarly is because there is a point at which it doesn’t make sense to raise/lower the price. Lower gas prices equal increased food sales but lower gas profits. Higher gas prices equal the reverse. Each station finds its happy medium and prices accordingly.

On to the Sharpie argument: I won’t answer too much since others already have.

The amount of the embedded costs, I think you’re missing on this Corey.

Sharpie production costs.

Obvious Ones:
Overhead
Labor (FICA)
Raw Materials

Not So Obvious hidded costs:
Resin (plastic) supplier
Ink Supplier
Transportation Company
Paper Company (packaging of markers)
Felt Supplier
Injection Mold Tool Supplier
Gasoline Refinery
Tankers to transport suppliers
Shipbuilders who made the tanker
Miners who mined the steel for the Injection Molding Tool and so on and so on and so on.

All of these companies have employees and their own raw materials with the same embedded (hidden) costs that Sharpie does but you don’t see them at first glance. The point is this. FICA and other hidden taxes are not that big when you look only at your own labor force. It’s when you start looking at all the other labor that was actually required to get your raw materials and equipment and so on that have the majority of the hidden costs embedded in them. Once you realize that you’d be saving a small chunk from EVERYONE involved in producing your (at first glance seemingly) simple marker then it becomes apparent that the savings may indeed approach the 30% figure.

James, Very good expanation.

a simplified expaination can be found at:
http://www.fairtax.net/chart4.htm

“The purchase price of a loaf of bread includes the compounded income taxes and compliance costs* of each company involved in producing it. Picture the chain of commerce that goes into the loaf of bread you buy at your local grocery store, starting with the farmer who grows the wheat. He adds his tax and compliance costs to the price of grain he sells. The trucker transporting the grain to the mill, the miller grinding the wheat into flour, the suppliers of all the other ingredients that go into the dough, the baker baking the dough, the distributor, and the retail outlet all add their taxes and compliance costs. There is no way around it; if a company does not add these compliance costs then they will not be able to make a profit and will eventually go bankrupt. ”

This makes good simnple reference for newcomers.
I am amazed at how many people have trouble with this. I die laughing when hear the “missing deduction” complaint. Ashford Schwall

James43:

You’re dreaming if you think people are going to act the way you think they will. People will complain about the sales tax at the beginning, get used to it, and then go back to watching American Idol, playing Guitar Hero, and voting for the politician with the best hair. There is nothing to stop people from complaining now. The taxes we pay are on every pay stub and the numbers slap you in the face again every April. Paying extra taxes at every purchase won’t change a thing. Your screaming in capital letters won’t make anyone do anything, not voters or politicians.

James:

The reason gasoline stations are prevented from charging excessivly low prices is because larger companies sell products below cost until their less well funded competition goes bellyup, then the survivors can charge what they want. Most of business isn’t about providing the best product for the best price, it’s about destroying the competition so you can charge what you want and confusing the customer so he can’t make a well informed decision.

webdog said:
You’re dreaming…
… There is nothing to stop people from complaining now.
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reply:
Sure there is. It’s called boiled frog syndrome. If you put a frog in a pot of hot water, it will make every attempt jump out. If , however, you put it in cold water and gradually heat the water , the frog will not notice and will stay even if it is boiled to death.

That’s how the present tax was set up from inception. It started out as a flat tax on the ‘privilege of working’, and calculated using your income as a guide. It was billed as being fair to all, since those who were able to make more money taking advantage of this ‘privilege’ would be shouldering more of the burden. Every chance they get, they sell some new addition to the code by saying that the ‘rich’ will be taxed more, thereby appealing to the ‘class war’ mentality that they know they can depend on to blind 3/4 of the voters.
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webdog said:
The taxes we pay are on every pay stub and the numbers slap you in the face again every April.
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reply:
And still, if you ask almost anyone at tax time, how much they paid in taxes last year, they will reply, “I didn’t pay anything, I got a refund”, smiling and drooling the whole time.

The taxes are taken from the paycheck before one gets it for the same reason. Subconsciously, people feel that if it wasn’t given to them, it wasn’t taken away either; if they don’t have to hand it over or write a check, they didn’t have to pay anything. I agree with what you’re saying, and obviously I’m trying to shake off that mindset and get others to do the same, but that the mindset exists and is rampant and prevalent is inarguable.

