done this dance before

my bit of dissent revolves around who set it up, and who benefits the most

big business

they don't have to pay any taxes any longer under this supposedly "fair" plan

i know their side of the argument, that they never pay taxes anyway..the consumer does

but unless every stock/equity trade is treated the way they do "consumption" for tax purposes it remains just another dodge scheme

add that simple thing, and tack on and import tax for ALL goods coming in the country (higher rates if there is not equitable trade between us and them...like with, say China) and i'll shout priase form the rooftops

without those two things, it remains a very clever scam for the benefit of the few, imo

well written article...thanks for sharing it with us

Excelsior?

I've been in favor of the FairTax since more than a year ago, when my own tax guy gave me a copy of Neal Boortz's book.

Thanks, Thomas, for a clear and concise explication of it.

What the great Gonzo said in comment #1.

To amplify his comments: Israel has a 15.5% VAT, which is a national sales tax. If we removed that, and moved the burden of the taxes onto a progressive income tax system, consumption here would increase immensely. So would prosperity. An income tax can be arranged so that there is barely any paperwork involved, and the Israeli income tax levied on individuals is such a system.

Be grateful for the vampire that is not sucking the blood out of your veins, Tom - a national sales tax.

i forgot to mention the boondoggle of the "pre-bate"

this one really boggles my Mind to try and get around...how does it make it "simpler" in any way?

no..fair would be an across the board consumption tax on everything under the sun...goods and services...add the import tax, and be done

this way a business buys something, it pays tax on what they buy, same as a person...you buy a stock, you pay your tax...your house, toilet paper...anything

with the volume of consumption (slightly higher for imported goods)the actual percentage wouldn't be burdensome...especially in light of removing the income tax

but you can have NO exceptions for ANYONE or anything...

otherwise, throw out the word "fair", it reeks of a marketing gimmick/Orwellian double speak under the proposed plan

Excelsior?

The prebate is the largest social welfare and wealth redistribution scheme ever conceived of. It's payoff to the left to get them to go along with the fair (lol) tax.

Here's a radical thought: income tax set at the same rate for EVERYBODY AND EVERY BUSINESS. Across the board. Same percentage of your income, no matter what you bring in, so you pay according to your ability to pay. Deducted at source, whether it's wages, social security, welfare, child support or whatever. The rate itself could be variable: reviewed annually and raised or lowered depending on national need. If Congress starts seeing dollar signs in its sleep and sets it too high, vote their asses out next chance you get. Now how fair and simple is that?

One thing I don't understand is how all you folks can fail to see that ALL the taxes a corporation (or any business) pays are passed through to the customer in the price of the goods or services.

The folks who rent my house pay the property taxes, not I. I merely collect the tax from them and pass it on to the government; the taxes are not coming out of my pocket, they're coming from my tenants.

It's a simple concept. The ONLY entities that REALLY pay taxes in our economy are the people.

The tax stops here...

i understand your point Clavos, but here's my thinking

my proposal lets the Free Market work FOR taxpayers...to wit - those businesses that take a small hit to their profit margin in order to keep their price after consumption tax low in order to increase sales volume will be rewarded with higher sales and thus greater profits than those who just "pass the cost along" in toto

how's that grab ya for Enlightened capitalism?

oh yeah..nice to see ya got yer keyboard fixed there, Lumpy

Excelsior?

Doc, I'm really bloody surprised at you, to say the least (consider that a slap on the wrist for evensuggesting such a thing). Flat taxes (and that's exactly what the so-called Fair Tax is) are the economists' equivalent of the Flat Earth Society.

Think about it, old boy, in terms of this so-called Fair Tax idea (which is actually quiote right wing in terms of how it affects the lower paid). If I earn $200,000 a year, and rush off to buy my groceries for a family of four, and let's say it comes to $100 (if I buy it at Aldi!), I pay 23 odd dollars in tax.

Now, a single mother of three, perhaps working part time on a wage of let's say $45,000, dumped by her husband who is fighting her through the courts for custody and won't give her a cent for the kids, does the same shop and it comes to around the same amount.

She also pays $23 in tax, not to mention 23 per cent on everything she buys for her children's school needs, holiday entertainment, etc.

While I would have to do the same on my hypothetical $200,000, it would be far less of an impost on me than her simply because of my earning power. I honestly don't have a problem with paying a bit more tax so that she pays a bit less.

These so-called Fair Taxes are in fact extremely unfair. I favour a GST/VAT of about 10 per cent on all goods and services except basic unprocessed/uncooked foostuffs (milk, meat, eggs, butter, vegies, fruit, bread, etc), coupled with an income tax applied on a sliding scale that is less at the lower end and higher at the top end, but not so high that it discourages people from working hard to earn a quid.

Basically, the so-called Fair Tax idea is an extremely to the right scheme that gives higher earners more money and lower earners a lot less.