If we can destroy that paradigm being exploited as I describe, we don’t have to beat the mindset. If we make people see that they are indeed forking over the money, and specific people are indeed spending it, people will wake up and care about it. As it is, anywhere I see it discussed, most people have to be convinced first that the tax rate is indeed 23/30% before the discussion of how to change it can even begin. They just don’t realize it, exactly as the pick-pockets in Washington designed it.
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webdog said:
Paying extra taxes at every purchase won’t change a thing.
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reply:
The taxes will not be extra. They will simply be pulled from the price of the item where they are currently hidden and placed as a clear amount of tax to be paid at the bottom of the receipt.

If you meant that you don’t think people are smart enough or self-interested enough to care, I disagree. The human mindset is generally one of laissez faire, not stupidity. Even if your cynicism (and man, it’s pretty deep) were well founded, would that be a good reason for intelligent people not to try?
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webdog said:
Your screaming in capital letters won’t make anyone do anything, not voters or politicians.
———————————-

reply:
If I had typed a whole screed in caps you’d be right about the screaming. As it is though, all I did was emphasize a very important point. And you’re right that what I write isn’t likely to make anyone do anything, but I reject the notion that “It’ll never work, we’re all gonna die”.

Curling up in a ball and letting them keep stealing from me isn’t an option if there’s something reasonable I can do about it, so here I am; trying to spread some knowledge and get others to understand that we can do something here and now, and that the plan is a good one on its own merits and far better than what we have now.

So if for some reason you think the current system is good, I say you should fight for keeping it, but if you don’t…

Here they go again with the ” taxes will be higher” statement. do our schools still algebra?

The income tax equation is income – taxes – compliance dollars = spending
The Fair Tax equation is income = spending + taxes + compliance dollars, so here we are taxed as we spend and keep the compliance costs.
Now to expand on this a bit…….

The income tax equation is income- withholding tax – SS payment – Medicare payments – spent compliance dollars = spending
The Fair Tax equation is income = spending + FT tax + saved compliance dollars
so here we are taxed as we spend and keep the compliance costs and SS and Medicare payments

Or, more simplified……..

The income tax equation is What I made – withholding tax – SS payment – Medicrae payments- spent compliance dollars = What I have left to spend

The Fair Tax equation is What I made = What I have left to spend less the FairTax + saved compliance dollars

AND then we have the ” oh no , I’ll lose my deduction” crowd.

UNDER THE INCOME TAX
OK, lets say you made $150.00 ( I’m keeping the number simple)
Mr. Income tax takes $50 in with holding. You now have $100.00 in your pocket.
At the end of the year, Mr. Gov’t says you get a $10.00 deduction.
You came out with $110.00 available to you and $40.00 given to the Gov’t

UNDER THE FAIRTAX

OK, lets say you made $150.00 ( again, I’m keeping the number simple)
Mr. Income tax takes $0 because there is no income tax.
You now have $150.00 in your pocket.
At the end of the year, Mr. Gov’t says you have 0 deduction because you paid 0 income tax.
You came out with $150.00 available to you and $0 given to the Gov’t.

Is that simple enough?
Ashford Schwall

James:
Thank you for a respectful reply. The tone here was getting pretty nasty.

I’m glad you understand that it’s a prerequisite to changing the system to have a way to stop politicians from corrupting it. When congress has a very low approval rating, but people approve of their own congressmen, because their own congressmen work to bring home the pork, how are the bums going to get thrown out? Somehow you have to change human nature to make people less self-interested or overthrow this democracy. I don’t believe for a second people are going to be more upset with taxation just because they see it on the cash register reciept. If your claim proves true, and the total cost is going to stay the same, they’re going to look at their credit card bill at the end of the month and shrug. If people were prone to action based on outrage, where is the outrage when merchants quote one price then tack on their chisel charges at the end of the sale, e.g. rental cars, hotels, phone serivce; even the oil change monkeys add on “shop towel fee” or “environmental cleaup fee”. Do you pay those, or do you scream bloody murder? Even the illusion I’ll get a benefit out of a tax is easier to swallow than those garbage fees, but there’s no revolt happening on that front, and if that ain’t shoved in your face I don’t know what is.