For that reason, it's also extremely bloody selfish.

good input STM, always a pleasure to hear the thoughts from Down Under

i forgot to mention, my proposal also has the added benefit of promoting American manufacturing/jobs/services

by using a higher consumption tax rate for imported goods and services (say 7% for domestic and 10% for imports, the actuarians would have to hammer out the exact rates needed) you have tax policy actually helping to foster and create American jobs as good business?

example - that Toyota plant making cars in the U.S. would have a lower retail price than a comparable car built in the Mexican Ford plant that would have the higher rate applied on similar models of cars...

folks can still choose what they want, but pricing now favors the domestically produced car!

i like STM's idea for exempting domestic uncooked foodstuffs...so i'm stealing it (thanks cobber)

i would have one tax free exemption...US savings and Treasury bonds!

and there's the gonzo tax plan, film at 11

Excelsior?

Yeah, but Stan, I'm not talking about sales tax (there are holes in that scheme you can sail the QM2 through, so bugger it say I), but income tax.

Of course here in the US, the whole thing is complicated by state taxes, which are levied on top of federal ones (although some states, such as Oregon and Texas, raise revenue by other means).

I do long for the simple, hassle-free (for Joe Bloggs, at any rate) Pay-As-You-Earn scheme we had in England. Haben Sie in Australien etwas ähnliches? Sometimes, in early February, I really feel that you need a master's degree in economics just to live here...

(Sorry about the lapsing into German back there - I think it's from discussing European beer with zing on another thread...)

Lumpy: "The prebate is the largest social welfare and wealth redistribution scheme ever conceived of. It's payoff to the left to get them to go along with the fair (lol) tax."

Very true. Unfortunately, such a payoff may be necessary to get it passed. Otherwise, how do you placate all those "single mothers of three who earn $45,000 a year"?

"Very true. Unfortunately, such a payoff may be necessary to get it passed. Otherwise, how do you placate all those "single mothers of three who earn $45,000 a year"?"

Don't be a dickhead Thomas ... you know this tax isn't fair. It's designed to give more money to high-income earners and less to low-income earners. Period.

As a person in my country in the highest tax and income bracket, I can tell you with absolute certainty that I like the idea that I pay a bit more so the single mother of three pays less.

There is nothing more detrimental to the wellbeing of a nation than having the haves having too much and the have nots having too little.

Somewhere in between keeps the social fabric unruffled, and your Fair Tax idiocy won't achieve that by a long shot.

Just remember, it's not always about you ...

Perhaps that's America's problem, in part. No real sense of community.

STM: "Don't be a dickhead Thomas"

You're the first in this thread to reach for abuse rather than a rational and civil response, so I guess you lose.

STM: "There is nothing more detrimental to the wellbeing of a nation than having the haves having too much and the have nots having too little. ... Just remember, it's not always about you"

It seems you assume I'm rich. FWIW, I'm not in one of the higher income tax brackets. I make well under six figures a year and I don't own a house (I missed out on the real estate boom).

Speaking of which, one of my fellow libertarians opposes a national sales tax, because he'd lose his mortgage and marriage deductions. He thinks the current system is more favorable to home owners (who are usually not the working poor).

But even though I'm not in one of the upper tax brackets, I hate those forms. They're a hassle, and an invasion of privacy. I'd even be willing to pay a little more in sales taxes just to never have to fill out a tax form again.

so your advocacy of this misnamed program stems from not wanting to fill out forms?

i'm a homeowner , married and i itemize...do my taxes online ...which takes under 2 hours...where's the difficulty here?

imo, certainly not worth even the bullshit the pre-bate would cause...much less the objections i raised earlier

your mileage may vary

Excelsior?

So Thomas, if the income tax and the way income was withheld in you country was reworked to make the amount nearly equal what the tax owed should be, and no forms had to be filled out, would that please you? That is usually the way things work here in Israel...

The difficulty, gonzo, lies at least partly in worrying whether, in your mind-bendingly complex journey through H&R Block Online or TurboTax, you've missed or misreported something that the IRS auditors are going to nail you on good sometime in the next five years.

Ruvy: you have PAYE in Israel too? Don't you just love it? :-)

actually Dr...it ain't hard at all, i don't find a single bit of the H&R process "mindbending" in the least...

before i sit down to do it, i have all my paperwork right with me, and i enter what's asked for and click away

now, it is possible i don't squeeze out every dime i possibly could..but if i wanted to spend a little extra on their services to have a pro go over it, i'm sure it would be fine..with their guarantee and all

but since i'm not trying to game the system in the least...i have no worries about an audit

now, would i rather not need to use H&R?...yeah, but i'm leery of using the IRS system alone, and am more comfortable having the H&R guarantee...i consider their price for the service reasonable under the circumstance

but that is just me...your mileage may vary

Excelsior?

Thomas: "You're the first in this thread to reach for abuse".

Once again, don't be a dickhead - dickhead is not a form of abuse, it's a form of address.