A couple questions for you about your plan. If I want to buy a new Porsche, can I start a paper route and claim my new Porsche as a business expense and not pay sales tax on it? I believe we’re not going to be embedding any taxes in anything until it gets to the final consumer. Is the government going to make me justify that my business needs a Porsche instead of a Saturn, or are they going to take my word for it? If they do require justification, then isn’t the government running my business? Can I claim that it’s 90% business and 10% pleasure and pay 10% of the sales tax? If I did that, and I’m caught riding it around on Sunday afternoon, I’ll claim it’s my 10% time, prove otherwise.

When I buy a new house, I’ll be sure to setup a home based business first, and that business is going to require 90% of the floor space of my house. It’ll use 90% of it to warehouse shipping popcorn, or anything to take up floor space. When I go out of business, do I have to then go pay the sales tax on the remaining 90%? What if I sell the house, or the car? They’re both used, do I have to collect sales taxes on them at that time? If I sell them to another business person, and he sells them to a non business person, 100 years from now, does the tax have to be paid then?If I sell them both to my brother for one dollar each, I probably wouldn’t mind paying 30% tax on that. Then he’ll probably sell these “used” items back to me for about the same price. Sweet!

This subject reminded me that when I was a kid, living on a farm, we had our own gas tank. My father signed a form every time gas was delivered, claiming that the gas was to be used for farming and therefore no road use tax was paid. Every time my father filled up the car out of that pump, which was every time he needed gas, he would keep looking down the road to make sure the tax man wasn’t watching him. He was a sharecropper with five kids and barely making a living, so don’t be too critical. That’s the only thing I know of that he ever cheated on.

So if this tax even gets close, I’m going to be the first in line for a paper route, and a private gas tank, for “business” use only, of course.

I don’t know if this has been trumpeted yet, but this plan would certainly generate a society of “entreprenuers”.

No one in their right mind is claiming the current system isn’t being cheated, but this scheme would be much easier to cheat. The reason more people don’t cheat on sales taxes now is because they’re too small to be worth it. Even with the current low 7% sales tax rate I know of examples. Does anybody pay sales taxes on jewelry anymore, or does the transaction look like it happened over the internet? (Go get’em reformer) Increasing the rate to 37% will turn a lot more people dishonest. Then the rate will have to go up, and more people will cheat, and people will know others are cheating, so they won’t want to be the only suckers paying the bills, so it will spiral on until we’re all sneaking into Canada to get a subsistance wage landscaping job.

Webdag said:
James:
Thank you for a respectful reply. The tone here was getting pretty nasty.
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reply:
De nada. Give respect, get respect.
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webdag said:
I’m glad you understand that it’s a prerequisite to changing the system to have a way to stop politicians from corrupting it. When congress has a very low approval rating, but people approve of their own congressmen, because their own congressmen work to bring home the pork, how are the bums going to get thrown out?
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reply:
Prevent them from allowing exemptions of any sort as I already pointed out. If they cannot pay their special interest supporters with exemptions from paying their fair share, the only quid pro quo will be pork. The pork is visible already, and would have already gotten the response it deserved if people truly understood – at the register – how much it is costing them.
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webdag said:
Somehow you have to change human nature to make people less self-interested or overthrow this democracy. I don’t believe for a second people are going to be more upset with taxation just because they see it on the cash register reciept…
…but there’s no revolt happening on that front, and if that ain’t shoved in your face I don’t know what is.
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reply:
Same as before. I can’t debate with cynicism. The only answer to that is hope. I have it. You say you don’t. Dead end.

Curling up and saying it’ll never work accomplishes nothing.
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webdag said:
A couple questions for you about your plan. If I want to buy a new Porsche, can I start a paper route and claim my new Porsche as a business expense and not pay sales tax on it?
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reply:
Is that how it works now?
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webdag said:
I believe we’re not going to be embedding any taxes in anything until it gets to the final consumer. Is the government going to make me justify that my business needs a Porsche instead of a Saturn, or are they going to take my word for it?
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reply:
Is that how it works now?
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webdag said:
If they do require justification, …
…Sweet!
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reply:
IBID.
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webdag:
This subject reminded me that when I was a kid, living on a farm, we had our own gas tank. My father signed a form every time gas was delivered, claiming that the gas was to be used for farming and therefore no road use tax was paid. Every time my father filled up the car out of that pump, which was every time he needed gas, he would keep looking down the road to make sure the tax man wasn’t watching him. He was a sharecropper with five kids and barely making a living, so don’t be too critical. That’s the only thing I know of that he ever cheated on.
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reply:
He was one man running a small family business and cheating on a ridiculously small portion of the total value of his total custom. If he were slightly more affluent and filling not only his vehicle, but those of you, your siblings, your close-by uncles, aunts, and cousins, how long do you think he would have gone unnoticed. Nobody keeps a secret like someone who tells no one else.
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webdag said:
So if this tax even gets close, I’m going to be the first in line for a paper route, and a private gas tank, for “business” use only, of course.

I don’t know if this has been trumpeted yet, but this plan would certainly generate a society of “entreprenuers”.

No one in their right mind is claiming the current system isn’t being cheated, but this scheme would be much easier to cheat.
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reply:
So you think that it’s going to be easy to cheat?
Perhaps. But only if you, as a business, stay small and don’t get greedy or stupid. Generally though, those who see opportunity knocking where it appears that the boss is not looking are both greedy and stupid.
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webdag said:
The reason more people don’t cheat on sales taxes now is because they’re too small to be worth it.
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reply:
The reason government doesn’t pay serious attention to this sort of cheating is because the amounts are so small (relatively speaking of course). Wait until the displaced IRS agents are filling the positions of enforcement in the state agencies tasked with collection/remittance, and they are no longer distracted by all the paperwork and investigation which currently bogs down income tax collection.

I already made this point in my reply to Reformer.
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webdag said:
Even with the current low 7% sales tax rate I know of examples. Does anybody pay sales taxes on jewelry anymore, or does the transaction look like it happened over the internet? (Go get’em reformer) Increasing the rate to 37% will turn a lot more people dishonest. Then the rate will have to go up, and more people will cheat, and people will know others are cheating, so they won’t want to be the only suckers paying the bills, so it will spiral on until we’re all sneaking into Canada to get a subsistance wage landscaping job.
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reply:
Once again I have to point out that the tax rate is not being increased, just moved out of where it’s hidden in the price of the product, and down as a clearly visible cost at the bottom of your receipt.
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reply:
This whole section (between the lines of plus signs) is an attempt to make the concept of enforceability look somehow naive. It fails once everyone stops laughing and looks at reality. When every state is working together to track not only interet sales, but intrastate sales through brick and mortar establishments, the system will become much more homogeneous, and integrated, not to mention simpler. Since it will be a national tax, there won’t be any interagency communication problems. If you sell to someone in Texas from a business in Maine, the overseeing organization will be able to watch the transaction at both ends.

This whole notion that one can somehow avoid paying the correct amount in taxes by claiming he didn’t keep the tax records required to be kept for seven years is only espoused by those who don’t, or won’t, understand the new paradigm. Right now there is a hodgepodge of laws and agencies and enforcement procedures for individual states and that allows larger businesses operating across state lines to obfuscate a lot. It also allows small businesses to hide behind the sheer number and diversity that weighs down poorly resourced state enforcement efforts.

When everybody works under the same set of SIMPLE rules, and record keeping is standardized from coast to coast, you gain economies of scale that simply don’t apply to the fragmented situation that exists today. These economies will apply not only to organization, but also to data collection and sharing amongst agency offices.
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The Free Market System will prevail in all aspects, including the response of the government to the need for a much larger, (larger relative to state collections, not relative to the IRS) better organized enforcement system. If cheating goes up , so will enforcement. If the sales tax is the only (or largest) revenue steam, the government will make enforcement a priority and not a secondary response.

johns43:

Like I said about the Porsche, it’s not worth trying to scam the system for 7%. 37% ($37,000)is entirely different, especially with a more compliant system. No, it doesn’t work that way now. You can only deduct the depreciation off against your profits on the business, which of course would be miniscule. (Please don’t tell me the price of that $100,000 Porsche is going to drop by 30%. It’s made in Germany.)