Thomas: "But even though I'm not in one of the upper tax brackets, I hate those forms. They're a hassle, and an invasion of privacy. I'd even be willing to pay a little more in sales taxes just to never have to fill out a tax form again".

And in the process, consign those who are really in need to even more hardship? Think about it seriously Thomas.

DD: "Ruvy: you have PAYE in Israel too? Don't you just love it? :-)"

We have PAYG (Pay as you go) here too, but you still have to put in your tax return forms.

What's the problem? It doesn't take that long, especially if you get a tax accountant to do it :)

Lately, though, I always end up owing. Bad news.

A moments thought reveals the flaws in Clavos' theory that businesses pay no taxes, just collect them from customers and pass them on to the government.

1) It is Clavos' responsibility to pay property taxes whether he has tenants or not. If his tenant absconds in the night Clavos must still pay. If he is unable to rent his domicile he still must pay. he can neither protest to the government that he has no tenant, nor can he chase old tenants and demand that they pay more retrospectively to help him pay his taxes. Clavos is indeed responsible for paying his property taxes.

2) one could equally well say that no worker really pays taxes since he must, perforce, collect sufficient moneys from his employer to pay those taxes levied on his income.

Clavos' argument is so easily refuted that one wonders that anyone advances it anymore.

It's not just the forms, it's the principle. It's an invasion of privacy.

Ruvy, the Israeli system may please me more, though I'd need to know more details.

Devising a 'fair tax' system has been the hobby of shallow thinkers for a long time. Alas, NO tax system is fair. Someone suffers unfairly, and some scoundrels benefit unfairly. Always.

If it must be so, that any system will be unfair, then it is best to keep the tax amount small and to spend wisely on projects of the greatest general benefit (instead of private pelf).

"It's designed to give more money to high-income earners and less to low-income earners."

I suppose by give you mean allow them to keep what they've earned.

"one could equally well say that no worker really pays taxes since he must, perforce, collect sufficient moneys from his employer to pay those taxes levied on his income."

Not really, without income there is no INCOME tax. Don't you read this stuff before you post it?

bliffle,

I don't think you refuted anything.

Of course I must pay my property taxes even if I have no tenants, but my point was that, while I DO have tenants, THEY are paying them; nothing is coming out of MY pocket.

I didn't say I don't have the responsibility to ENSURE that they are paid; merely that while the house is rented, I collect the money for the taxes from the tenants and pass it on to the government. That's a true statement.

Re income taxes, see Doug Hunter's comment #26.

"...it's the principle. It's an invasion of privacy."

You can't be serious, Thomas. If you have a cell-phone, or that bluetooth technology or a blackberry, or blueberry or huckleberry, or whatever the hell it's called, some prick can follow you personally around like a little pup because of the GPS technology built into it... Did I mention those computerized maps?

And when I say follow around, I do mean anywhere your technology goes. If you happen to have your cell phone strapped onto your belt when you are on the throne thinking great thoughts, whoever is trailing you can follow you there.

Tax forms are pieces of paper, fer cryin'out loud, designed to squeeze money out of your wallet, that's all. They are a royal pain in the ass (not as bad as real pains in the ass, hemorrhoids, BTW), but throw them in the trash and they don't emit a little beep alerting federal goons to beat the living shit out of you.



Yet.

Ruvy, I've never had a blackberry, but I have an old cell phone. I'm a real Luddite, in some ways. I've never text-messaged, I have no GPS service (although I realize all phones have it). My phone isn't even color and it takes no photos.

You're right though, that there's more we can do about privacy. We give it up too easily, without thought.

Another advantage of the Fair Tax is that by getting rid of deductions, it disempowers lobbyists and politicians from economic tinkering. Politicians shouldn't be able to to create "economic incentives," manipulating us into how or where we spend our money.

There should be no "tax-free zones" or deductions. Such things are discriminatory. It should not be for the govt (or lobbyists, or unions, or businesses) to pay off politicians to buy themselves an economic advantage.

With a Fair Tax, all businesses and locations are on an equal footing.

Don't be a dickhead Thomas ... you know this tax isn't fair. It's designed to give more money to high-income earners and less to low-income earners. Period.

stan, you may need to read up some more on the fair tax. it really isn't structured that way. because it's a sales tax it hits those who consume more, and because of the prebate it exempts low income earners from any real taxation at all. if it has a flaw, i think it is that it will probably hit middle-income people more heavily than the current system. that and, of course, that the rate proposed is not realistic and the tax will probably be considerably higher than they claim.

dave

Clavos claims:

"Of course I must pay my property taxes even if I have no tenants, but my point was that, while I DO have tenants, THEY are paying them; nothing is coming out of MY pocket."

But YOU still must pay tax even if the house is empty.

"I didn't say I don't have the responsibility to ENSURE that they are paid; merely that while the house is rented, I collect the money for the taxes from the tenants and pass it on to the government. That's a true statement."

Not if you collect less than your expenses, as is common here where landlords are speculating on the appreciation and have negative cash flow. In fact, they can often justify that negative cash flow to balance excess positive cash flows from other investments and level their taxes.

Doug,

"...without income there is no INCOME tax."

Doesn't apply to the situation.

Actually, it makes more sense to eliminate all personal income taxes and only tax companies, after eliminating loopholes and tax subsidies, of course. There are fewer tax subjects so the paperwork is reduced, fewer chances to cheat because of the chance of whistleblowers, etc.

a side on Privacy - Thomas...you don't have a shred of privacy left...you have posted on the Net with your full name and middle initial...

"contemplate that upon the Tree of Woe" - Thulsa Doom

Excelsior?

Gonzo Marx: "a side on Privacy - Thomas...you don't have a shred of privacy left...you have posted on the Net with your full name and middle initial..."

But that was my choice. Regarding taxes, I have no choice.

The Fair Tax is thus more Pro-Choice on privacy than an income tax, which forces you to file financial info with the govt.

i understand, Thomas

i still stand by my proposal for a consumption tax with the outline i have put in this thread

i consider it much more fair than the proposal..it eliminates the ridiculous "pre-bate", and promotes growth of the American economy and American business as well as utilizes the free market systemics for both positive and negative feedback loops...it even adheres to your desire for privacy and no paperwork on the part of the Individual

what's not to like?

your mileage may vary

Excelsior?

bliffle,

"Not if you collect less than your expenses, as is common here where landlords are speculating on the appreciation and have negative cash flow. In fact, they can often justify that negative cash flow to balance excess positive cash flows from other investments and level their taxes."

Talk about straw men!

I was talking about MY house; not anyone else's, and it has VERY positive cash flow; so positive that I have recouped every dime I ever put into it, including purchase price, interest payments (while there was still a mortgage) and ALL taxes and insurance. My net profit so far is equal to nearly half the original purchase price of the house, and I expect to rent it for many years to come. and that doesn't count the deductions (including the most important one: depreciation) i get from it every year at tax time.

"But YOU still must pay tax even if the house is empty."

Of course. But while it's rented, they are paying enough to tide me over between tenants. It rarely stays vacant more than a month or two every 2-3 years.

I know how to do the math, bliffle; in effect, I am NOT paying taxes on that house (or insurance, or maintenance, either, for that matter).

Gonzo. what you're proposing is what flat taxers proposed before they realized that investment was good for the economy and that they could never pass the reform without paying off the demos with the prebate.

Lumpy - i agree investment is good, i just think that it is as much consumption as anything else, and should be taxed upon purchase...this eliminates tax when selling and any capital gains is not taxed

no loopholes

the ONLY exempt items in my proposal are uncooked foodstuffs produced domestically, US savings and Treasury bonds

other than that, if you buy it, you pay tax on it...individuals and business alike...sounds pretty fair, eh?

and as i said, by having a higher rate for ALL imported goods and services, you provide incentive for domestic production and penalize outsourcing since it doesn't matter where the company is based, only that the goods/services themselves are imported

as i also stated, the prebate is bullshit, imo

i have still to read anyone poke any holes in my proposal..as opposed to the many poked in this "fair tax" which is anything but fair...

both plans have many similarities, but for all the high paid "experts" in theirs, mine avoids the prebate boondoggle, closes the loopholes big enough to drive a battleship through and stimulates the domestic economy via positive/negative feedback loops

seems like a solid capitalist proposal that is fair to ALL, to me

Excelsior?

what's not to like - ?

taxation without representation

(btw - manipulating prices and therefore consumer behavior through differential tax rates is not a free market mechanism)

lol..well troll, if it gets voted in by our representatives and the old system is tossed out...we have had our representation, eh?

and the prices are not being manipulated, far from it....businesses can pass along the cost of the tax directly if they choose, there is just incentive to keep prices low from the consumption end (the Market) and to purchase domestic instead of imported (again via the Market)

your mileage may vary

Excelsior?

Lumpy #38:

Not quite, Lumpy, because gonzo's also proposing protectionist tariffs not included in the FairTax.

Gonzo's stated reason for the tariffs is to protect American "manufacturing/jobs/services." Coming, as I do, from a country that has had protectionist tariffs for most of a century, I can tell you that such tariffs benefit the business sector, yes, but not the workers, who receive none of the increased profit, but do pay higher prices on everything.

In Mexico, the beneficiaries have been the oligarchs who own most of the significant industries and corporations; here in the US, since we are already a corporatist state, the beneficiaries will be the corporations and their stockholders, NOT the workers.

Beginning about twenty years ago, Mexico began to ease their tariffs. The result has been a significant increase in industry in general, and the fastest growing middle class in Latin America.

"(btw - manipulating prices and therefore consumer behavior through differential tax rates is not a free market mechanism)"

Quoted for Truth. (With apologies to gm)

Clavos, to clarify..i'm not proposing any kind of tariff..that would be the government collecting on the imports when the goods are brought in...my proposal collects the taxes upon purchase

it's the purchase transaction and price that gets taxed...for everything (with the few exceptions i've listed)

hope that helps

Excelsior?