>>>>Quote “If you sell to someone in Texas from a business in Maine, the overseeing organization will be able to watch the transaction at both ends.”

Can you not see that this as yet unnamed agency you envision is getting near omnipiscent?

>>>>Quote “Wait until the displaced IRS agents are filling the positions of enforcement in the state agencies tasked with collection/remittance, and they are no longer distracted by all the paperwork and investigation which currently bogs down income tax collection. ”

>>>>>Quote:When every state is working together to track not only interet sales, but intrastate sales through brick and mortar establishments, the system will become much more homogeneous, and integrated, not to mention simpler.

50 different states, controlled by 50 different governors and legislatures are NOT going to setup a system to improve on the IRS, no matter how screwed up the IRS is.

Your enthusiasm and your faith in human nature are commendable, but human nature is what it is. Wishing otherwise will not change it, and just because I understand that doesn’t mean I spend my time curled up in a ball.

I promise to read your response, but I will not be responding. Takes me to much time.

webdog said:
…No, it doesn’t work that way now. You can only deduct the depreciation off against your profits on the business, which of course would be miniscule…
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reply:
Just to be sure that my point is clear; you’re right, it doesn’t work that way now, and will not work that way in the future.
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webdog said:
(Please don’t tell me the price of that $100,000 Porsche is going to drop by 30%. It’s made in Germany.)
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reply:
Another very good point sir. The cost of imports will not drop in the same manner as the price of domestic goods. That is one of the intended boons for domestic manufacturers. Within the states, import prices will rise overall by the amount of the Fairtax, but domestic product prices will remain the same overall. That means that to remain competitive in our market foreign manufacturers will have to set up shops here and hire Americans to work in them.
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webdog said:
>>>>Quote “If you sell to someone in Texas from a business in Maine, the overseeing organization will be able to watch the transaction at both ends.”

Can you not see that this as yet unnamed agency you envision is getting near omnipiscent?
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reply:
I don’t know about omniscient or omnipresent, but it will have a very deep and broad overview of all levels of commerce, yes. The thing which makes it so non-intrusive compared to the IRS is that it will look at ONLY public business transactions. You will never have to expose your personal financial information unless you find yourself under investigation for tax fraud, and then it will take a court order, not just a request from the local IRS office. Another very good incentive for keeping good business records.
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webdog said:
>>>>Quote “Wait until the displaced IRS agents are filling the positions of enforcement in the state agencies tasked with collection/remittance, and they are no longer distracted by all the paperwork and investigation which currently bogs down income tax collection. ”

>>>>>Quote:When every state is working together to track not only interet sales, but intrastate sales through brick and mortar establishments, the system will become much more homogeneous, and integrated, not to mention simpler.

50 different states, controlled by 50 different governors and legislatures are NOT going to setup a system to improve on the IRS, no matter how screwed up the IRS is.
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reply:
It won’t be fifty different states setting it up, just one agency at the national level. The states will be in the role of collector/remitter, not legislators. They won’t make the rules, and they won’t enforce the rules. They will only collect and remit.
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webdog said:
Your enthusiasm and your faith in human nature are commendable, but human nature is what it is. Wishing otherwise will not change it, and just because I understand that doesn’t mean I spend my time curled up in a ball.

I promise to read your response, but I will not be responding. Takes me to much time.
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reply:
Oh I don’t know. People surprise me pleasantly all the time. Smile at a stranger or hold a door open and you get a completely different reaction than if you just meet their glance, pass judgment, and keep walking. Give people something worthwhile to work toward, some feeling of belonging to a group that is working for good, and a reasonable hope of success, and there’s no telling what good might come of it, or how soon it might come to fruition. Add to that an actual understanding of the goal and the benefits of attaining it and miracles happen.