Naysayers rail against the FairTax plan (which becomes a de facto defense of the INCOME TAX), because they apparently believe:

• Workers love having their pay confiscated, hourly, through gov't withholding and don't mind getting their money back by involuntary servitude - to the tune of 50 hours/year (on average) - preparing an annual tax return

• It's better to have theIRS fishing through citizens' income transactions (complete with audits, interest, penalties, and threats against individuals and families as well as confiscation of their homes and bank accounts) rather than - Gawd forbid - issue a gov't check to an individual (while pretending that Social Security payments disbursement logistics really can't work for "prebates")

• Real "fairness" advocates don't challenge the tax system with a workable alternative like the FairTax that fixes only some problems, they want it ALL fixed - now

• Real "fairness" advocates don't get up off his/her duff to actually do something to effect constructive change, they just sit around blogging and complaining about government spending - and critiquing workable alternatives (like the FairTax plan, for example)

• "Hidden taxes" in higher prices are fine, because they're not "taxes" (hey, forget that families are really paying business's costs for complying with a business income tax)

• Only lobbyists, special interests, and business deserve "handouts" (the politician gets a payoff from a lobbyist, the lobbyist gets a payoff from its client, and the citizen gets higher taxes and/or prices that pay for it all)

• It's far better to have a gargantuan tax collection "service" in Washington, than to have 50 decentralized, smaller, leaner state collection agencies collecting taxes from fewer sources

• That certifying the number of persons in your family (annually, and, ancillarily, upon change in household) is an abrogation of our freedom - more intrusive and complex than filing a tax return every year subject to threats and intimidation by theIRS.

I'm certainly glad that there are real "fairness" advocates out there blogging - to help bring real "change" to America (via the coffers of theIRS).

Demand TRUE tax reform of your representatives in Congress

gonzo,

But higher for imports, right?

And, though the POS merchant will "collect" it, he's not going to be able to keep it, right? The gummint will get it in the end.

Even with lipstick on, it's still a protectionist tariff sow.

and not only that - !

while I am well represented by the gremlins in the house and the trolls in the senate I'd have thought that the rest of you might be less than satisfied - not a human in the bunch

lol for the troll!!

i didn't say we were well Represented, just that some representation was going on...but ya knew that

Clavos - fair enough, so here's the thing, is my proposal better or worse than the current system in your opinion? do i plug the holes in this "fair tax" proposal and achieve a more equitable system that also incentivises American goods/services/jobs first, but not too painfully to stop imports from being profitable and competitive?

you have a better idea? i'm all ears

Excelsior?

i didn't say we were well Represented, just that some representation was going on

Sure 'nuff. It's the 'my congressman is great, it's just all the rest that suck' syndrome.

Dave

gonzo,

No, I don't have a better idea; mostly because I don't see the problems you do with the FairTax, so I haven't really tried to come up with a replacement or modifications.

I know what you've said you don't like about it, but I'm not convinced, especially by your objection to the "prebate" and your objection to the non taxation of equity purchases.

I should think you'd be in favor of encouraging savings, in the case of the latter.

i am..not taxing the sale of stocks bugs me, and is a blatant loophole

there's other things, but you got the gist of my objections

i still think my proposal is more fair, and would have a lower overall rate due to taxing all consumption for everybody

but the point is moot, ain't like anybody would listen ta lil ole me about it, eh?

Excelsior?

As for taxing the sale of stocks, the obvious reason I see for not doing it - aside from the obvious fact that stocks are not goods or services - is that one of the things we want people to do is save money. And given the size of the tax we're talking about here, in anything less than a boom market, or with conservative investment in a mutual fund, you'd spend the first 5 years of your investment digging out of the tax hole.

Taxing stocks would also eliminate the liquidity which they currently have. Would they get taxed yet again when you sell them to someone else? That would mean stocks might be taxed over and over again, which is something the Fair Tax scrupulously tries to avoid. Maybe the right compromise would be to tax stocks purchased in an IPO or when new stock is issued and not tax the resale. That would work better.

Dave

Higher income earners (that's me among 'em) SHOULD pay more tax than lower-income earners.

It's a few grand out of my pocket, but much less of an impost for me than it would be for lower and middle-income earners under these ridiculous flat-tax schemes. Fucking fair tax - what bollocks.

And like I say, people shouldn't mistake the willingness of people like me to embrace sliding income-tax scales as leaning towards socialism (well, that's a purely American perspective from my experience).

It's about community, which is a different thing.

I'd rather live in a happy society like this one where the wealth is distributed (reasonably) fairly than one in which it's "every bastard for himself, and fuck the rest of youse".

And as you can see from my arguments here, I am (and have been) willing to put my hard-earned where my mouth is.

The good that results from it is why I chose to live in Australia, not America, although I have nothing at all against the US. It came down to a personal choice of what kind of society I wanted to live in.

It might seem a small thing, but when you see first-hand how two virtually identical cultures (you guys speak funny, though) can also be very different because of their different attitudes to this kind of stuff, it's a no-brainer.

Here's the most obvious thing: the gap between the haves and the have-nots is far less obvious, resulting in a culture with less obvious poverty and class divisions.

ummm..stocks ARE goods, they are ownership shares of a tangible asset, a corporation

remember, i am proposing a consumption tax on EVERYTHING except non-processed foodstuffs, US savings and treasury bonds

this should help to keep the rate pretty low, considering our consumer driven economy

but hell, i'm going to stop repeating myself here, since i've laid it out and i still stand by my opinion it is more fair than the proposal in the Article and more comprehensive

Excelsior?

Dave sez: "..one of the things we want people to do is save money. "

What you mean "we", right man?

Why do you want people to save more? Savings appear to be efficacious only in assuaging ones parents, but not in helping economic systems. It's a theory that adults seem to hold, but which doesn't work well in economic systems. In fact both theory and practice show that net money flow is roughly inversely proportional to savings rate, i.e., as savings increase net money flow decreases. Increasing the US savings rate would have a greatly disproportionate effect on the economy, to it's detriment.

The US post-WW2 prosperity was based on non-saving and indebtedness. And European nations that followed the USA model have similarly benefited.

Rather than exhort ones children to save one ought exhort ones children to make the payments on installment debts in a timely manner.

would a US tax restricted to consumption have an impact on the world economy equivalent to gonzo's proposed tax on all transactions - ?

to what extent does historical data support the maxim: taxed activities will decrease - ?

It's a fair (pun intended) question, troll, and one I've wondered about, too.

Is there such a thing as historical data regarding the effect of consumption taxes in this country? I wonder...

Stan,

You've commented several times about the inequity of the FairTax proposal.

I think the proponents have adequately addressed that issue with the "prebate" and the fact that it's a consumption tax, which means that, after basic needs are met, it's a voluntary tax.

bliffle,

I think you're right. We don't really want everyone to save in lieu of spending, because we're a consumer based economy.

However, with higher savings rates, both the savers themselves and the institutions that hold their savings have more funds available for investment, which also stimulates the economy. People like Warren Buffett stimulate growth in the overall economy and create jobs with their investments.

bliffle, we just want them to save now so that they can spend later. and if the money is saved through investing, then it's out in the economy doing good and they also get to spend it later, so it does double good work.

dave

This IS a consumer oriented economy. And the nature of modern business is to follow consumer leads, not to innovate new markets and products. Witness the plights of Ford and GM. The advancements in computers and internet we've seen in the last 20 years have been in spite of the big companies. It has been consumer demand that created the markets.

In the modern context, increased investment mostly take the form of cost reductions, which usually means layoffs. Large corporations have been successful in dishing off expensive and risky research and development to other people, usually the taxpayer. the mantra is : "socialize the risk and privatize the profit".

Re-directing monies from consumer spending to investment means reducing the benefits of the high Economic Multiplier of consumers while increasing the small effect of the investment Multiplier.

What is proposed would be directly against the forces that have created our boom economy and would be seriously debilitating to the USA. It would also be a severe Security Risk because it would diminish our ability to develop and deploy the military and economic means we need to remain viable as a minority nation in the world.

Look before you leap.

An observation- Most people, myself included, who were opposed to the Fair Tax or by whatever name you like to call it, due to a lack of information and background reading about what it is, and what it is NOT. Just the cost of compliance is in the billions of dollars. Companies make decisions based largely on tax economic impact, and in their planning. The tax code is unintelligible to mortals, and to some of the best economic minds. There ARE some considerations that need to be made before it is instituted, and it is not perfect. It is, however, a LOT better than the present tax system. This fair tax idea is supported by many Democrats, Republicans, Independents, Libertarians and so on. Incredibly wide-based support. In my view, the fair tax, flat tax, a rose by any other name would smell as sweet. It deserves serious consideration by the Congress and I would suggest you ask your candidates do they support or do they NOT support the Fair Tax. Some democrats and one socialist will not support it. Why in the world would they want to support something that actually returns economic power to the citizens of our republic? Unfortunately, some politicians view power as the ability to control large sums of money, and welcome increased government interference in our lives. I would remind them that it is OUR money in the first place.

Does anyone actually think this will ever be more than a glimmer in the eyes of the libertarians? It's a gigantic, radical overhaul. I would be astonished if it ever happened.

[I say this as no fan of the current system and also no opponent to radical change. But a shift this large could have massive unintended consequences as well.]

"Witness the plights of Ford and GM."

Due entirely to execrable management over a span of fifty years manifested as a failure to remain competitive as to both pricing and quality.

"In the modern context, increased investment mostly take the form of cost reductions, which usually means layoffs."

Necessary because in a global economy (the reality of today, like it or not), US workers are no longer competitive in price (wages + benefits).