I’ve had enough of being drained because very wealthy men think of government service as a way to make themselves and their friends richer, and I’ve had enough of just whining about it. This is a way to get their shenanigans out in the open, and move toward changing the organizational underpinnings which make those shenanigans even possible. Time to shine a light on the roaches and chase them back where they came from.

We’ll know when we’ve succeeded, because they will no longer be willing to spend tens of millions of dollars to get voted into a job that only pays two hundred thousand. Consider that while you’re thinking about how hard it might be to hold the little guys accountable under the new system.
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Also, for just a moment, put aside the discussion of the Fairtax. Isn’t there something outrageously wrong with the fact that we (lower/middle class making less than $100,000/yr) are paying nearly forty five percent of our gross salaries to taxes both obvious and hidden; national, state and local?

That is not an exaggeration and I for one find it impossible to either excuse to myself, or further tolerate and greet with inaction.
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Keep asking questions, and if you can’t find anything against it except your conviction that people will never let it work, then maybe you might want to reweigh the possible benefits, against the difficulty inherent in change, even for the good. Peace out.

so what if someone makes more and saves a lot of it? a person earning 25,000 and spending it all would pay tax on 25,000. a person earning 100,000 and spending half would pay tax on 50,000! it’s an elective tax – pay as much tax as you want by spending as much as you want.

the people that don’t earn as much and therefore have to spend a greater percentage of their earnings are reimbursed proportionally greater by the prebate, insofar as a 500 prebate is proportionally greater to a 25,000 earner than a 100,000 earner.

When the churches find out their donations are no longer tax deductable, this ‘fair’ tax will be DOD.

Steve, Why So? “When the churches find out their donations are no longer tax deductable, this ‘fair’ tax will be DOD.”

Why so? whhat would you deduct it from?

On average you have to earn $125.00 to have $100.00 inyour pocket.

Deductions
UNDER THE INCOME TAX
OK, lets say you made $125.00 ( I’m keeping the number simple)
Mr. Income tax takes $25 in withholding. You now have $100.00 in your pocket. You donate that to the church.
At the end of the year, Mr. Gov’t says you get a $10.00 deduction but no interest on the money they kept all year.
You came out with $115.00 available to you and $10.00 given to the Gov’t. So out of your $125.00, you gave $100.00 to the church and got back $10.00 for your trouble.

UNDER THE FAIRTAX

OK, lets say you made $125.00 ( again, I’m keeping the number simple)
Mr. Income tax takes $0 witholding because there is no income tax to withhold from..
You now have $125.00 in your pocket. You give $100.00 to the church.

So out of your $125.00, you gave $100.00 to the church and you kept $25.0.

NOW YOU PICK….. Do you want $10.00 from an income tax deduction or $25.00 from the FairTax not taking your money in the first place??
Ashford Schwall

I was for the Fair Tax. Then I met Ron Paul, and now I’m for NO TAX.

Are you FairTax opponents crazy?! The FairTax is the result of years of research by economists who know a lot more about the economy and taxes than you do. Your arguments against the FairTax are nothing more than copy/paste from others who don’t have a clue themselves. Bruce Bartlett, yeah, a Reagan Republican, that’s who you trust. Gimme a break.

The tax system we have now is a mess. The IRS is corrupt. And you all want to go against a plan that would eliminate decades of pain and criminal activity by the government? The FairTax is worth a try. If it doesn’t work out after a few years, fine, we’ll try something else. Until then, shut up!

We are all complete fools….We are truly the boiling frog. A brand new IRS “rule” is that your accountant is required to either flag your return with an IRS form or fill out a form saying that they advised you that the tax advice they gave you may get flagged for an audit and has a likely hood of losing in court. If they don’t do that they may have to pay a hefty fine and risk losing their CPA license. CPA’s in the piece acknowledge that this new rule makes your tax preparers an agent of the IRS and will cost the tax payer even more money since the preparer will want to do extensive research before giving advice. It’s in this months FORBES magazine. This is yet another reason why we need the fairtax now more then ever and sooner rather then later. If you were a conspiracy kind of person it may cause you to think that the IRS is turning up the heat for entertaining the thought of the FAIRTAX. STOP the madness work on making the FAIRTAX a true alternative.