We have managed to remain competitive in terms of productivity by dint of massive automation coupled with high tech innovation, but even that, as Maurice has pointed out, is slipping severely.

We tax our businesses too much already; this is why Ireland is rapidly replacing the USA as the software development capital of the world, and they are doing it with US companies, most notably Microsoft and Oracle.

While many who are invested in the current income tax system seek to demagog the well-researched FairTax plan (*), its acceptance in the professional / academic community continues to grow (**). Failure to enact the FairTax - choosing instead to try to "flatten" a NON-FLATTENABLE income tax system - will result in an IRREVOCABLE economic meltdown. (*** Impossible, you say?)

Here is why the FairTax MUST replace the income tax. It's:

• SIMPLE, easy to understand
• EFFICIENT, inexpensive to comply with and doesn't cause less-than-optimal business decisions for tax minimization purposes
• FAIR, loophole free and everyone pays their share
• LOW TAX RATE, achieved by broad base with no exclusions
• PREDICTABLE, doesn't change, so financial planning is possible
• UNINTRUSIVE, doesn't intrude into our personal affairs or limit our liberty
• VISIBLE, not hidden from the public in tax-inflated prices or otherwise
• PRODUCTIVE, rewards, rather than penalizes, work and productivity

Its benefits are as follows:

FOR INDIVIDUALS:
• No more tax on income - make as much as you wish
• You receive your full paycheck - no more deductions
• You pay the tax when you buy "at retail" - not "used"
• No more double taxation (e.g. like on current Capital Gains)
• Reduction of "pre-FairTaxed" retail prices by 20%-30%
• Adding back 29.9% FairTax maintains current price levels
• FairTax would constitute 23% portion of new prices
• Every household receives a monthly check, or "pre-bate"
• "Prebate" is "advance payback" for monthly consumption to poverty level
• FairTax's "prebate" ensures progressivity, poverty protection
• Finally, citizens are knowledgeable of what their tax IS
• Elimination of "parasitic" Income Tax industry
• NO MORE IRS. NO MORE FILING OF TAX RETURNS by individuals
• Those possessing illicit forms of income will ALSO pay the FairTax
• Households have more disposable income to purchase goods
• Savings is bolstered with reduction of interest rates

FOR BUSINESSES:
• Corporate income and payroll taxes revoked under FairTax
• Business compensated for collecting tax at "cash register"
• No more tax-related lawyers, lobbyists on company payrolls
• No more embedded (hidden) income/payroll taxes in prices
• Reduced costs. Competition - not tax policy - drives prices
• Off-shore "tax haven" headquarters can now return to U.S
• No more "favors" from politicians at expense of taxpayers
• Resources go to R&D and study of competition - not taxes
• Marketplace distortions eliminated for fair competition
• US exports increase their share of foreign markets

FOR THE COUNTRY:
• 7% - 13% economic growth projected in the first year of the FairTax
• Jobs return to the U.S.
• Foreign corporations "set up shop" in the U.S.
• Tax system trends are corrected to "enlarge the pie"
• Larger economic "pie," means thinner tax rate "slices"
• Initial 23% portion of price is pressured downward as "pie"
increases
• No more "closed door" tax deals by politicians and business
• FairTax sets new global standard. Other countries will follow

(copy/paste following links in browser address box)

(*) snipurl.com/taxpanelrebutted (displays .pdf)

(**) snipurl.com/econsopenletter (Lists every tax that FairTax will eliminate, together with the power they represent to pol's and lobbyists.)

(***) Listen to an interview where Prof. Kotlikoff elaborates: snipurl.com/meltdowninprogress


The time for sitting around, pontificating, is over. We have NO CHOICE but to ACT.

Great idea for bringing back those Economic Glory Days of the 30s:

"...i still stand by my proposal for a consumption tax..."

But anyway, if we did it surely a war would follow to create demand and regiment production. Oh, and kill 500,000 USA soldiers, too. Small enough price to pay, say I, for the ensueing recovery. Gee, just like the 20th century.

This foolish question reveals the depth of Clavos' ignorance:

"Is there such a thing as historical data regarding the effect of consumption taxes in this country? I wonder..."

Reveals his unfamiliarity with economic literature.

So enlighten me, bliffle.

let's see some.

[Edited...]

Ignorant as you say I am, bliffle, at least I'm not so Alzheimer's riddled that I put my comments in the wrong threads like you, old man.

Clav: I think the proponents have adequately addressed that issue with the "prebate" and the fact that it's a consumption tax, which means that, after basic needs are met, it's a voluntary tax."

Clav, with respect, and I've set out the reasons why I think this is an unfair tax. As Dave also points out above, while people on certain low incomes might be helped by the prebate, those in the lower middle income bracket would be much worse off.

It may be voluntary, but people need certain stuff to live, especially if they have kids.

It's amazing how it all mounts up. Calling this a Fair Tax is a total misnomer IMO.

It's also got as much chance of being implemented as have the views of the Flat Earth Society ...

Talking about restructuring the tax system is fine and dnady but we also need to talk about reducing wasteful spending.

OK, Archie, let's talk about terminating this free-spending administration which has increased government by 30% and started a high-priced futile unnecessary war in Iraq.

Are you with me Archie?

How about cutting $170billion of corporate welfare each year.

Are you with me Archie?

Maybe you'd rather talk about vacationing in Portugal, Archie? Lot of people around here are doing that. you'd probably like them.

Nice article, Thomas. And, nice try to the rest of you trying to set Excelsior straight. He's made it clear that he actually LIKES the current system (thinks he's protected by H&R), as opposed to having real CHOICE of whether he even pays any of the Fair Tax. He also doesn't realize that the Fair Tax added to imports just evens up the playing field for the US, as all US exports are now taxed at the destination country, in addition to carrying with them all the costs of our tax code embedded in their prices. All the other countries part of the OECD remove their embedded taxes from their products, but we can't because we have a direct tax. Once we go to the Fair Tax (an indirect uniform tax, like the Founders set up for us), our exports will be lighter by price and more competitive. And, we'll also have more products and services being manufactured in the US (more, higher paying jobs).

It appears that Excelsior would rather just stay in his state of comfortable misery, content with lost freedoms, and being forced to pay the taxes embedded in ALL goods and services, cascading like a snowball until they reach the consumer, as well as all other income taxes.

If he really wants to know the deal, its been simplified for him, along with a national citizen grassroots movement he can pariticpate in: www.OperationOffTheFence.org

Tireless...can you actually READ what i've typed?

not only have i stated that this system needs to be fixed, but i've put my proposal for HOW to fix it in this very thread, and discussed it on numerous occasions...

go back, read it again..then if you care to discuss it..i'm all for it, but you obviously have a prejudicial outlook..fair enough..but here's the thing

reading comprehension, and paying attention to the discussion will take you much further than merely sycophantically parroting what your masters tell you too

just as an example..the names gonzo marx...Excelsior is a tag line used to sign off...it mean...

always upward

so many things you are so factually incorrect about...how about we just give you a mulligan , let you go back and see why you are so mistaken about some things...and let you try again when you are feeling more connected to the real world and not fantasyland?


Excelsior?

"gonzo marx" -- sorry about the mis-identification. And, you're partially right. I didn't have time to read ALL of your ramblings; I stopped once it was clear you didn't know the Fair Tax.

Everything I said about the Fair Tax is true. I've done MY homework.

as i have done mine...this dance has been done many times before around here

things like , who wrote the proposal, and who benefits from it the most

hence my counter proposal

but thanks for being honest enough to confirm that you did NOT do all your *homework* on this Thread

which causes one to doubt just how much due diligence you utilize in other endeavors

enjoy your day...

Excelsior?

I'd rather live in a happy society like this one where the wealth is distributed (reasonably) fairly than one in which it's "every bastard for himself, and fuck the rest of youse".

This "every bastard for himself, and fuck the rest of youse" society has contributed more to charity than any other society worldwide.

On the question of taxing income or consumption, I present this argument. What is income? It is an individual's contribution to society. He performs services that benefit society and is compensated by his employer. Yes. I know that the employee's services directly benefit the company that he works for. But, the company benefits society by providing products and services and JOBS. What is consumption? It is the selfish acquiring of products and services for personal use. Why does it make sense to tax contributions to society instead of selfish consumption? It doesn't.

Since businesses provide benefits for society in addition to the personal rewards to its owners and stockholders, it seems counterproductive to tax businesses. Especially in light of the fact that those tax burdens are passed along to the end consumer.

The prebate is no more a redistribution of wealth than the income tax refund. The prebate is nothing more than a return of overpaid taxes, barring the small amount that will be income to those spending below the poverty level (equivalent to the Earned Income Credit in the current system).

There will be no need to add a tax to imports to make American products more competitive in the US. The FairTax will do this by simply removing any embedded tax component to American products while the imported products will contain the embedded taxes from its country of origin. The FairTax will also make American products more competitive overseas by removing any tax burden from exported products.

How can a consumption tax benefit the biggest consumers, the rich? Obviously it cannot. STM, if you want to pay more in taxes then spend more. Under the FairTax, the more you spend the higher your effective tax rate will be. The rate is 23% but because of the prebate no one will pay a 23% effective rate. But as spending increases the effective tax rate increases approaching 23% but never reaching it.

While no tax system can be considered fair. The FairTax is more fair than the current system or any other proposed system that I have studied.

It amazes me how much misinformation there is on the FairTax. Equally, I am amazed at how individuals who have never read the FairTax book are willing to make negative comments based on what they think the Fair Tax is and not on the facts. Deciding the FairTax is wrong for America based on "belief" is the same as thinking you can act as your own lawyer knowing only that you believe you know the law based on what you've heard.

That's an interesting point of view, but it implementing it would mean convincing a lot of people and reversing the current establishment.